Critical Connections: Communication for

the Future

February 1990

OTA-CIT-407

NTIS order #PB90-182742
Recommended Citation:

U.S. Congress, Office of Technology Assessment, Critical Connections: Communication for

the Future, OTA-CIT-407 (Washington, DC: U.S. Government Printing Office, January

1990).

Library of Congress Catalog Card Number 89-600713

For sale by the Superintendent of Documents

U.S. Government Printing Office, Washington, DC 20402-9325

(order form can be found in the back of this report)
Foreword

The U.S. communication infrastructure is changing rapidly as a result of technological

advances, deregulation, and an economic climate that is increasingly competitive. This change

is affecting the way in which information is created, processed, transmitted, and provided to

individuals and institutions. In addition, the lines that historically have divided domestic and

international communication systems and markets are gradually disappearing. Today,

decisions concerning communication systems and industries must reflect a global perspective.

While new technologies have the potential to effectively meet the needs of an

information-based society, they will undoubtedly generate a number of significant social

problems. In some areas they will create opportunities; in others, they may constrain activities.

How these technologies evolve and are applied—as well as who will reap their benefits and

bear their costs-will depend on decisions now being made in both the public and private

sectors.

To provide a broad context for evaluating the impacts of new communication

technologies, the House Committee on Energy and Commerce asked the Office of Technology

Assessment to undertake this study. The report analyzes the implications of new communication technologies for business, politics, culture, and individuals, and suggests possible

strategies and options for congressional consideration.

OTA gratefully acknowledges the contribution of the Advisory Panel, workshop

participants, contractors, reviewers, and many others who provided information, advice, and

assistance. However, OTA bears sole responsibility for the contents of this report.

u JOHN H. GIBBONS

Director
Critical Connections Advisory

Christopher Burns, Chairman

President, Christopher Burns, Inc.

Stanley M. Besen

Economist

The RAND Corp.

Robert R. Bruce

Partner

Debevoise & Plimpton

Lawrence Daressa

President

California Newsreel

Jack Golodner

Director

Department for Professional Employees

AFL-CIO

Doris A. Graber

Professor of Political Science

University of Illinois at Chicago

Heather E. Hudson

Director, Telecommunications Program

McLaren College of Business

University of San Francisco

Jeff Jeffries

Manager

Planning, Policy & Standards

BP America Inc.

Steve Johnson

Research Director

Center for Urban Studies

Portland State University

Anne Jones

Attorney

Sutherland, Asbill and Brennan

Louise McCarren

Chittendon Bank

(Former Chairman, Vermont Public Service Board)

Charles Miller

Director of Public Affairs

AT&T

Vincent MOSCO

Professor

Mass Communication Program

Carleton University

Eli Noam

Commissioner

New York State Public Service

Commission

Adam C. Powell, 111

Head, News and Information Programming

National Public Radio

Wallace O. Powers

General Network Planning Manager

Carolina Telephone & Telegraph Co.

Howard Rheingold

Journalist

Joseph M. Robbins

Executive Director, BellSouth

Bell Communications Research

Daniel T. Schiller

Associate Professor

Graduate School of Library and Information Science

University of California, Los Angeles

Andrew J. Schwartzman

Director

Media Access Project

Robert Lewis Shayon

Professor of Communications and Broadcasting

Annenberg School of Communications

University of Pennsylvania

NOTE: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the advisory panel members.

The panel does not, however, necessarily approve, disapprove, or endorse this report. OTA assumes full responsibility for the

report and the accuracy of its contents.

iv
OTA Project Staff--Critical Connections: Communication for the Future

John Andelin, Assistant Director, OTA

Science, Information, and Natural Resources Division

Frederick W. Weingarten, Program Managed

Communication and Information Technologies Program

James W. Curlin, Program Manager2

Communication and Information Technologies Program

Project Staff

Linda Garcia, Project Director

Jean E. Smith, Assistant Project Director

Priscilla M. Regan, Senior Analyst

Susan Koch, Analyst

Mark Nadel, Analyst

David Margulius, Research Analyst

Administrative Staff

Elizabeth Emanuel, Administrative Assistant

Karolyn St. Clair, Secretary

Jo Anne Price, Secretary

Isenior Associate as of 1/89.

2As of 4/89.
Contractors

Raymond U. Akwule

George Mason University

Stuart N. Brotman

Consultant

Christopher Burns

Christopher Burns, Inc.

Donal A. Carbaugh

University of Massachusetts

Kan Chen

University of Michigan

Daniel J. Czitrom

Mount Holyoke College

Brenda Dervin

Ohio State University

Joseph W. Duncan

The Dun & Bradstreet Corp.

Martin H. A. Edmonds

University of Lancaster

Deborah Estrin

University of Southern California

David S. Evans

Fordham University

J. D. Eveland

Technology Applications Research

Heather E. Hudson

University of San Francisco

Richard B. Kielbowicz

University of Washington

Vincent Mosco

Carleton University

Abbe Mowshowitz

Technology Impact Research

Greta S. Nettleton

Consultant

Howard Rheingold

Journalist

Nathan Rosenberg

Stanford University

Daniel T. Schiller

University of California, Los Angeles

Jennifer D. Slack

Consultant

Gerald Sussman

Emerson College

Lucja Swiatkowski

Consultant

Paul E. Teske

Consultant

Deborah G. Tumey

Citibank. N.A.

Langdon Winner

Rensselaer Polytechnic Institute
CONTENTS

Page

Chapter I: Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Chapter 2: Conceptual Framework for Analyzing Communication Issues . . . . . . . . . . . . . . . . . . 29

Chapter 3: New Technologies and Changing Interdependencies in the Communication

Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Chapter 4: The Impact of New Technologies on Communication Goals and Policymaking.. 75

Chapter 5: Communication and Comparative Advantage in the Business Arena . . . . . . . . . . . . 107

Chapter 6: Communication and the Democratic Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

Chapter 7: Communication and the production of Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

Chapter 8: Communication and the Individual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211

Chapter 9: Equitable Access to Communication Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243

Chapter 10: Security and Survivability of the Communication Infrastructure . . . . . . . . . . . . . . . 275

Chapter 11: Interoperability in the Communication Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . 293

Chapter 12: Modernization and Technological Development in the U.S. Communication

Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325

Chapter 13: Jurisdictional Issues in the Formulation and Implementation of National

Communication Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361

Appendix A: Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 389

Appendix B: Reviewers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390

Appendix C: List of Contractor Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393

Appendix D: List of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394

vii
Chapter 1

Summary
CONTENTS

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

CHANGING COMMUNICATION INFRASTRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

OPPORTUNITIES AND CONSTRAINTS PRESENTED BY NEW

COMMUNICATION TECHNOLOGIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Communication and Comparative Advantage in the Business Arena . . . . . . . . . . . . . . . . . . . . . 5

Communication and the Democratic Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Communication and the Production of Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Communication and the Individual . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. .. .. ... . .. .......+ 8

POLICY ISSUES AND CONGRESSIONAL STRATEGIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Equitable Access to Communication Opportunities .. .. .. .. .. .. .+ . . . . . . . . . . . . . . . . . . . . . . . 10

Security/Survivability of the Communication Infrastructure . . . . . .. ................+..,.. 12

Interoperability of the Communication Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Modernization and Technological Development of the U.S. Communication

Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Jurisdiction in the Formulation and Implementation of National

Communication Policy .. . .. .+ .. ... . ..+. . . . . . . . ..............+.......+.. ● . . . . . . . . . . . 18

THE NEED FOR A NATIONAL VISION OF THE ROLE OF COMMUNICATION . . . . . . . 18

Market Vision-Communication as a Market Commodity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Economic Vision-Communication as a Springboard for National Economic Growth

and Development . . .,...,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..,...*. ... ....22

Social Vision-Communication as Social Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ..........................+.. . . . . . . . . . 23

Figures

Figure Page

l-1. Congressional Strategies and Options To Address Access to Communication

Opportunities..... ... ... .....+. .. .. .. .. .. .. .+. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

l-2. Congressional Strategies and adoptions To Address Security/Survivability of the

Communication Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . ● . . . . . . 15

l-3. Congressional Strategies and Options To Address Interoperability/Coordination

of the Communication Infrastructure, . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . 17

l-4. Congressional Strategies and Options To Address Modernization of the

Communication Infrastructure . . . . . . . . . . . . . . . . . . . .. . . . .+ . . . . . . . . . . .+ .. . . ... ....+.... 19

l-5. Congressional Strategies and Options To Address Jurisdictional Issues in

Communication Policymaking . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . ...+.,. 20
Chapter 1

Summary

INTRODUCTION

The U.S. communication system is changing

dramatically. Recent advances in information

storage, processing, and transmission technologies, occurring in a newly deregulated and

increasingly competitive economic climate, are

rapidly reconfiguring the Nation’s communication infrastructure. New computer and communication technologies have already transformed

the regulation and market structure of the

industry, altering the way information is created, processed, transmitted, and provided to

individuals and institutions.

Changes are also taking place at the international level. Because the new technologies

encourage the flow of, and the demand for,

information products and services across national borders, they are wearing away the lines

that historically have divided domestic and

international communication systems and markets. Communication is one of the fastest

growing sectors in the international marketplace, and international conglomerates are increasingly being formed to provide products and

services both at home and abroad.

New technologies hold promise for a greatly

enhanced system that can meet the changing

needs of an information-based society. At the

same time, however, these technologies will

undoubtedly generate a number of significant

social problems. How these technologies

evolve, as well as who will be affected positively or negatively, will depend on decisions

now being made in both the public and private

sectors. This study provides a context for

evaluating these decisions.

CHANGING COMMUNICATION

INFRASTRUCTURE

The communication infrastructure is the

underlying structure of technical facilities and

institutional arrangements that supports communication via telecommunication, broadcasting, film, audio and video recording, cable,

print, and mail. Although the “public works”

connotation of infrastructure may lead some to

think of the term as public facilities, most of the

U.S. communication infrastructure is held by

private individuals and firms.

With digitalization all of the media

become translatable into each other—

computer bits migrate merrily—and

they escape from their traditional means

of transmission . . . If that’s not revolution enough, with digitalization the content becomes totally plastic—any message, sound, or image may be edited

from anything into anything else.

Stuart Brand

The Media Lab:

Inventing the Future at MIT, 1988.

The communication infrastructure helps

shape communication through the nature of its

technical facilities and the ways in which those

facilities are organized and made available to

users. Communication, in turn, is central to the

business, political, and cultural life of a society,

and to the individuals that comprise it.

The societal effects of the Nation’s communication infrastructure are determined by its overall technical capabilities, their availability, and

their patterns of use. Three aspects of the

infrastructure are relevant:

1.

2.

3.

the technical characteristics of the communication facilities themselves;

the economic interdependencies among

producers, distributors, and users o f

communication facilities; and

the policy goals and rules that define and

constrain these relationships.

-3-
4 ● Critical Connections: Communication for the Future

The following advances in communication

technologies are generating changes in all three

aspects:

improved technical performance in

transmission, encoding, decoding, storage

and retrieval, and content production, at

decreasing costs;

convergence of communication functions,

as well as communication products and

services;

decentralization of intelligence and control

throughout communication systems with

the development of software-driven and

software-defined communication facilities;

the availability of some discrete communication services that were previously provided only as part of a package (unbundling);

increased portability of products and services;

improved ease of use through better software design;

increased networking capability; and

increased capability to target messages to

specific individuals or groups.

These technological trends and their

socioeconomic impacts are unraveling the existing U.S. communication system, creating new

opportunities, players, and problems. In the

wake of these changes, fundamental questions

are being raised about how to organize communication systems to promote innovation, maximize the benefits of competition, and capture

economies of scale and scope, Moreover, the

fact that the various media are converging as a

result of digitization raises basic questions about

the rules that govern access to communication

technologies. Above all, questions are being

raised about the goals of the communication

system, as well as how, and by whom, future

communication policy decisions should be

made.

If Congress is to affect the future of the U.S.

communication infrastructure, it will need to

address these questions, perhaps by revisiting

and reevaluating the Nation’s basic goals for

communication. To successfully renovate the

Nation’s communication policy, Congress will

need to gain the support of, and coordinate its

efforts with, an ever-increasing number of

players in a variety of decisionmaking arenas.

The task is a critical one, notwithstanding the

difficulties involved in such an undertaking. If

Congress fails to act decisively and generate

broad support, the opportunity to make

deliberate choices about new communication

technologies—and about the nature of American society itself—will be overtaken by rapid

technological advances, the hardening of

stakeholder positions and alliances, and the

force of international developments and

events.

OPPORTUNITIES AND

CONSTRAINTS PRESENTED BY

NEW COMMUNICATION

TECHNOLOGIES

To determine the role that government might

play in the realm of communication, Congress

will need to consider the opportunities that new

communication technologies offer society, as

well as the obstacles that prevent those opportunities from being realized. The stakes are

high—for businesses, the democratic process,

culture, and individuals—because using communication effectively provides a strategic advantage in achieving goals. Taking advantage of

new communication technologies in one of

these four realms may, however, conflict with

their use in the other three. For example,

providing communication systems that meet the

security standards of business and government

may limit the extent to which the same systems

can be used for research and collaborative

efforts. Also, the business use of communication storage and processing technologies to

target customers may create problems of information overload and of securing privacy for

individuals.
Chapter l-Summary ● 5

Communication and Comparative Advantage

in the Business Arena

Although the United States has fared reasonably well over the past few years, many observers

are beginning to express serious reservations

about the future of the U.S. economy and its

ability to compete in an increasingly global

environment. They point out that recent economic growth in the United States has been

fueled by foreign capital, and that the growth of

manufacturing exports has been slower than

imports. Experts note that the continued decline

of the U.S. economic position in world trade is

having serious consequences for labor. Pointing

to the recent success of the Japanese model of

business organization, some have even suggested that, to be competitive, the United States

may also need to develop and adopt new ways

of organizing for production.

Many of those who are concerned about the

U.S. economy look to the communication and

information sectors to provide the impetus for

future growth. This focus on “telematics” is not

surprising, given the trend toward a greater role

Photo credit: Bell Atlantic

Mobile telephones allow personnel to communicate with their offices and clients while on the road. New cordless phones that can

be carried on a belt are also being introduced to facilitate communication for those who work outside or away from their desks.
6 ● Critical Connections: Communication for the Future

for information in advanced industrial societies,

and the fact that the United States has traditionally had a comparative advantage in this area.

Communication is regarded not only as a source

of economic growth, but also as a means of

reconfiguring work relationships to make them

more effective.

Given the increased dependence of American

businesses on information and its exchange, the

competitive status among businesses and in the

global economy will increasingly depend on the

technical capabilities, quality, and cost of the

communication facilities on which they can

rely. The emergence of new technologies

provides a unique opportunity for businesses

and nations to create comparative advantages in a changing world economy. Failure

to exploit these opportunities is almost certain to leave many businesses and nations

behind.

How well American businesses are able to

take advantage of these opportunities will depend on:

the compatibility and interconnectivity of

communication and information systems,

the laws concerning the use of information,

economic and technical resources,

corporate culture and organizational structure,

developments in international trade and

international telecommunication regulation,

domestic regulatory policies, and

the availability of a skilled work force.

It is clear that if government wants to

promote the effective use of new communication technologies to improve the economy, it

must find ways to deal with issues such as

standards and the standards-setting process,

education and training, corporate organization and labor relations, and international

trade.

The widespread deployment of new communication technologies for economic advantage

may also raise equity issues. To use telecommunication competitively, many businesses are

finding it necessary to create their own private

communication networks. But the costs of such

systems are high, in terms of both organizational

and financial resources. Thus, many small

companies cannot afford to take advantage of

the new technologies. To the extent that the

government looks to new communication

technologies to foster U.S. economic growth

and development—and wishes its small and

medium-sized companies to participate in

this—it may need to take special steps to

facilitate those companies’ use of these technologies.

Communication and the Democratic Process

Since communication is central to all political

activities, the way in which the U.S. communication infrastructure evolves is likely to affect

the future of the American political system. New

technologies can create new communication

pathways, allowing new gatekeepers to mediate

political dialog. For this reason, political “outsiders” have historically viewed communication

technologies as an effective means for becoming

political “insiders.” Those already in positions

of authority have sometimes sought to structure

laws and behavior in order to limit access to new

communication technologies.

A new form of “politics” is emerging,

and in ways we haven’t yet noticed. The

living room has become a voting booth.

Participation via television in Freedom

Marches, in war, revolution, pollution,

and other events is changing everything.

Marshall McLuhan,

Quentin Fiore, Jerome Agel

The Medium is the Massage, 1967.

Today, many people regard the technological

advances in communication as a means for

enhancing both citizen participation and government performance. The interactive, online capabilities of new technologies, it is claimed, could

allow citizens to directly voice their opinions on
Chapter I-Summary ● 7

Photo credit: C-SPAN

C-SPAN provides regular coverage of congressional floor debates and committee hearings via its cable network.

Citizens can interact directly with program participants in Washington by telephone.

public issues, as well as conduct an ongoing

dialog with other citizens, elected representatives, and government bureaucrats. Moreover,

the targeting capabilities of the technology

could improve the ability of citizens to identify

like-minded people, create new interest groups,

raise financial and political support, and track

the activities of—as well as lobby—government

officials.

Government agencies can improve their efficiency by using technologies that facilitate both

networking and data storage and reprocessing.

For example, the ability to identify specific

groups can be used to improve law enforcement,

immigration control, and the detection of fraud,

waste, and abuse in welfare systems. Real-time

communication among government agencies,

through the use of online systems, could also

make government operations more efficient and

effective.

Other people are more skeptical of the effect

of new technologies on government and politics.

They view them as a means by which those

already in positions of power or authority can

further solidify their influence. For instance,

they claim that online, interactive political

dialogs will generate information about individuals that could be used by government to

monitor the activities of groups or individuals.

Moreover, they are concerned lest the targeting

of specialized groups lead to greater fragmentation of the body politic. Some also fear that new

communication capabilities will not be used to

improve the substance of political debate, but

rather to promote personality instead of policy.

In government and politics, as in the past, the

impact of new communication technologies will

be determined to a large extent by the rules,

norms, and skills that govern access to them.

The emergence of new political gatekeepers,

and who they are, will be of critical importance.

As information is treated more and more as a

commodity to be bought and sold in the

marketplace, the traditional political gatekeepers—including political parties, the traditional

press, and government agencies—are being
8 ● Critical Connections: Communication for the Future

replaced by new kinds of political gatekeepers,

such as political consultants, media consultants,

private sector vendors, and international newscasters. Whereas the traditional gatekeepers are

governed by political rules and norms, the new

gatekeepers are guided to a greater extent by

market criteria. Where markets dominate the

allocation of communication resources--

such as information, a speaking platform, or

access to an audience-political access may

become increasingly dependent on the ability

to pay. Thus, the economic divisions among

individuals and groups may be superimposed

on the political arena.

On another level, new international players,

such as multinational news agencies, are replacing government officials as gatekeepers in areas

such as international diplomacy. Depending on

the extent of this development, the ability of the

Nation to exercise its sovereignty through

traditional diplomatic channels may be compromised.

Communication and the

Production of Culture

Communication is the process by which

culture is developed and maintained. Information, the content of communication, is the basic

source of all human intercourse. Throughout

history, information has been embodied and

communicated in an ever-expanding variety of

media, including spoken words, graphics, artifacts, music, dance, written text, film, recordings, and computer hardware and software.

Together, these media and their distribution

channels constitute the web of society that

guides the direction and pace of social development. From this perspective, the communication

of information permeates the cultural environment and is essential to all aspects of social life.

The new information and communication

technologies provide many opportunities to

enhance our culture by expanding the infrastructure for information-sharing and exchange.

Communication can be used to generate greater

amounts of information and new cultural forms,

to make this knowledge more accessible, and to

provide it in more convenient and suitable ways.

Because these technologies are decentralized

and widely available, they can provide the

opportunity for more people to become actively

involved in creative activities.

However, it is likely that many of the

cultural opportunities afforded by new communication technologies will not be realized

without further government involvement or

structural changes in the communication

industry. Recent communication history illustrates, for example, that technological developments leading to a greater number of transmission channels do not necessarily lead to

A panoply of electronic devices puts at

everyone’s hand capacities far beyond

anything that the printing press could

offer. Machines that think, that bring

great libraries into anybody’s study,

that allow discourse among persons a

half-world apart, are expanders of

human culture.

Ithiel de Sola Pool

Technologies of Freedom, 1986.

increases in the diversity or quality of information content and programming. Equally important in determining the kind of content produced

are the economic relationships among the key

players in the communication arena. If, in the

future, government wishes to encourage more

people to become active in creating their own

cultural environment, economic incentives may

need to be considered. Moreover, efforts will

need to be made not only to assure that people

can access a broad variety of information and

cultural content, but also that they have the skills

and resources necessary to create, package, and

distribute information.

Communication and the Individual

Emerging technologies promise to provide

individuals with opportunities to increase their

personal autonomy, enhance their sense of

connection to others, and, in general, enable
Chapter 1--Summary ● 9

greater accomplishments and self-fulfillment.

These same technologies, however, could produce the opposite outcomes, contributing to

personal isolation, increased dependency, and

the loss of privacy. How new technologies will

affect individuals will depend in part on the rules

that Congress adopts to govern access to information and the new communication technologies. For example, government decisions about

access to the data that are collected in the course

of economic transactions will affect individual

privacy rights. Also, decisions about what kinds

of information services telephone companies

can provide will affect the speed at which, and

the extent to which, fiber technologies and the

information services they make available can be

deployed to the home.

The medium, or process, of our time--

electric technology—is reshaping and

restructuring patterns of social interdependence and every aspect of our personal life.

Marshal McLuhan,

Quentin Fiore, and Jerome Agel

The Medium is the Massage, 1967.

The Nation’s communication infrastructure is

becoming increasingly complex. Individuals or

firms are becoming more responsible for designing the various communication resources they

require. In order to take the greatest advantage

of new technologies, people will need to be

more technically skilled and have access to

better “navigational tools” (means to help people access the systems, analogous to today’s TV

guides or telephone books). Navigational tools

will be crucial in making individuals aware of

communication opportunities, and in providing

guidance in the use of these systems. The

communication capabilities of individuals—

their "1iteracy" in the languages, commands,

and structures of future systems—will

largely determine the benefits they receive.

The extent to which access depends on the

ability to pay will also determine the impact of

Photo credit: Bell Atlantic

New caller identification terminals use a small electronic

screen to display the telephone number from which an

incoming call was placed.

new communication technologies on individuals. In telephony, for example, there is general

agreement that services should be provided

universally and it has been clear what those

services should be. Until recently, achieving

consensus was relatively simple because the

range of telephone services that could be offered

was narrow. The needs of all users could thus be

equated and the cost of service could be shared;

therefore, the price that individuals were

charged for service could be set relatively low.

With shared usage it was possible to allow some

users to subsidize others.

Today, the concept of providing universal

service on a common, shared network, as well

as the system of subsidies that supported it, is

breaking down. Major questions are being

raised about the kinds of communication

services that are needed, and the degree to

which all users have equivalent needs that
10 ● Critical Connections: Communication for the Future

can be served in the same fashion. Thus, the

question of what should constitute universal

service in an information age needs to be

readdressed. Depending on how this question is

answered, the United States could be faced with

a two-tiered communication system, which

would give rise to issues of equitable access. For

example, if businesses view their needs as

unique and decide to develop their own private

networks, as some are doing now, there may be

insufficient revenues available to support an

advanced public network to serve all individuals. Under such circumstances, the costs and

prices of services would be higher, to the extent

that there are diminished economies of scale and

scope.

New technologies will not only affect how

people access information, but also how information impinges on people’s lives. The pace of

technological change has created confusion

about the appropriate standards for information

use. For instance, what privacy protections

should individuals expect? While eager to take

advantage of new electronic shopping opportunities, many people are unaware that transaction

data generated in the process can be collected,

processed, and used in the future as tools for

marketing or even surveillance. While embracing new ways to access information for their

own use, many individuals may find it difficult

to cope with the fact that others, in turn, now

have much greater access to them.

POLICY ISSUES AND

CONGRESSIONAL STRATEGIES

Although new communication technologies

afford a myriad of socioeconomic opportunities,

many of these opportunities may go unrealized.

Some may fail to materialize for lack of

foresight, public demand, or political will.

Others may founder because of poor circumstances and timing. Some opportunities can only

be fulfilled at the expense of others.

The need to make trade-offs among opportunities is particularly great in communication because communication lies at the

heart of social activity. For example, the

growing use of private branch exchanges

(PBXs) and high-speed data transmission lines

to create private business telephone networks

may, if carried too far, drain the pool of financial

and human resources available to the public

switched telephone network. This could limit

the extent to which the communication

infrastructure can serve other economic, political, and social goals. Making such trade-offs is

likely to be more contentious in the future

because the strategic value of information is

increasing in business, politics, culture, and

individual development and personal

growth.

Analyzing the potential for conflict among

new communication opportunities, OTA identified five major areas in which public policy

issues are likely to arise:

1.

2.

3.

4.

5.

equitable access to communication opportunities,

security and survivability of the communication infrastructure,

interoperability of the communication

infrastructure,

modernization and technological development of the communication infrastructure,

and

jurisdiction in formulating and implementing national communication policy.

These are characterized below, along with

congressional strategies and options for addressing them.

Equitable Access to Communication

Opportunities

The opportunities for people to participate in

economic, political, and cultural life depend on

their ability to access and use communication

and information services. Individuals need skills

and tools to locate the communication pathways, information, and audiences in a timely

fashion and in an appropriate form. Unequal

access to communication resources leads to

unequal advantages, and ultimately to inequalities in social and economic opportunities.
Chapter 1--Summary 11

OTA found that changes in the U.S.

communication infrastructure are likely to

broaden the gap between those who can

access communication services and use information strategically and those who cannot.

Moreover, the people most likely to be adversely affected are those whom the new

communication technologies could help the

most—the poor, the educationally disadvantaged, the geographically and technologically

isolated, and the struggling small and mediumsized business.

OTA identified a number of factors that are

likely to contribute to access problems. For

example, technological advances, deregulation,

and increased competition have led to the

reduction of a number of communication subsidies, and to changes in the way in which many

communication services are operated and financed. For some, these developments are

increasing the cost of purchasing communication services. The overall costs of identifying,

locating, and applying relevant information in a

timely fashion are on the rise. Costs are increasing because there is a larger volume of information for individuals and businesses to cope with,

and because the tools and systems needed to deal

with the larger volume are becoming more

complex. Access to communication services is

also likely to be more limited in the future if

trends toward increased mergers and vertical

integration of communication-related industries

Ownership in every major medium now

includes investors from other media—

owners of newspapers, magazines,

broadcasting, cable systems, books and

movies mixed together. In the past, each

medium used to act like a watchdog over

the behavior of its competing media

. . . But now the watchdogs have been

cross-bred into an amiable hybrid, with

seldom an embarrassing bark.

Ben H. Bagdikian,

The Media Monopoly, 1987.

continue at their present pace, and if media

gatekeepers, in selecting content, are increasingly guided by market criteria. It is more

difficult to establish appropriate rules for access

in this rapidly changing environment. New

technologies are challenging traditional regulatory criteria, magnifying the confusion

and inconsistencies that surround first

amendment rights, and dismantling the traditional definition of universal service.

In addressing these problems, Congress may

have to move in some new, and untried,

directions. Past policies to promote access to

both communication and information focused

on assuring access to transmission media. Barriers to access were reduced by structuring the

rights of those who owned the transmission

systems (for example, by limiting the number of

broadcast stations that an individual can own),

or by structuring the prices that users paid for

transmission service (as in the case of telephone

and postal rates). Using transmission media as

the leverage for access was the chosen regulatory approach, given first amendment proscriptions limiting government’s role in regulating

content. It was, moreover, a relatively effective

approach because transmission media represented the major bottleneck to communication

access.

Today, this is no longer the case. Although

transmission bottlenecks still exist (as, for

example, in the local telephone exchange), new

kinds of bottlenecks are also appearing. Some of

these have more to do with the identification,

production, and application of information content than with its transmission. These bottlenecks occur because people lack, for example,

the necessary technical skills, navigational

tools, and access to production facilities. To

effectively promote communication access in

the future, government policies will need to

focus more on these newly emerging barriers to

access.

Congress could pursue six different strategies

to improve access to communication services:
12 ● Critical Connections: Communication for the Future

1.

2.

3.

4.

5.

6.

influence the means by which communication services are funded and financed,

structure the prices at which communication services are offered,

provide direct government support for

users to access information and communication paths,

regulate and/or redefine the rights of

media owners,

influence the level and availability of the

tools and resources required to access

communication and information services,

and

assume a more proactive role to assure

robust debate on- issues of public importance.

These strategies, and the options that each might

entail, are summarized in figure 1-1. An analysis

of the benefits and disadvantages of adopting

any of these options is provided in chapter 9.

Security/Survivability of the

Communication Infrastructure

Adequate security and survivability are essential characteristics of an acceptable communication infrastructure. However, establishing a

secure and survivable infrastructure requires

trade-offs against access, cost, and ease of use.

Although most people probably support the

general goal of security and survivability, there

is disagreement with respect to the level of

security and survivability needed, and the extent

to which other communication goals should be

sacrificed to achieve these goals.

OTA identified a number of factors and

developments that can affect the security and

survivability of the communication infrastructure. The increased reliance of business and

government on communication and information

systems makes them more vulnerable to system

failures. The number and variety of problems

that may threaten the security or reliability of

communication systems are greater than in the

past. Communication systems are more complex, decentralized, and interdependent. Thus, it

is more difficult to achieve security and survivability goals.

In the past, issues surrounding the security

and survivability of the communication infrastructure were not important to most Americans.

Such problems were generally addressed behind

the scenes in private businesses and government. These issues are becoming less containable. OTA found that security and survivability

goals are becoming more important and

more visible; but it is also becoming more

difficult to make the trade-offs in communication policy required to achieve these goals.

Stakeholders’ views differ about how these

trade-offs should be made and what policies

should be pursued. In addition, government

agencies are not adequately organized to resolve

security and survivability issues and achieve

security goals.

Congress may need to play a more active

role in resolving competing security goals

and in promoting the security of both private

and public communication systems. The Federal Government’s role in this area was traditionally limited to assuring that the Nation’s

communication infrastructure was secure and

reliable enough to meet the needs for defense

and emergency preparedness. Today, however,

the public’s stake in the security and survivability of communication systems goes well beyond

defense and disasters. Given the dependence of

many corporations on communication and information systems, there are now larger social costs

from major failures in private systems. For

example, in November 1985, a computer problem in the Bank of New York’s offices prevented the company from completing an exchange of government securities. This fault in

the system not only cost the bank $1.5 to $2

million after taxes; it also forced the bank to

borrow $24 billion from the Federal Reserve

System. In this sense, communication security

problems occurring in the private sector are

much more difficult to contain. As the role and

value of communication increase, the likelihood

that security problems will spill over into the

public sector also increases.
Chapter 1--Summary ● 13

Figure 1-1--Congressional Strategies and Options To Address Access to Communication Opportunities

I Option A 1 I Option C I

Option C

Provide commoncarrler status for

crltlcal navigatlonal

tools, recognizing

their essentialfacility nature

Option A

Re-examine and reevaluate the

traditional regulatory categories of

common carrier, print

and broadcasting in

the light of technological change and

market developments

to determine whether

they continue to be

the most suitable ,for

fostering communication

access

1

1

Option B

Increase support for

advertiser-subsidized

media that provide

the publlc with

noncommercial

Information at prices

already heavily

subsidized

Option C

Provide public

Institutions with

communication

equipment, or

Increase current

funding or subsidies

for its purchase

Option A

Provide monetary

subsidies to

individuals and

special groups using

Information and

communication paths

I

D

Option B

Prowde equipment,

(or subsldles for Its

purchase) to Indlwdual

users

EE

I

Strategy 4

I Regulate and/or

redefine the rights

‘ -El --4,, ,1

of media-owners,

Option D Option B

Strengthen requlre- Rescind the cable/

ments to provide telephone company

public access to crossownership rules

production facilities to Increase the competition faced by

the cable Industry Strategy 5

Influence the level

and availability of the

tools and resources

required to access

information services.

4

Option C Option A

Require media providers Codify the Fairness

to uphold more stringent Doctrine for broadpubllc-interest standards casters and/or extend

it to other media Strategy 6

Assume a more

,

I

+ proactive

role to assure

1 ’ I

robust debate on

issues of public

Option D Option B importance.

Adopt campaign-reform Mandate time and space

Iegislatlon on communicatlon pathways for discussion

of public policy issues

1

r Option B

Provide Federal

support for

technological Iiteracy

L

Option D

Provide funding for

creation of

bibliographlcal devices

for publicly funded

programs and

Information

SOURCE: Office of Technology Assessment, 1990,
14 ● Critical Connections: Communication for the Future

Congress could pursue six different strategies

to address the security and survivability of the

communication infrastructure:

1.

2.

3.

4.

5.

6.

undertake further study and analysis of

changing security and survivability needs

of the communication infrastructure;

facilitate the transfer of information about

security and survivability, garnered in the

public agencies, to the private sector;

establish security and survivability requirements for key industrial sectors;

provide special emergency facilities for

private sector use;

improve coordination of survivability

planning; and

increase activity geared to preventing

security breaches.

These strategies, and the options that each might

entail, are summarized in figure 1-2 and analyzed in chapter 10.

Interoperability of the

Communication Infrastructure

Communication systems are, by definition,

designed to interconnect. Thus interconnection,

or interoperability, is critical to the communication infrastructure. The more interoperable a

communication system is, the more connections

it can provide and the more accessible it will be

to everyone on an equal basis. Interoperability

provides for redundancy, thus improving system

survivability. Interoperability is important not

only in a technical sense, but in an administrative sense as well. To be most useful, the

infrastructure needs to be transparent to users in

terms of the services offered.

Interoperability also has a downside. It can

make a communication system more vulnerable

to breaches in security by broadening access. To

the extent that interoperability requires standardization, it can retard technological innovation and slow development of the system.

In the past, there were few problems in

achieving adequate interoperability within the

communication infrastructure. In the area of

telephony, AT&T provided end-to-end service

and system interconnection. The government

played an important role in mass media and

information processing, assuring, when necessary, that there was adequate standardization.

Interoperability is likely to become more of

a technical and administrative problem in the

future. Not only will the need for interoperability be greater, but achieving it is also likely

to be more difficult. Five developments have

contributed to the difficulties of ensuring interoperability. First, the growing importance of

information and communication as a strategic

resource attaches greater importance to the

interoperability of any communication infrastructure. Second, many of the traditional ways

that interoperability has been achieved have

been eliminated. Third, the globalization of the

economy has led to a greater need for international standards and the extension of standardssetting efforts to the international arena. Fourth,

the number and variety of players in the

standards-setting process have increased, as

have the costs and stakes of adopting standards.

Fifth, the standards that need to be set are more

complex (e.g., anticipatory, process standards

such as open systems interconnection [OSI]l

and integrated services digital networks

[ISDN]). 2

Although the overall circumstances in which

particular government strategies are likely to be

the most appropriate can be generalized, these

will have to be tailored to each case. Congress

could pursue five different strategies to address

the interoperability of the communication infrastructure:

1. support research to provide better data and

a more analytic rationale for standardssetting decisions;

031 is an Mchitecture for computer networks and a family of standards that permits data communication and processing among diver= technologies.

21SDN is ~ network that provides in[egated stitch and facility dl~ta] connections ~tw~n user-network interfaces to provide or SUppOfl i3 rNl&

of different communication services.
Chapter 1--Summary ● 15

Figure l-2--Congressional Strategies and Options To Address Security/Survivability

of the Communication Infrastructure

Option C

Support the

development of

curricula to be used

in schools, Iibraries,

museums, and other

public facilities to

foster a more positive

computer ethic

I

Option A

Provide government

incentives to both

vendors and users for

Improving computer

security

I

u

Refine computer

crime laws and the

remedies and

penalties for crlmlnal

abuse

Option A

Continue funding and

support for the NRC

to evaluate the state

of reliability of the

U S communication

infrastructure for

Option C

Use government

procurement policies

to create incentives

for vendors to build

better security into

their computer-based

1 4

I

support for studies of

the security of

communication

systems

SOURCE: OffIoe of Technology Assessment, 1990.
16 ● Critical Connections: Communication for the Future

2.

3.

4.

5.

allow for the emergence of market solutions, either in the form of gateway

technologies or through the setting of de

facto standards;

indirectly influence the standards-setting

process by providing assistance and guidance to foster the setting of standards;

influence the setting of particular standards by providing incentives or imposing

sanctions; and

mandate industrywide standards.

These strategies, and the options that each might

entail, are summarized in figure 1-3 and analyzed in chapter 11.

OTA identified three specific cases where

interoperability--or the lack of it—will have

major implications for U.S. communication

policy. These are related to the establishment of

ISDN, the evolution of OSI, and the creation of

an open network architecture (ONA).3 In considering whether Congress should take additional steps to encourage the standards-setting

process in these three cases, certain factors need

to be kept in mind. These are outlined, together

with corresponding policy responses, in chapter

11 (tables 11-1, 11-2, and 11-3).

Modernization and Technological

Development of the U.S.

Communication Infrastructure

As the role of information increases in all

aspects of life, additional demands will be made

on the communication infrastructure. Some of

these demands may increasingly be in conflict.

The communication infrastructure will have to

be more competitive in providing communication at the international level. To adequately

meet and balance all of these communication

needs, the U.S. communication infrastructure

must make maximum use of advances in communication and information technologies. It will

need to do so in the most efficient and costeffective manner. The most critical policies are

those related to research and development,

capital investment, and human resource

development.

Historically, the United States has set the

international pace for technological development in communication and information technologies. However, in the late 1970s, technological advances began to outstrip the pace of

change within the public shared telecommunication network, finally leading to the divestiture of

AT&T and the emergence of a number of

competing communication networks and service vendors. Although competition has clearly

contributed to growth and economic activity in

the communication sector, OTA identified a

number of factors that suggest that in a competitive, global environment, the United States may

find it increasingly difficult to retain its world

technological leadership.

The first factor is the development of international competition resulting in an increase in the

pace of technological advancement in communication infrastructure. The second is the high

capital costs of modernizing the communication

infrastructure and uncertainties as to how it will

be financed. The potential inefficiencies that

could result from lack of national coordination

and planning for communication represent the

third factor. The fourth is the proactive role

played by foreign governments in modernizing

their communication systems. The fifth factor is

the fractionated U.S. decisionmaking process.

The sixth is the limits of human resources for

communication.

Congress could pursue three strategies to

address the modernization of the communication infrastructure:

1.

2.

involve the government directly in the

development, planning, financing, and coordination of the communication infrastructure;

provide indirect incentives for modernizing and developing the communication

infrastructure; and

3ONA is tie over~l design of a c~er’s basic network facilities and services to permit all users of the basic network to interconnect to SpWifiC buic

network functions and interfaces on an unbundled and equal access basis.
Chapter 1--Summary ● 17

I

I

o(n0)

E

i!! (0m

1!

%
18 ● Critical Connections: Communication for the Future

3. create a regulatory environment that is

more conducive to the modernization of

the communication infrastructure.

These strategies, and the options that each might

entail, are summarized in figure 1-4 and analyzed in chapter 12.

Jurisdiction in the Formulation and

Implementation of National

Communication Policy

Rapid technological advances in communication, coupled with the unraveling of a

traditional regulatory framework in the

United States, have given rise to a highly

uncertain communication policy environ=

ment. Occurring at a time when the role of

information is particularly important, these

developments will affect everyone. Each individual has a high stake in the outcome of current

communication policy debates. An exceptionally equitable, efficient, and effective policymaking process will be required to find

appropriate solutions to the complex and thorny

policy dilemmas that society faces, and to

reconcile the conflicts that will inevitably arise

among competing—even if meritorious—

interests. At the very least, the allocation of

authority and the rules of the game will need to

be clear and perceived by the public to be

legitimate.

As the United States participates in the

increasingly global information economy, the

lack of a coherent and coordinated national

communication policymaking process is likely

to severely hinder the development and execution of a strategy for dealing with the myriad of

communication issues that will emerge. The

American policy process has always been somewhat disorderly because of the important role of

federalism and the separation of powers in the

U.S. political system. However, its untidiness

has been particularly noticeable in communication policy—a fact that has already prompted

two Presidential policy boards (in 1951 and

1968) to recommend the creation of a central

agency to formulate overall communication

policy.

OTA findings suggest that a number of

factors are likely to make these problems worse

in the future. These include the shift of communication decisionmaking from political institutions to the marketplace, the expanding links

between communication policies and other socioeconomic policies, the increased interdependence of national and international communication policies, and the emergence of large

users-often multinational corporations-as

key players in communication decisions.

Congress could pursue four basic strategies to

address jurisdictional issues in communication

policymaking:

1.

2.

3.

4.

take the lead in establishing communication policy priorities and in allocating

organizational responsibilities accordingly;

establish an ongoing organizational mechanism, outside of Congress, to resolve

policy inconsistencies and jurisdictional

disputes;

provide an interagency and/or interjurisdictional mechanism for coordinating

communication policy and resolving jurisdictional issues; and

establish an institutional basis for facilitating coordination and cooperation among

government agencies, industry providers,

and communication users.

These strategies, and the options each might

entail, are summarized in figure 1-5 and analyzed in chapter 13.

THE NEED FOR A NATIONAL

VISION OF THE ROLE OF

COMMUNICATION

The choice of congressional policy strategies

and options will depend primarily on how

Congress views the role of communication in

21st-century America and what communication

goals it will set for the Nation. This study

provides Congress with a roadmap for matching
Chapter 1--Summary ● 19

2

g

%

1! o
20 ● Critical Connections: Communication for the Future

Figure l-5-Congressional Strategies and Options To Address Jurisdictional Issues in

Communication Policymaking

I Option C I I Option A I I

Establish a new

executive agency to

address

communication

issues.

Option D

Establish an agency

within the Executive

Office of the President

to develop a

comprehensive

communication policy

and to coordinate the

activities of existing

communication

agencies.

Option C

Establish a

government

corporation to perform

essential

communication

services for the

public.

I

%%$:;or *

Designate the FCC as

the lead organization

communication policy. I I ~fi

.

Option B

Designate an existing

executive branch

agency, such as the

NTIA, as the lead

agency to coordinate

communication policy

Option A

Encourage or support

the establishment of

advisory bodies to

provide input to

executive agencies

and the FCC on

specific

communication

issues.

I

Option A

Reassess and Option C

redefine national Establish a Joint

communication policy Communication

goals, revising the Committee within

Communications Act Congress.

of 1934 where

appropriate.

I I

I1

Option B

Establish a national

commission to

evaluate the changed

communication

environment and

recommend to

Congress appropriate

policy changes and

steps to implement

them.

Option A

Establish an

Interagency

coordinating body

with representatives

from all the agencies

that have

responsibility for

communication policy.

— I

I

Option B

Establish an ongoing

Federal/State agency,

along the lines of the

Federal/State Boards,

to coordinate and

resolve Federal/State

interjurisdictional

communication policy

issues.

SOURCE: Office of Technology Assessment, 1990.
Chapter 1--Summary ● 21

There is nothing more difficult to plan,

more doubtful of success, nor more

dangerous to manage than the creation

of a new order of things.

Machiavelli, 1513.

U.S. communication policy with consistent

strategies and policy options, based on the five

issues discussed above. Three possible visions

are presented here:

1.

2.

3.

communication as a market commodity,

communication as a springboard for economic growth and development, and

communication as a basic societal infrastructure.

These visions are purposely sharply drawn to

provide clear alternatives.

Market Vision-Communication as a

Market Commodity

This vision reflects the view that communication is an end in itself, and that communication

services should be treated like any other commodity that can be bought and sold. This view

is illustrated at the extreme by former FCC

Chairman Fowler’s statement equating television sets and toasters, which, he said, leads to the

conclusion that the marketplace is the most

appropriate mechanism for determining the

production, distribution, and use of television

sets as well as other communication devices and

services.

Those with this perspective include many

antitrust economists and lawyers who place a

high value on economic efficiency, viewing its

attainment as the measure of an optimal social

outcome. They claim that through market competition the criterion of efficiency is most likely

to be met. Supporting this viewpoint are many

new participants in the communication system

(for example, resellers of communication services, system integrators, and gateway and information vendors) who, eager to take advantage of

the new technologies to add value to existing

products and services, want a chance to enter the

market and compete. Many business users who

operate their own private communication networks also subscribe to this point of view. So,

too, would consumer advocates who, viewing

communication primarily as a commodity, are

concerned most about the cost of service to

consumers.

Viewing communication policy from this

perspective, the ideal role for the Federal

Government would be to intervene to corrector

ameliorate situations where market failures can

be clearly identified. Members of this group

might disagree, however, about the means of

government intervention. While some favor

trying new or experimental regulatory approaches such as price-cap regulation for telephone companies, others insist that, where real

competition is lacking, adequate protection for

users and potential competitors requires traditional rate-of-return regulation. With these differences in mind, the following congressional

strategies are consistent with the vision of

communication as a commodity, and the government’s perceived role:

●

●

●

●

●

●

●

reexamining and readdressing regulatory

categories in terms of the market structure

of various industries as it is affected by

technological advances, and strengthening

regulatory procedures where required;

refining computer crime laws and penalties;

allowing for the emergence of market

solutions to problems of incompatibility;

influencing the standards-setting process

indirectly by providing assistance and

guidance to foster standards-setting;

providing indirect incentives for modernizing and developing the communication

infrastructure;

providing for some technology research

and development; and

phasing out some existing regulatory agencies and integrating others.
22 ● Critical Connections: Communication for the Future

Economic Vision--Communication as a

Springboard for National Economic

Growth and Development

This vision reflects concerns about the state

of the U.S. economy and the decline of the U.S.

competitive position in an increasingly global

economy, and calls for the promotion of communication technologies and the modernization

of the communication infrastructure. Proponents view communication not just as an end in

itself, but also--and more importantly-as the

means for bringing about renewed economic

growth and development in the United States.

Some are concerned lest other nations—viewing

the modernization of their communication infrastructures as part of their overall national

industrial policies--employ new communication technologies to gain a competitive advantage over the United States.

Most who hold this view would agree that the

communication infrastructure can serve a number of social goals. However, because of the

growing intensity of international economic

competition, some would argue that, where

societal goals conflict, using communication to

foster national economic goals should take

precedence. They would point out that, if the

United States fails to achieve economic success,

it will no longer have the wherewithal to

accomplish other goals.

Such arguments have been made by a number

of government officials who deal with trade and

national industrial policy issues. This viewpoint

is also reflected in some recent government

reports calling for a revision of the Modified

Final Judgment? and alternatives to rate-ofreturn regulation. Most of the regional Bell

operating companies that stand to benefit from

these changes also use this argument when

presenting their case to government. Some users

in small and medium-sized businesses who

cannot afford to develop their own communication networks, but who view communication as

a strategic resource, might also be inclined to

favor the view of communication as the “springboard for economic growth.”

Proponents of this view call on the Federal

Government to play a more active role in

promoting technological development and the

modernization of the communication infrastructure. While they might differ on how to promote

communication technologies for economic

ends, the congressional strategies consistent

with this overall viewpoint include:

providing direct government support for

users to access information and communication paths;

undertaking further study and analysis of

the changing security and survivability

needs of the communication infrastructure;

providing special emergency facilities for

private sector use;

improving coordination of survivability

planning;

increasing activities geared to prevent security breaches;

supporting research to provide better data

and a greater analytic rationale for standards decisions;

while allowing for market solutions to

standards problems, providing for a government role when necessary to achieve

overall, national economic goals;

providing indirect incentives to encourage

investment in modernization;

removing regulatory barriers that discourage modernization; and

taking the lead in establishing communication policy priorities, and in allocating

organizational responsibilities accordingly.

Wle Modified Final Judgment was the 1982 consent agreement entered into by AT&T and the Department of Justice, and Subsequently aPProv~

by the U.S. District Court for the District of Columbia. AT&T retained most long-dlstancc operations and terminal equipment. The Bell operating

companies were spun off and reorganized into seven regional holding companies. They were permitted to offer local monopoly services, as well as toll

services within their restricted operating territories. They could provide new terminal equipment, but could not engage in manufacturing.
Chapter I-Summary ● 2 3

Social Vision-Communication as

Social Infrastructure

This view emphasizes the linkages between

communication, human activity, and social

structures. It focuses on the relationship between access to communication and services,

and access to power, wealth, and position in

society. Hence, in weighing communication

policy choices, it places great weight on equity.

Because proponents of this vision hold that

communication can serve as a means as well as

an end, they often propose communicationrelated solutions to many of society’s problems.

This viewpoint is currently not well represented in the communication policy community.

There are, however, many in the academic

community-specially in departments of communication and social science—who strongly

advocate this point of view. There are also many

educators, health providers, government officials, and citizen activists who see in communication a potential for assisting them in solving

their problems. Communication providers who

could benefit from significant economies of

scale and scope by expanding and integrating

their services would also support this view.

Those who view communication as a means

to accomplish societal ends historically have

tended to grow in number (or at least to become

more vocal) as technological advances in communication give rise to new aspirations. This

was so for the penny press, telegraph, telephone,

radio, and television; and it is likely to be so as

the Nation moves forward in an age of information and advanced communication.

For those who view communication as social

infrastructure, the role for government is to

ensure not only that needed technologies and

communication services exist, but also that they

are available to everyone and will serve all

social purposes on an equitable basis. Thus, they

strongly advocate—in addition to many of the

strategies identified for the Economic Vision

above-congressional strategies that are more

directly designed to improve access. These

would include, for example:

●

●

●

●

●

influencing the means by which communication services are funded and financed;

structuring the prices at which communication and information services are offered;

regulating and redefining the rights of

media-owners;

influencing the level and availability of the

tools and resources required to access

communication and information services;

and

assuming a more proactive role to assure

robust debate on issues of public importance.

Whereas those who adhere to the Economic

Vision might want to limit government’s role if

it appeared to create additional burdens for

business and industry, those who view the

infrastructure more generically might not be so

inclined. Considering all social goals to be more

or less equivalent, adherents of this Social

Vision might also favor the following strategies:

●

●

●

establishing security and survivability

standards for communication systems in

key industrial sectors;

influencing the setting of particular standards by providing direct incentives or by

imposing sanctions where necessary to

achieve social ends; and

mandating industrywide standards where

necessary to achieve social ends.

CONCLUSION

Before selecting communication policy strategies for the future, Congress will first need to

consider how it views the role of communication

in society. This report provides a context for

these considerations by analyzing and reviewing

the changes taking place in the communication

infrastructure. It identifies the range of societal

opportunities that new communication technologies afford, and the problems and issues to

which these new technologies give rise. If

Congress can agree on a consistent vision of

communication goals, many policy choices will

naturally follow. What is first required is a

vision, and a commitment to pursue it.
Part I

Changing Communication

Infrastructure,

Goals, and Policymaking
Chapter 2

Conceptual Framework for

Analyzing Communication Issues
CONTENTS

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

DEFINING KEY TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

The Nature of Technology . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. .. . .. ... .., .....+. . . 30

The Definition of Communication and Other Related Terms . . . . . . . . . . . . . . . . . . . . . . . . 31

A CONCEPTUAL FRAMEWORK FOR ANALYZING POLICY

ISSUES ENGENDERED BY NEW COMMUNICATION TECHNOLOGIES .......+. 34

Existing Conceptualizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

A Model to Guide the Present Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +...... 34

ORGANIZATION OF THE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Figures

Figure Page

2-1. Shannon/Weaver Model of Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

2-20 Communication Process . . . . . . . . . . . . . . . . . . . 4 . . . . . ....+.... . . . . . . . . . . . . . . . . . . . . 33

2-3. Interactive Model of Communication and Society . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Chapter 2

Conceptual Framework for

Analyzing Communication Issues

INTRODUCTION

New technologies create new potential and new

opportunities that change our notions and expectations about what is possible and what is not. In fact,

we have often looked to the development of new

technologies to resolve thorny societal problems that

have no obvious or tractable solutions. However,

past efforts to correctly anticipate the use and impact

of new technologies all too often have fallen short of

the mark.

In the realm of communication alone, for example, the potential of the telephone was not widely

appreciated, although Alexander Graham Bell, himself, had an uncanny prescience about its future use. 1

Nor did radio technology appear very promising—

viewed primarily as a mode for point-to-point

communication, microwave technology was rejected as being too difficult to focus and control.2

More recently, the computer’s role in society has far

exceeded the expectations of its early creators and

developers.3

The gap between expectations and actual experience with new technologies can be explained, in

part, by our limited understanding of the relationship

between technology and society. Attempts to depict

this relationship have typically been unidimensional, focusing either on technology as a driving

force or on a particular set of social forces that has

determined the evolution of technology. However,

experience has proven such conceptualizations to be

far too simplistic. Lacking an adequate understanding of technological development we, as a society,

have been unaware of the realm of choices available.

Thus, we have often been unable to channel technological development in the most positive directions.

Today, we are witnessing profound changes in

communication systems worldwide brought about,

in part, by the development and advancement of a

wide variety of information and communication

technologies. Together, these new technologies

have significant potential to enhance communication and improve social, economic, and political

circumstances in a number of different ways. If, as

a society, we are to maximize this potential and have

a greater choice about how these new technologies

evolve, we will need to improve our analytical basis

for assessing their development.

To this end, this chapter will provide an analytic

framework for assessing the new communication

and information technologies and the alternative

roles that the Federal Government might play in

their development and use. It will lay out a

conceptual model of the relationship between technology and society that takes into account technological developments, social forces, and the values

and roles of individuals and groups who have

authority to make decisions about technology. The

model will be used to define the scope of the OTA

assessment and organize the report. By identifying

the critical points at which choices about technology

might be made, the model suggests the key questions

that need to be raised about new communication

technologies.

IFrom tie ~~~ng, Bell foresaw a network of private telephones that would be available to everyone, rich and Poor alike. But most

others-perhaps because it appeared so soon in the wake of the telegraph-found the telephone unworthy of comment. Totally underestimating the

telephone’s future, William Orton, President of Western Union Telegraph Co., for example, declined the opportunity to buy its patent rights,

pWOrtdlY WYIW: “what use could this company make of an electrical toy?” Sidney H. Aronson, “Bell’s Electrical Toy: What’s the Use? The Sociology

of Early Telephone Usage,” Ithiel de Sola Pool (cd.), The Social Impact of the Telephone (Cambridge, MA: The MIT Press, 1977), p. 16.

2David Swnoff, of NBC, took particular exception to this point of view. In a letter to Edward J. Nally, General Manager of the Mmconi CO., he

proposed taking advantage of the leaky aspects of this technology to develop a “radio music box.” Gleason L. Archer, LL.D,, His[or)’ of Radio b i92tJ

(New York, NY: The American Historical Society, Inc., 1938), p. 112.

3A5 paul Cewzi has pointed out: “[computer progr~ers] had no glimmering of how thoroughly the computer would permeate modern life.

[They] saw a market restricted to a few scientific, military, or large-scale business applications. For them, a computer was akin to a wind tunnel; a vital

and necessary piece of apparatus, but one whose expense and size limited it to a few mstallations.” Paul Ceruzzi, “An Unforeseen Revolution:

Computers and Expectations, 1935 -1985,” Joseph J. Corn (cd.), Imagining Tomorrow Htstory, Technology, and the American Future (Cambridge,

MA: The MIT Press, 1986), p. 189.

-29-
30 . Critical Connections: Communication for the Future

DEFINING KEY TERMS

To develop an analytic framework to examine the

potential impacts of new technologies on communication systems, and to identify the potential ways

that the Federal Government might respond to these

advances, it is necessary to define the concepts, such

as technology and communication, that are used

throughout this report. Such terms are the building

blocks of conceptual analysis. How they are defined

will determine not only the scope of this study, but

also the terms of the debate about, and the range of

options for dealing with, new and emerging communication issues.

The Nature of Technology

Technology can be defined in many ways, both

broad and narrow. Some older definitions, for

example, limit its meaning to specific tools or

machines. Other theorists define technology more

broadly as know-how--"a system of knowledge

intended to have a practical bearing.”4 Beyond this,

a definition of technology can also include the

human processes and relationships required to bring

a scientific idea to lifes

People choose their definition of technology to

suit the questions they are asking and the problems

they must solve. Scientists and engineers, for

example, may have less need to consider human

factors; thus, their definitions concentrate on machines and physical structures such as roads, airports, and nuclear reactors.6 However, a purely

mechanical definition of technology would be inadequate for a study analyzing how technology

might affect communication and communication

systems. In this report, we have defined communication and communication systems as processes in

which individuals and groups come together to

formulate, exchange, retrieve, and interpret information.7 Understanding how technologies might affect

these activities requires a definition of technology

that is broad enough to include the intersection of

physical objects and people. As Todd LaPorte has

said: “One must look at ‘who is technology’ as well

as ‘what is technology'.”8

This report, therefore, defines technology

broadly, incorporating the relationships and transactions of those involved in communication processes.

To maintain this view, while allowing for independent analysis of machines, tools, and techniques, the

technology will be considered an interdependent

(but not necessarily tightly connected) conglomeration9 that, to borrow from Langdon Winner’s categories, comprises:

●

●

●

apparatus: the physical devices of technical

performance, such as tools, instruments, machines, etc.;

technique: the technical activities, such as

skills, methods, procedures, and routines that

people engage into accomplish tasks; and

social arrangements: the relationships that are

established and the transactions that &e place

allowing people to carry out technical processes and to give physical form to their ideas.10

Looking specifically at apparatuses, for example,

this report will consider how new technical applications might affect the formulation, exchange, and

interpretation of information. Focusing on technique, the study will examine issues such as the kind

of technical training and level of socioeconomic

resources that would be required to successfully

implement a new technical apparatus. And, in

examining social arrangements, it will raise a

number of institutional questions about who needs to

cooperate with whom, and in accordance with what

4J~y welnSteln, socio/ogy/Tec~o/ogy Fowu@ions of Post-Academic Science (New Brunswick, NJ: Transaction Books, 1982)* P. xi. See also J.K

Fiebleman, “Pure Science, Applied Science, Technology Engineering: An Attempt at Definitions,” 7’echnofogy and Culture, Fall 1%1, pp. 305-317;

and Charles Susskind, Understanding Technology (Baltimore, MD: The Johns Hopkins Cjniversity Press, 1973), p. 1.

sFor a discussion of technology viewed as “a form of SOCld organization,” see Todd R LaPorte, “Technology as Social Organization,” Institute of

Governmental Studies, Working Paper, 4-384-1, University of California, Berkeley, n.d.

bibid.

TSW followlng ~tion for detailed definition of communication.

8L~o~e, op. Cit., footnote 5, p. ~.

~he notion of a loosely constructed conglomeration has been used here to convey the idea that technology is never a finished product, but is always

evolving in relationship to social forces. In this sense, then, one might think of technology as a process. For a comparison of the characterization of

technology in these two senses, see Jennifer Daryl Slack, “Historical Review of the Concept of Communication Needs With Respect to Technology,”

OTA contractor report, November 1987.

l~angdOnwiMer,AUtowmow Tec/1~/Ogy Techm”cs OutofControlas a Theme in Political Thought (Cambridge, MA: MIT Press, 1977), PP. 11-13.
Chapter 2--Conceptual Framework for Analyzing Communication Issues ● 31

rules and regulations, if new technological apparatuses are to be effectively deployed. The impacts of

new technology on communication and on society

vary according to each of these aspects of technology, and they need to be considered both separately

and in their entirety.

The Definition of Communication and

Other Related Terms

The word “communicate” comes from the Latin

root “communis,” signifying communion or the

idea of a shared understanding of, or participation in,

an idea or event. In this original sense, the word

communication was used as a noun of action that

meant “to make common to many (or the subject

thus made common).”l 1 Toward the end of the 17th

century, the notion of imparting, conveying, or

exchanging information and materials was incorporated into the concept. 12 Although modern dictionaries tend to adhere to the latter definition,13 both

connotations continue to survive in everyday

speech. Their dual usage can, at times, be a source of

confusion in discussions about communication. *4

Academics and researchers have generally defined communication in accordance with the sender/

receiver model developed by Shannon and Weaver

in their work on information theory. 15 As depicted in

figure 2-1, this model characterizes communication

as a systemic process, the main components of

which include: sender, message, transmission,

noise, channel, reception, and receiver. Although

originally developed to account for technical aspects

of information transfer, this model has had a much

more general appeal and has been used to examine

many forms of communication.l6

Notwithstanding its past popularity and its record

of versatility, the sender/receiver model is not

particularly well-suited to many of the tasks required

for this study, which seeks to address the entire range

of policy issues raised by new communication

technologies. Policy issues generally entail points of

conflict, and this model is not designed to draw

attention to them.17 The rather passive notions of

“message,“ “sender,” and “receiver,” for example,

draw attention to the problems of effective communication and downplay any problems involved in, or

issues about, who gets to formulate, send, and access

information, on what bases, and with what objectives and effects. Nor does this model provide a basis

for raising questions and issues about communication goals. Effectiveness and efficiency are simply

presumed to be the most appropriate measures for

evaluating communication processes.

The sender/receiver model is also much too

orderly to adequately describe many of today’s

mediated communication processes. It assumes that

communication takes place as a consistent, linear

sequence of events-an assumption that is not

supportable in today’s technology-mediated inforIIDmjelJ. czjtrom,~ediau~~~e A~er~ca~~jnd(chap[ Hj]l, Nc: The University of North Carolina Press, 1982), p. 10. It wascle@’ this definition

that the philosopher, John Dewey, had in mind when he wrote in Democracy and Education: “Society not only continues to exist by transmission, by

communication, but it may fairly be said to exist in transmission, in communication. There is more than a verbal tie between the words common,

community, and communication. Men live in a community in virtue of the tiings they have in common; and communication is the way in which they

come to possess things in common. ’’John Dewey, Democracy and Educatwn (New York, NY: Macmillan Co., 1915), as cited in Czitrom, supra, p. 108.

lz~eu~ of thetem t. designate thephysic~ means of communication evolved during the period of rapid development of railroads, c~ds, and rOd.

For a discussion, see Raymond Williams, Keywords: A Vocabulary of Cuhre and Society (New York, NY: Oxford University Press, 1976), pp. 62-63.

IsWebster’s NW collegiate DictWnary, for ex~ple, defines communication as “an act or instance of transmitting,” and m “a process by w~ch

information is exchanged between individuals through a common system of symbols, signs, or behavior.”

14czjfrom, op. cit., fOOt.nOte 11, P. 10

IsClaude Sh-on and Wmen Weaver, The Mathe~tica/ Theory of Communication (Urbana, IL: University of Illinois press, 1949). P. 5. The

sendertieiver model has recendy fallen on hard times as many communication researchers have become interested in elements of communication that

are downplayed by the model, such as context, formal constraints of media, and cultural norms. For a discussion of other models of communication and

a comparison of their strengths and weaknesses, see C. David Mortensen, Communication The Study of Human Interaction (New York, NY: McGraw

Hill Book Co., 1974), ch. 2, pp. 29-65.

16Poljtjc- scientists, for exmp]e, have emp]oy~ this conceptu~izatlon to study propaganda and its eff~ts. It hu dso been used h mass media

studies to describe the one-way flow of information to mass audiences, and feedback in the form of buying ckxisions and comments to broadcasters.

Sociologists have integrated it into their structural/functional models to examine the efficiency or effectiveness of organizational communication. The

sender/receiver model has even been used in conjunction with humanistic models of interpersonal communication to explain problems in

understanding as “breakdowns.”

17 Joseph F. coa~s, “what IS a public Policy Issue?” (Washington, DC, n.d.), P. 29. AS descri~.

- “A public policy issue may be defined as a

fundamental enduring conflict among or between objectives, goals, customs, plans, activities or stakeholders, which is not likely to be resolved

completely in favor of any polar position in that conflict.”
32 ● Critical Connections: Communication for the Future

Figure 2-1-Shannon/Weaver Model of Communication

< \

Sender Transmission —> Message *

4

A @

Channel Reception Receiver

+$%

Feedback

SOURCE: Office of Technology Assessment, based on Claude Shannon and Warren Weaver, The Mathematical Theory of Comrnur’tication (Urbana, IL:

University of Illinois Press, 1949), p. 5.

mation environment.18 With a computerized bulletin

board, for example, how does one identify and

distinguish between who is the sender and who is the

receiver? And, similarly, who is considered the

sender when the receiver can now access information on demand?

To focus on potential areas of conflict, this study

requires a model that highlights interrelationships

and interdependencies among people and institutions. And, to bring the new technologies into play,

it needs a multi-directional way of thinking about the

process of communication. To meet these two

requirements, this study will define communication as the process by which messages are

formulated, exchanged, and interpreted. These

activities are considered to be related to one another

in a process, insofar as they are all required for an act

of communication to take place. But the process is

not necessarily linear, nor does it entail a predictable

sequence of events. In fact, there are numerous ways

in which these activities can be brought together, as

can be seen in figure 2-2.19

Defining communication broadly in this fashion,

it is clear that, just as it is becoming increasingly

difficult to view communication technologies as

being separate from information technologies, the

process of communicating can no longer be viewed

as a mere transmission process, separate from the

information that is being communicated. Thus, the

analysis of new technologies will look at developments in information retrieval, processing, and

storage, as well as information transmission and

exchange. Similarly, the analysis of communication

providers and the relationships among them will

focus not only on the providers of communication

channels and pathways, but also on the creators and

users of information content.

Communication processes do not occur in a

vacuum; rather, they are facilitated and sustained by

an underlying network of individuals and institutions that provides the means and mechanisms for

formulating, exchanging, and interpreting information, and for establishing the necessary linkages

between these activities. In pre-industrial societies,

such networks might entail a number of institutional

structures such as kinship groups or caste systems;

in advanced industrial societies, they are generally

constructed around a complex set of technologies,

assuming the broad definition of technology given

above.

20 In this report, this entire network of

apparatuses, knowledge resources, and institutional

arrangements that support communications will be

referred to as the communication infrastructure.

When such communication processes, technologies, and organizational and institutional relationships become established over time, they give rise to

lgNor does tie line~ m~el apply to interpe,rmna] communications. lt ignores the reciprocal aspects of communication and the fact that liste

very much active participants. For the first interactive model that takes the reciprocal nature of communication into account, see Wilbur L.

The Process and Effects of A4uss Communication (Urbana, IL: University of Illinois Press, 1954).

lgwhen tie sequence of a communication process becomes established as a recognizable and predictable pattern of events, it takes on tie Um

what can be called a communication system. By “system” we mean, at the most basic level, a cyclical pattern of interlocking behavior based o

expectations about what is taking place.

Zo’r’his is not to say fiat sociaj networks do not play a significant role in advanced industrial societies in facilitating the formulation, excha

interpretation of information. In trying to understand the impact of new communication technologies on society, one important research

concerns the extent to which technologies replace these social networks, and with what eff’cxt.
Chapter 2--Conceptual Framework for Analyzing Communication Issues . 33

Figure 2-2-Communication Process

SOURCE: Office of Technology Assessment, 1990.

an accepted set of values, functions, behavioral

norms and practices, and rules about how communication decisions should be made. Considered in their

entirety, these institutional and organizational relationships, the infrastructure that sustains them, and

the norms that regulate and reinforce their behavior

will be referred to as the communication regime.21

The communication regime is both nested in and

sustains the larger social system of which it is apart,

for communication is the basis for all human

interaction and one of the means for establishing and

organizing society. Communication is the process

by which all social activity is conducted; without it,

a society could not survive. It is the means by which

group norms are established, expectations are

voiced, individual roles are assigned, change is

enacted, social control is maintained, and activities

are coordinated.22

Communication also allows the individual to

function in society. Only through interaction with

others do individuals acquire the tools of language

and the shared sense of reality they need to establish

intimate relations and to cooperate to achieve

common goals.23 Through acts of communication,

people define themselves—their sense of uniqueness as well as their self concepts—and negotiate

and sustain a position and place in the world.24

Supporting all forms of human activity, communication runs like a thread entwined throughout the

course of history. As Lucian W. Pye has described

it:

Communications is the web of human society.

The structure of a communication system with its

more or less well-defined channels is in a sense the

skeleton of the social body which envelops it. The

content of communications is of course the very

substance of human intercourse. The flow of communications determines the direction and the pace of

dynamic social development. Hence it is possible to

analyze all social processes in terms of the structure,

content, and flow of communications.25

How the communication regime is ordered, therefore, is likely to have a significant impact on society,

just as changes in society are likely to have a

zl~e tem “regime” is borrowed from the field of international politics, where: “Regimes can be defined as sets of implicit or explicit principles,

norms, rules and decision-making procedures around which actors’ expectations converge in a given area of international relations. Principles are beliefs

of fact, causation, and rectitude. Norms are standards of behavior defined in terms of rights and obligations. Rules are specific prescriptions or

proscriptions for action. Decision-making procedures are prevailing practices for making and implementing collective choice.” Stephen D. Krasner,

(cd.), “Structural Causes and Regime Consequences: Regimes as Intervening Variables,” /nternutionul Regimes (Ithaca, NY: Cornell University Press,

1983), p. 2.

~Martin Lawrence LeFleur, Theories of Commum”cufion (New York, NY: David McKay CO. Inc., 1970). See also Lucian W. Pye (cd.),

Conwwnhztwns and Poiiticuf Development (Princeton, NJ: University Press, 1%3), p. 4.

~Don~d P. ~hman and mdley D. Cahn, Jr., Communication in lnterpersonul Relarwnsk”ps (Albany, NY: State University of New Ymk press,

1985). See ASO Dorud Qrbaugh, “Communication Systems: Exploring the Role of Information Technologies,” OTA contractor report, December 1986.

2%id.

25fie (~.), op. cit., footnote **$ P. 4.
34 ● Critical Connections: Communication for the Future

considerable effect on the nature of the communication regime. Thus, in order to identify and understand the policy issues raised by new communication technologies, it is first necessary to construct a

clearer picture of the relationships between technology, the communication infrastructure, and society.

A CONCEPTUAL FRAMEWORK

FOR ANALYZING POLICY ISSUES

ENGENDERED BY NEW

COMMUNICATION

TECHNOLOGIES

Theoretical models are abstractions or simplifications of the real world as viewed from a particular

vantage point. By defining critical relationships,

such models serve as maps to guide researchers

through extraneous materials to relevant questions

and interesting insights. It will be useful, therefore,

to begin the investigation of how new technologies

might affect the realm of communication and society

by conceptualizing how new technologies interact

with society, and how choices about these technologies are made.

Existing Conceptualizations

There is ample literature that seeks to explicate

the causal relationships between technology and

society.26 Some thinkers on the subject posit that the

role of technology is supreme, dictating social and

economic relationships. In his work, The Technological Society, 27 Jacques E1lu1, for example, argues

that the shape society takes is but a mere reflection

of technique. In similar fashion, Harold Innis

concludes, in The Bias of Communication,28 that it

is the modes of communication that determine the

structure of society, a theme later developed by

Marshall McLuhan in The Medium is the Massage.29

The opposite proposition-that social systems

structure technological developments—can be

found in the tradition of Lewis Mumford. For

example, in Technics and Civilization, Mumford

contends that the invention of the clock was almost

inevitable because the rigid schedule of monastic

life required it.30 More recently, this perspective

resounds in the works of those who represent the

“critical school” of communication.31

Acknowledging situations in support of both

propositions, many scholars and researchers are now

developing models about technology and society

that are based on the interdependence and interaction of the two.32 It is on this interactive model of

technology and society, which is historically more

realistic, that this and subsequent chapters will be

based. 33

A Model to Guide the Present Analysis

The analytic framework that will be used in this

assessment is depicted in figure 2-3. The key

elements of this model are:

● the existing communication regime;

. the interactions between technological advances and social forces;

%e study of technology and society has a long history going back two centuries to the works of Adam Smith, Henri Saint-Simon, and Karl Marx.

In fact, it was the growing interest in technological developments that gave rise to the field of sociology. Interest has intensified in recent years as both

scholars and policymakers have sought to anticipate and ameliorate the unintended consequences of the deployment of technology. Once again, these

interests have given rise to a new field of study, that of technology assessment. For three very different accounts of the history of ideas about technology,

see Weinstein, op. cit., foomote 4; Winner, op. cit., footnote 10; and Jennifer Daryl Slack, Communication Technologies and Socie~: Conceptions of

Causality and the Politics of Technological /intervention (Norwood, NJ: Ablex Publishing Corp., 1984).

~Jacq@s E1lu1, The Techndogicai Society (New York, NY: Knopf, 1964).

28H~old hmk, The Bias of Communication, 1951 (Toronto: University of Toronto Press, Reprint, 19’71).

29Marahall McL~an, The Medium is Ihe Massage (New York, NY: Random House, 196’7).

3WW1S M~fmd, Technics and Civilization (New York, NY: Harcourt Brace& CO., 19153).

31&., forexaple, Richwd Collins et ~. (eds.), Media, cult~e a~Society,A critical Re~er (~don: SAGE fiblications, 1986); S= ilkso, Michael

Gurevitch et al. (eds.), Culture, Society and the Media (Lxmdon: Methuen, 1982).

32s= Slack, Co-w”c@”om Techw/ogies, op. Cit., foo~ote 26, p, 7, for a disc~sion of ~ese approaches. It ~ould be noted hat these models differ

with respect to the degree and timing of how society and technology influence one another. According to one school of thought, technology is essentially

neutral before it has been developed. And it is only as technologies are exploited and molded in accordnce with particular social, economic, and political

conditions that it takes on a determining force of its own. For this view, see Clifford Christians, “Home Video Systems, A Revolution?” Journul of

Broadcasting, vol. 17, Spring 1973, pp. 223-234. Others think of technologies as being biased in favor of particular outcomes at the moment of their

conception because they are envisioned and designed with certain purposes and practices already in mind. For this perspective, see Raymond Williams,

Television Technology and Cuhral Form (New York, NY: Schockien Books, 1973).

SSTVVO OTA Workshops, “~~acterlzing tie us. Communication System” (Jan. 9, 1987) and “Tracking Technology: A Workshop TO Identify the

Ingredients of Change” (Dec. 15, 1986), were important sources of information and insight for this conceptualization.
Chapter 2--Conceptual Framework for Analyzing Communication Issues ● 35

Figure 2-3-interactive Model of Communication and Society

El Potential opportunities

and constraints stakeholders and

R

posed by declslon-making

new technology 2a 3 b4b

SOURCE: Office of Technology Assessment, 1990.

● Potential opportunities and constraints generated by new technologies;

. the key stakeholders and decisionmaking processes; and

. the outcomes of decisions about new technologies.

To follow this model, begin by focusing on the

existing communication regime and trace the interactions and interrelationships between these elements (from 1 through 5 and back to the starting

point). The arrows in figure 2-3 depict what are

considered to be the most critical relationships.

Existing Communication Regime

As defined above, the communication regime

consists of the:

a.

b.

norms, values, goals, and roles that sustain and

maintain communication within a given realm;

communication infrastructure that supports

and facilitates communication processes; and

c. decisionmaking processes and the rules and

regulations that govern how the communication regime is managed and regulated.

As demonstrated in figure 2-3, the communication regime is not a closed system; it is influenced

both by decisions that are made about the regime

itself [4a] and by decisions that are made about new

communication technologies [5a]. Moreover, the

communication regime will also affect the larger

society, of which it is a part. Because communication is essential to all social activities, how the

communication regime operates will affect all social, economic, political, and cultural activities [la],

as well as the values and positions of key decisionmakers [lb]. Activities within the communication

regime will also affect the level and direction of

technological development [lc].

Interaction of Social Forces and

Technological Advances

Technological advances involving communication are the product of decisions made about
36 ● Critical connections: Communicationfor the Future

technological opportunities [5b] and the activities

that take place within, and the outputs of, the

communication regime [lc]. These technological

advances are constrained in their effects on society,

however. They are tempered by social forces (e.g., as

economic and demographic trends) and major historical events (e.g., such as war or a depression) that

may give rise to needs and conditions that can either

foster or inhibit certain technological applications.

The particular form or application of a new technology will also be shaped by the play of social forces

and the conditions under which it is brought into

use.

34 If the social and technological infrastructure is

inadequate to exploit the benefits of new advances,

some technologies may never be applied at all.35

Together, technological advances and social

forces interact to create new ways of carrying out

economic, political, cultural, and social activities, as

well as new opportunities and constraints [2a]. The

interaction of technological advances and social

forces also creates new communication needs and

desires, and changes stakeholder perceptions of their

interests [2b].

Potential Opportunities and Constraints

Engendered by New Technologies

In figure 2-3, social forces and technological

advances are viewed as converging to create new

possibilities that, depending on how and by whom

they are experienced, might be viewed as either

potential opportunities or potential constraints. An

opportunity in one realm of life, for example, maybe

a constraint in another—just as something that

benefits one person may create a problem for

another.

Technological advances might give rise to new

economic opportunities for some people, for example, by creating new markets for old products,

making possible new products, reducing production

costs, or allowing newcomers to enter old markets.

However, these same advances might establish new

economic constraints for some producers if they

increase the rate of obsolescence of some of their

products, increase the number of their competitors,

and/or reduce their market shares. Similarly, new

political opportunities might be generated if technological applications reduce the costs for individuals

and groups to participate in political processes, or

increase their access to decisionmakers or to potential allies and supporters. But to those in the political

process who may be circumvented by new technological applications, these developments will be

perceived as a new constraint. The emergence of

such opportunities provokes some stakeholders to

reassess their needs, values, interests, resources, and

traditional alliances, and to adjust. Other stakeholders may remain unaware of the significance of the

changes, or be unable or unwilling to alter their

behavior. Depending on their responses, the relative

position and status of stakeholders are likely to

change [3a].

Key Stakeholders and

Decisionmaking Processes

Whether or not new technological possibilities are

developed, and how these opportunities and constraints are distributed among individuals and

groups throughout society, will be determined by the

decisions that are made about them in the context of

existing institutional structures, laws, and practices

[4a]. And such decisions will, in turn, depend on

who the key decisionmakers are; how they perceive

their needs and interests and goals and objectives in

the light of new technologies; and the power and

authority that they have to determine events.36

Decisions about technology will be made consciously or inadvertently. They will be made in a

3dFor a description of how soci~ forces have affected the design and development of communication technologies, see LeFleur, OP. Ck. footnote

22. As he points out, these forces often override the idealistic aspirations and hopes that are attached to technological change. The development of the

penny press is one example. Many social reformers hoped that it could be used to re-establish a broad moral and political consensus across the United

States after the turmoil caused by the Civil War. Social and economic conditions worked against them, however. The penny press emerged not only in

a period of cultural upheaval and transition, but also in a period of intense competition for advertisers and readers. Instead of trying to improve the

cultural and moral standards of people, newspaper publishers felt compelled to adopt any sensationalist device so long as it would bring in additional

readers. Czitrom, op. cit., footnote 11, pp. 92-93.

s%uch WN the CZIS in ancient Alexandria, for example. Although inventors had the theoretical knowledge necessary to create prhitive versions of

a steam engine and a wheeled cart, these ideas lay dormant and only became practicable in application centuries later in conjunction with tie industrial

revolution. Winner, op. cit., footnote 10, pp. 73-74, More recently, this problem has become evident in a number of developing countries where

government leaders have been disappointed by the failure of a high technology to take hold and catapult their nations into a new, modem era. W.W.

Rostow, The Stages of Economic Growth (Cambridge, England: University Press, 1971).

sb~isionm~ers have genel-~ly found such opportunities quite threatening. For an historical account of the conservative role that COrnrnUniC~iOn

stakeholders played with respect to new technological developments, see Brian Winston, Misunderstanding Mediu (Cambridge, MA: Harvard

University Press, 1986), pp. 15-34.
Chapter 2-Conceptual Framework for Analyzing Communication Issues ● 37

variety of arenas—the scientific/technical community; the marketplace; and the social/organizational,

political, and cultural arenas. However, in any

particular instance the outcomes of such decisions

will be determined by, and reflect the preferences of,

those who, within the relevant context, have the

authority and/or the resources to structure the

choices of others.

Outcomes of Decisions About

New Technological Opportunities

As decisions about new communication technologies are made, it will become clear which opportunities and constraints will materialize, and who will

win and who will lose as a result.37 These decisions,

moreover, will affect all elements of the model,

setting the entire complex of interrelated changes

into motion once again.

Clearly, this framework is a simplification of the

complex set of factors and interactions that come

into play when new technologies confront society.

However, by identifying critical relationships, it

suggests the key questions to be examined and issues

to be raised in identifying and analyzing future roles

that the Federal Government might play with respect

to new information and communication technologies. In this fashion, the framework provides the

underlying rationale for the scope and structure of

this report. As described below, the organization and

the subjects of the chapters reflect the flow and logic

of this model.

ORGANIZATION OF THE REPORT

To assist Congress in determining appropriate

communication goals for an age of information and

advanced communication, this report is divided into

three parts. Part I (incorporating boxes 1 and 2 in the

model) examines the U.S. communication regime

and how it is being altered in response to technological advances and changing social forces. It includes

chapter 2; chapter 3, which discusses the norms,

policy goals, and rules that govern relationships in

the communication infrastructure; and chapter 4,

which examines how technological changes are

affecting the interdependencies among producers,

distributors, and users of communication facilities.

Part 11 (encompassing box 3 in the model)

examines the potential opportunities and constraints

posed by new technologies in four realms of life.

Chapter 5 looks at how new communication technologies can be employed to create comparative

advantage in the business arena, and the issues and

policy implications to which these new possibilities

give rise. Chapter 6 focuses on the role of new

technologies in the political arena, and its impact on

democratic processes. Chapter 7 examines what

effect new technologies might have in allowing for

broader participation in the shaping and development of culture, and what public policy steps might

be required for such possibilities to be realized. And

chapter 8 considers whether and how new communication technologies might be used to facilitate or

detract from individual efforts to achieve personal

autonomy and self-realization.

Part III (covering boxes 4 and 5 in the model)

analyzes the crosscutting communication policy

issues engendered by technological change, and

identifies and evaluates alternative policy strategies

and options for their resolution. Chapter 9 focuses on

issues involving equitable access to communication

opportunities. Chapter 10 looks at issues concerning

the security and survivability of the communication

infrastructure. Chapter 11 examines the problems

and issues entailed in achieving interoperable communication systems. Chapter 12 considers the requirements and policy alternatives for modernizing

the Nation’s communication infrastructure. And

chapter 13 analyzes the jurisdictional issues that are

likely to arise in formulating and implementing a

national communication policy.

37For a ch~actefiation of how ~ese d~isions Me made in communication policy, see Vincent Mosco, Pushbutton Fantasies (Norwood, NJ: Ablex

Publishing, 1982), figure 2-2, p. 26.
Chapter 3

New Technologies and Changing

Interdependencies

in the Communication

Infrastructure
CONTENTS

Page

INTRODUCTION .. .. .. .. .. .. .. .. .. ... .+. . . . . . . . .. .. .. .. .. .. .. .. .. ... +.. ..+.... . . . 41

THE COMMUNICATION INFRASTRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

THE IMPACT OF TECHNOLOGY . . . . . . . . . . . . . . . .. .. .. .. .. .. .. ... ... ...+.... . . . . . 43

THE TECHNOLOGICAL EVOLUTION OF THE COMMUNICATION

INFRASTRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. .. .. .. .. ... ... .....+. 44

The Technical Characteristics of the Communication Infrastructure . . . . . .........+.. 44

Technological Trends Affecting the Communication Infrastructure. . . . . . . . . . . . . . . . . 45

STRUCTURAL CHANGES IN THE COMMUNICATION INFRASTRUCTURE . . . . . 67

Globalization of the Communication Infrastructure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

The Growing Importance of the Large User in Defining the

Communication Infrastructure .. .. . . .+ . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. +. . . . . . . . . .69

Vertical Integration of Key Industry Players and the Rise of the System Integrator . . . 70

Multiplication of Communication Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Boxes

Box Page

3-A. The Intelligent Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

3-B. Factors Affecting the Development of Residential Broadband Services . . . . . . . . . . . 49

3-C. Repeaters, Bridges, Routers, and Gateways . . . . . . . . . . . . . . . . . . . .. . ... ... ...+..+. 64

3-D. Major Trends in the Local Area Network (LAN) Industry . . . . . . . . . . . . . . . . . . . . . . . 65

Figures

Figure Page

3-1. Diffusion of Technological Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

3-2. Continued Deregulation and the Growth of Intelligent Carrier Networks Should

Foster Rapid Growth in the ISDN Services Market Through the Next Decade. ...,. 51

3-3. The Number of Integrated Services Digital Network Trials Throughout

the Country Doubled in Just a Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

3-4. Intelligent-Network Equipment Markets: Annual Revenue by Equipment Type.... 55

3-5. Consumer Videotex Subscriber Growth Leading Services: 1983 to 1990 . . . . . . . . . . 56

3-6. How a Consumer’s Credit File Can Travel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Tables

Table Page

3-1. Types of Computers Used in Network Components . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

3-2. Computer Costs, Capabilities, and Speed Over Time ..,.... . . . . . . . . . . . . . . . . . . . . . 46

3-3. Fast-Packet Technology Promises More Options and Greater Flexibility . . . . . . . . . . 48

3-4. Switching Technologies: Percentage of Total Access Lines .,... . . . . . . . . . . . . . . . . . . 54

3-5, Domestic Shipments of Telecommunications Equipment by Major Product

Categories, 1975-2000, .. .. ... .,, ......4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... ..+..... 58

3-6. World Telecommunications Equipment Market . . +. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Chapter 3

New Technologies and Changing Interdependencies

in the Communication Infrastructure

INTRODUCTION

The communication infrastructure, which supports and negotiates the flow of communication

within society, is a critical social structure. How it is

constituted, and the rules that govern its use, will

greatly affect the nature of all social interaction. The

technical characteristics of the infrastructure, for

example, limit the kinds of messages that can be

exchanged, the ease and speed of exchange, and the

fidelity of the messages. Similarly. the infrastructure’s architecture-how facilities are arranged and

distributed-will determine who will be able to

communicate, under what conditions, and with what

degree of effectiveness.

The form the communication infrastructure takes

is determined by decisions made in the marketplace,

as well as in the public, governmental arena. These

decisions are greatly influenced by the economic

relationships, or interdependencies, that exist among

those involved in the formulation, exchange, and

interpretation of information. And these interdependencies will depend, in turn, on the nature of the

technological environment. Although at first glance

the term “infrastructure” may suggest a permanent

technological apparatus, the communication infrastructure, configured around economic interdependencies, is in fact very susceptible to technological

change.

To establish optimal rules for governing the

Nation’s communication infrastructure in the future,

Congress will need a more accurate picture of how

technological advances are changing the communication infrastructure, its relationships, and its interdependencies. For, as Don R. Le Duc has pointed out

in his analysis of broadcasting policies, all too often

Federal communication policies have failed for lack

of consideration of private market incentives and

imperatives. 1 To assist in understanding these variables, this chapter will:

●

●

●

●

define the communication infrastructure and

describe how it develops and evolves in

relationship to changing technology;

identify and describe the major technological

changes likely to impinge on the present

infrastructure;

provide a brief overview of the U.S. communication infrastructure, and identify and describe

the major changes that are now taking place

within it; and

identify and describe the potential implications

of these changes for communication policymakers.

THE COMMUNICATION

INFRASTRUCTURE

To analyze how technological advances might

affect communication, it is useful to view the

communication infrastructure from a systems perspective. 2 Such a perspective is particularly useful

for analyzing change because it focuses on the

interdependence of social structures rather than on

their more static, or constant, attributes.3 For, as

defined by social psychologists Daniel Katz and

Robert L. Kahn:

All social systems consist of the patterned activities of a number of individuals. Moreover, these

patterned activities are complementary or interdependent with respect to some common output or

outcome . . .4

IJJon R. b DUC, Beyond Broadcasting Patter-m in Policy and Law (New York, NY: Longrnan, 1987), P. 8.

2There is an ~nomOu~ literature on he prope~les and behavior of social systems, See, for ~.xample, Daniel Kam and Robert L. Kahn, The Socia/

Psychology of Orgardzatwns (New York, NY: John Wiley & Sons Inc., 2d cd., 1978); J.G. Miller, “Living Systems: Basic Concepts,” Behavioral

Science, vol. 10, 1965, pp. 193-237; and Taicott Parsons, The Social System (Glencoe, IL: Free Press, 195 1). In using a systems approach, it is important

to avoid the problem of reification-that is, speaking of systems as if they possess a personality, Systems are not “real,” but rather arc “interpreted” or

“enacted” by their participants. See Eric Goffman, Frame Analysis (New York, NY: Harper and Row, 1974).

qKa~ and Kahn, op. cit., footnote 2, p. 22.

qlbid., p. 21. See also Karl E. Weich, The Social Psychology of Organizing (New York, Ny Random HOW% 1979).

4 1 –

89-148 0 - 90 - 2 QL 3
42 ● Critical Connections: Communication for the Future

Systems come into being as a result of, or in order

to facilitate, exchange transactions.5 Each transaction has a goal and some criteria for judging the

success or failure of the interaction.6 Over time, the

relationships within social systems gain a degree of

stability and consistency as certain kinds of behavior, attitudes, values, and criteria come to be

associated with carrying out certain kinds of activities. Such expectations are generally socially reinforced and sanctioned.7

Although relatively stable, social systems are

responsive to their environments and subject to

change and dissolution. As Katz and Kahn point out:

As human inventions, social systems are imperfect. They can come apart at the seams overnight, but

they can also outlast by centuries the biological

organisms that originally created them. The cement

that holds them together is essentially psychological

rather than biological. Social systems are anchored

in the attitudes, perceptions, beliefs, motivations,

habits, and expectations of human beings.8

A system’s continuity will depend on the extent to

which it produces outcomes that fulfill the expectations of its participants, and on whether it generates

the necessary incentives to sustain a given social

activity. Insofar as these relationships are contrived-that is, people invent them by reenacting

complex patterns of behavior—psychological factors, such as attitudes and expectations, will be

critical to their existence.

In accordance with this analytic frame of reference, the communication infrastructure can be

characterized as a social system. Building on the

definition of communication established in chapter

2, the infrastructure is comprised of interdependent

relationships among individuals and groups who

cooperate to provide the means and mechanisms for

formulating, exchanging, and interpreting information, and for establishing the necessary relationships

among these activities. Together, this entire network

of apparatuses, knowledge resources, and institutional arrangements, which supports all forms of

communication, constitutes the communication infrastructure.

in the U.S. communication infrastructure, where

so many communication functions are carried out in

the private sector, economic criteria and economic

interdependencies provide the primary context in

which relationships are determined.9 And the marketplace provides the major institutional mechanism10 by which the signals and incentives that

induce individuals and groups to interact with one

another are transmitted and exchanged.ll For example, market prices reflect costs of production, and

consumer behavior will reflect market demand.

Economic situations are generally based on the

principle of rationality-that is, the certainty of the

relationship between means and ends. It is assumed

that people know what they want and how to transact

to attain it. In an economic transaction, then, the

SFor ~ di~cm~ion Of ~x~hange ~ansactions, se L.B. Mohr, “The Concept of Organizational Goal,” The American political Scieme Revi@, VO1. 67?

1973, Pp. 470481.

6HOwever, the= in~rde~ndencles we not necessarily established around equal relationships; nor do tie pales involved need to shine common

goals. In order for these relationships to form, the people involved must believe that their ability to achieve their objectives will depend on what others

do. For discussions, see Weich, op. cit., footnote 4, and J.D. Eveland, “Stakeholder Relationships in Communication Systems,” OTA contractor report,

October 1987.

T’rhe exwtations ~Wclated ~~ tie behavior of someone pforming a p~icul~ task, or occupying a p~icul~ position, me cdld “roles.’” whi31

individuals interact to accomplish a task, it can be said that they are in a reciprocal role relationship, and that their behaviors are governed by mutual

role expectations. Because role relationships can be aggregated at any level. one can view society-or any subunit within it, such as the communication

infrastructure-as a complex network of systematically interlinked units of reciprocal role behaviors.

gKa~ and Kahn, op. cit., foomote 2, p. 37.

$’Exchange transactions and role behavior are not carried out in isolation, but within complicated sets of related goals, roles, rules, criteria,

aasurnptions, and expectations about behavior and the outcomes sought, which are called “contexts.” A context is embodied in language, descriptive

vocabukuy, and understanding of the implicit relationships between the parties involved in an interaction. It is the framework in which the construction

and enactment of particular situations take place. Thus, for example, what distinguishes a family dispute from a manager-employee quarrel is less the

absolute behavior, or even the words and body language, than the underlying assumptions about differences between family and organizational relations.

People’s assumptions about what outcomes they and others are seeking are central-in short, the criteria bcirtg used by oneself and others. For analytic

discussions of the notion of context, see L. Smircich, “Implications for Management Theory,” L. Pumam and M.E. Pacanowsky, Communication and

Organizatwn: Anlnteqwetive Approach (Beverly Hills, CA: Sage Publication, 1983), and P. McHugh, Defining the Situation (Indianapolis, IN: Bobbs

Merrill, 1968).

l~ere we, Ofcom=, a v~ety of other polltlcal and ~cia] institutions that carry out parallel functions in other areas. For a discussion, wx “M~kets!

Bureaucracies, and Clans,” Adminisfrutive Science Quarter/y, vol. 25, 1980, pp. 129-142.

llIt should ~ not~ hat Cmlng out any role is heavily dependent on info~ation. We need information, for ex~ple, to te]l us what effect our

behavior is having, what outcomes are being achieved, as well as what criteria are being satisfied,
Chapter 3--New Technologies and Changing Interdependencies in the Communication Infrastructure ● 43

emphasis is placed on the transaction rules of

rationality, reciprocity, and competition.

By establishing the rules of behavior and the basic

incentive structure in which economic players interact, national goals and public policies will also

greatly affect the communication infrastructure. A

discussion of communication policy and its impacts

will be deferred, however, until the next chapter.

THE IMPACT OF TECHNOLOGY

As is the case in all social systems, the set of

relationships that constitutes the communication

infrastructure is subject to changes in its environment. One external factor likely to have a major

impact is technological change. Technological advances will clearly affect such things as economies

of scale, the availability of product substitutes, and

the costs of production. As Porter has described:

Technological change is one of the principal

drivers of competition. It plays a major role in

industry structural change, as well as in creating new

industries. It is also a great equalizer, eroding the

competitive advantage of even well-entrenched

firms and propelling others to the forefront. Many of

today’s great firms grew out of technological

changes that they were able to exploit. Of all the

things that can change the rules of competition,

technological change is among the most prominent.12

To a considerable degree, the impact of technological developments on the infrastructure will

depend on the rate and speed of their diffusion.

Although the diffusion of new technologies generally follows an S-shaped curve,l3 as depicted in

figure 3-1, the rate at which a specific technology is

adopted will depend on a number of factors, making

it difficult to assess the long-range impact of

technological change.

Because the infrastructure as a whole is comprised

of hundreds of technologies coexisting, each at

different points on their diffusion curves, how

quickly communication innovations will be adopted

will be highly dependent on factors such as interconnectivity and the interdependence of content and

equipment.

14 Although these technologies often

appear to be competing, in many cases the growth in

one medium will actually support growth in others.

For example, the popularity of music videos on cable

television reinforces the sales of audio recordings

rather than substitutes for them.15

But network interdependence may also retard

innovation. For example, once users have invested

in equipment conforming to a particular standard,

they will be reluctant to purchase any equipment that

is incompatible. Users will invest gradually as old

equipment wears out or is written off.l6

As Everett Rogers has pointed out, the growth of

a new product, although slow at first, will quicken

with the development of a critical mass of users. This

pattern occurs because the value of any communication system increases for all with each additional

adopter. 17 Diffusion will also increase because new

communication media are used as tools whose

applications will multiply as they are adapted to new

and different tasks .18

The deployment rate of new communication

technologies will depend not only on the role that

users play, but also on how communication and

information providers react to technological advances. To channel technological change in their

favor, communication-related businesses might

lz~chael poner, CoWetitive Advantage: creating and sustaining Superior Performance (New York, NY: The Free press, 1985)! P. 164.

13~~ysE have mapped tie life cycles of t~hnologic~ innovations on “diffusion curves” that plot the number of uSCrs adopting tie Product over

time. For discussions, see J.C. Fisher and R.H. Pry, “A Simple Substitution Model of Technological Change,” Technological Forecasting and Social

Change, vol. 3, 1971, pp. 75-88; Ralph Lenz, Rates of AdoptionlSubstltution in Technological Change (Austin, TX: Technology Futures, Inc., 1985);

and David Rink and John Swan, “Product Life Cycle Research: A Literature Review,” Journul of Business Research, vol. 7, 1979, pp. 219-242.

IdEverett M. Rogers, Cowm”catlon Te~hno/ogy: The New Media in Socieo (New York, NY: The Free Press, 1986), pp. 116-149.

15~en two or more means of Commwlcatlon seem t. fulfill the s~e f~ction for potenti~ users, tiey can both smivc if each develops a particular

niche in the marketplace. This is what happened, for example, with the introduction of television, which forced radio to become more of a local medium,

financed through Iocat advertising revenues. For a discussion of niche markets, see John Dimmick and Eric Rothenbuhler, “The Theory of the Niche:

Quantifying Competition Among Media Industries,” Journal of Communication, vol. 34, No. 1, Winter 1984, pp. 103-119.

16For exmple, ~o~ in tie s~e of compact disc players is dependent on he av~lability of prerecorded compact discs. Thus, actions that df~t the

availability of discs will stifle growth in the sale of players as well. See John Quinn, “Help CDs Reach Their Market Potential,” “Commentary, ’’Bif/board,

Dec. 12, 1987, p. 9.

ITSWRogem, op. Cit., fm~ote 14, p. 120. See also Lyme Mwkus, “Toward a ‘Critical Mass’ Theory of interactive Media, ’’Commuw”cation Research!

October 1987, pp. 491-511.

18Rown, op. cit., footnote 14* p. 121”
44 ● Critical Connections: Communication for the Future

Figure 3-1--Diffusion of Technological innovation

-

units

adopted

time -–+

The classical diffusion curve is S-shaped, with the rate of change in

the number of units adopted increasing until a ‘‘crltlcal mass’ point (x),

at which the rate of growth reaches zero, then becomes negative. Growth

continues to slow until the market IS saturated Penetration stays at this

‘ ‘plateau’ unless new consumers enter the potential-adoptor pool (which

causes new growth), or unless another Innovation replaces the product

(which causes a gradual decline)

SOURCE: Office of Technology Assessment, 1990.

seek, for example, to control patent developments,

integrate markets, and/or employ the regulatory

system to their advantage. Such strategies were

adopted, for example, by Theodore Vail on behalf of

AT&T in the years between 1879 and 1894.19

According to Brian Winston, these defensive responses on the part of business give rise to what he

has labeled “the law of the suppression of radical

potential.” This law, he says:

. . . operates firstly to preserve essential formations

such as business entities and other institutions and

secondly to slow the rate of diffusion so that the

social fabric can absorb the new machine.20

To understand how technological changes might

impinge on the communication infrastructure, it is

necessary to examine the changing technological/

economic context in which communication decisions are being made, as well as the potential ways

in which key communication industry players might

respond to such changes.

THE TECHNOLOGICAL

EVOLUTION OF THE

COMMUNICATION

INFRASTRUCTURE

The Technical Characteristics of the

Communication Infrastructure

The technical characteristics of the communication infrastructure establish the range of communication opportunities available and how they are

allocated throughout society. More specifically, the

technical functionality of the infrastructure will

determine the following aspects of a communication

system or facility:

●

●

●

c

●

●

●

●

●

●

●

●

capacity (speed and volume of data transmission);

flexibility (how easily the system can be

modified);

versatility (the extent to which the system

supports a wide range of applications or services);

interoperability (the degree to which facilities

can transfer information or share resources

automatically);

timeliness (overall speed of message exchange);

fidelity (the extent to which the technical

quality of a message is compromised by

transmission or playback);

security (the ability to protect messages);

survivability (the degree of resistance to natural

or manmade crises, as well as the extent and

speed at which a system can be restored);

reach (the extent of a system’s or facility’s

service area);

openness (the ease with which the system and

the service components that comprise it can be

accessed);

penetration (the density of the facilities within

a served area); and

usage (the levels of usage by those within a

service area).

l!lFOr an ~ccO~t of ~e~e ~rategles, see Gerald Bro~k, The Teleco~unicatlom /rrdKslry The Dynamics of Market structure (Cambrid

Harvard University Press, 1981).

zOBI-ian w~~on, ~lsu~ersltz~lng ~e&a (Cambridge, MA: Harvard University Press, 1986), pp, 24-25. This law, argues Winston, “explains tie

delay of the introduction of television into the United States which lasted at least seven years, excluding the years of war. It explains the period, from

around 1880 to the eve of the First War, during which the exercise and control of the telephone (in both the United States and the United Kingdom) was

worked out while its penetration was much reduced. it accounts for the delays holding up the long playing record for a generation and the videocassette

recorder for more than a decade. ”
Chapter 3-New Technologies and Changing Interdependencies in the Communication Infrastructure ● 45

Technological Trends Affecting the

Communication Infrastructure

The technical characteristics and capabilities of

the communication infrastructure will be significantly affected in the future, given a number of

recent technological advances and developments.21

These developments can be summarized in terms of

the following trends.

Greatly Improved Performance at

Decreasing Costs

Performance has improved in all technical aspects

of content production, encoding, transmission, decoding, and storage/retrieval. More than any other

trend, this development will have an all-pervasive

impact on the communication infrastructure. For

many of these improvements result from advances in

computer technology which, as can be seen in table

3-1, is ubiquitous throughout communication systems. The impact of these advances on the cost and

performance of computer technologies can be seen

in table 3-2.22

A critical factor in creating such performance/cost

ratios has been the rapid advances in microelectronics resulting from the development of very large

scale integration (VLSI) .23 VLSI allows the placement of over 106 logical operations on a single

integrated circuit chip, and this number is doubling

every 18 months. Given this level of integration,

communication within computers can take place

much more rapidly and efficiently; bits no longer

have to travel between chips over shared buses when

the source and destination both reside on the same

chip. Over the past 20 years, chip densities have

increased several orders of magnitude.24

Improvements in materials and in the use of

gallium arsenide (GaAS) in the production of chips

will also permit greater integration. All siliconbased materials have a 0.2 micrometer limit to line

width and therefore a limit to possible circuit density

per chip. Because gallium arsenide has a smaller

limit, it permits more logical operations per chip;

chips designed using this material therefore offer

greater speed. In the more distant future, the speed

and size limitations of electronic devices will be

overcome by using optical computing elements .25

According to Ian M. Ross, President of AT&T Bell

Laboratories, by the year 2000, it will be possible to

place 1 billion components on a single silicon chip

using these technologies.26

Advances in computer architectures and software

have also helped to harness the processing power in

27 In the Past, SwitCh

-

communication applications.

ing mechanisms were used to replicate the manual

operations entailed in placing a telephone call. The

development of common channel signaling and

intelligent databases now permits network switches

to operate as computers, making real-time routing

decisions based on the status of the network, call —.

zlFor addition~ discu..sion of advances see, for example, Jo~ s Mayo. “Materials for Information and Communication,” Scientific American,

October 1986; Frank D. Reese, “Technology” Yesterday, Today and Tomorrow,” TE&A4, Jan. 15, 1988, p. 3: Bethesda Research Institute, “Study of

Communications and Information Processing—Technologies, Structure, Trends, and Pollcy Considerations,” OTA contractor report, 1986; U.S.

Congress, Office of Technology Assessment, lnjbrming the Nation Federal lrformali(~n Dusemlmmon in an Electroruc Age, OTA-CIT-396

(Washington, DC: U.S. Government Printing Office, October 1988); Deborah Esmn, “Communication Systems for an Information Age: A Technical

Perspective,” OTA contractor report, December 1986; “Telecommunications: The World on !he Line,” The Economist, Nov. 23, 1985; “Hello Again:

The Future of Telecommunications,” IEEE Spectrum November 1985.

zzB~lett w Me] et ~l., “Tablet: persona] Computer In tie Yew 2000,’” CoMunicariom oj rhe ACM, June 1988, pp. 639-646; and G. pmd Zachary,

“Awaiting the Next Generation of Personal Computers,” Tht Washington Post, July 11, 1988.

zJEstrin, op. cit., fOOttIOtt? 2], pp. 12- I ~.

z41bid.

zsIbld. One of tie problems wl~ such denwly mtegated chips is [he Complexity of design. For his reason, much effofi has shifted to developing VLSI

design technologies to allow exploitation of current and future densities. This is one example of a syndrome evident in many areas of information

technology. The underlying hardware developments have outstripped our ability to exploit the complexities that they introduce. At the same time, these

hardware capabilities may be the key to solv]ng some of the problems of complexity by rclievlng some constraints and by supporting increasingly

complex design, development, and management tools.

z~such advances can ~ made, according t. Ross, by t~lng advantage of ul~aviole[ and electron beam and x-ray iitho~aphy, IIICrGMIIlg the SIZe Of

chips, and moving to three-dimensional chip architectures. Ian M. Ross, Keynote Address fi)r Publicatmn in the Conference Proceedings of the 1988

Bicentennial Engineering Conference, Sydney, Australla, Feb. 23, 1988.

27VLSI is being u~d to SUppOII new computing architectures that provide for massive parallel processing (which dlow$ COrnputerS to Perform a

number of operations simultaneously, rather than one by one). These architectures include dataflow, hypercube, and connection machine. VLSI also

supports special-purpose architectures for specialized applications such as array processor image processing. These computing structures will eventually

be found in the telecommunication system as swnching components and as components of uwrs’ systems. Once again, the state of’ the art in operating

systems and programming languages for thew parallel architectures lags behind the systcm ar, hlmcture itself, just as the system architecture lags behind

the device technology.
46 ● Critical Connections: Communication for the Future

Table 3-l—Types of Computers Used in Network Components

Network component Types of computers used Examples

Modem . . . . . . . . . . . . . Integrated circuits Hayes Smartmodem, Xyplex Nonwire, CASE Communications

Series 4000, IBM 5866, Telindus Hyacinth

Multiplexer . . . . . . . . . . ICs, microprocessors CCC ADCoMM 96/48, Aydin Monitor Systems T1 multiplexer

Matrix switch, PABX . . Microcomputers, minicomputers Bytex Autoswitch, M/A-Corn IDX750 Data PBX, T-Bar DSM

Series 2001

PAD, network interface,

protocol converter . . ICs, microprocessors ACC IF-370/DDN interface, BBN Communications C/10 PAD

Packet switch . . . . . . . . Micro-minicomputers BBN Communications C/300 PSN, M/A-Corn CP9000 Series II

Gateway . . . . . . . . . . . . Micro-minicomputers, parallel

processors XMITxGATE 625, BBN Communications Multi-Corn X.25 Gateway

Network management

& service systems . . Micro-minicomputers, PCs, workstations Northern Telecom DFMS, BBN Communications C/70 NOC,

IDA-COM PT protocol tester

Key: ICS = Integrated clrcu!ts, LATA = local access and transport area, NOC = network operations center, PABX= private automatw branch exchange, PAD

= packet assembler/disassembler, PBX = private branch exchange, PCs = personal computers, PSN . packet-switched network.

SOURCE: Reproduced by special permission of Te/ecmrrrrwricatiorrs magazme.

Table 3-2-Computer Costs, Capabilities, and

Speed Over Time

Decade Computer costs, capabilities, and speed

1940 . . . . In 1945, it cost about $1,000 to do 1 million

operations on a keyboard and took at least a

month.

1950 . . . . In 1952, it cost about $300 to do 1 million

operations and took 10 minutes.

1960 . . . . In 1960, it cost $75 to do 1 million operations and

it took 1 second.

1970 . . . . Computers can do 1 million operations for less

than 6 cents in about 1/2 a second.

1980 . . . . Computers can do 1 million operations for 1/10 of

a cent in 1/1O of a second. Cost per 100,000

calculations decreased to $0.0025 in 1980.

1990 . . . . Between 1983 and 1997, computer costs to

decrease by a factor of 100 with a 20 to 30%.

decrease in manufacturing costs.

SOURCE: Copyright 1989 by CMP Publications, inc., 600 Community

Drive, Manhasset, NY 11030. Reprinted from Cornrrrunicatior?sWsek with permission.

loads, and the characteristics of callers.28 As depicted in box 3-A, using Signaling System 7—the

international standard for common channel signaling—telephone company central offices can both

exchange information on, as well as query databases

about, the called or calling number.29

With new developments in switching technologies, these kinds of intelligent network operations

can be executed with much greater flexibility and at

increasing speeds .30 Fast packet-switching has been

an important development in this regard.31 This

technology is similar to conventional (X.25) packetswitching in a number of ways. Like conventional

packet-switching, fast packet-switching makes optimal use of a transmission channel. It breaks messages up into small bundles, or packets, each of

which carries with it its own address; then interleaves them on a channel, taking advantage of the

“silences” present in the information stream; and

finally routes them throughout the network to their

destinations where they are reassembled. Fast

packet-switching offers the advantages of greater

speed and flexibility. Whereas conventional packetswitching is suitable for data only, fast packet

28JamesE. Holcmb, “me Nex[-&neration Switch,” Bell Comrnunicatwns Researt3h Exchange, September/October 1987, pp. 23-27; and Mldergmd

Pusch, “Aspects of CCS7 Network Configurations,” Telecommunications, October 1987, pp. 240-251.

Z9A,S discus~ below, it is in fact this protocol that will provide the underpinnings of ISDN and the advanced intelligent network of the 1990s. See

William Stallings, “Demystifying SS7 Architecture,” Telecommunications, March 1989, pp. 41-44,46,48. See also Paul Korzeniowski, “The Intelligent

Transformation, ’’CommunicatiomWeek, CLOSEUP, May 30, 1988..

s~or a discussion, s= Richard Vickers and Marek Wernik, “Evolution of Switch Architecture and Technology,” Telecommunications, May 1988,

pp. 55,58,60,62-64. As the authors note, this flexibility and speed is gained by separating the functions of call control from connection control, allowing

for the establishing of virtual circuits, which provide logical rather than physical end-to-end connectivity. See also Denis Gilhooly, “Which Way for

Broadband Switching?” Telecommunications, June 1987, pp. 36, 38-39,42, 45; and A.M. Rutkowski, “Emerging Network Switching Technology and

Applications,” Telecommunications, Febmary 1987, pp. 40-41,44,46,48,50.

slpacket.s~tch~g Wm developed for data Communication betw~ncomputers. Digit~ information is packaged into small pi~cs Calld packets, each

containing information about the source and destination of the data and the relationship of that piece to the whole message. The packets are transmitted

separately through the network, sometimes taking different paths depending on which ones are free at the moment. Packet-switching systems incorporate

computers into the network in such a way as to make data transmission far more efficient. It is cheaper, faster, more accurate, and elimimtes some

incompatibilities.
Chapter Mew Technologies and Changing Interdependencies in the Communication Infrastructure ● 47

Box 3-A—The Intelligent Network

The intelligent network is comprised of four basic elements. These include:

● A Service control Point (SCP), which consists of a centralized database that uses algorithms and customer

instructions to route messages;

. A Common Channel Signaling System (CCS7) that provides out-of-band, packet-switched communications

among network elements;

● A Service switching point (SSP) that consists of local and tandem-switching nodes designed to carry out

low-level, high-volume functions such as dial tone, announcements, and routing. The SSP performs

functions as directed by the SCP; and

. An Operations Support System (OSS) that provides for network planning, engineering, provisioning,

monitoring, maintenance, and repair.

How these elements relate to one another to provide service can be seen in the figure below.

25

/

/

/

)2SSP — —

Q..\ 0ss

II

/ “eCCS7 —

/’

/ ‘0——\\

SCP

v

SSP: Service Switching Point

SSP

CCS7: Common-Channel Signalling No. 7

SCP Service Control Point

a OSS: Operations-Support Systems

SOURCE: Art reproduced by special permission of Te/ecomnwnicatiorw magame.

To envision how this network operates,

consider what happens with an 800 call.

When an 800 number call is generated, it

is sent to the SSP, which identifies it as an

800 call. At this point the SSP sends the

number, together with other information

about the calling party, to the SCP via the

CCS7 signaling network and asks for

further instructions about how to treat this

call. The SCP searches its database, translates the received 800 number into a

standard telephone number, and returns

this telephone number together with a

routing instruction to the SSP, which then

routes the call to its correct destination.

SOURCE: Paul Bloom and Patrick Miller, “Intelligent Network/2,” Telecommunications, June 1987, p. 58.

technology can be used to switch voice, data, and each other without interfering, whereas electrons get

video images in an integrated fashion (see table 3-3). in each other’s way. Because high speeds permit

Also, fast packet-switches can transmit hundreds of massive parallelism and new kinds of architectures,

thousands or millions of packets per second, while photonic computers could have 1,000 times more

conventional ones operate at a rate of only a few power than today’s electronic computers.34

thousand packets per second.32

Advancements in transmission technologies are

Even greater switching speeds can be anticipated keeping pace with, if not exceeding, those in

in the late 1990s, when optical switching is expected switching. Developments in fiber optics, which

to become a practical reality .33 Optical switches will provides an excellent medium for transmission, have

operate at much greater speeds than electronic been most significant. With minimal transmission

switches because beams of photons pass through loss, fiber allows many more signals to travel over

szDaVl(J P. HelfriCh, “F~ Packet Switching: An @eIView,” Telecommunications, November 1988, p. 68. See also James Brackett, “Fast Packet

Switching: A TWorial,” Telecontmu nicutions, November 1988, pp. 65, 67-68, 70-72, and 76.

33U~ike optic~ ~a~mission, optical Switching is still a la~ratov t~hno]ogy and is likely to be used only in specialized applications well dU

the end of the decade. Bell Laboratories in the United States and several commercial research laboratories in Japan currently lead the world

state-of-the-art fiberoptic research and development. See J. Lenart, S. Su, and L. Jou, “A Review on Classification of Optical Switching Systems,” I

Commuw”cutions Maguzine, vol. 24, No. 5, May 1986. See also Michael Warr, “There Are No FIN~ Frontiers,” Te@~nY, Dec. 14, 1987.

34Enc E, S-er, “Te]Womunication~ Technolo~ in fie 19$)os,’” Te/eco~~icatio~, January 1989, p. 38. See also h Greenfeld, “Opt.iC

Computing,” Computerworfd, June 26, 1986, pp. 83-89.
48 ● Critical Connections: Communication for the Future

Table 3-3-Fast-Packet Technology Promises More Options and Greater Flexibility

Plans for

Current Planned standardized

maximum maximum multivendor Functions

Network technology speed speed interoperability supported

ISDN . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5 million bit/sec. 100 million bit/sec. Yes Voice, data, video, image

Traditional circuit-switched

networks. . . . . . . . . . . . . . . . . . . . . 45 million bit/sec. 100 million bit/sec. No Voice, data, video, image

Packet-switched networks . . . . . . . . . 64 thousand bit/sec. 1.5 million bit/sec. No Data

Fast-packet . . . . . . . . . . . . . . . . . . . . . 1.5 million bit/sec. 100 million bit/sec. Yes Voice, data, video, image

SOURCE: Copyrght 1989 by CW Publishing Inc., Framingham, MA 01701. Reprinted with permission from Cornpuferworki

longer distances with smaller numbers of repeaters

than does copper wire.

35 In addition, the capabilities

of lightwave transmission are doubling every year,

a trend that is likely to continue for another decade.

Already, commercial systems have been developed

that transmit 1.7 billion bits of information per

second on a single pair of glass fibers, an amount

equivalent to 24,000 simultaneous phone calls.36 In

the future, the use of laser systems and wavelength

division multiplexing on a single fiber will push

transmission capabilities into the range of 20 gigabits per second.37 With wave division multiplexing,

each fiber optic cable can accommodate multiple

channels by assigning each data stream a different

wave length or color.

Given these advances, it is clear that any constraints on the deployment of fiber technology will

be economic, not technological. Although fiber is

increasingly being used for interoffice trunk lines,

and even in some local loop facilities for business

users, it is not expected to be extended to the home

(with the exception of new construction) for a

number of years.38 For most of the residential

community, fiber loop systems are still not economically viable; splicing and cabling costs are still high,

and high-speed multiplexing is not as yet cost

effective. The demand for fiber in the local loop is

still uncertain; most of the services in which

residential users have shown an interest can be

provided through the existing network, or, as in the

case of video services, through alternative distribution channels such as cable TV and videocassette

recorders.39 Given its superior quality as a transmission medium, it is clear that fiber will eventually

work its way into the home.40 However, how and

when this will happen will depend on a whole range

of variables, a number of which are listed in box 3-B.

The major barrier to further improvements in the

cost/performance ratios of information and communication technologies is in the area of software

development. Software is pervasive throughout

communication systems. and accounts for approximately one-half the cost of many systems. And

programs are not only becoming larger in size; they

are also much more complex. For example, a

switching machine that in 1965 might have consisted of 100,000 lines of code would today require

more than 2 million.41 Thus, to fully exploit technological advances in other areas, software development will need to keep pace. Currently, however,

software productivity is lagging behind hardware

development.

sSCommerci~ly av~]ab]e fiber optic techno]ofl operates in the 500 million megabits-per-second range. However, fiber optics can cw data rates

in the tens of billion gigabits-per-second range. Rates should increase in the future with the use of single mode fibers and coherent

modulation/demodulation schemes, By 1990, two gigabit-per-second speeds should be commercially available. Estrin, op. cit., footnote 21, p. 17.

Sbsumer, op. cit., footnote 34, p. 38.

sTEN.rin, op. cit., footnote 21, p. 16.

38For one dis~ussion, ~ RO&=~ M. Pepwr, “T~Ou~ he ~Ok~g Glass: Integrated Broadband Networks, Reg~atory policies and hlstitutional

Change,” Working Paper No. 24, Federal Communications Commission, Office of Plans and Policy, 1988.

s~ordiscussions, ~Grd~ Finrue, “The Disciples of Fibre,” Telecommunkation,}, January 1989, p. 11; I-es Hewitt and Mark Pitchford, “Making

the Transition: Fiber Winds Its Way Home,” Tefephony, Feb. 15, 1988, pp. 35-39; Herb Brody, “The Rcwlring of America,” High Technology Business,

February 1988, pp. 34-38; Bo Vikltmd, “Fiber Optics in the Local Loop,” Telecommumcations, May 1987, pp. 66, 68, 72; Graham Finnie, “Lighting

Up the Local Loop,” Telecornmunicaftons, January 1989, pp. 31-32, 37-38, 40; Lloyd F. Eh-lsk, “Neighborhood Fiber: Putting a Laser in Everyone’s

POTS,” Telephony, Feb. 20, 1989, pp. 27-28; and Tom Valovic, “The Rewlrmg of America: Scenarios for bcal-Loop Distnbutlon,”

Telecommun icatwm, January 1988, pp. 30-31, 34, 36.

~stirrtates are that within 2 to 4 years the cost of providing “plain old telephone w-vice” with fiber in the local ioop will be less than the cost of

providing POTS with copper wire. For a discussion, see Pepper, op. cit., footnote 38, ~]. 12.

llsumner, op. cit., footnote 34, p. ~S.
Chapter 3-New Technologies and Changing Interdependencies in the Communication Infrastructure ● 49

Box 3-B—Factors Affecting the Development of Residential Broadband Services

● the current level of penetration of analog coax-based CATV;

. PUC thinking as to the justification for BOC fiber-optic deployment;

● B-ISDN: technical advances in optical and fast-packet switching;

● demand for advanced information services in the residential setting;

c technical advances in video compression, HDTV, and other broadcast areas;

s convergence of the computer, publishing, and broadcast industries;

c ongoing deployment of fiber in the local loop by the BOCs;

. advances in LAN transmission over unshielded twisted-pair wire;

. investment incentives for BOC acceleration of CO switch upgrades;

. anticipated significant cost reductions in fiber-optic technology;

Q the renewal of major cable franchises in the mid-1990 time frame,

● the threat of virtual remonopolization posed by a systems approach;

. the role of satellite transmission in television broadcasting; and

● current service demand levels as defined by POTS and entertainment video.

KEY: B-ISDN = broadband integrated services digital network, BOC = regional Bell operating company, CATV = community antenna

television, CO= central office, HDTV = high definition television, LAN = local area network, POTS = plain old telephone service, PUC

= public utility commission.

SOURCE: Reproduced by special permission of Telecommunications magazine.

The Convergence of Communication Functions, ingly difficult to distinguish between the functions

Communication Media, and Communication

Products and Services

Technological advances over the last decade have

also led to the convergence of communication

functions and communication media. For example,

data processing and telecommunication were once

clearly distinct sets of operations. carried out by

quite different economic actors. This is no longer the

case.

42 Digital switching and data processing now

serve as the centerpieces of modern communication

networks, and the networking of computers into

local area networks, metropolitan networks, and

wide-area networks is fast becoming the norm.43

With the deployment of fast packet-switching and

the integration of further intelligence into the

telecommunication network, it will become increasof switching and transmission. 44 To exploit the

economic opportunities presented by this convergence, businesses that once were limited to providing telecommunication services are now joining

forces with data-processing companies; and those

that traditionally have focused on data processing

are seeking to align themselves with those who have

an expertise in transmission.45

One major technological advance contributing to

this trend is digitalization-the process of transforming “analog” messages (a spoken word, a

picture, a letter) into signals made up of discrete

pulses that can be transmitted, processed, and stored

electronically. When in a digital form, audio, video,

and textual messages can be combined and recombined, allowing information to be integrated in a way

IZSW Stuti N, Brotman, “~tegration in Key Communication Industries: Business ,md P >Ilcy Considerauons,” OTA contractor report, June 1988.

43.sW discussion klow.

%ihong Kim, “The Evolution of Transmission Systems for the Next 10 Years,” Telecornrnunicutiom, Aug. 10, 1987. Some examples noted by the

author are statistical multiplexer, digital cross-connect systems, concentrators, and switches with built-in optical fiber interfaces such as DS3. See also

A.M. Rut.kowski, “Telecommunication Sandcastles: Boundaries That Have Outlived Their Usefulness,” Telecommunications, June 1987, p. 8; and

Richard Solomon, “Broadband ISDN: With Compulers, the Sum IS Always Greater Than th,,, PM-B,” International Networks, vol. 5, No. 2, Sept. 15,

1987.

lsFor exmples, and a r~ge of discussions, see John Foley, “Nynex Acquisition Strengthells Position as Systems Inte~atOr,” CommunicationsWeek,

June 20, 1989, p. 8; Carol Wilson, “The ‘New’ IBM Beckons to Telcos to Become Technology Partners,” Telephony, Mar. 21, 1988, p. 8; “DEC Scores

Partners,” Comrnu nicationsWeek, May 29, 1989, p. 1; Neil Watson, “HP Boosts T] MUX. Packet Switch Offerings,” CommunicationsWeek, Apr. 10,

1989; Christine Bona!leld, “AT&T Targets SNA Customers,” CommunicarionsWeek, Iune 20, 1988, p. 1; Timothy Halght, “IBM Buys Into Fiber

Company,” CommunicationsWeek, Jan. 16, [ 9W, p 20: and Peter Purton, “Olivetti Expand< Into Telephones,” Telephony, Mar. 6, 1989, p. 22.
50 ● Critical Connections: Communication for the Future

that previously was impossible.46 As Stewart Brand

has described this phenomenon:

With digitalization all of the media become

translatable into each other---computer bits migrate

merrily-and they escape from their traditional

means of transmission. A movie, phone call, letter,

or magazine article may be sent digitally via phone

line, coaxial cable, fiberoptic cable, microwave,

satellite, the broadcast air, or a physical storage

medium such as tape or disk, if that’s not revolution

enough, with digitalization the content becomes

totally plastic—any message, sound, or image may

be edited from anything into anything else.47

Digitalization was first introduced into the shorthaul exchange of the telephone network in the early

1960s, and into the long-haul sectors and local

exchange markets in the 1970s. With the development of digital loop technologies providing digital

connectivity to the customer, it became possible to

offer digital data services.48 The development of,

and growing demand for, these kinds of services

further encouraged digitalization.49 Transmitting

digital data is much more efficient than transmitting

analog data; in digital systems, data do not have to

be converted into tones simulating a voice signal.

Improvements in the performance and reliability of

digital technologies, together with a reduction in

their size and cost, have also fostered this trend.

Given these incentives to deploy digital technologies, it is likely that the interoffice telephone

network will be almost totally digital by 1990, and

that almost the entire local exchange will have

acquired digital capability by the year 2000.50

The development of lightwave technology has

also spurred the trend towards convergence. Given

the generous bandwidths provided by fiber optics,

telecommunication providers, for example, are no

longer technically precluded from transmitting highspeed video images. According to one estimate, a

broadband integrated services digital network (BISDN) could provide “four network-switchable

channels with the capability of delivering current

analog-type video services or future high-definition

television on more than 100 megabits per channel.”51 Thus, with broadband networks, telephone

companies will be candidates for providing video

services at the leading edge.”52

Epitomizing this trend toward convergence is the

much touted B-ISDN.53 Based on a common set of

standards, 54 B-ISDN envisions a universal and

ubiquitous system designed to provide efficient

broadband interconnection for all possible communication services. Because it would not require

separate systems for voice, data, and video, such a

network would be truly integrated. To provide such

~he trend towards digitalization reflects the fact that digital technology is inherently more efficient than analog. In an analog network, data have

to be converted into tones simulating a voice signal; in a digital system, the transmission of data does not require special processing. Digital technology

has also been improved in terms of performance and reliability, while its cost and size have been significantly reduced. For a discussion, see Don R,

Gibson and John M. Curry, “New Techniques for Digital Transmission,” Telecommunications, January 1988, pp. 68-71.

qTStew~ Brand, The Media f..ub: Inventing the Future at MIT (New York, NY: Penguin Books, 1988), P. 19.

4Wti, op. cit., foomote 44.

@Accordingto tie ~p~mentofcommerce, (iatacornmunication increased by almost 40 percent between 1970 and 1985. See A Primer onlnregrated

Services Digital Network: Implications for Future Global Communications (Washington, DC: NTIA, U.S. Department of Commerce, September 1983).

S%awrence K. Vanwon, Ralph C. Lenz, and Richard S. Wolff, “How Fast Is New Technology Coming?” Telephony, Sept. 18, 1989, pp. 47-52.

SIM FW~ue Mesiya, “~plementation of a Broadband Integrated Service Hybrid Network, ’’fEEECommunication Magazine, vol 26, No. 1, J~uary

1988.

52whe~er or not hey we free t. do s. from ~ ~egu]atov ~r5Wct1ve i5, of course, a different question. AS Robc~ pepper notes: “There are significant

regulatory and legat obstacles to telephone companies expanding those fiber networks into broadband networks if, realistically, the only broadband

service they see as worth offering in the foreseeable future is video programming. ” Pepper, op. cit., footnote 38, p. 19.

S3AS defined by fie Consultative Committee for International Telephone and Telegraph, Study Group XVIII, ISDN constitutes: “A network evolv~

from the telephone ISDN (Integrated Services Digital Network) that provides end-to-end connectivity support for a wide variety of services, to which

users have accessby a limited set of standards and multipurpose customer interfaces. ” In practice, ISDN has come to mean different things to different

people and in diffenmt contexts. For some general discussions, see Tom Valovic, “Fourteen Things You Should Know About ISDN,”

Telecommunications, December 1987, pp. 37-38,40, 42; Rolf Wigand, “Integrated Services Digital Networks: Concept, Policies, and Emerging Issues,”

Yourrud of Communication, vol. 38, No. 1, Winter 1988, pp. 29-69; and Lou Feldner, “Some Unresolved Questions on ISDN in a Competitive

Environment,” Harry M. Trebing and Patrick C. Mann (eds.), Alternatives to Traditional Regulation: Options for Reform, Proceedings of the Institute

of Public Utilities, 19th Annual Conference, 1987, Michigan State University Public Utility Papers, East Lansing, MI.

$$standar~ for ISDN are being established by the Consultative Committee for International Telephone and Telegraph (CCITV. Ail of the standard

ISDN interfaces are based on a multiple of a digital voice-grade channel (64 kilobits per second). These include the Basic Rate Interface, or 2B+D format,

which provides a total channel capacity of 144 kilobits per second, and the Primary Rate Interface, or 23B+D format, which provides the equivalent to

a T1 channel, that is, a total capacity of 1.544 megabits per second, and broadband ISDN. which provides dynamically configurable charnels, or packets,

at rates up to 150 megabits per second transmitted via an optical interface. Valovic, op. cit.. footnote 53, p. 37.
Chapter 3-New Technologies and Changing Interdependencies in the Communication Infrastructure ● 51

capability, this network will take full advantage of

both digitalization and lightwave technology.

The development of B-ISDN is still essentially in

the planning stage, although recent standards developments have been quite promising.55 Most ISDN

activity has been limited to trials of narrowband

ISDN applications, and most of these have been

relatively modest. There are, for example, only

about 70 large customers who are either involved in

ISDN trials, or who are using commercially released

ISDN products.56 However, the rate at which trials

are being undertaken has been increasing, and the

market for ISDN is predicted to grow significantly

over the course of the next decade (see figures 3-2

and 3-3).

A number of factors have accounted for the slow

diffusion of ISDN into the telecommunication

infrastructure. The fact that there is a large embedded investment in the existing network is probably

the most important one. Private users, in particular,

have already expended significant amounts of time

and money developing their own sophisticated data

communication systems, most of which would be

incompatible with ISDN technologies.57 Also, the

purported benefits of ISDN, while appealing in

theory, have yet to be demonstrated in practice.58

Given such uncertainty, it may be difficult to

convince users to purchase ISDN-related products

and services at prices sufficiently high to cover the

cost of their development and implementation.59

This problem of pricing is compounded by the fact

that there is no real historical basis for pricing what,

Figure 3-2-Continued Deregulation and the Growth

of Intelligent Carrier Networks Should Foster Rapid

Growth in the ISDN Services Market Through the

Next Decade

Revenue in $ billions

12 ;

10 i

81

61

’89 ’91 ’93 ’95

SOURCE: Comwmht 1989 bv CW Publishimt Inc., Framirmham, MA 01701.

Rep;in;ed with p&mission from -Computerwo%.

in reality, is an experimental service.60 The long and

cumbersome process of achieving standardization

will also delay the deployment of ISDN. Without

finalized standards, vendors have been very reluctant to develop ISDN-compatible products.6l

The major push for ISDN will come from the

public telephone companies, Because it will allow

them to offer the kind of sophisticated services that

business users will need in the future, such as virtual

networks and customer control, the telephone companies view the development of ISDN as the critical

component of their strategies to compete with

alternative service providers.62 Telephone compass~e of~e mom fiw~ant rmentevents has been the international agreement reached on a standard for the Synchronous OPtiCd Network (SONET’)

interface. For discussions, see Rodney J. Boem, “SONET: The Next Phase,” Telecommunications, June 1989, pp. 37-38, 40; Gilbert L. Pringle, “Sonet:

Problem or Opportunity,” Telephony, Aug. 14, 1989, pp. 61-63, 65; and Thomas C. Miller, “Sonet and BISDN: A Marriage of Technology, ’’Telephony,

May 15, 1989, pp. 32-35,38.

sbs~ja Girsh~~, “Ge~ng Up for ISDN’S,” CommunicationsWeek, CLOSEUP, Apr. 17, 1989, p. 37.

sT’’Ultfiately, Me choice ~tw~n a single public B-ISDN and separate, specialized, incompatible networks turns on the extent Of long-run eCOnOmies

of scale and scope in telecommunications, and on the cost of gateways to connect incompatible systems.” William Lehr and Roger G. Nell, “ISDN and

the Small User: Regulatory Policy Issues,” Center for Telecommunications and Information Studies, Columbia University, 1989, pp. 11, 19.

58For ~scu=ions, ~~~n E. Mier, “ISDN: Another version of the Emperor’s New Clothes,” Data CommUnlcatlonS, ~cem~r 1986? PP. 45-60;

Sarah Underwood, “ISDN on Trial,” Damnation, Feb. 1, 1987, pp. 51-56; and Candee Wilde, “ISDN: Let the Buyer Believe,” CommunicationsWeek,

Feb. 27, 1989, p. 44.

59sa Ka&l=n Kfllet~, “Con~overS1~ costs,” COmnlcatiomweek, cLosE~, Sept, ] 8, 1$)88, p. C8; and J3mce page, “cost k the Key, ”

Computerworld, Dec. 12, 1988, p. 72.

%id.

blEliza~~ Hot-witt, “ISDN-H~gry Users Finding They’re on a Restricted Diet,” Computerwork.i, Feb. 27, 1989, p. 1.

~For one disc~sion, see Tom Valovic, “Will ISDN Replace Lam?” Teiecommurucafions, September 1987, PP. 67-68,70.
52 ● Critical Connections: Communication for the Future

Figure 3-3-The Number of Integrated Services Digital Network Trials Throughout the Country

Doubled in Just a Year

/)~- Seat t Ie —..—

/

< -- 7

Port land /’ / “-’

!BSan Francisco

s

‘\

=.

\ P hoe n i x ‘ - -

D e nver

~

. .

St. Louis

Ottawa, Canada

.9

\

Toronto, Can ada 7/

— . . _ J1

.— —. -L

‘ ‘.( New York

/’ L,, /m‘( ❑ ‘ “ ’

t o n

\ 1 ~ Red,B&t k, N J

\ H r r;s>’urg ■ ●

L

/’ Pittsburgh ■ \

Am

-. Atlant a

\

\

Birmingham ■

“=----- - \ DalIas

198 6

‘\\ —.

Ull!l!l

/-- ““ \ ‘V”=.

Houston

.

\

198 7

/’~ . Austin ‘– - ‘

‘\

198 8

\

/’

\ /

\

\

—1

‘\]\ P h i Iadeph ia

,<

\

I

:(JacksonviIIe

\

SOURCE: Copyright 19S8 by CW Publishing Inc., Frammgham, MA 01701 Reprinted with permission from Corr?puterworki

nies are already offering a number of Centrex The effects of digitalization will be experienced

services 63 that are designed to maintain, and even far beyond telecommunication. By providing the

regain, their business customers and provide a capability to integrate and process voice, video, and

transition to ISDN.64 However, because the tele- text, digitalization will also give rise to a wide range

phone companies have a large embedded investment of multimedia applications, some designed to run on

in older equipment, they plan to move from narrow- desktop computers.65 Although this multimedia

band ISDN to broadband ISDN in an evolutionary, industry is currently only in its infancy, it is expected

rather than a revolutionary, fashion. One major to constitute a $7 billion market by 1994.66

dilemma they face is that, by the time telephone

companies can provide broadband services, other One use of this technology will be to provide

ways of meeting the needs of large business users multimedia videotex, where the French have made

may already be firmly entrenched. a number of advances. This service is already

@Cen~x ~rvic~ are tie switched business telecommunication services that are provided from the telephone company’s central office. rather tian

!lorrt equipment on &e customer’s premises. For discussions of the role of Centrcx m ~he telephone company’s competitive strategies, see John R.

Abrahams, “Centrex Versus PBX: The Battle for Features and Functionality,” Telecommunications, March 1989, pp. 27-28, 31-32; Carol Wilson,

“Centrex II: The Telcos Revenge,” Telephony, July 17, 1989, pp. 28-31; and James Quarforth “Cenrrex to the Rescue,” Telephony, July 17, 1989, pp.

22-23.

@sw M* ~kkmen, “Cenvex NOW, ISDN Later,” Telecommurdcations, Februaq 1987, pp. 53-54, 84; and Martin l+. Singer, “Hybrid Networks

Move to Telecom’s Center Stage,” Telephony, Mar. 6, 1989, pp. 41-46,51.

~Mjc~ej Alex~der, “Everyone’s Talking Multimedia,” Cornputerworld, September 1989.

‘Ibid.
Chapter 3--New Technologies and Changing Interdependencies in the Communication Infrastructure ● 53

available on the French Minitel 10 system where it

is used, for example, to provide foreign language

instruction. 67 The French are also using multimedia

technology to provide compact disc selection via

ISDN ,

68 and they are now in the process of

developing interactive digital video for use in the

near future.69

Characterizing the momentum driving the trend

toward multimedia technology, Stewart Brand

points out:

Communication media are not just changing,

they’re changing into each other, and when they get

together, they breed. Since the process selfaccelerates and self-branches, there’s no reason to

expect a new stability any time soon.70

Decentralization of Intelligence Throughout

Communication Systems With the Development

of Software-Driven and Software-Defined

Communication Facilities

The greatly improved performance of computer

technologies and their convergence with communication technologies have facilitated the dispersal of

intelligence and control throughout communication

systems. 71 More and more, systems are becoming

defined and driven by software.

72 This development

will make future communication technologies and

systems more flexible and more versatile.

As noted above, it was digital processing that

initially brought intelligence to the telecommunication network. The first computer-controlled switching systems were deployed 20 years ago. In the

1970s, when advances in integrated-circuit technology permitted the creation of a solid-state exchange,

telecommunication providers began to deploy alldigital switches.73 Today, approximately 98 percent

of all AT&T switches are digital.74 With respect to

the regional Bell operating companies (BOCs),

Nynex is 38 percent digital, Bell Atlantic 34 percent,

Ameritech 30 percent, US West 30 percent, Pacific

Bell 28 percent, and Southwestern Bell 25 percent.75

For the projected deployment, see table 3-4.

With the development of even more powerful

microprocessors, faster computing speeds, and

larger memories, it is possible to locate intelligence

not just in the central office switch, but also at nodes

throughout the network. Because these “intelligent”

nodes can communicate in real time with one

another, as well as with other networks, communication systems based on this kind of architecture offer

greatly enhanced flexibility-they can respond

quickly to network problems and to changes in user

demand; optimize network capacity; and ensure

greater system and service reliability.76

This dispersal of intelligence throughout communication systems is well illustrated in the intelligent

network. Using intelligent switches and databases,

together with common channel signaling, the intelligent network allows network control functions to be

separated from network switching functions.77 This

capability permits the network to select the most

appropriate services and optimal routes, and to

introduce new value-added services via simplified

and modularized software. Among the services that

67FOT a disc~sion, see Herve Layec and Pierre-Imuis Mazoyer, “Implementing Multimedia Videotex,” Telecommunications, May 1989, pp. 57-60.

68Jem.~em Te.fime, ‘Cvideotex Enters Another Mmensiom “ Telephony, Sept. 25, 1989, pp. 59, 62, and 64.

@Ibid., p. 60.

70Brand, op. cit., fOOmOte 47> P. 19.

71 For awwefi~, ~d~@y ifiuentl~, dlscussionof ~s trend, ~ peter Huber, The Geodesit, Ne~ork: lg~zRgpOrtOn Cm?qwfifion in the Telephone

Industry (Washington, DC: U.S. Government Printing Office, January 1987).

TZThe distinction ~twwn h~dw~e_ and softwme.b=d t~hnologics is somewhat ~iflcia], H~&v~e technologies rely Incremhlgly (Xl SOftWWe

design tools, while software developments are shaped by hardware support and developments. Moreover, a function that today is implemented in

hardware may tomorrow be implemented in software, and vice versa.

Software systems are built on top of hardware technolo~es. These technologies are highly application-dependent and therefore the technologies and

techniques are very diverse; thus, they are difficult to categorize. J.ncluded are switching protocols, network configuration and management, distributed

operating systems and databases, network scrwces such as directories and security, and protol o! conversion. For a discussion, see Estrin, op. cit., foomote

21, p. 11.

TsAllen A~s ad JohII wade, “hlang Ahead to the Next Generation,” Telepkl~. k~ay ~ ‘I, 1988, p. 57.

74ROX, op. cit., foomote 26, P. 12.

Tspaul Travis, “Wtich Way DO We Go?” Telephony, July q, 1989. P. 36.

76jo~ 0. B== ~~ RiCh~d B. Robo&, “SeNice Convol point: The &~ns Be~nd the Intelligent Network,” Belicore Exchange ,

November/December 1987, p. 13.

TTFor ~scwslom, ~ David G. Fisher and William Bauer, “Multiplexing With Intelligen~’e. “ Telecommunications, February 1988, pp. 73-74, 79; see

also Marcel E. Looson, “The State of the Intelligent Network Art,” Telecommunications, February 1988, pp. 47,52, and 57.
54 ● Critical Connections: Communication for the Future

Table 3-4--Switching Technologies: Percentage of

Total Access Lines

Analog Digital Total

Year EM SPC SPC SPC Total

1980 . . . . . .

1981 . . . . . .

1862 . . . . . . .

1983 . . . . . . .

1964 . . . . . . .

1985 . . . . . .

1986 . . . . . .

1987 . . . . . .

1988 . . . . . . .

1989 . . . . . . .

1990 . . . . . . .

1991 . . . . . .

1982 . . . . . .

1993 . . . . . . .

1994 . . . . . . .

1995 . . . . . . .

1996 . . . . . .

1997 . . . . . .

1998 . . . . . . .

1999 . . . . . . .

2000 . . . . . . .

58.88

52.86

48.27

42.74

36.20

30.84

23.36

16.76

10.39

6.55

4.65

2.10

1.14

0.61

41.09

46.96

51.39

56.35

58.47

59.54

59.98a

58.12

56.48

53.73

50.57

44.35

36.49

27.57

19.07

12.19

7.35

4.26

2.41

1.35

0.74

0.03

0.17

0.35

0.91

3.34

9.62

16.67

25.11

33.12

39.73

44.78

53.55

62.37

71.82

80.61

87.77

92.61

95.70

97.55

98.61

99.22

41

47

52

57

62

69

77

63

90

95

98

99

99

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

Key: EM= electromechanical, SPC= stored program control

● Peak percentage for analog SPC

SOURCE: Reprinted with permission from Telephony, July 3,1989.

the intelligent network can provide are dynamic call

routing, call forwarding, call queuing, credit card

billing, reverse charging, control of calls based on

data held in a central database, wide area Centrex,

and virtual private networks.78 A description of the

basic components comprising the intelligent network, and a discussion of how they are joined

together to provide intelligent services, was provided in box 3-A.

Because software databases and intelligent

switches can be accessed and modified by customers

as well as by telephone-service providers, the

integration of intelligence into the network will

allow users to exercise much greater control over the

services they receive.79 For example, employing

software-based management technologies, similar

to those used by public network operators, users can

customize their own services to optimize their

communication strategies, respond dynamically to

emergencies, and optimize the use of the network’s

resources.

80 

Eventually, residential users will be

able to take advantage of these intelligent capabilities, using them, for example, to block 976 calls.81

The idea of developing an intelligent network is

not new. It was first conceived by AT&T before

divestiture as a means of providing nationwide 800

database services and private virtual networks.82

Since divestiture, both AT&T83 and Bell Communications Research (Bellcore), with the cooperation of

other vendors, have been conducting research and

development in this area. Equipment vendors are

also engaged in developing products for these

networks. As can be seen from figure 3-4, this

activity is likely to increase in the future.

A number of factors should encourage this

development. Most importantly, intelligent networks are likely to serve the needs and interests of

both providers and users of communication services

alike. With intelligent networks, for example, communication providers will be able to offer large

business users the kinds of services and control to

which they have become accustomed in their own

private networks, thus helping the public switched

network providers to regain, or at least maintain, a

healthy portion of this lucrative business.84 With

continued advances in operating support systems

(OSS), communication providers will also be able to

exert greater control over the costs of the development and deployment of new services in the

network. With sufficient revenues from business

subscribers, providers will also find it easier to

modernize the network while continuing to provide

basic services that everyone can afford.85

Despite these incentives, the development of the

intelligent network has been much slower than was

originally anticipated. Initially, Bellcore planned to

develop the intelligent network in stages—

Intelligent Network/l (N/1), which was intended for

completion in 1991, and Intelligent Network 2

I’ti~~~ Gijh~ly, *~Welcme t. a Fu~re whe~ uss IS More,” CommunicationsWeek, CLOSEUP, Sept. 4> 19*9> P. C5.

TgBob Vtiton, “AptitU& of tie IN,” Communicurion.sWeek, CLOSEUP, May 22, 19*9, P. 49.

@Ross, op. cit., footnote 26, p. 17.

81vfim, op. Ch., fOO~O[e 79.

t%id.

83At divesti~, AT&’1” ~~n~ he Bel] system ~so~es that h~ ~n mv~~ to developing the intelligent tlctwodc,

~For discmsions, see Art Beaty, Jr., “The Evolution to Intelligent Networks,”’ Telecommunications, February 1989, pp. 29-30,32,34, and 36; and

Denis Gilhooly, “Tbwards the Intelligent Network,” Telecommunicurioms, December 1987, pp. 43-44,46,48,

‘51bid.
Chapter 3-New Technologies and Changing Interdependencies in the Communication Infrastructure ● 55

Figure 3-4-intelligent-Network Equipment Markets: Annual Revenue by Equipment Type ($millions)

Multiplexe r

3,000 [

I

Network management systems

2,000 ~— ‘ — – —

2,500~ -1

2,000

1,500

1,000

500

0

1985 1988” 1990” 1995 “ 2000”

Interface equipment

3,000

2,500

2,000

1,500

1,000

500

0 —

1985 1988” 1990” 1995” 2000”

1,500

I

1,000

500 L — ‘

– —‘—

2,000

1,500

1,000

500

0

1985 1988” 1990” 1995” 2000”

Switching equipment

1985 1988-1990” 1995” 2000”

“Projected

SOURCE: Copyright 1969 by CMP Publications, Inc., 600 Community Drive, Manhasset, NY 11030. Reprinted from CornrnunicationsWeek with permission.

(N/2), which was cast as the network of the 1990s.

Designed to be even more flexible than N/l, N/2

would allow services to be provided in a variety of

physical network configurations under the control of

many different entities.86 In January 1989, however,

Bellcore adopted a revised, more staggered approach, and postponed the development of the

Advanced Intelligent Network (equivalent to an

enhanced version of N/l, often referred to as N/l+)

until 1995, a delay of 4 years. As explained by

Bellcore’s division manager for network services

product management:

I think the feeling was that we had better make

sure that we understand what the performance

implications of the architecture are well in advance

of making a commitment to deploy .87

As part of this reassessment, Bellcore decided to

coordinate its efforts more closely with telecommunication and data communication vendors. To this

~As described by pau] Bloom and Parnck Miller, the concept of N/2 was “based on the premise that each customer service can be assembled from

essential service capabilities. What distinguishes one service from another are the specific elemental capabilities used and the order in which they are

sequenced.” Paut Bloom and Patrick Miller, “Intelligent Network/2,” Telecommunications, February 1987, pp. 57-60,64-65.

mRo~fi ~ton, “Bells’ ~telligent Network Could Be Delayed Until 1995,” communirationsweek, Feb. ZO, 1989.
56 ● Critical Connections: Communication for the Future

Figure 3-5--Consumer Videotex Subscriber Growth

Leading Services: 1983 to 1990

Number of subscribers (in thousands)

1600 —–-–--– ——— ––– -

1358

1400 J

800 -~

1

1983 1984 1985 1986 1987 1988 1989 1990 (est. )

_ US Videotel = CompuServe ~-- Genie =3 Quantum Link

[-la Amer Online % Delphi = PC Link [=-1 Prodigy

L— .- - -J

SOURCE: Copyright 1989 by Jupiter Communications. Reprinted from

Conned Times with permission.

end, it has set up the Multivendor Interactive

Administrative Committee.88

The trend toward the dispersal of intelligence and

control in communication systems is not limited to

large telecommunication networks. Intelligence will

also be provided to the user at office work stations

or via computers, video terminals, or telephones in

the home. For example, by 1993, according to one

estimate, office work stations will be able to handle

32 million instructions per second; have 16 megabytes of random access memory, and cost approximately $350.89 Given such performance/price improvements, market analysts expect that, by early

1990, the total number of computer workstations in

Europe, Japan, and the United States will surpass

100 million.90

Just as users of the intelligent network will have

greater control over the types of services they

receive, so too will the users of intelligent customerpremises equipment. People can use interactive,

intelligent terminals to do their own publishing, for

example, by compiling, processing, and formatting

information for themselves or others.91 As Ithiel de

Sola Pool described the situation:

The technologies used for self-expression, human

intercourse, and recording of knowledge are in

unprecedented flux. A panoply of electronic devices

puts at everyone’s hand capacities far beyond

anything that the printing press could offer. Machines that think, that bring great libraries into

anybody’s study, that allow discourse among persons a half-world apart, are expanders of human

culture. They allow people to do anything that could

be done with communication tools of the past, and

many more things too.92

Although the distribution of intelligence in this

fashion can greatly extend the ways in which

end-users can employ communication technologies,

it can also discourage the adoption and use of

technology if it requires users to have greater

knowledge and skills. Many have suggested, for

example. that videotex would be more popular in the

United States if users could access it, as in France,

on “dumb” terminals.93 They note that audiotex

services, which can be easily accessed over the

telephone, have been much more popular than

videotex. Despite the industry’s difficult early years,

its prospects for the future appear brighter, as

evidenced in figure 3-5. The factors likely to account

for this change include:94

. the availability of better host/user software,

. the availability of improved gateway services,

. a greater number and variety of information

services, and

. an increase in the use of (and therefore comfort

in using) personal terminals.

ss~chwl WSK, “Bellcore Slows Program for Network Evolution,” Telephony, May 15, 1989. p. 12. It should be noted that some regional Bell

operating companies are aiming to deploy the intelligent network ahead of the Bellcorr schedule.

89Gi~ly, op. cit., f~mote 78> P C4.

9oIbid.

glForadi~cuX1on of how new t=~ologies ~low individuals to more emily ~Ome creators and information provi~rs m their OWIl right, W “hIlpaCt

of Tcehnology on the Creative Environment,” U.S. Congress, Office of Technology Assessment, Infeflectuuf Properry Righrs in an Age of Electronics

and /#or?nution, OTA-CIT-302 (Springfield, VA: National Technical Information Service, April 1986), ch. 5.

gzI~el de Sola Pool, Technologies of Freedom (Cambridge, MA: The Belknap Press of Harvard University, 1986), P. 226.

WSm Simm, ~~~nt, Issue I@unics, Inc., personat communication, September 1987.

gq’’~~ng Vid-ex Sewices‘fop a Million: Revenues Follow 80/20 Rule,” iTon~~-t 7’imes, April/May 1989, p. 6.
Chapter 3--New Technologies and Changing Interdependencies in the Communication Infrastructure ● 57

Unbundling of Some Communication

Services or Functions

Unbundling refers to the ability to separately

purchase communication services or functions that

were formerly available only as a single unit. Linked

to the trends of convergence and decentralized

intelligence, this phenomenon is becoming increasingly prevalent in all communication systems.

While unbundling allows for greater access to, and

control over, communication services, it can also

create problems for the interoperability, security,

and survivability of the communication infrastructure.

Unbundling first appeared in telecommunication

with the Carterfone decision of 1968,95 which

allowed customers to add equipment to their telephones as long as they did not adversely affect the

operation of the telephone system or its usefulness

to others.% A clarification of this decision by the

FCC in December 1988 extended its provisions to

microwave systems and computers. The Carterfone

decision ruptured the well-established arrangement

whereby AT&T was assigned the responsibility of

providing national end-to-end telephone service.

Applied broadly, these decisions encouraged the

entry of new entrepreneurs who wanted to plug into

the network with new kinds of customer-premise

equipment (CPE) or enhance the value of their

private systems by interconnecting with the public

network.

97 Thus, they cleared the way for the

development of entirely new communication industries.

Many other factors and events also contributed to

this development. As Stone has pointed out, given

the numerous technological advances that had been

made in communication and computers, together

with the greatly increased post-war demand for

service, it is likely that:

. . . no one firm-not even one as large as AT&T—

could possibly seize all of these opportunities as

rapidly as they could be realized.98

The growing convergence of computer and communication technologies made it even more difficult

to determine what “end-to-end” service should

entail. 99 Capping off all of these developments was

divestiture and the breakup of the Bell System.

Today, the unbundling of the communication

infrastructure is clearly demonstrated by the emergence of a whole range of communication equipment providers. AT&T’s share of this market has

dropped precipitously; for example, with respect to

equipment sold to telephone companies, its market

share has fallen to between 40 and 60 percent.l00 As

can be seen in table 3-5, CPE vendors constituted a

$25.6 billion market in 1988. In recent years,

however, profit margins have been eroding due to

extremely competitive conditions and the failure of

most vendors to offer overall system solutions.lO1

Unbundling is also apparent in the extent to which

users now own their own dedicated units. As Peter

Huber has pointed out:

Twenty years ago CPE markets were comparatively tiny. Equipment that was located on customer

premises-everything from handsets to mainframe

computers-was provided only under lease, and then

only grudgingly, with strict instructions that nothing

was to be tampered with in any way. The real

electronic brains stayed safely in the central-office,

where the no-tampering policy could be enforced

even more fully.102

Now major companies such as AT&T and IBM are

in the business of selling equipment, not renting it.

gs’’AT&T.---Foreign Attachments, Tariff Revisions, ” 15 FCC 2d 605 ( 1968).

%le Carterfone was a device that permitted callers to use the telephone network to communicate directly with others located at remote mobile radio

tetminals. It was not the fwst telephone attachment to be developed outside of the Bell System. As Alan Stone has pointed out, there have always been

inventors developing attachments that could supplement or even substitute for Bell equipment. However, both AT&T and State regulatory authorities

strongly opposed the use of such components, viewing them as inimical to the well-established requirement that AT&T provide end-to-end service. For

a discussion, see Alan Stone, Wrong Nuder The Breakup of AT&T (New York, NY Baslt Books, Inc., 1989), pp. 87-90.

g71bid., p. 95.

98~1d<

99T0 sort out this issue, the FCC undertook a series of computer inquiries, (called Computer Inquiry 1, II, and III), none of which fully resolved this

problem. For a discussion, see Anthony Rutkowski, testimony at hearings before the House Subcommittee on Telecommunications and Finance, July

30, 1987.

l~o~r NO]l, “Tel~ommunications Regulation in the 1990s,” Stanfmd University, Center for Economic Policy Research, Publication No. 140,

August 1988, p. 19.

101SUW Ubis and Qatdana kin, “Feeding Frenzy Grips Competitive CPE Market,” 7elephony, Apr. 11, 1988, PP. 32-35.

102Hu&r, op. cit., fOOtnOte 71 ~ P. 1.11 ~
58 ● Critical Connections: Communication for the Future

Table 3-5-Domestic Shipments of Telecommunications Equipment by Major Product Categories,

1975-2000 (in current $million)

Switching Transmission Customer premises Cable/wire and

Year equipment equipment equipment lightguide Total

1987 . . . . . . . . . . . . . . . . . . . . . . . . 4,075 6,525 11,240 2,230 24,070

1988 . . . . . . . . . . . . . . . . . . . . . . . 4,400 6,950 11,950 2,350 25,650

1989P . . . . . . . . . . . . . . . . . . . . . . . 4,660 7,213 12,667 2,435 26,975

CGR 79-89 . . . . . . . . . . . . . . . . . . 1.570 8.6% 5.40/0 –1 .20/0 4.4%

CGR 89-00 . . . . . . . . . . . . . . . . . . 5.2% 5.5% 5.3% 3.00/0 5.1%

Key: CGR = average annual compound growth rate, p. projection.

SOURCE: U.S. International Trade Commission and Computer and Business Equipment Manufacturers’ Association (CBEMA) Industry Marketing Statistics.

At the same time, many large users are growing

accustomed to owning and operating their own

communication networks. According to Huber, in

1987, private buyers accounted for 80 percent of the

purchase of satellite transmission service, 40 percent

of the telephone switching market, 20 percent of

microwave transmission equipment, and 20 percent

of fiber-optic cable and electronics.l03 In addition,

sales of mainframes have greatly declined in favor of

purchases of mini-and micro-computers.l04

The development of open network architecture

(ONA) will lead to the further unbundling of the

telecommunication network. But, as previously

noted, the ability to open the network will depend,

in part, on both software development and the

advance of the intelligent network.l05 If pursued far

enough, open architecture would allow independent

providers and other users to purchase the most

elemental network functions. They could also create

their own products, reconfiguring and customizing

these functions to meet their own needs.lO6

However, technology will not be the only determinant of network architecture. Because open architecture will affect the security and interoperability of

the infrastructure, as well as the efficiencies and

costs of providing services, the issue of how open the

communication infrastructure should be is a matter

of considerable debate.107 Also, not all users will

want to buy unbundled services, As a number of

business users are finding out, although unbundling

can reduce prices and increase their purchasing

choices, it also transfers to them the burden of

network planning and management. Many businesses are finding it difficult to take on this new

responsibility. For some, the only option is to pay a

systems integrator to rebundle the products and

services they need.l08

Many of the advantages and disadvantages of

unbundling telecommunication products and services, and hence the factors that are likely to drive this

trend, can be seen by examining the private branch

exchange (PBX). A private switching system located on a customer’s premises, the PBX is, in effect,

a small local telephone office. Because it competes

directly with the providers of public switched

services, the PBX provides an excellent paradigm

for considering developments in this area. As Peter

Huber explains:

PBXs are complex and expensive, they require

sophisticated forms of interconnection with the

public network, and they compete directly with

network-based services such as Centrex. PBX-based

private networks are the main competitive threat to

the local exchange monopoly.l09

The fortunes of the PBX industry mirror those of

many other manufacturers of customer premises

equipment. The PBX was first developed and used

within the Bell System and leased by telephone

companies to business users. In the wake of divestiture, a number of companies, including AT&T and

the BOCs, began to manufacture and distribute PBX

lmIbid.

Wbid.

l%id.

106A.M0 Ru&ow&i, “me Smond National Open Network Arehit.ecture Forum,” Telecommunications, May 1987, pp. 118-119, 123.

lcnw ~licy i5meS ent~]~ in this decision are discussed in chs. 10 and 11.

I08A dlscus~im of me emergence of the ~y~tems integator m a strate~c player in me communication infrastructure appears 1ater in this chapter.

l@Hu~r, op. cit., foomote 71, p. 16.1.
Chapter 3--New Technologies and Changing Interdependencies in the Communication Infrastructure ● 59

equipment for sale.ll0 This market flourished in the

aftermath of the Carterfone decision and divestiture.111 New players abounded. Incorporating the

latest digital computer technology into the PBX, the

largest manufacturers such as Northern Telecom and

Rolm were able to make considerable inroads into

AT&T’s share of the market.112 With users eager to

take advantage of the liberalized, post-divestiture

environment, demand soared; between 1982 and

1985, total system shipments increased by about 20

percent.113

The tide turned, however, in 1986, when the

demand for PBXs began to flatten out, a trend that

is projected to continue in the near future.114 Two

factors have contributed to this reversal, both of

which suggest that users are only now beginning to

come to grips with some of the more problematic

aspects of unbundling. The first of these is the

reemergence and upgrading of Centrex services.

Over the last several years, telephone company

providers have sought to regain lost customers by

aggressively marketing their Centrex offerings, providing services that compete directly with PBXs,

such as central office local area networks (COLANs). And they have been quite successful. Many

users, disillusioned by the hidden costs and problems entailed in running their own communication

networks, are looking to public network providers to

develop new kinds of solutions for them, such as

hybrid and virtual private networks.115 Thus we see

that, while the PBX market has remained flat,

Centrex has grown during the last 3 years at an

annual rate of more than 20 percent.

The second factor contributing to the PBX industry’s change in fate is the evolution of network

technologies and the development of system standards such as integrated services digital network

(ISDN) and open systems interconnection (OSI).

While PBX manufacturers have tried to upgrade

their systems technologically,ll6 they have been

slower at adapting their products to international

standards. However, as more and more products and

services are unbundled, it will become even more

important to users that they be interoperable. And

with recent progress towards developing international standards, many users are becoming less

inclined to purchase PBXs without some assurance

that they will be able to fit in.

Generalizing from the case of the PBX, we can see

that there are more than just technical and regulatory

constraints that limit the degree to which unbundling

can effectively take place. If users are to take full

advantage of unbundling, greater progress will need

to be made in the areas of network management and

standardization.

Increased Portability

Miniaturization and the ability to unbundle intelligent equipment from the communication infrastructure are also increasing the portability of

communication products and services. With the

development of cellular phones and paging systems,

for example, users can now communicate from any

location.

Advances in cellular technologies, in particular,

have greatly enhanced the ability to develop and

deploy portable communication systems. The development of cellular technology grew out of the use of

radio communication technologies in World War 11.

By the late 1940s and early 1950s, some radio

common carriers and a few businesses, having been

granted licenses and allocated radio frequency by the

FCC, began to offer modest, local mobile communi11OAS Hu~r ~oteS: ‘Cvlgmom ~omwtltion in me pBx market deve]o~ betw~n ]979 and 1982, d~ing,which period AT&T’s share of the market

dropped from almost 70 percent to under 30 percent.” Huber, op. cit., footnote 71, p. 16.5. Although thd BOCS are prohibited from manufacturing

customer premises equipment, they are important distributors of PBXS and PBX-related equipment.

IllFor a discu~ion, see Barry L. Marks, “The PBX Market: Past, Present, and Future.” Telecommunicatwns, January 1989, pp. 57-58.

llzHuber, op. cit., foomote 71, p. 16.5.

llqMarks, Op. cit., foomote 111, pp. 57-58.

114see, for instance, James N. Budway, “PBXS From Riches to Rags,” Telecommunications, November 1988, pp. 101-102.

llsFor discussions, see Valovic, op. cit., foomote 62, pp. 67-70; and “Opportunities for CO Serviws, “ Telephony’s CO Services Special, May 1989,

pp. 1-28; Martin Pyykkonen, “Centrex Now, ISDN Later,” Telecommunications, February 1987, pp. 53-84; and John R. Abrahams, “Centrex Versus

PBX: The Battle for Features and Functionality,” Telecommunications, March 1989, pp. 27-32.

116For exmple, over 80 ~rcent of new digital pBXs have data. switching capabilities< Moreover, the= switches can perform eXtenSiVe prOtOCOl

conversion, and they support both synchronous and asynchronous transmission for electronic mail, file sharing, terminal-to-terminal, and

terminal-to-host communication. For a discussion of the relationship between the PBX and ISDN, see Tibor G. Szekeres, “Will ISDN Make the PBX

Obsolete?” CommunicationsWeek, Sept. 19, 1988, p. 16.
60 ● Critical Connections: Communication for the Future

cation services. *17 Over the past 30 years, a number

of different services have been developed, including

radio paging; telephone-answering services; mobile

telephones; private, two-way radio dispatch systems; citizen band two-way radio; public air-toground radio telephone service; and voice-mail

services. 118

Although regulatory barriers retarded the development of cellular technology for a number of years,

cellular mobile telephone service is currently available in most cities.119 High-power satellites can track

mobile units on Earth, making nationwide mobile

telephony possible. Although mobile communication is now primarily focused on car telephones,

efforts are being made to create portable equipment

that would permit communication with anyone,

anywhere, at any time. Motorola Inc. has already

introduced a new cellular telephone that can fit

easily into a pocket or purse. And pagers have been

transformed from simply tone-only alerts to portable

electronic mailboxes.120 Many industry analysts

predict that people will soon be able to carry an

entire portable telecommunication center with them

wherever they go.121

Advances in cellular technology are finding their

rewards in the marketplace. In 1988, for example,

the cellular telephone industry’s customer base

increased by 68 percent, a rate that is likely to

continue, if not increase, over the next 5 years.122

This demand will be fueled by a continued decline

in prices. Reflecting these gains, the per capita value

of the top 20 cellular licenses increased from $16.23

to $77.71 between 1985 and 1987, a figure that is

expected to climb to $100 by the early 1990s.123

Annual revenues for the entire U.S. cellular industry

totaled $1.15 billion in 1988.124

How far cellular technology can evolve to meet

the rising demand for portability will depend in part

on how the public spectrum is allocated in the future.

Although cellular technology was originally seen as

a spectrum-saving technology, its deployment, like

that of American highways, has typically generated

more use than the capacity it created. Although the

FCC recently agreed to grant the industry additional

spectrum, most industry pundits fear these allocations will not suffice.

A second factor that could diminish the future

prospects of cellular technology is standardization.

Believing that standards may discourage technological innovation, the FCC has decided to back away

from setting standards in this area. *25 However,

without standards it will be difficult, if not impossible, to establish a nationwide cellular network. If

each operator is free to divide up his or her 25

megahertz, and to decide which particular radio

technique to use, there will be no way to assure that

one operator’s system would be compatible with

another’s. 126

llTClifford A. Bean, “Trends in Mobile Communications,” Telecommunication, January 1989, pp. 72-75. These services were generally limited to

metropolitan areas. It should be noted that the development of cellular radio suffered from considerable regulatory delay. See George Calhoun, “The

Next Generation of Cellular Radio,” Telecommunications, June 1988, pp. 41-45.

1 I* Ibid.

119’rhe fmstcomerci~ ~ellulw mobile telephone ~emice was deployed by Amerlt~h in ]$)83. For discussions about the diffusion of tiis technology,

see’’ Spreading Mobility,” Communications International, August 1987, p. 8; “America Goes Mobile,” Communications international, September 1987,

p. 22; Rodney Gibson, Gerard MacNamee, and Sunil Vadgama, “Universal Mobile Telecommunication System—A Concept,” Telecommunications,

November 1987, p. 23; and Filip Linden, Jan Swerup, and Jan Uddcnfeldt, “Digital Cellular Radio for the 1990s,” Telecommunications, October 1987,

pp. 254-265.

lzOM~gle Semilof, “The Upscaling of a Basic Carry out Item,” CO?7V?U4 nicationsWeek. CLOSEUP, Apr. 8, 1988, p. C4.

Izlsee, for ~~tance, J~es L Johnson, “The Times They Are A Changing,” Cow/Tl[atlomweek, June s, 1$)89, p. 1’2; see dso Semilof, op. Cit.,

footnote 120, pp. C4-C5; and Frank Grimm, “Towards the Universal Mobile Telecommunication System,” Telecommunications, November 1987, p.

9.

122Jo~son, op. cit., footnote 121, P. 12.

lzsMMi~th H-r, “will the RHCS Devour the Cellular Industry?” Te/ephon~, July I I, 1988, P. 26.

lz’$candee Wilde and Glenn Abel, “McCaw Bid Jolts Industry,” Commuw”cationsWeek, June 12, 1989, p. 62.

l~~e E~o~anS, ~ Conwast, me t~inga more deliberate approach to the pursuit of cellular standards. For a discussion, see Stephen Temple!

“Pan-European Cellular Standards bad the Way,” Telecommunications, November 1987, pp. 28, 91. In the 1990s, Europe will comprise the single

largest cellular radio market in the world. Most recently, Plessey has announced plans to begin constructing a wireless public switched telephone network

for the entire United States, based on an enhanced version of the European Group Special .Mobile digital cellular radio standard, which supports cheap,

pocket-sized handsets. See Graham Finnie, “P1cssey Unveils Wireless PSTN,” Teltcomrnurucarions, June 1989, pp. 29-30.

l~mge Cdhom, “The Next Gcneratlon of Cellular Radio,” Tefec>o~ m’{ a[[orfs, IUTIC I 988, pp. 41-45,
Chapter 3-New Technologies and Changing Interdependencies in the Communication Infrastructure ● 61

Improved Ease of Use

As technologies become more sophisticated and

communication systems more complex, it will be

important to develop system interfaces that make it

easier for individuals to interact with technology in

human terms. This means creating machines that can

see, speak, hear, and reach conclusions much the

same as people do.127 Failure to develop user-

-friendly systems will increase the risk of error,

which could have serious consequences in a society

that is increasingly communication dependent. Fortunately, many new communication devices, ranging from video cameras to private data networks, are

now being designed for operation by nontechnical

users.

Until recently, computer technology was the

exclusive province of a narrow technological elite.

The use of computers required a special set of skills

and knowledge possessed by highly trained computer scientists and a select group of self-educated

computer hobbyists. Advances in hardware design

and operation, as well as improvements in software

design and applications, have now brought computer

technology closer to the general public. Further

progress is likely in the future with the development

of natural language processors that will allow people

to direct computers by conversing with them.

Searching online computerized databases was

also done until recently by trained information

specialists, such as librarians or technical specialists

employed by large companies. Such searches not

only required the use of highly specialized and

arcane computer commands; users also needed a

highly specialized knowledge of the databases

themselves. More accessible software designed to

reach online databases now makes it much easier to

retrieve information using personal computers. Similarly, improvements in the design interface of

online systems are making it easier to search and

locate information.

Advances in speech processing and its integration

into computer and communication systems will play

a particularly important role in making these technologies more accessible. There are systems on the

market now that can recognize isolated spoken

words and phrases from a vocabulary of about 100

words. *28 And technologies are now being developed that can synthesize intelligible, reasonably

normal speech from a written text. By the turn of the

century-given the present rate of progress in the

computerized analysis of natural languages, together

with increased computing power—some experts

think it will be possible to perform machine translation, and even re-create practical spoken conversation. 129

Increased Networking Capability

Although seemingly paradoxical, the unbundling

of the communication infrastructure, in conjunction

with the distribution of intelligence throughout

communication systems, has led to the simultaneous

reintegration of communication systems through the

process of computer networking. While the proliferation of communication networks makes the communication infrastructure more flexible and responsive to some users’ particular needs, it could serve to

limit communication access if it reduces overall

system connectivity.

A computer network is a collection of computers

that communicate with each other using common

protocols. The computers may be microcomputers,

commonly used in homes and businesses, or they

may be larger minicomputers, mainframes, or supercomputers. Transmission can be provided using

coaxial cable, optical fiber, satellite links, twisted

pair, or telephone lines. Connections between hosts

can be limited to a local area (local area networks, or

LANs), or they may provide long-haul connectivity

(wide area networks, or WANs). Employing such

systems, data in the form of text, voice, and video

can, in principle, be stored, modified, and exchanged

by anyone. anywhere on the planet.130

Computer networks offer a number of benefits.131

At a minimum, they can provide electronic mail and

127ROSS, Op. cit., footnote 26, P. 27.

128Fo~ di~Cu~~lom, ~ paul w~lich, “~ttlng Swwh R~O@erS t. work,” IEEE ,$peclr~, April 198’7, pp. 55-57; Torbjom Svendsen, “S~ch

Recognition: An Overview,” Telecommunications, December 1987, pp. 3743, 65; Ben Hoh, “Beyond the Old Frontiers: Voice Processing Technology

Enters the Third Generation,” Telephony, Jan. 23, 1989, pp. 4244; and Robert Rosenberg, “Speech Processing: Hearing Better, Talking More,”

Electronics, Apr. 21, 1986, pp. 26-30.

129ROSS, Op. cit., foomote 26, p. 9.

130For a de~l~ deScnption of ~omputer networks, ~~drew S+ Tannenbaum, co~ut~r Ne~orks (Englewood Cliffs, NJ: Prentice-Hall, 1981).

131w peter Bnrting, “me Science of Computing: Computer Networks,” American Scientist, VO1. 73, 1985, PP. 127-129.
62 ● Critical Connections: Communication for the Future

news services.132 They can also provide remote

processing, allowing any computer in the network to

access computer programs stored on any other host.

Network users can also gain remote access to

supercomputers to do advanced graphics, chip

design (and remote fabrication), and scientific or

economic computer simulation, and can access

remote databases. In addition, they can use the

network to collaborate with others or to participate

in computer conferences. 133 perhaps the most important attribute of networks is that they can sort out

people with similar interests and bring them together. This capability will become increasingly

important as the problems people face become more

complex and the tasks they perform become more

specialized.

Given this ability to link like-minded people

remotely, it is not surprising that computer networks

were initially developed to meet the needs of

specific groups of users. For example, ARPANET,

the first computer-based message system, was set up

in 1968 in the Department of Defense by the Defense

Advanced Research Project (DARPA) to provide

communication between computer terminals and

host computers. Building on the packet-switched

network technology developed by DARPA, other

agencies developed specialized networks for their

research communities (ESNET, CSNET, and

NSFNET). Meanwhile, other research-oriented networks, such as BITNET and Usenet, were developed

in parallel by academic and industry users who, not

being grantees or contractors of Federal agencies,

were not served by the agency-sponsored networks.134 Although telecommunication and electronic industries provided technology and capacity

for these networks, they were not the innovators or

promoters of these new systems.

Businesses also began to take advantage of

computer networking to improve the productivity of

their ever more powerful desktop microcomputers.

Local area networks,135 which allow users to rapidly

transfer large files of information among personal

computers, have been particularly popular in the

business community, where they have proliferated

without much thought to planning. 136 Describing the

situation in the electric utility industry, which by all

accounts is quite typical, Taylor Moore notes:

. . . most utilities’ computers and communications

systems were designed only to perform specific

functions, such as supervisory control and data

acquisition in transmission or distribution operations

or financial accounting in corporate systems. Most

were put in place fairly piecemeal as needs arose or

as new technology opened opportunities to automate . . . . Most systems were installed with no-or

only limited-capability to communicate with other

systems. And rarely have all the systems a utility

uses come from the same vendor, with compatible

interconnections or standard communication protocols. 137

Reflecting this increasing demand for networking, the LAN industry has grown from about $2.6

billion in 1987 to approximately $4.2 billion in

1988. And predictions are that in 1992, 55 to 60

percent of new personal computers acquired by

Fortune 1000 companies will be connected to

LANs. 138

Given the unruly way in which LANs have been

deployed, businesses are now confronted with the

task of managing them and trying to incorporate

13qIK we of ~rrtputers for electronic mail systems was originally constrained by the limited availability of computers. With the widespread

deployment of personal computers, this is no longer the case. As Stephen A. Casswell points out, the cost of adding electronic mail for most personal

computer users has dropped 200 percent in just 5 years. Stephen A. Casswell, E-MAIL (Boston, MA: Artech House and Gage Educational Publishing

Co., 1988), p. 41,

133~~m~ ~ “i~~femncing has ken incre~~g ~ more inexwnsive and Sophisticated digit~ systems me ~ing develo~d. The amuat rate of

growth in the United States has been between 25 and 30 percent. For discussions, see Mark Maltz, “A New Age of Videoconferencing,” Telephony, June

26, 1989, pp. 30-34; and Scott Douglas, “Why Travel When You Can Call?” Telephony, Apr. 3, 1989, pp. 38-42.

134JoluIs. @~~an, The Matrh: Networks Around the Worki (Burlington, MA: Digital Press, August 1989).

135A L~ cm & dew-i~d ~ “a package of media that includes transmission devices, end-user interface units, gateways, SeIVers, netwOrk

management, hardware, software, and application software. Such networks typically provide communication between dissimilar nodes within a building,

metropolitan, or campus environment.” Martin Pyykkonen, “Local Area Network Industry Trends,” Telecommunications, October 1988, p. 21. For a

technical discussion, see also Ivan T. Frisch, “Locat Area Networks Versus Private Branch Exchanges,” Telecommunications, November 1988, pp.

23-26,

lqbFor discu=iom of fie emer~nce of the LAN market, see Nina Burns, “Micro Melting Pot,” Cornputerworfd, Nov. 2, 1988, pp. 19-20; Jennifer

Samuel, “Tapping In: Data Base LANs,” CommunicationsWeek, CLOSEUP, Jan. 11, 1988, pp. 6,7, 10; Jennifer Samuel, “Departmental Nets,” Nov.

21, 1988, pp. C12-C13; and Timothy Haight, “LANs Abound,” CommunicationsWeek, Feb. 6, 1989, pp. 22,24.

137Tay10r Moore, “Building a Framework for htegrated COmmtiCatiOnS, “ EPRI Journal, July/August 1988, pp. 29-35.

138- &em, “Backd~ LANs: How to Manage Unsanctioned Networks,” Computerworki, NOV. 2, 1988, pP. 31-32.
Chapter 3--New Technologies and Changing Interdependencies in the Communication Infrastructure ● 63

them into larger and larger networks.139 As Lee

Sustar has described:

Many companies are now reaching the conclusion

that these strays must be gathered back into the

mainstream of corporate computing, not only for the

sake of accountability but also for improved efficiency for locally networked users, some of whom

are beginning to suffer from the limitations inherent

in their independent status.140

These management and coordination problems

are compounded by the fact that standards for high

capacity fiber optic LANs, referred to as the Fiber

Distributed Data Interface (FDDI), are still being

developed.141 Failure to develop such standards may

constrain networking in the future, since the further

deployment of more powerful workstations will

require higher performance systems.

This trend toward networking is also increasingly

evident among individual computer users. A growing number of personal computer enthusiasts, for

example, now keep in touch via computer bulletin

boards. These networks consist of computerized

storage space, offered by a computer owner, that is

used to post messages. As detailed in chapter 8,

people are now using these systems to find solutions

to problems, seek support from others in similar

situations, or overcome loneliness.

Although communication providers did not initiate this networking craze, they are working hard to

capitalize on it. Some companies, for example,

provide networking services to outside users for a

profit. Included are service providers such as Telenet, Tymnet, the Source, and CompuServe. Others

offer interLAN networking products and services

such as bridges, routers, gateways, and brouters142

(see box 3-C). To better position themselves to offer

connectivity, a number of LAN providers are

consolidating or forming alliances and partnerships

(see table 9-3 in ch. 9). In addition, traditional

telephone companies and other ISDN providers also

offer solutions to the problems of wide area networking. As Tom Valovic points out:

As the LAN market matures and ISDN inches

closer toward the prospect of significant commercial

deployment, the question of the relationship between

these two technologies is beginning to be raised in

the strategic and marketing arena. ISDN is a standard

without a product. LAN, despite some preliminary

efforts, is still a product without a standard.143

For a summary of the major trends occurring in the

LAN industry, see box 3-D.

Increased Targeting Capability

Targeting specific messages to particular categories of people requires high capacity, easily accessible, online storage capability, together with highspeed reprocessing and editing capabilities. Taken

together, many of the trends outlined above provide

such capabilities, making it much easier to parse

information, tailor messages, and address them to

particular users and locations.

Using computers, for example, it is now relatively

easy to compile and cross-reference mailing lists and

telephone numbers so that direct mailers and telephone marketers can carefully target certain receivers. As described in figure 3-6, people often inadvertently register to be placed on such lists when

purchasing an item or service. 144 Using technologies

such as VCRs and pay-per-view to unbundle programming, users can also adapt mass media content

to their own particular interests. 145 “People meters”

and other improvements in audience measurement

techniques allow media providers to better meet

audience demand.

139Ro&tfi craven, ‘me ~~lenge of Ente@~-Wide hternetworking, ’’7’eleco~nicdons, October 1988, pp. 3 1-37; s~ ~so ~e SUS~, “~lling

LANS Into the Act,’’ CornputerworM, May 23, 1988, pp. S1-S4; Roy D. Gemberling, “ManagingLinked LANs,” Telecommunications, September 1989,

pp. 67-69; and Richard Patti, “LAN/WAN Integration,” Telecommunications, September 1987, pp. 47-54.

l~uwm, op. cit., fOOtnOte 139> P. s 1“

IQI~e mmket for fi~r optic LANS is ex~cted t. ~ple by 1992. Its growth is ti~ to the development of a LAN standard. FDDI, which s~ifies the

use of fiberoptic cable providing speeds of 100 megabits per second, is now being developed by the American National Standards Institute. Caryn Fox,

“Fiber Lan Market to Triple By 1992,” CommunicatwnsWeek, Mar. 20, 1989, p. 14. For another discussion of FDDI, see Michael V. Moore and Vickie

A. Oliver, “FDDI: A Federal Government LAN Solution,” Telecommunications, September 1989, pp. 35-40.

14ZWi]]im Stdings, “~ternetwork~g: A G~de for the pev]ex~,” Teleco~~”cations, September 1989, pp. 25-30; Debbie Shimman, “Enter the

Brouter: An Update on Linking LANs,” Teieconvnunications, November 1988, pp. 38-41.

IQsTom Vdovic, “will ISDN Replace LANs?” Te/eCo~unications, September 1987, pp. 67-60; = also Martin Sinnot, “IsDN shows Pron’lix *

a LAN Booster,” Cornputerworfd, May 23, 1988, p. S7.

144For a di~~us.sion, ~ Jeffrey Rothfeder, “1s Nothing fivate?” Busi~SS week, Sept. 4, 1989, pp. 74-82. SW ~SO G~ Slutsker, “Relationship

Marketing,” Forbes, Apr. 3, 1989, pp. 145-147.

l’$sFor one discussion, see peter Ainslie, “Confronting a Nation of Grazers,” Channels, September 1988, P. 54.
64 ● Critical Connections: Communication for the Future

Box 3-C—Repeaters, Bridges, Routers, and Gateways

Networks are designed in layers, starting at the bottom with hardware and moving upwards towards software

applications. For example, networks built in conformance with the International Organization for Standards

reference model, referred to as Open Systems Interconnection (OSI), consist of seven layers—the physical, data

link, network, transport, session, presentation, and application. Where network equipment does not conform to this

model, several devices can be used to achieve interoperability.

As can be seen in the figure below, there are four basic devices that can be used to interconnect networks into

a larger network. These include repeaters, bridges, routers, and gateways.

Repeaters, Bridges, Routers and Gateways Mapped Into

The OSI 7 Layer Model.

— — —

LAN

OSI Interconnection

Model Device

~“ 1

~-— –-—... –– --—

f

7—Apple.ation

rk

Gateways

r ‘-1 T- - -

”

--- ‘----- ‘“

L‘-”e”ork H-R~’-----

2—Data link

l—Physical

—

l--+=---

—

SOURCE: Reproduced by special permission of Telecommunications magazine.

Repeaters: Repeaters are the

most basic of all the tools used

for internetworking. Operating at

the physical layer, they regenerate signals that are transmitted across the network. Repeaters can connect local area

networks (LANs) that use the

same or different media, but they

cannot connect them if they use

different protocols. Thus, while a

repeater can connect an Ethernet

LAN to another Ethernet LAN, it

cannot connect an Ethernet LAN

to a Token Ring LAN.

Bridges: To connect LANs

that employ dissimilar protocols

requires abridge. Bridges operate

at Layer 2 of the OSI reference

model, and thus they are protocol

transparent. Bridges also offer

some intelligence. They can filter

messages to determine which ones

should be forwarded to another

segment of the network. Because their operations are more complex, bridges function more slowly than repeaters.

Routers: Routers are more intelligent than bridges. Whereas abridge can only determine whether or not to pass

a message forward, a router will determine the optimal route that the message should take. This capability reduces

not only the cost of transmission, but also network congestion. Routers operate at Layer 3 of the OSI model. They

are protocol sensitive, and hence can only connect LANs based on the same upper-level protocols.

Brouters: Brouters combine some of the bridge’s functions with those of the routers.

Gateways: Gateways operate at the applications, or top level of the OSI reference model. They link dissimilar

networks by translating from one set of protocols to another, thereby overcoming differences in transmission speeds,

signal levels, and data format.

SOURCE: Debbie Shimman, “Enter the Brouter—An Update on Linking LANs,” Telecommun ications, November 1988, pp. 38-43. Also

William Stallings, “Internetworking: A Guide for the Perplexed,” Telecommunications, September 1989, pp. 25-30.
Chapter 3--New Technologies and Changing Interdependencies in the Communication Infrastructure ● 65

Box 3-D—Major Trends in the Local Area Network (LAN) Industry

Vendor consolidation: Mergers, acquisitions, and joint ventures among traditional LAN vendors are increasing

as the industry matures and vendors consolidate. Driving factors include convergence in LAN applications and

products and expanding geographic network scope towards WANs (i. LAN-to-LAN integration).

Public telephony network entrants: Local telephone companies will increasingly offer LAN and WAN on an

intra-LATA basis as central-office switches are enhanced with data networking functionality. Telcos will either be

a competitor to LAN vendors or possibly a partner in serving certain key strategic end-user accounts.

Software differentiation: LAN software is becoming the core differentiating technical factor. Vendor strategies

are based on software platforms and protocols, and user product selections are based more on software performance

than the underlying hardware.

Dual standardization-Ethernet and token ring: Recognizing that Ethernet and token ring have different

applications suitability, users are increasingly standardizing on both and then allowing individual procurements to

be made between them as applications dictate. Strong product support from multiple vendors in each case reinforces

the dual standardization and places vendors of proprietary standards at more of a disadvantage than previously.

Network management: Before the industry’s vendors have been able to adequately offer network management

products for a single LAN, users are demanding more sophisticated products that can manage and integrate multiple

LANs over a geographically dispersed scope. Network management limitations continue to be the single most

frequent reason why users limit the size and scope of LAN implementations.

Network software performance and packaging: Multiple software protocols and interfaces will become more

commonly included in a single server or gateway interface. As protocols are embedded in a common interface or

protocol stack, overall network memory requirements will be reduced and users will have more capacity for

applications-specific tasks.

FDDI emergence: Fiber-optic technology cost/performance is becoming feasible for LAN-to-LAN backbone

integration and will be feasible for linking high-power workstations within 2 years. FDDI will become established

as the primary fiber LAN standard. Major vendor support is now beginning, as seen by FDDI plans announced by

DEC and IBM.

Pre-OSl acceptance of TCP/IP: TCP/IP is rapidly becoming established as a high-performance network

protocol—recently in commercial applications segments as well as the federal government for which it was

originally developed. User investments will not be discarded for at least several years until OSI protocols

solidify--even then, specific integration plans will have to be available to address TCP/IP-to-OSI needs.

Workstation networks: More LANs will be based on nonhost access needs. As early mainframe and

minicomputer processing power becomes available at the desktop, LANs will serve to distribute information and

computing power in high-performance workstation groups.

LAN security: Beyond physical transport security (e.g., encrypt}(m), LAN managers are facing growing needs

to establish information security-from unauthorized internal as welll as external access. As LANs proliferate so

does general distribution of information, thereby compounding information security management in contrast to

earlier centralized data processing environments.

Key: FDDI = fiber distributed data interface, LAN = Local area network, LATA -- local access and transport area, OSI = open systems

interconnection, TCP/IP = transport control protocol/internet protocol, WAN = wide area network.

SOURCE: Reproduced by special Permission of Telecommunications magazine

— .——
66 ● Critical Connections: Communication for the Future

2

3 A year later, Billy Buyit

applies for a loan with

Credit Happy Inc., a mortgage lender. Credit Happy

checks with Just Ask to see

if Billy Buyit pays his bills on

time and, for $2, gets a complete report

Figure 3-6-How a Consumer’s Credit File Can Travel

The bank sends the information to the Just

Seeing the potential in this, Just Ask looks

for new ways to make money. So it buys

data on Billy Buyit from the federal government, state and local courts, motor vehicle bureaus, and insurance companies.

Then, for about 10¢ a pop, it sells his

profile and credit record to

marketers looking for

customers in Billy

Buyit’s age, income,

and lifestyle group

5 One is Extra

Tight Window

Co., which notes

Billy Buyit’s Salary

and offers a deal on

replacement windows. He’s also on

a list bought by Too

Bad Collection Co.

It duns him for an

old $50,000 loan he

took to go to Sky’s

the Limit University but didn’t repay

SOURCE: Reprinted from the Sept. 4, of Business by special permission. Copyright 1989 by Inc.
Chapter 3--New Technologies and Changing Interdependencies in the Communication Infrastructure ● 67

Targeting, however, is a two-way street. While

individual users can employ targeting devices to

customize the messages they receive, the transactional records they leave behind can be compiled and

manipulated by others to target them for unsolicited

information.

STRUCTURAL CHANGES

IN THE COMMUNICATION

INFRASTRUCTURE

For almost a century, technological developments

in communication supported and sustained the U.S.

communication regime, which was vertically structured around distinct media. Within each industry,

control flowed generally from the top down, and

relationships among the key players were extremely

stable.

In telecommunication, for example, the business

decisions facing a central office executive were quite

straightforward because relationships among suppliers and customers were rather cozy. 146 And telecommunication users played almost no decisionmaking

role at all. The situation was not much different with

respect to the mass media. Although there was no

monopoly, the large film studios and the three major

television networks made the key decisions, establishing programming and determining the means of

its distribution.

The patterns of these relationships have now been

overturned, due in part to the technological trends

identified above. Given the rate of technological

change, it is difficult to predict what the future might

hold. Nonetheless, four major structural changes in

the communication infrastructure can be discerned:

1. the globalization of the communication infrastructure,

2. the heightened importance of the large user,

3. the need for system integration and the rise of

the system integrator as a key player, and

4. the multiplication of communication networks.

Globalization of the Communication

Infrastructure

With the liberalization of communication regimes

worldwide, technological advances and economic

developments will foster an increasingly global

communication infrastructure. In the short period

since the divestiture of AT&Tin 1984, communication vendors and users alike have taken a number of

steps that will inexorably lead to such an outcome.

Historically, U.S. needs for communicationrelated products and services were met domestically.

However, by rupturing old relationships and the

established way of doing things, the process of

divestiture opened up the U.S. market to foreign

countries. Many foreign firms were quick to take

advantage, and understandably so. At present, the

United States represents approximately one-half of

the world market for telecommunication equipment

and services. And the Department of Commerce

estimates that by 1992 the value of this market will

be around $1 trillion. 147 Meanwhile, the world

market is also sizable, estimated to be $140 billion

by 1992148 (see table 3-6).

Technological developments are also contributing to this trend. Although advances may lower the

costs of products and services in the long run, in the

short run such developments can greatly increase the

cost of doing business. For example, it now costs

approximately $2 billion over a 10-year period to

develop a modern central office switch.149 To spread

these development costs, firms are expanding their

markets beyond their national boundaries.

European firms have been particularly active in

this regard. A good illustration is British Telecom,

now the world’s fourth largest telecommunication

company. 150 In 1984, British Telecom did not boast

an office outside of the United Kingdom; today, it

has offices in 30 countries.151 As part of its global

strategy, British Telecom spent $1.37 billion to

purchase a 22-percent interest in McCaw Cellular,

the largest cellular carrier in the United States. To

round out its efforts, it also bought the Tymnet

1*S= Robefl J. -b~a, “s@ate@es for Global Markets,” CornmunicafionsWeek, Oct. 19, 1987, p- 20.

14TJefferson GrigSby, “Global Report,” Financial World, Apr. 18, 1989, p. 33.

l@Fri~ W. Ringlirlg, “Going Global,” Telephony, Au~. 28, 1989, p. 39.

149Grigsby, op. cit., footnote 147) P“ 33”

IS~or a &Scmsion, see Tbrn Valov]c, ‘*BT Ventures Proliferate as International Markets Complicate,” Telecommunicatwns, September 1989, pp.

57-58.

151@g~y, op. Cit., fOOtnOte 147$ p. 36-
68 ● Critical Connections: Communication for the Future

Table 3-6-World Telecommunications Equipment

Market (billions of dollars)

1988 1989 1992

actual estimated projected

Customer premises

equipment . . . . . . . . 40.0 44.0 59.0

Transmission . . . . . . . . 23.0 22.0 19.0

Cable and outside

plant . . . . . . . . . . . . . 11.5 11.0 9.0

Switching . . . . . . . . . . . 40.0 43.0 53.0

Total . . . . . . . . . . . . . 115.0 120.0 140.0

SOURCE: Reprinted with permission from Telephony, Aug. 28, 1989, p. 40

subsidiary of McDonnell Douglas Corp., thereby

acquiring the second largest public data network in

the United States. 152 Among British Telecom’s other

North American holdings are 51 percent of Mitel,

the Canadian-based PBX manufacturer, and 80

percent of Metrocast, a national paging service.153

Ericsson, the third largest telecommunication

company in Europe, has made equally impressive

strides, now drawing 80 percent of its revenues from

exports. Entering the mobile telephone business in

the beginning of the 1980s, the Swedish company

now accounts for 25 percent of the U.S. mobile

telephone market and 40 percent of the world

market. 154 While slow to enter the European telecommunication market, Ericsson has had considerable success selling in the Middle East, the Far East,

and Latin America.

Given the success of Minitel in France, it is not

surprising that the French have based their U.S.

market debut on the future prospects of videotex and

information services. *55 In May 1988, Minitel Services, a subsidiary of France Telecom’s Intelmatique

Division, was established through a joint venture

between Minitel USA and Infonet. Thus, Americans

with modems will now be able to access American,

French, and Canadian information, entertainment,

shopping, and other services.

Global acquisitions have not been limited to

telecommunication. In the years since divestiture,

foreign companies have spent more than $12 billion

to buy book, magazine, movie, record, and printing

companies that are based in the United States.156 As

one industry analyst notes with a touch of irony:

Bruce Springsteen’s anthems about life in America have made him a superstar, but when it comes to

his record label, a Japanese company now calls the

tune. 157

In like fashion, the German media conglomerate,

Bertelsmann AG, is today the owner of RCA

Records and Doubleday Books, which publishes the

prototypical American magazine classics, Young

Miss and Parents Magazine. ’58

It is only recently that U.S. communication

businesses have begun to fully explore the possibility of developing their markets abroad. One reason

for the delay is that, with deregulation proceeding in

foreign countries more slowly than in the United

States, U.S. firms have not been able to gain access

to their markets. This situation should improve in the

future, as all countries are now experiencing considerable pressure to liberalize their communication

regimes.

159 A second reason why U.S. firms have

been slow to develop global strategies is that the size

of the U.S. market has been generally large enough

to fulfill their revenue needs.l60 With a saturated

domestic market and increased competition from

foreign suppliers, such a parochial approach is

becoming harder and harder to sustain.

in response to this changing environment, a

number of U.S. companies are rapidly seeking

foreign partnerships and alliances. Recently, for

example, AT&T entered into a major agreement

with Italtel to help it modernize the Italian telephone

network and to jointly produce equipment for the

European market. 161 And the BOCs, eager to extrilszJohII wllli~~n and CM] Wi]son, “British TeIecom Buys Tymnet; Expands U ‘i. Da; Mom Positron,” Telephowi, Aug. 7, 1989, p. 8.

lsJ~ld.

t$Gigsby, op. cit., footnote 147, pp. 34-35.

lssKa~l~n M1lette, “French Minitel Services Coming to America,” CommunicaticmsW()+, Nov. 7, 1988, p. 46.

156sW Ben H, Bagdikian, “The Imrds of the Global Village,” The Nation, June 12.1989 pp ‘?99-819.

15Tpau] F~hi, “me Quiet ~vasion of the Media Moguls: Global Firms’ U.S. Acqumtions RX* Fears.” The Washington Post, Nov. 27, 1988, p. HI.

158~id,

159ThuS we ~, for exmple, that the E~opean Economic Cornrnissiort is pushing Icgislatlon that would end state monopolies for certain telephone

services. For a discussion, see M. Pyykkonen and S. Shekar, “The Impact of Europe 1992 on the Telecom Industry,” Te/ecomrnunications, August 1989,

pp. 59-60.

l~or a discussion, see Ringling, op. cit., footnote 148.

lblJohn willi~~, “AT&T, Italtel Finallzc Stock Swap Agreement,” Telephony, June 1 ~, 1989, P. ~.
Chapter 3--New Technologies and Changing Interdependencies in the Communication Infrastructure ● 69

cate themselves from domestic regulatory restrictions, are now undertaking a number of international ventures. US West, for example, has joined a

company from Hong Kong to bid for that country’s

first cable system. Pacific Telesis has joined Cable

&Wireless to develop a $350 million undersea cable

to Asia. And Bell South is involved in cable

enterprises throughout the world.l62

Characterizing the upheaval that is taking place in

an increasingly global communication environment,

telecommunication analyst Tom Valovic notes:

It is increasingly an anything-goes scenario, with

benefits accruing to users if, and only if, they can

stop scratching their heads and start figuring out

which companies they should start making alliances

with. Take something as seemingly innocuous as

cellular in the U.S. In Nynex’s territory, there are no

less than two other BOCs—Southwestern Bell and

Bell South-looking for cellular business (besides,

of course, Nynex). Extend that to the global market

and the BOCs as a group have more irons in the fire

than McDonald’s has ISDN lines. Bell Atlantic, for

example, is involved in upgrading Spain’s public

telephone network-no mean feat. But, as the British

like to say, turn-about is fair play, so we should

expect that the PTTs will increasingly be scouting

for prospects in the BOCs backyards as well.1b3

The Growing Importance of the Large User in

Defining the Communication Infrastructure

In the regulated environment before divestiture,

communication users were extremely limited in the

degree to which they could influence the communication infrastructure. The key decisionmakers were,

first, the communication vendors, and second, public policy officials. As two industry analysts characterize the situation:

Typically, the major vendor (or vendors) established industry standards regarding systems architecture, product features, and incorporation of new

technology, technical protocols, performance standards and pricing. These parameters became the

benchmarks against which other vendors designed

and marketed their own products. And so in many

respects, vendors paid more attention to one another

than to the user. . . .

Government policymakers determined market

participants, specified which products and services

the market participants could offer, and approved the

rates that could be charged for these services.164

The role of the user began to change, however, in

the face of technological advances.165 As described

above, the dispersal of intelligence throughout the

network, together with the unbundling of communication products and services, gave users much

greater control. It was, in fact, the new-found ability

of users to design their own equipment or create their

own networks that ultimately led to the breakup of

the old communication regime.

Economic developments have also supported an

enhanced role for the user, especially the largebusiness user. With the shift toward an informationbased service economy, communication is becoming more of a strategic, competitive factor in

business (see ch. 6). Hence, many companies are

now spending unprecedented amounts on communication services. For a service business such as

Citicorp, for example, telecommunication has become the third largest cost item.166 Under such

circumstances, large users are far more likely to both

seek and bargain for the best set of arrangements to

meet their own particular needs. With a much greater

stake in communication and information services,

they are also more likely to organize as a group to

achieve their common ends. Business users also

have much greater economic clout. Approximately

50 percent of all long-distance traffic is accounted

for by 5 percent of domestic and long-distance

users. 

167

Viewing communication as a competitive

weapon, business users have been quick to adapt to

their new role. As detailed in chapter 6, many have

opted to bypass traditional providers, devising

communication networks of their own. Others have

joined forces to establish user groups to design and

develop their own sets of standards. Users’ efforts to

16@rigsby, OP. Ch., fOOmOte 147.

lbqv~ovic, op. cit., footnote 150, p. 57.

164san~aG. ~ck and Audley M. Webster, “vendors and U=rs: They N~d to Stm B~]]ding Together,” co~m”c~ionsweek, CL.ONX.JP, Feb. 29,

1989, p, 13.

165 For ~histow of (he changing role of the lmge business ~Xr, SW Dan Schiller, Te/e~[ics a~Gover~n/(Norwood, NJ: Ablex Publishing, 1982).

166E11 Nom, *~The~blic TelWommmlcations Network: A Concept in Transition, ’’Jo~r~/o~Co~nicat~n, VO1. 37, No. I, Winter 1987, pp. 30-48.

lbTpeter Cowhey, “’rhe Globalization of Telephone Pricing and SerViCe,” Telecornmunicahons, January 1988, p. 39.
70 ● Critical Connections: Communication for the Future

develop protocols for manufacturing and office

automation are an example.168

Vertical Integration of Key Industry Players

and the Rise of the System Integrator

As aptly portrayed in the nursery rhyme “Humpty

Dumpty,” trying to put things back together again

often presents a great challenge. In the postdivestiture environment, the winners will be the

vendors who do this best. As Peter Huber perceived

with prescience in The Geodesic Network,1b9 the

demand for system solutions, one-stop shopping,

and ease of management will eventually lead to the

vertical reintegration of the communication industry. A number of signs already point in this direction.

One major indicator is the number of mergers and

acquisitions occurring in the industry. Many businesses spawned by divestiture are now finding their

situations more difficult. Not only is there more

competition; users, having become more sophisticated consumers, are seeking more technically

advanced and integrated solutions to their problems. 170 Notes Elizabeth Horwitt in this regard:

They tell me that corporate network managers are

crying for Mother-Ma Bell, that is. Well, why not?

In the predivestiture days, companies ordered everything from AT&T and howled for AT&T whenever

there was a problem. Those were the days. Now

post-divestiture has complicated telecommunications departments’ lives, with an ever-shifting array

of tariff structures and diverse, rapidly evolving

technology. Management is simultaneously

demanding strategic, reliable communications and a

firmer bottom line.171

To survive in this environment, businesses are

finding it necessary to team up with one another.

This kind of a response is particularly evident today

in the market for LANs.172 Throughout the industry,

the number of players has been dwindling, with all

of the major LAN companies—including Thernet,

Novel, 3 Corn Corp., Excelan, Sytek, Inc., Netar

Inc., Interlan, and Bridge Communications—

involved in at least one acquisition.173

Many companies are also taking advantage of

technology convergence to enhance their overall

system capabilities. Digital Equipment, for example,

recently announced four new alliances designed to

bolster its strength in communication. It has signed

agreements with DSC Communications Corp. to

develop a service control point, with Cincinnati Bell

Information Systems to design and market a new

cellular billing management system, with Siemens

Public Switching Systems to develop and market an

information service gateway for the telephone market, and with DATAP Systems to help market its

operations support system for telephone company

network management.174 In like fashion, AT&T has

offered $250 million to purchase Paradyne Corp. in

an effort to strengthen its position in the data

communication marketplace.

To package their services to meet the needs of the

business user, most vendors now see themselves in

the role of “systems integrator.” These vendors

might include the classic systems integrator, such as

Computer Sciences Corp. or Electronic Data Systems Corp., as well as major computer vendors, the

BOCs, the big eight accounting firms, and independent companies such as Network Management Inc.,

that have merged to compete with the larger

vendors. 175 According to one analyst: “They’re all

hungering for a pie that [is said] to be growing at 20

percent a year. ’’176 As described by another:

This whole thing of network management isn’t

about providing end users with what they want to

see. The fight is about grabbing control of network

management. He who manages the network controls

the data processing center.177

IGgFordiscussions, gee Stan Kolodziej, “No More Money to Burn: Industry Demands Solutions,” Co~urerworld, Sept. 7, 1988, pp. 31-M; ~d Mitch

Betts, “MAP~P User Patrons Plan Crusade Expansion,” Cmrqxaenvorki, Feb. 20, 1989, p. 42.

l@ Huber, op. cit., foomote 71.

IT~or a discussion, see John Keller, “As the Big Get Bigger, the Small May Disappear,” Business Week, Jan. 1*, 19*7, P. 90.

171Eli~be~ Hrjrwi& “when Others Tend Your Net,” ComputenvorM, MM. 6, 1989, p. 66.

IT&e Timothy Haight, “Merger Marks the Industry’s Midlife,” CommunicationsWeek, Apr. 3, 1989, pp. 1,46.

1731bido

171@uol Wilson, 46FOW New Ml~ces Target Telcos,” Telephony, May 29. 19*9, PP. 15-16.

175&lly Jackson, “me Diversification of Systems Integration,” CommunicationsWeek, Aug. 28, 1989, pp. 2*. 23.

176MMk Breib~, “systems Integration Swge,” Computewor/d FOCUS on ]ntegrution, Feb. Q, 1989, p. 12.

ITTA,s cit~ in Chritine BonaHeld, “AT&T Targets SNA Customers,” CommunicutionsWeek, June *O, 1988. P. 1.
Chapter 3---New Technologies and Changing Interdependencies in the Communication Infrastructure ● 71

Multiplication of Communication Networks

In the past, one telecommunication network

existed to provide universal service to all users. This

arrangement was quite suitable, as users needs were

very similar and the services that could be offered

were relatively limited. Businesses used the telephone for voice communication in much the same

way as households did.

Today, this is no longer the case. For many

businesses, transmitting data now represents a more

significant cost item than transmitting voice. Different kinds of businesses increasingly have different

kinds of business needs. Thus, banks and other

financial institutions have developed specialized

communication services such as the Society for

Worldwide Interband Financial Telecommunications (SWIFT’), while manufacturers have developed

their own communication protocols, such as manufacturing automation protocol (MAP). Even system

integrators are beginning to differentiate themselves

by providing specialized networking services.178

Given this increased demand for specialized

communication services, together with the technical

ability to unbundle and reconfigure communication

systems, the number of communication networks

that comprise the communication infrastructure is

likely to multiply in the future. As Eli Noam has

pointed out:

The emergence of technological and operational

alternatives undercut the economies of scale and

scope once offered by the centralized network. In the

past, sharing a standardized solution was more

acceptable to users because the consequential loss of

choice was limited and outweighed by the benefits of

the economies of scale gained. As the significance of

telecommunications grew, however, the costs of

nonoptimal standardized solutions began to outweigh the benefits of economies of scale, providing

the incentive for nonpublic solutions. Furthermore,

some users began to employ a differentiation of

telecommunication services as a business strategy to

provide an advantage in their customer’s eye.

Therefore they affirmatively sought a customized

rather than a general communication solution.179

171JKCUY Jackwu Dive~~lcation of Systems Integration,” Cmvnunica&msWe& Aug. 28, 1989, PP. 22-24.

1T9E]1 M. Nom, ‘me Futm of tie ~blic Network: F~m the Stw to the Ma~x,” Te/eco~~”catio~, Mmch 1988, pp. 58-59,65,90.
Chapter 4

The Impact of New Technologies on

Communication Goals and

Policymaking
CONTENTS

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. .. .00 ”- .”w ”--+o ””””.” .’. 75

THE NATURE OF GOALS AND THE GOAL-SETTING PROCESS . . . . . . . . . . . . . . . . 76

U.S. COMMUNICATION POLICY GOALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Freedom of Speech and Freedom of the press . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..+... 79

Fostering Diversity and a Marketplace of Ideas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

Achieving Efficient, Interconnected Communication Services . . . . . . . . . . . . . . . . . . . . . . 88

Universal Service and Equitable Access . . . . . . . . . . . . . . . . . . .. . .. . .. ... .....’.+” .“ 94

Comrnunication in Support of National Defense and National Security . . . . . . . . . . . . . . 99

Box

Box Page

4-A. Strategic Imperatives for Trend Toward Market Domination by

Larger and Vertically Integrated Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Chapter 4

The Impact of New Technologies on

Communication Goals and Policymaking

INTRODUCTION

The nature of the communication infrastructure

reflects the pattern of economic relationships that

exists among and between key players in the

communication system, as well as the public policy

goals and corresponding rules that govern these

relationships. In the United States, government has

traditionally played a minimal role in shaping the

communication infrastructure. In general, industry

leaders have been the driving force in developing

and promoting communication technology in the

marketplace, competing among themselves for primacy. Government intervened either to induce or

ratify interindustry agreements, and to temper them

in accordance with public or national security needs.

As one communication scholar has characterized the

decisionmaking process:

Regulation is not a central driving force in the

system; rather it hovers outside and to the rear of the

system, reacting to problems rather than initiating

policy, and generally seeming to maintain a balance

among competing interests rather than promoting

one specific interest.l

In the past, the goals and rules of the system, and

the balance among interested parties, were generally

accepted and relatively stable. Today, however,

these arrangements are increasingly being called

into question. Recent technological and socioeconomic developments are unraveling the U.S. communication regime as it has traditionally evolved,

bringing new possibilities, new players, and new

problems to the fore. Above all, questions are being

raised about the goals of the communication system

and about how, and by whom, future communication

policy decisions should be made.

The divestiture of AT&T and deregulatory communication policies, for example, are shifting more

and more decisions into the marketplace at a time

when new technologies are generating new opportunities in all realms of life. Some applaud these policy

developments, seeing in them new possibilities for

innovation and growth.2 Others fear that if decisions

about new technologies are made solely in the

marketplace, important social, cultural, and political

opportunities will be lost.3

The retreat of the government from the communication decisionmaking process at the Federal level

has given rise to a number of jurisdictional issues

centering on the role of the States in establishing

communication policy. Jurisdictional issues have

also emerged among Federal institutions, as different stakeholders have sought to gain their own

advantage by structuring the decisionmaking process in their favor. In addition, the rise of transnational corporations in a global economy is blurring

the boundaries between national and international

decisionmaking.

If the Federal Government is to develop and

execute a national communication policy appropriate for this new environment, it will need to develop,

and garner widespread agreement on, a common set

of up-to-date communication policy goals and

strategies. This requires an examination of past goals

and strategies to determine whether, given changing

conditions and circumstances, they are likely to

remain valid in the future. To this end, this chapter

will:

●

●

●

●

describe the nature of goals, and the manner in

which they are generally established;

identify and describe the traditional values and

goals that have guided U.S. communication

policy in the past;

describe and evaluate from an historical perspective how well, and under what circumstances, communication goals were achieved in

the past; and

identify barriers or changed conditions that

may make it difficult to achieve such goals

today, employing similar kinds of strategies.

lv~wnt Mosco, 6*’rhe comm~ication System From a Regulatory pers~tive~ “ OTA contractor report, December 1986.

2S=, fu Cxaple, E]i Nom, “me ~blic Telecommunication Network: A COnCept in Transition) “JournalofCornmunication, vol. 37, No. 1, Winter

1987, pp. 30-48.

s%, fm exmple, fomer FCC Commissioner Nicholm Johnson’s comments on the Van Deerlin bill, in Thllothy Htight (d.). Telecomum”catio~

Policy and the Citizen (New York, NY: Praeger, 1981), pp. 1-8.

-75-
76 Critical Connections: Communication for the Future —..—

THE NATURE OF GOALS AND

THE GOAL-SETTING PROCESS

To understand how communication goals might

affect choices about the communication infrastructure, it is necessary first to consider the nature of

goals themselves and how they are established.

Goals are statements of values that serve to guide

decisionmakers.4 They are the criteria against which

choices are weighed. Goals serve to signal the

bounds of acceptable behavior and to legitimate the

allocations of costs and benefits associated with

decisions. Individuals, organizations, and nations

establish goals as a way of signaling a commitment,

identifying aspirations, clarifying objectives, or

integrating diverse elements through a common

bonds

Goals can be general or specific, they can cover a

broad or narrow range of activities, and they can be

long term or short term.6 Generally speaking, the

less structured the organizational context, the less

agreement there is likely to be on norms and values,

and thus the more vague and general the goals.

Similarly, goals set higher within an organizational

hierarchy tend to be more generic because the views

to be reconciled are more narrow and specialized. In

like fashion, the more enduring goals are intended to

be, the greater the number of situations and events

for which they must account, and the more ambiguous and flexible they will be.7

Goals can be established in a number of ways.

They may be set as part of a deliberate, formal,

rational process. Or they may be established inadvertently, for example, through some administrative

action. 8 They may even be created after the fact, as

a means of synthesizing or justifying some previous

activity. More often than not, however, goals are

created through an informal, day-to-day process of

“organizational fighting, mutual concessions, and

coalition building.’* Or they are determined indirectly by the cumulative behavior of individuals and

groups acting through the push-pull mechanisms of

the marketplace.

The issue of whether or not to establish or

significantly alter basic goals is rarely placed on

decisionmakers’ agendas as a formal matter, to be

considered as part of a rational decisionmaking

process. It is much more likely that goals will be

defined, interpreted, and/or redefined in the course

of their execution and implementation. Or, if goals

remain inchoate, they may be determined indirectly,

driven primarily by market or technological forces.

To the extent that issues about goals are resolved

either indirectly or from behind the scenes, one

might say that, although decisions are made, the

subject of goals is never really placed on the policy

agenda.

Major revision of goals is discouraged by a

number of factors. One of the most important is that

existing goals reflect past bargains and agreements,

which may have been attained only with considerable effort and expense. By formally reopening the

question of goals, existing bargains and alliances

may become unglued, and a new consensus around

a new set of goals will need to be developed.

Organizations also become structured around

goals, and their structures may serve to constrain

future choices. Within organizations, decisionmakers will generally try to deal with problems in a

piecemeal fashion and with well-tried solutions. As

social psychologists Katz and Kahn have described

it:

They [the decisionmakers] do not consider all

possibilities of problem solution because it is of the

vet-y nature of organizations to set limits beyond

which rational alternatives cannot go. The organization represents the walls of the maze and, by and

large, organizational decisions have to do with

solving maze problems, not reconstructing maze

walls. “ ‘

It is, in fact, this interrelationship between organizational arrangements and goals that suggests that any

4~e.~fi s~on, ~~~ tie concept of ~gani~ationa] Goals,” Admirusfrarive Science Quurrerfy, v~l. 9. No. 1 * June 19@, P. 3.

sM~ay ~elma, The Sytiollc u.!es Of po/itics (Urbana, IL: University of Illinois P~(w, 1985).

bD~iel Ka~ and Robet-t Kahn, The Soctal Psychology of Organizations (New York, N y John Wdey and .%ns, 1976), p. 479.

TSW discWslom ~ Simon, op. ~lt., fmmo[e 4, pp. 176-178; Kau and Kahn, op. c](., tcx }mote 6, p. 481; and Richard M. Cyert ~d J~es G. MMch!

A Behavwraf Theory of the Firm (Englewood Cliffs, NJ: Prentice-Hall, 1963).

8Sim~, op. cit., fOOtnOte 4.

9K~ ad K~, op. Cit., footnote 6. For a discussion of this process, see Cyert and MwCh. W. cit., footnote 7! PP. 294.

IOKaV and Kahn, op. cit., foomote 6, p 283.
Chapter 4--The Impact of New Technologies on Communication Goals and Policymaking ● 77

basic change in an organization’s goals will entail a

corresponding change in its structure.

Decisionmakers may also avoid publicly raising

issues about basic goals because of the potentially

negative political consequences. The setting of

policy goals generally serves to establish or reinforce the way in which scarce resources or values are

distributed among members of a group or within

society. By not questioning goals, or by speaking of

them only in the broadest sense, decisionmakers can

be held less accountable to those stakeholders who

are losers in the goal-setting process.

Although it is rare that basic goals are totally

revised, they are often adjusted in an incremental

fashion over time to meet the requirements of

changing circumstances and values. Such readjustments come about, for example, when the authority

to define and refine goals through the process of

rulemaking is delegated to a government agency.ll

Through this process, Federal administrators often

have considerable leeway to “interpret” and operationalize the meaning of a law. The amount of this

leeway depends on the specificity and narrowness of

the law, and on the extent to which other actors are

able to constrain an agency’s actions. ’z

Just as issues about goals are raised by Federal

agencies in the administrative process, they can also

be placed on the agenda through the judicial process.

In addition to adjudicating disputes, the courts have

filled in the rules on “policy issues left unresolved by

existing legislation, often expanding the scope of

government programs in the process.”13 The judicial

process has also been used by individuals and groups

as a means of gaining access to the policymaking

process, a development that the courts have fostered

by lowering standing requirements.14

It should be noted that goals, once set, can

subsequently be undermined. According to the

“capture” theory of regulation, for example, agency

administrators become co-opted over time by the

very interests whose behavior they have been

established to regulate. As a result, they tend to

redefine the agency’s original goals in a way that is

favorable to the regulated industry .15 Of course,

administrative agencies are more or less subject to

capture, depending on the overall political climate

and on the resources and behavior of other actors.16

When goals are undermined, or when they do not

keep pace with changing circumstances, they may

need major revisions. The neglect of fundamental

changes over time will result in impotency, if not

irrelevance. Signaling the need for change might be,

for example, the breakdown of internal alliances, the

recurrence of unsolved problems, and the emergence

of powerful new players who may want to change

not only the rules of the game, but the game itself.

Experience in the United States matches this

general description of goal-setting. This is particularly true in the case of communication, where only

a few major legislative decisions about goals have

been made. Of course, the most important and

enduring decision occurred within the context of a

total revision of governmental affairs-at the Constitutional Convention when the delegates agreed to

include within the Constitution three clauses that

provided, in turn, for freedom of the press, the

1 IF~er~ agencies operate in accord~cc with “organic” statutes that define their spezific rdcmaking authority, For a discussion of Ildemting, ~

“Regulators and Rulemaking,” ch. 4, Regufunon Process and Politics, Congressional Quarterly Inc., 1982.

12~y have ~W~ that it is the admlni~~atlve leeway that h~~ led to reWlatoV f~]~e and he “~ap[~e” of agencies by theti clientele. AS Cutler

and Johnson have described it: “Regulatory ‘failure’ then, as we would define it, occurs when an agency has not done what elected officials would have

done had they exercised the power conferred upon them by virtue of their ultimate pohtical responsibility. Agencies would be said to fail when they reach

substantive policy decisions (including decisions not to act) that do not coincide with what the politically accountable branches of government would

have done if they had possessed the time, the information, and the will to make such a de~:lslon “ Lloyd N. Cutler and David R. Johnson, “Regulation

and the Political Process, ’’The Yale Law Jfuwna/, vol. 84, No. 7, June 1975, p. 5, For another crmque of the broad administrative mandate, see Theodore

J. Lowi, The End of Liberalism, 2d ed. (New York, NY: Norton, 1979).

13R. Shep Me~ck, Reg~~zon and rhe courts The case o~the clean Air Ac- (W~hington. DC: ‘rhe Brookings Institution, 1983), p. 1. For other

works on the role of the courts in establishing public pohcy, see, for example, Abram Chayes, “The Role of the Judge in Public Law Litigation,” Harvard

L.uw Review, vol. 89, 1976; Owen M. Fiss, “Foreword: The Forms of Justice,” Harvard Iuw Review, vol. 93, 1979; Donald L. Horowitz, The Courts

and Sociul Policy (Washington, DC: The Brookmgs Institution, 1977); and Nathan Gl~tr, “Should Judges Administer Social Services?” The Public

Interest, No. 50, Winter 1978, p. 64.

IQR1c~d B. Stewm, “me Refo~ation of American Adminl~ative Law,” Hu~ard i @ ReVi~, vol. ~, 1975; see ~~ Laurence Tfi~, American

Constitutwnul Law (Mineola, NY: The Foundation Press, Inc., 1978).

l~For a disc~sion, see J~es L. Baughman, Television’s Guardians” The FCC and the politics of programmi

University of Tennessee Press, 1957), pp. xiv-xv.

ng, Z958-1967 (Knoxville, TN:

t6& Nell ad men ~lnt out, interest ~oups do not ~ways get what ~y want, es~lally If po]lcym~ers do not behave pwsively Ill KX3pOIlSe tO

their activities. Roger G. Nell and Bruce M Owen, “What Makes Reform Happen’)” Rei?idarion, VOI 7, No. 2, March/April 1983, pp. 19-24.
78 ● Critical Connections: Communication for the Future

protection of intellectual property, and the establishment of postal roads.17 It took almost 150 years,

however, before the legislature debated and established additional national communication goals,

first in 1912 and 1927 with the enactment of the

Radio Acts, and subsequently in 1934 with the

passage of the Communications Act.

Even then, the standard that broadcast communication should serve “the public interest, convenience, or necessity” was stated so vaguely as to leave

room for considerable compromise. *s So, too, was

the goal for providing “so far as possible, to all the

people of the United States, a rapid, efficient,

Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges;” for this definition did not provide

criteria for defining adequacy and reasonableness.

Although from 1976 to 1980 Congress did reevaluate communication goals, these efforts to revise the

1934 Communications Act failed for a lack of

consensus.

19 Today, as a result—in the absence of

clearly defined and consistent goals established

either by the legislature or by the Executive—

national communication policy is being set, for the

most part, by the courts.

Despite past reticence in formally addressing

communication policy goals, there are, today, a

number of circumstances and considerations that

might again place this subject on the agenda of key

decisionmakers. As the boundaries between technologies, markets, and jurisdictions are realigned, many

of the agreements and coalitions that have sustained

traditional communication goals are beginning to

erode. Not only is the balance of power among

traditional stakeholders shifting; in addition, new

players, eager to take advantage of the opportunities

that new technologies afford, are entering the scene

and placing new demands on the system. In this

context, many of today’s problems are no longer

amenable to old solutions, and efforts to resolve

them may be more difficult. With the multiplication

of players and the globalization of communication

markets, control over the communication infrastructure is becoming increasingly dispersed.

In reevaluating communication goals, it is useful

to consider how the development of new technologies has affected communication goals in the past.

Communication goals have rarely been established

formally at any one moment in time, but rather have

been developed over time in the course of political,

administrative, and economic processes. Therefore,

any analysis of their evolution requires taking a

broad historical approach, focusing on the values

that Americans have attached to the role of communication at different times and in different circumstances.

Employing such a perspective, it becomes evident

that the way a new technology evolves and the

purposes for which it is deployed depend not only on

the specific technical characteristics it exhibits, but

also on the social context in which it emerges and the

laws and public policies that exist, or are set up, to

govern its use. The emergence of new communication technologies has always served to center

attention on the role of communication in society. In

recognizing the potential of each new technology,

communication has been viewed not just as an end

in and of itself, but also as a means for addressing

other societal issues. In this sense, although a

nation’s communication system is built of technology, organizations, and personnel, its very nature

reflects major social choices and values.

U.S. COMMUNICATION

POLICY GOALS

Despite the fact that Congress has only rarely

established communication policy goals on a formal,

legislative basis, it is possible to identify a consistent

set of U.S. goals that have endured over the past 200

years. The major goals have been:

. freedom of speech and freedom of the press,

. fostering the diversity of content and a marketplace of ideas,

. achieving efficiency and interconnection,

. nationwide universal service and equitable

access, and

ITIthiel de Sola Pool, Technologies of Freedom (Cambridge, MA: The Belknap Press of Harvard University, 1983), PP. 16-17.

lg~sclauw did not go unnoticed, however. “One commentator wrote shortly after the passage of the Radio Aet that the inclusion of the phrme public

interest, convenience, and necessity was of enormous consequence since it meant that ‘licenses are no longer for the asking. “Eric C. Krasnow, Lawrence

D. I.xmgley, and Herbert Terry, The Politics of Broudcust Regufution (New York, NY: St. Martin’s Press, 1982), p. 17.

Igfi=owet & @ntout, for exmp]e, that ah.hough the proposed legislation failed to paw, the debate about it did signal the Federal Communications

Commission (FCC) about the new directions a number of Congressmen were considering. They note, moreover, that many of the changes proposed in

the bill have subsequently been adopted as policy by the FCC. Ibid.
Chapter 4--The Impact of New Technologies on Communication Goals and Policymaking ● 79

. communication in support of national security

and defense.

To ascertain the relevance of these goals today,

and the most effective way of achieving them, this

chapter will analyze each of the goals in terms of:

●

●

●

●

●

the reasons, and conditions under which, they

were adopted;

the political basis of their support;

the policy mechanisms adopted to achieve

them;

the success of these policies in achieving their

ends; and

present-day stresses and strains that may make :

it more difficult to employ these means or

achieve these goals in the future.

Freedom of Speech and Freedom of the Press

Enshrined in the first amendment, freedom of the

press is perhaps the value most closely associated

with communication in the United States. Applied

most fully to the print media, it has consistently

meant private ownership, freedom from prior restraints, virtually no content controls, and relatively

limited liability for the consequences of a message.

Except during times of war and social stress, this

value included the right to criticize government

vigorously.

This conception of press freedom has survived

largely intact because of its centrality to selfgovernment and a free marketplace. With the

development of new information and communication technologies, however, questions have been

raised with respect to the extent to which, and how,

the first amendment should be applied to them.

Some fear that if new technologies are not covered

by the first amendment, American citizens’ rights to

free speech and a free press will suffer as more and

more information is compiled, stored, and delivered

electronically .20 Others contend that the development of new technologies requires a rethinking of

policies to achieve traditional first amendment

goals.*’

Establishing the Goal of Freedom of Speech and

Freedom of the Press

To find the source of the goal of free speech and

freedom of the press, it is necessary to look to the

origins of printing. Introduced into an authoritarian

England in 1476, printing existed under a system of

strict control until nearly 1700. Society recognized

the interests of the state, not those of individuals, as

paramount. In keeping with this view, the monarch

was sovereign—a religious leader as well as head of

state. The people were not considered capable of

discerning truth for themselves; thus, secular and

religious leaders exercised various controls over

communication. The ultimate role of the press in this

system was to sustain the state.22

During the 1600s, the growth of political democracy and religious freedom, the expansion of free

trade and travel, the acceptance of laissez-faire

economics, and the general philosophical climate of

the Enlightenment undermined authoritarianism and

23 Resting on an called for a new political concept.

entirely different set of values, this new concept, the

libertarian theory, reversed the role of the press. The

press was viewed not as a means of disseminating

government-approved dogma, but rather as an aid to

the people in their search for truth. According to this

view, the press, operating independently, should at

times provide harsh criticism of government.24

The battle between authoritarian and libertarian

conceptions of the press, which took generations to

resolve in England, was reprised fairly quickly in the

American Colonies where the libertarian view soon

~ool, op. ci~, footnote 17.

zlFor o= disc~i~, ~ ~n h DUC, f)eyoti Bro~cmting: Patterns in Policy and h (New York, NY: ~gm~> 1987).

~pr~~k sie~~, ~~ore petermn, ~d Wilbw s~hr~, Four Theories ofthe Press (Urbana, IL: University of Illinois Press, 1956), pp. 9-37.

Perhaps the most odious pws control was licensing. But in 1530, Henry VIII shifted some of the licensing authority to secular authorities, and 8 years

later he extended licensing to all printed materials. Licensing was later supplemented by government-sanctioned craft controls. In 1557, the Crown

chartered the Stationers Co., a group of master printers who monitored and controlled competition. In other words, the government authorized a private

monopoly over the means of communication.

~Ibid., p. 3.

‘Ibid., pp. 39-57.
80 ● Critical Connections: Communication for the Future —

triumphed. 25 The revolutionary struggle had itself

demonstrated the value of communication in public

education, persuasion, and social change, and engendered a democratic view of public opinion in the

emerging republic.26 The fomenting and winning of

the war for independence also helped create a strong

public sentiment for legally protecting the press. The

first amendment to the Federal Constitution, covering freedom of speech, religion, assembly, petition,

and the press, forbade Congress from interfering or

making any law that might abridge those freedoms.

The amendment gave American newspapers a degree of liberty unknown elsewhere.27

Interpreting and Implementing the

First Amendment

Although the first amendment has served as a

fundamental building block of American Government, the first major cases involving its applicability

did not arise until after World War I with the

introduction of the “clear and present danger”

standard. 28 Subsequent Court interpretations of first

amendment rights have ranged from a strict absolutist view (most closely associated with Justices Hugo

Black and William O. Douglas), which takes the first

amendment literally at face value, to a more

restrictive, historicist view (espoused by Judge Felix

Frankfurter), which allows for exceptions to the rule

in cases such as obscenity, libel, and national

security. The Court has generally adopted an intermediary stance between these two positions: while

consistently holding that freedom of speech is not

absolute, the Court has defined the exceptions very

narrowly. 29 Among the justifications used for

abridging first amendment rights have been:

●

●

●

●

the existence of a clear and present danger;

the need to balance freedom of speech against

other legitimate interests;

the fact that the nature of speech is unprotected,

as in the case of obscenity; and

the fact that speech is made in conjunction with

actions that are, themselves, subject to regulation. 30

In all of these cases, however, the Court will give

precedence to first amendment considerations. As

Pool has described:

At a conceptual level, this weighting is expressed

by the Court’s assertion that freedom of speech

enjoys a “preferred position” in the law of the land.

Operationally, this preferred position means that for

those who claim interference with their First Amendment rights, certain procedural burdens are waived

and certain usual legal presumptions are reversed.31

Resolving first amendment issues has become

more difficult with the emergence, and subsequent

convergence, of many new communication technologies. For example, with the development of technologies that allow many people to communicate

simultaneously with one another-as in the case of

electronic bulletin boards-it is no longer always

clear what constitutes “speech,” “the press,” or

“assemblv." 32 

The problem of defining first amendment rights is

also compounded by the fact that it has not been

—.—

applied equally or consistently to all communication

 . .

25~~ou@ British ~o]ofi~ ~u~ofitles had tfied, ~i~ ~~est success, to use the press ,.~s an lns~rnent of con~ol, tiey soon discovered that they

needed newspapers to communicate with one another and with the people. Thus, they encouraged postmasters, presumably loyal to the Crown, to compile

newspapers from officiat pronouncements and semi-official correspondence. There was, however. a segment of the press that occasionally needled the

authorities, to the delight of readers. This group derived its support from a growing merchant clws, commercial advertising, and printing contracts let

by colonial assemblies. h was this latter strain of journalism, in fact, that provided an outlet f~w aggrieved colonists to agitate for revolution. See Thomm

C. Leonard, The Power of the Press: The Birth of American Political Reporting (New York , NY Oxford University Press, 1986).

~Wtile revolution~es s~nt some time harassing loyalist editors, most of their eff~n-ts w cre devoted to thw own public information Campai8nS. BY

all accounts, the revolutionaries were vastly more imaginative and successful than the Brll/sh tn using information to persuade the people. Patriotic

propagandists orchestrated an information campaign that disseminated news reports (often ( wggerated ), along with expost% of conditions in England.

Robert A. Rutland, The Newsrnongers Journalism in the L@e of(he Nation 1690-1972 [ k-w York, NY: Dial Press, 1973), pp. 26-53; Edwin Emery

and Michael Emery, The Press in Amertca (Englewood Cliffs, NJ: Prentice Hall, I i )78 ~. , tp fii.73; ,ind John Tebbel, The Compact History of the

American Newspaper (New York, NY: Hawthorn Books, 1969), pp. 33-54.

zTD~ie] czi~om, “Goals of the IJ.S. Communication System. An Historical Perslwctll ~ , ““ OTA Corltractor report, September 1987.

Z%eratd Gun~er, comtit~~~l LaW Cases ati Materials (Mineola, NY: Foundation k’TCSS, % d., 1975), ch. 12.

29P@ op. cit., fOOtnOte 17* P. 59

sOIbid.

sl~id., p. 62. AS POO1 pints out, at least nme different rules give first amendment righ(b a preferred position. These are: reducing the p~sumption

of constitutionality; shift in the burden of proof; expedited actions; disallowance of vaguenew: requirement of well-defined standards; disallowance of

overbreadth; diszdlowance of procedural burdens, restriction on choice of means; and narn w intcrpretxion of laws.

32ForadiscWsion, ~ U,S. Congess, Office Of Technology As~ssment, science, 7kthm1f g}, a~the First Ame~enr, OTA. CIT.369(Washington,

DC: U.S. Government Printing Office, January 1988).
Chapter 4--The impact of New Technologies on Communication Goals and Policymaking ● 81

technologies. As Ithiel de Sola Pool has pointed out,

in the United States, there have been three different

regulatory systems established to deal with communication technologies.33 The print media have been

governed primarily by the first amendment; telegraphy and telephony by the law of common carriage;

and radio and television by a specially developed

broadcast law. The problem of applying the first

amendment in a new technological context arises not

only because new technologies have been developed

that do not fit neatly into these three categories, but

also because, with the convergence of print, carrier,

and broadcasting technologies. the categories themselves do not always apply.

First Amendment Tensions: The Case of Cable

The case of cable television can serve to illustrate

both of these problems. No recent technology has

had such a topsy-turvy development or regulatory

history. Although cable has constituted a part of the

U.S. communication system for four decades, it is

only recently that it has emerged as a key element in

the system.

The original goal of community antenna television (CATV) was to provide a practical way of

enhancing television signals for communities located on the fringe or outside of good broadcasting

reception. 34 Throughout the 1950s, the Federal

Communications Commission (FCC) essentially

ignored CATV, viewing it as a temporary development and a mere auxiliary to the broadcasting

system.35 Seeking to avoid the administrative burden of regulating another industry, the FCC pointed

out that CATV was neither a common carrier

(because the subscriber did not determine the nature

of the signal being carried) nor a form of broadcasting (because signal transmission was completely by

wire). Thus, what attention the FCC did pay to

CATV in the early years centered on possible

interference or problems for the broadcast service.36

This situation changed greatly in the late 1960s

when small cable operators were joined by larger

systems that aimed to greatly expand their markets

by importing broadcast signals. These operators

could offer better service and more channels of

programming. In response, broadcasters began to

pressure Congress to restrict cable. They also began

to buy into cable systems, gaining control of 30

percent of them by 1968. With Congress and the

courts unwilling to control the development of cable,

the FCC reluctantly issued a series of rulings in the

1960s, which had the cumulative effect of restricting

cable development. The period from 1968 to 1972

was thus marked by a curtailment of cable in major

markets.37

In 1972, the FCC issued the Cable Television

Report and Order, offering for the first time a

somewhat comprehensive set of rules on cable.

Cable systems were freed to expand to the top 100

markets, but they continued to be restricted in terms

of the number and kinds of signals they could carry.

Cable also had to provide channels for educational

institutions, municipal governments, and public

access. The cable industry began to expand in the

mid-1970s when several court decisions forced the

FCC to relax some of these constraints, but its

growth was still limited because it was difficult for

cable companies to get financing to lay cables.

Two factors served to stimulate the industry in the

1970s and 1980s.38 First, the rise of pay-cable

services such as Home Box Office (HBO) revealed

an extensive latent demand for alternative programming. These channels charged a premium above the

basic monthly cable rate, offering schedules dominated by old movies, live sports, and entertainment

specials. Secondly, and more important in the long

run, cable programming was linked to satellite for

the first time in 1975 when Time, Inc. (owner of

HBO) established the first national network to

distribute cable programs to local operators. The

success of RCA’s and Western Union’s communication satellites created reliable and economically

feasible distribution networks for the cable companies. The availability of new and specialized pro33po01, op. cit., footnote 17.

sqA~r w~ld W= II, the typic~ ealy CATV compay would build a tall master antenna on a hill or mountain to pick up the ftint signals from a

nearby city. These signals were amplified and fed into coaxial cables ultimately connected to the homes of people subscribing to the service.

35For ~ di~~~~sj~ of the FCC and tie re~jation of cab]e, ~~n ~ Due, c’~le Te/e ti$wn and the FCC’, A Crisis in Media Contro/ (Philadelphia,

PA: Temple University Press, 1973).

NTATV ~~a ~tenti~ ~reat t. tie FCC’S vision of a iocaliz~ television system kcause if cab]e operators began to imwfl di~ant si~~s into

local markets, they might drive local stations out of business. However, in the early years of cable, this danger appeared to be minor. Ibid.

37Na swns~gly, ~Psltlon t. cable Cxpanslon from broadcmtcrs weakened as m( Ire ~nd more broadcasters hught into cable sYstems.

38Qi~om, op. cit., footnote 27.
82 ● Critical Connections: Communication for the Future

gramming in turn stimulated a new demand for cable

systems around the country. By 1980, 22 percent of

American TV households had become cable subscribers. 39

As the cable industry’s fortunes improved, and as

more and more programming services became

available, cable operators sought to legitimize the

idea that, as an industry, cable was more analogous

to the newspapers than it was to broadcasting; hence

it should be deregulated and have the benefit of full

first amendment rights.40 Cable’s apparent unlimited channel capacity lent considerable credibility

and support to this point of view because spectrum

scarcity has provided the major rationale for broadcasting regulation.41 Cable’s perspective also gained

sustenance from an increasingly deregulatory policy

climate. Commenting on the growing tension within

the regulatory framework, Laurence Tribe noted:

The clear failure of the “technological scarcity”

argument as applied to cable television amounts to

an invitation to reconsider the tension between the

Supreme Court’s radically divergent approaches to

the print and electronic media. Indeed, since the

scarcity argument makes little sense as a basis for

distinguishing newspapers from television even in

the late 1960s and early 1970s, such reconsideration

seems long overdue.42

Taking all of these developments into account, the

Cable Communications Policy Act of 1984 was

intended to reduce some of these tensions. Nevertheless, considerable confusion about the nature of

cable—what it is and how it should be dealt with by

government—was embodied in the act itself. For

example, the Cable Act substantially deregulated the

industry. Cities lost the authority to regulate subscribers’ rates, and they no longer had much

discretion with respect to franchise renewal. The

Cable Act also prohibited the future regulation of

cable as a common carrier or public utility. However, at the same time, cities were permitted not only

to charge franchise fees, but also to require public

access channels and certain kinds of programming.

Such ambiguity is perhaps not surprising, given

that such laws are generally the product of stakeholder compromise. In the case of the Cable Act, a

compromise was developed based on the cities’

desire to charge franchise fees and the cable

operators’ wish to greatly facilitate the franchiserenewal process. But the compromise, in effect,

sidestepped the issue of the first amendment.

Although separated from the political fray, the

courts have been no more successful than legislators

in clarifying cable’s position in the present regulatory structure.43 Although the Supreme Court has

ruled in the case of Preferred Communication v. City

of Los Angeles that cable actions have first amendment implications, it has failed to specify what these

implications are.44 Moreover, in the few years since

the Cable Act was passed, a number of courts have

come to contradictory conclusions about the extent

of the cable industry’s first amendment rights.45

Judges in Palo Alto and Santa Cruz, CA, for

example, have asserted that cable companies are

entitled to the same rights as the print media,

‘W%meable’s argument as to why it should enjoy first amendment rights, see G. Shapiro, P. Kurland, and J. Mercurio, Cublespeech: The CuseforFirst

Amen&nent Protecdon (New York, NY: Harcourt Brace Jovanovich, Publishers, 1983).

Throughout cable’s history, a number of people have suggested that it be treated as a common carrier, an idea that cable companies have fiercely

resisted. In 1970, for example, the Sloan Commission on Cable Television toyed with the common-carrier approach, but concluded that if cable

companies were given common-carrier status, they would not have enough economic incentive to develop their systems. Pool, op. cit., foomote 17, p.

169.

Q1’rhe Supine Court upheld the constitution~ity of broadcast regulation in the case of Red Lion Broudcusting Co. V. RX on the gr~ds th~

“broadcast frequencies constituted a scarce resource whose use could be regulated and rationalized only by government. Without government control,

the medium would be of little use because of the cacophony of competing voices, none of which could be clearly and predictably heard.” 395 U.S. 367,

23 L. ed. 2nd 371,89 S Ct 1794 (1969), quote as cited by Pool, ibid., p. 130.

42Tnb, op. cit., foomote 14, p. 699.

d3pml h~ &SCri~ tie COurt’S early role with respect to cable. As he nOteS: “The courts, however, were not totalIy supine. Though they gave the

FCC a long leash, in bursts of occasional vigilance they puzzled about where the limits of its regulatory authority might lie. Early decisions seemed to

give the FCC almost unlimited power over cable systems. Later decisions began to question that authority and to overturn a number of cable rules.” Pool,

op. cit., footnote 17, p. 160.

441111986, the sup~rnc COWI sent the case of Preferred Comrnw”cutwn back to the district court for trial. III so doing, it tid thtU Cdlle klevision’s

activities “implicated First Amendment interests,” but added that where a cable system’s “speech and conduct are joined in a single course of action,”

first amendment rights “must be balanced against social issues.” The Court left open the question of how to judge first amendment challenges.

dSFor discuwlom, see JOhXI Wo]fe, “conflicting Rulings on Cable Rights Set Stage for Supreme Court Showdown,” Cablevision, Sept. 28, 1987, PP.

32-33; “Of Cable and Courts, Franchising and the First,” Broadcasting, May 22, 1989, pp. 69-71; Craig Kuhl, “Franchise Fees Struck Down,”

Cablevision, Nov. 7, 1988; and “First Amendment Claims by Erie Cable Left Dangling by U.S. Appellate Court,” Broudcuwing, Aug. 8, 1988, p. 42.
Chapter 4--The impact of New Technologies on Communication Goals and Policymaking ● 83

whereas in Erie, PA, the court has ruled that the

requirement of local public access channels was

constitutionally sound.46

Quite in keeping with cable’s mercurial history,

the issue of cable regulation and its relationship to

the first amendment is not likely to disappear. Given

the industry’s rising prices and increased levels of

concentration, there are, for example, a growing

number of people who now believe that the role of

cable in the communication system needs to be

reconsidered. 47 And some of the most recent first

amendment cases have not been in cable’s favor.

The pressure to resolve this issue is likely to mount,

moreover, as telephone companies seek to enter the

business, perhaps on a common-carrier basis.

Fostering Diversity and a Marketplace of Ideas

The goal of fostering diversity of content and a

marketplace of ideas is closely associated with the

first amendment objectives of free speech and a free

press. Whereas the former goal is aimed at preventing government interference with and control over

the media, the latter seeks to foster public access to

a broad range of information content. However, it

should be noted that these two goals can often come

into conflict.48 With the advance of communication

technologies, such conflicts are likely to become

more prevalent and acute.

Establishing the Goal of Diversity and a

Marketplace of Ideas

Like the first amendment, the goal of fostering a

diverse media grew out of the age of the Enlightenment with its belief in human rationality and the

ability of individuals to seek out, and discern, truth

for themselves. The Enlightenment values of human

equality and natural rights also lent support to this

communication goal by fostering representative

government, and with it the notion that citizens

needed regular access to trustworthy information

about public affairs. Together, these notions congealed into the influential concept of a “free

marketplace of ideas.” Put simply, this concept

refers to the idea that communicators should be free

to offer their ideas for popular acceptance in an

unregulated forum; that rational human beings,

exercising their faculties, will find truths in a welter

of competing claims; and that only under such

circumstances can the audience make informed

decisions about self-government and other matters.49

In the United States, where the first amendment

had firmly established distance in the relationship

between government and the print media-and

where common-carrier regulations had determined

access to, and the operation of, telegraphy and

telephony—the issue of the government’s role in

explicitly fostering the diversity of information

content did not fully emerge until the advent of

broadcasting. Unique in requiring the use of what

appeared to be a very limited public spectrum,

broadcasting seemed to require a regulatory structure all its own.50 The general belief at the time was

that, without some means of allocating the public

spectrum, the airwaves would become so overcrowded and interference would become so rife as to

actually preclude broadcasting.51

After debating alternative regulatory approaches

for over a decade, Congress finally adopted a system

that provided for the allocation of broadcast licenses

461bid.

47s=”~ c~le ad COW-KS, Franchising and tie First,” Broadcasting, May 22, 1989, pp. 69-71; and “Appeals Court Distances Cable from print

Model,” Broadcasting, Aug. 7, 1989, p. 71.

d8For a discussion of fis Cofiict and ~ ~Wment that m~es a case for its ration~ity in public policy terms,sLtXS C!. Bollinger, Jr., “Freedom of

the Press and Public Access: Toward a Theory of Partial Regulation of the Mass Media,” Michigan Law Review, vol. 75, No. 1, 1976, pp. 142.

4gJo~Milton’s 1~ essay,Areo~~8i~C~, ~aS the first Comprehensive statement of fis idea, ~~oughMilton wodd not accord all groupsftdl fRedOIll

of expression. An unqualified brief for this Libertarian concept of free expression was offered by John Stuart Mill in his 1859 essay, “On Liberty.” In

it, Mill argued that even falsehoods deserved protection, a position accepted by the U.S. Supreme Court in law governing the defamation of public

officials. See John Milton, Areopagitica (New York, NY: Appleton-Century-Crofts, 1951 J, pp. 121-129; and The New York Times v. Sullivan, 376, U.S.

253 (1964).

SOItshould~not~, mpool has pointed out, &at policy m~ers greatly underes~ated~e ~Ount of spc~ hat would eventually bWOme aV~hble.

Pool, op. cit., foomote 17, pp. 113-116.

51~s view W= sh~ by ~~icw~ers ad indus~ reve~ntatives dike. Concerned about the problems of interference, broadcuters ~ign~ in

1922 to form the National Association of Broadcasters, whose express purpose was to get government to become more active in radio regulation. The

Secretary of Commerce, Herbert Hoover, described tie situation at the time as “one of the few instances that I know of when the whole industry and

country is earnestly praying for more regulation. ” As cited in Baughman, op. cit., footnote 15, p. 5. For an excellent discussion of the confusion of the

air waves during this period, see Marvin R. Bensman, “The Zenith-WJAZ Case and the Chaos of 1926-27, ’’Journal of Broadcasting, vol. 14, No. 4,

Fall 1970, pp. 423-440.
84 ● Critical Connections: Communicationfor the Future

on the basis of a broadcaster’s ability to meet

public-interest standards.52 Accordingly, on February 23, 1927, Congress passed a new Radio Act. The

act established the Federal Radio Commission

(FRC), granting it the authority to issue broadcast

licenses when it found that “public convenience,

interest, or necessity would be served by the granting

thereof.”53

This goal of broadcasting in the public interest

was subsequently incorporated, almost verbatim,

into the Communications Act of 1934. Employing

the phrase that had first been used in an 1887 Illinois

railroad statute, legislators called on broadcast

regulators to determine their policies and administrative actions on the basis of what would best serve

the “public interest, convenience, or necessity.”

What this phrase actually implied for policymakers,

however, was left quite vague. Commenting on the

looseness of this phrase and the problems that might

be entailed in interpreting it, Don R. Le Duc notes:

[While] it would seem relatively easy to decide

when the extension of a rail line or an increase in

shipping tariffs might ultimately serve the needs or

interests of its customers, it was far more complex

and less precise in outcome to make a similar

determination in terms of audience requirements,

about the factors as sophisticated and subtle as

programming balance or local orientation.54

To implement this policy goal, Congress delegated authority to the newly created Federal Communications Commission. Set up as an independent

regulatory commission, in the political fashion of

the times, the FCC was authorized to use its

licensing authority to gain broadcasters’ compliance.

55 In accordance with this mandate, the FCC

was to allocate broadcast licenses not just on the

basis of a station’s technical, legal, and financial

qualifications, but also on the basis of its commitment to provide programming that responded to

community needs. The FCC could, moreover, rescind a station’s license if, after a 3-year period, the

station had failed to live up to its programming

commitment. As part of their responsibility to serve

the public interest, broadcasters were also required

to seek out controversial issues of public importance

and to present them in a balanced, objective fashion,

in accordance with the Fairness Doctrine. 56 In

addition, under section 315 of the Communications

Act, stations have to make broadcasting time available on an equal basis to all bona fide political

candidates .57

The Courts, while often restraining the FCC from

actions that were considered to be excessive, have

generally sanctioned the structure and goals of the

broadcast regulatory system. As in the case of those

who had designed the regulatory structure, the

notion of spectrum scarcity was a major factor

influencing how members of the Court viewed

broadcasting issues. Setting the tone for the future in

the landmark case Red Lion Broadcasting Co. v.

FCC, the Supreme Court considered the constitutionality of the Fairness Doctrine:

. . . broadcast frequencies constitute a scarce resource whose use could be regulated and rationalized

only by the Government. Without Government

control, the medium would be of little use because of

the cacophony of competing voices, none of which

could be clearly and predictably heard. [Thus] Every

licensee who is fortunate in obtaining a license is

mandated to operate in the public interest and has

assumed the obligation of presenting important

public questions fairly and without bias.58

szconcern~ abut the possibility of government censorship, policy makers were opposed to the European model of setting UP broadcmting M a

national monopoly. And the common-carrier model did not seem practical, because it would not provide broadcasters sufficient economic incentive-the

same argument made later with reference to cable operators. Not surprisingly, broadcasters were as opposed to the common-carrier model as cable carriers

are today. For a discussion of the national debate over options, see Pool, op. cit., footnote 17, ch. 6.

Sspublic Law No. 632, SIX. 11.

sqh DUC, op. cit., footnote 21, p. 10.

SSM independent ~wlatow agency s~med preferable to having licensing authority reside within the Interstate Commerce Commission, which

appeared to be too closely associated with the Roosevelt Administration. For a discussion. see Pool, op. cit., footnote 17, pp. 118-128.

56Develo@ by ~ FCC ~thout explicit au~ori[y, many feel that the F~rness Doctrine ww ratified, in effwt, by Congress in a 1959 ~endment

to stxtion 315 of the Communications Act. The FCC does not accept this interpretation and has repeated the doctrine.

57Bmo C, Schmidt, Jr., Freedom of the press vs. p~/ic Acces~ (New York, NY: Praeger, 1976), p. 19$), public interest stand~& were made mOre

concrete in March 1946 when the FCC issued a report, “public Service Responsibilities of Broadcast Licenses,” commonly referred to as the Blue Book,

which laid out new and more definite program standards. At the same time, the Commission ordered stations to submit annual statements describing

sample weeks of programming g, and to produce certain types of noncommercial fare. See Baughman, op. cit., footnote 51, p. 11.

sgRed Lion Broudcusting Co. v. FCC, quote cited in Pool, op. cit., fOOmOte 17. P ls~
Chapter 4--The Impact of New Technologies on Communication Goals and Policymaking ● 85

Implementing the Public Interest Standard

In the years since the FCC was frost established,

a number of steps have been taken to encourage the

diversity of media content and the development of a

marketplace of ideas. Notwithstanding these efforts,

most evaluations of the FCC’s performance in this

area generally conclude that the agency has fallen

considerably short of its regulatory goals. The

explanations and accounts of the FCC’s past failures

have differed considerably, however. To determine

what future actions, if any, the Federal Government

might want to take to encourage diversity, it is

necessary first to reconsider the various accounts of

why the Federal Government has failed to meet its

objectives in the past.

One explanation of the the FCC’s failure is based

on the theory of the captured regulatory agency .59

Focusing, in particular, on the 1950s when the

agency was involved in a number of scandals,

political scientists and other social observers concluded that the FCC, much like all other independent

regulatory agencies, had fallen “captive” of the

industry it had been established to regulate. 60 And,

in fact, the evidence to support such a thesis was

certainly available during this period. As James

Baughman has described:

If an independent agency ever needed the disinterested “experts” with whom progressives earlier had

anticipated populating the commissions, it was the

FCC in the 1950s. And yet, the temptations surrounding the awarding of TV franchises proved too

great for the statehouse types Eisenhower named

. . . A pattern did emerge of ex parte contacts:

commissioners fraternizing with and accepting gifts

and loans from license applicants and their lobbyists.

These reports wounded the FCC’s already marginal

reputation for judicious behavior.61

Under these circumstances, it is not surprising that

the Landis Commission, set up by President-elect

Kennedy in 1960 to assess the general performance

of the independent agencies, cited the FCC specifically as a prime example of a failed agency.62 As

Landis wrote:

The Federal Communications Commission presents a somewhat extraordinary spectacle . . . The

Commission has drifted, vacillated and stalled in

almost every major area.63

While acknowledging that the capture theory may

serve to explain the FCC’s conduct during the period

of the 1950s, others contend that it does not account

for the FCC’s consistent problems in the years

following. In particular, this theory cannot explain

the FCC's history during the 1960s when two

consecutive FCC Chairmen sought quite aggressive] y to improve the quality of broadcasting.

It was, for example, during this period that

Chairman Newton N. Minow took the lead in

advocating broadcasting in the public interest. As

noted by Baughman, in Minow’s speech comparing

television to a vast wasteland, he:

. . aroused industry and public opinion . . . in a

manner unprecedented for an FCC chairman. With

one cleverly phrased speech, Minow emerged as the

symbol of all of those who had so long been

determined to reshape television.64

Claiming that he had not come to Washington to

“idly observe the squandering of the public’s airwaves, ” Minow earnestly sought to institute a

number of policy changes.65 During his tenure, for

example, the Commission began to execute the

licensing process with much greater care, even

trying to bring the public into the process. And

Minow tried persistently and in a number of different

ways to enhance and diversify programming, pressing, for example, for the deintermixture of UHF and

VHF markets, increased production of children’s

and educational programming, and limitations on

59s=, for ~xaple, Smuel (Jri~l~v and Lloyd M~~olf, The politics of Regu/atL,n (B~s[on, MA: t+ough~cm Mifflin, 1964), p. H; and Robert E.

Cushman, The independent Regulatory Commissions (New York, NY: Oxford University Press, 1941 ).

@For example, House hearings conducted in 1958 and 1960 not only found the F(’C totally meffectlve; they also concluded that two commissioners

had been guilty of establishing intimate tics to parties subject to commission proceedings Baughman. op. cit., footnote 15, pp. 14-16.

GIIbid., pp. 13-14.

62JmeS M. L~i~, Report on Regu~[oq Age~~ieS t. the PreS~ent.E[eCt, subcommi[tt.e on Administrative %actice and Procedure, 86th Cong., 2d

sess. (Washington, DC: U.S. Government Printing Office, 1960).

GqAS clt~ in Baughrnan, op. cit., footnote 51, p. 52.

Wbid., p. 54.

fiIbid., p. 63.
86 ● Critical Connections: Communication for the Future

television advertising.66 But despite his intense

efforts, Minow was not particularly successful in

bringing about change.

According to critics of the capture theory, in

trying to explain the FCC’s problems during this

later period, it is not enough to look just at the

relationships between the commissioners and the

industry. Far more important in accounting for the

FCC’s behavior are the structural problems that were

built into the agency’s organization itself.67 Chief

among these is the FCC’s lack of adequate political

and administrative resources to do the job assigned

to it. According to James Baughman, for instance,

the FCC failed because, as an independent agency,

it was too weak in the face of opposition from the

three branches of government. Making a similar

case, Don Le Duc cites the difficulties that the FCC

has had to face when trying to execute the licenserenewal process in accordance with the public

interest standard. As he describes:

Yet, even if the commission had been able to

gather the type of information necessary to evaluate

the quality of each renewal applicant’s programming

more effectively, it would have lacked the capacity

to consider it. Only 350 of the commission’s

2,000-member staff were assigned to the Broadcast

Bureau, and the Renewal and Transfer Division

handling these applications generally consisted of no

more than two dozen full-time employees, Each year

this group faced a workload of 3,000 renewals, with

each television application requiring the analysis of

a 21-page form prescribed by the commission, as

well as accompanying exhibits prepared by the

broadcaster to document statements in the form. To

have added additional evidence in this review

process and to have insisted that it be considered

carefully before any contested renewal was granted

would have imposed an impossible burden on the

limited staff. Unfortunately, this is precisely what

the much heralded United Church of Christ decision

in 1966 did require of the commission.68

While describing many of the structural problems

inherent in the FCC’s organization, Le Duc also

points out an additional, and perhaps even more

important, factor that has prevented the agency from

achieving many of its regulatory objectives. Most of

the FCC’s past policies, according to Le Due, fail to

take economic realities and private sector motivations into account. And in a number of cases,

policies and economics have been significantly at

odds with one another.69 Referring, for example, to

the FCC’s problem in trying to influence network

fare, Le Duc notes:

In theory, of course, the FCC did have the legal

authority to end the practice of networking at any

time by simply enacting a regulation barring the

licensing or the license renewal of any station that

agreed to transfer any portion of its own programming responsibilities to any other party. In practice,

however, it was clear, virtually from the inception of

broadcasting in the United States, that basic economics would make this simple act of public policy

impossible to implement. The creation and widespread dissemination of polished mass entertainment

depended on a large commitment of capital, which

only a large organization could afford . . . Had

either the FRC or the FCC tried to curtail this

circumvention of public law intent, they would have

faced not only the political opposition of the

broadcast industry, but also the wrath of citizens

suddenly denied access to their favorite programs

because of this action.70

The consistent failure of the FCC to achieve its

objectives has led many in the policymaking community to question the wisdom of trying to achieve

the goal of programming diversity through regulatory means. As noted below, this disillusionment,

together with the development of new technologies

that expand the number of channels available for

programming, has given rise to a number of tensions

in the regulatory system, which focus around the

issue of public interest standards for broadcasting.

Tensions in Broadcast Regulation

Challenges to the broadcast regulatory framework

first got under way during President Carter’s admin661bid. me deinte~ture policy would have designated markets as either all-VHF or all-UHF. By segregating the markets, it was designed to foster

the development of UHF stations, which at the time were technically inferior to VHF stations.

67s=, for ~wance, Baughman, op. cl{., foomote fiI; Barry Cole and Mal Oettinger, Reluctanr Regulators: The FCC’ and The Broadcast Audience

(Reading, MA: Addison-Wesley, 1978); b Due, op. cit., footnote 35; h Due, op. cit., footnote 21; and Selected FCC Regulatory Policies: Their

Purposes and Consequencesfor Commercial Radw and Television, CED 79-62 (Washington, DC: U.S. General Accounting Office, 1979).

68~e ufit~Chwh of Chriq decision ~wulred tie Commission to ~low citizens to intervene to protest tie qu~ity of service being provided by the

licensee. As I-e Duc points out, as in this case, it was often the Court that increased the FCC’S regulatory task. However, as he is quick to add, Congress

was made quite aware of the FCC’s administrative burden and did little to improve its situation. See k Due, op. cit., footnote 21, p. 55.

@Ibid., p. 13.

7Qid.
Chapter 4--The Impact of New Technologies on Communication Goals and Policymaking ● 87

istration when FCC Chairman Charles Ferris initiated a deregulatory policy, much in keeping with the

direction of the administration’s overall policy on

deregulation. These efforts only achieved their full

momentum, however, during the Reagan years,

when Chairmen Mark Fowler and Dennis Patrick set

out to revamp the entire regulatory structure, substituting marketplace constraints in place of regulatory

controls. 71 But just as their predecessors had found

themselves limited in their ability to execute policy

by virtue of the FCC’s organizational structure and

lack of resources, so too did these proponents of

deregulation. Bearing witness to these limitations,

we find today, for example, the anomalous situation

in which the FCC has refused to enforce the Fairness

Doctrine while key members of Congress continue

to champion it, promising at the frost opportunity to

codify it in legislation. As described by Le Duc:

At the moment, then, the broadcast deregulation

has reached an impasse. Congress refuses to release

the commission from its obligation to regulate

American broadcast service, while the agency refuses to discharge this obligation with any more

diligence or dedication than absolutely required by

law.72

This growing tension in broadcast regulation can

only be resolved by considering whether government should continue to have a role in an electronic

digital environment, where lack of channel capacity

is no longer likely to be a fundamental issue. It is on

the grounds of scarcity that broadcast regulation was

first justified, and it is on the basis of the changing

nature of this situation that advocates of deregulation now rest their case.73

As noted above, some of the earliest proponents

of deregulation were among those who had become

convinced by past FCC failures that regulation was

an inappropriate way to achieve broadcast policy

goals. In fact, in their analysis of the regulatory

process, they had concluded that the FCC’s actions

had at times actually been counterproductive, as, for

example, in the case of the agency’s efforts to

constrain the development of cable television. There

were a number of economists among these critics,

and it was quite natural for them to look to the

marketplace for an alternative solution. Moreover,

given the growth in channel capacity with the

development of cable, the problem of scarcity could

no longer serve as the rationale for government

involvement. In addition, a market approach seemed

more in keeping with first amendment principles.

Industry players also lent their support to this new

perspective, although they were much more pragmatic than principled in their enthusiasm, generally

favoring only those measures that were economically advantageous.74 At the same time, the political

basis for the old regulatory regime—that is, the

modus vivendi that, over the years, had been

established between broadcasters and the FCC—

began to disintegrate as many new media players

joined the fray. Clearly, the time was ripe to try

something new.

To bring about a more competitive media market,

the FCC began to undo the elaborate structure of

rules and regulations that had been set up over the

years. Among the rules that were eliminated and

redefined were:75

. rules on advertising: although these rules had

been voluntary, the FCC eliminated all constraints on the number of minutes per hour or

the spillover of paid advertising into programming;

● rules on content: the FCC eliminated the rules

requiring that a given amount of time be

devoted to different classes of nonentertainment programming (5 percent for information,

5 percent for local, and a total of 10 percent for

nonentertainment programming) ;

. ownership rules: the FCC relaxed a number of

ownership rules, including the limitation on

multiple station ownership. (The limits of 7

AM, 7 FM, and 7 TV stations were increased to

12, 12, and 12); and

71 For ~ di~cu~~im, ~ Martha ~fiick and paul J. @i&, The Politics of Deregulation (Washington, DC: The Brwkings ~StltUtion> 1985); and

Jeremy Tbnstall, Communicatwns Deregulation: The Unleashing of America’s Communication industry (Oxford, U. K.: Basil BIackwell, 1986).

7ZU DUC, op. cit., footnote 21, p. 30.

73*, fa exaple, Mark S. Fowler and Daniel L. J3renner, “A Market Place Approach to Broadcast Regulation,” Texas Luw Review, vol. 60,1982,

p. 207.

74For Cxmple, while me cable indus~ hm favor~ deregulation for “must-carry” rides, 11 still calls fOr a Compulsory liCenW. Similarly broadcasters

would like to dispcw of the Fairness Doctrine, but they want to maintain the must-carry rules.

VIHI, op. cit., footnote 71, p. 146.
88 ● Critical Connections: Communication for the Future

● franchise renewal procedures: these procedures were modified to the benefit of incumbents.

The effects of these deregulation policies to date

have been somewhat disappointing. The experience

suggests that the relationship between channel

capacity and the diversity of programming is not as

great as deregulation advocates had hoped for or

anticipated. In fact, as Don Le Duc has pointed out,

it is most likely that the increase in the number of

transmission channels has served to encourage

integration within the programming industry, and

hence to reduce the variety of content available to

the public. This outcome results from the economics

of the media industry. According to Le Due, for

example:

. . . there is virtually no correlation between the

number of outlets available for dissemination of film

or music and the amount of such material actually

produced. Thus, for example, cable-delivered payTV furnished a vast new nationwide network for film

distribution without having any appreciable effect on

the number of new films produced each year.

Instead, distributors used pay-TV competition to

justify raising the network-television licensing price

for existing films, a practice that is causing networks

to reduce the number of films scheduled.

This high-risk, high-expense industry, with only

a few unchallenged distributors and a handful of

acknowledged stars, has almost an infinite capacity

to absorb additional funding without expanding

production. New media outlets competing with one

another for this relatively constant quantity of mass

entertainment material will simply continue to

inflate production costs to the point where many

outlets will be forced to withdraw from competition. 76

This situation is not likely to improve in the

future. As Jay Blumler has pointed out, in a

multichannel, highly competitive media environment, the likelihood for vertical integration in the

industry becomes much greater. 77 The strategic

imperatives that Blumler identifies as being responsible for this development are listed in box 4-A.

Given these trends, it would appear that the policy

problem of how to achieve diversity of content and

a free marketplace of ideas has yet to be overcome.

Achieving Efficient, Interconnected

Communication Services

The notion of a “marketplace of ideas” underscores the intimate connection between the traditional values of press freedom and laissez-faire

economics.

78 As part of this tradition, it was

assumed that, in a competitive, free-market economy, communication services would be provided in

an optimally efficient manner.

This combined set of notions came to be challenged only later with the development of communication technologies such as the telegraph and the

telephone. which enjoyed large-scale economies and

required national interconnection. For the first time

a conflict appeared between the goal of establishing

a free marketplace of ideas and the goal of creating

an efficient, interconnected, national communication system. Thus, the telegraph and telephone first

provoked what has become a lively and recurring

debate about how best to organize the communication media to achieve the goal of efficiency. The

debate continues today, as we try to understand and

make the best use of advances in communication

technologies.

Establishing the Goal of Achieving Efficient,

Interconnected Communication Services

The goal of providing communication services in

the most efficient manner, consistent with the

attainment of other communication policy goals,

was formally set in the Communications Act of

1934, which called for the establishment “so far as

possible, to all the people of the United States, a

rapid, efficient, nation-wide, and world-wide wire

and radio communications service with adequate

facilities at reasonable charges.” The first recognition that government, itself, might need to take some

direct measures to assure the efficiency and interconnection of service occurred earlier, however,

with tile development of the telegraph. For, as

Richard DuBoff has noted: —. —-. .—

76~ Due, , op. Cit., foo~ote 21! p. 128.

77 Jay G. Blum]er, “The Role of Public Policy in the New Television Marketplace .“ Bcvton Foundation Project on Communications and Information

Policy Options, paper No. 1, 1989.

78~e 1~a& ~tw=n mew “~ue~ ~m already appwentin ]690 when-..-du~ng ~ p~llamcnt~ debate about one of the last vestiges Of authoritian

controls, licensing of the press-some opponents of licensing justified their positron on free market grounds, Siebert et al., op. cit., footnote 22, pp.

260-263.
Chapter 4--The impact of New Technologies on Communication Goals and Policymaking ● 89

Box 4-A-Strategic Imperatives for Trend Toward Market Domination

by Larger and Vertically Integrated Organizations

The need to spread risk (for many programs will not succeed in the market), cover losses, and bear deficits before

programs finally pay their way.

The need to aggregate resources for large-scale production and related activity, including research, development,

marketing, promotion, and sales.

The need to operate effectively in a multi-market, domestic-global programming economy.

A need to bring scarce, highly valued, and highly costly top talent (actors, producers, writers, directors) under

one’s organizational umbrella.

Incentives to diversify, so that if certain outlets and programs disappoint, others can make up for it.

In the case of production companies, a need to control distribution outlets in order to guarantee at least a minimal

take-up of their wares.

In the case of distributors, a need to invest in program suppliers so as more effectively to control their competitive

offerings, including what they cost.

The greater difficulty smaller companies have in raising capital in these circumstances.

SOURCE: Reprinted from The Role of Public Policy in the New Television Marketplace, b} Jay G. Blunder, with pmnission from the Benton

Foundation, Washington, DC.

It was in the telegraph industry that the basic

unworkability of the free market on a national scale

was first posed in clear and compelling terms.79

Requiring large-scale technologies and national

interconnection, the telegraph posed a number of

questions about how this communication industry

should be organized and what its relationship to

government should be. Should it be treated like the

press and be privately owned? Should the system be

owned and operated by the government, as was the

postal service? Or should it be dealt with as a private,

but regulated, common carrier? The answer was not

simple, and it took some time to resolve.

Although the Federal Government had provided

$30,000 for the construction of the first telegraph

lines in the United States, it declined to take control

of the new technology. The government’s reluctance

to play a more active role stemmed, in part, from the

fact that the Post Office Department, already burdened by deficits, was not inclined to assume

responsibility for the Washington, DC/Baltimore

line, which appeared to have only limited commercial value. Also contributing to this outcome was the

fact that the inventor of the telegraph, Samuel F.B.

Morse, seemed to prefer a mixed public and private

telegraph system. He not only feared that businesses

would manipulate markets in a strictly private

system, but also that government would use a

telegraph monopoly as a weapon of despotic control. 80

In the absence of active government involvement,

the decision about the structure of the telegraph

industry was initially made in the marketplace.

Telegraph firms started stringing wires between

towns of any commercial consequence. With dozens

of competing telegraph companies, none in a commanding position, customers found it difficult to

secure rapid. reliable transmission of their messages

between distant points. 81 And the telegraph was

quickly becoming essential to bankers, brokers,

speculators, and railroads. Such businesses preferred

dealing with a few reliable national firms to many

small precarious ones. Consolidation was the market’s answer. Western Union began absorbing competitors, emerging with a near monopoly by 1870.82

With the efficiencies of one major national

telegraph company, however, came concerns about

potential abuses of its power. Between 1870 and the

early 1900s, Congress regularly entertained proposals to purchase the telegraph companies and place

T9Rich~d B. DuBoff, “The Rise of Communication Regulation: The Telegraph Industry, 13 Q- 1880,’” Journal of ComWIication, vol. 34, No. 3,

Summer 1984, pp. 52-66. Quote at p. 54.

gwichard R. John, Jr., “A Failure of Vision’? The Jacksonians, the Post Office and the Telegraph, 1844- 1847,” paper presented at the amtd meeting

of the Society for Historians of Technology, Pittsburgh, PA, Oct. 23, 1986; and Robert L. Thompson, Wiring a Continent: The History of the Telegraph

Industry in the United States, 1832-/966 (Princeton, NJ: Princeton University Press, 194”’).

81~ido

gzRic&d B. ~ff, *’Bus~ess Demand and tie Development of the Telegraph in the Lnited States,” Bu.nness History Review, VOI. 54, winter 1%0,

pp. 459479.

89-148 0 - 90 - 3 QL 3
90 ● Critical Connections: Communication for the Future

the system under the Post Office. Western Union

lobbied vigorously against the plan, deriding government incompetence and extolling free enterprise.

Furthermore, Western Union suggested that government control of telegraph wires, the press associations’ nervous system, would compromise freedom

of the press. By tying together the two concepts of

freedom of the press and free enterprise, Western

Union succeeded in justifying its private monopoly.

In 1866, Congress granted privileges to telegraph

companies in return for their promises to provide, in

Pool’s words: “service like a common carrier,

namely to all comers without discrimination.” In

1893, the U.S. Supreme Court ratified the telegraph’s status as a common carrier and Congress

legislated it in the Communications Act of 1934.83

The history of the telephone industry followed a

similar pattern. Before its patents expired in 1894,

the Bell System established a virtual monopoly in

telephony, launching service within and between

sizable cities where business use and profit seemed

greatest. As a result, many communities that could

not afford the expensive Bell technology went

without service. The patents’ expiration triggered a

rush to wire towns and even some rural areas.

Independent telephone companies proliferated in

various forms; some were for-profit corporations,

others municipal utilities, and still others little more

than neighborhood projects. According to Pool, by

1902, “451 out of 1,002 cities with phone service

had two or more companies providing it.”84 Telephone users, notably businesses, found this competition burdensome, since they had to have two or more

phones-one for each system serving the community. Thus users, public utility commissioners, and

the larger telephone firms themselves, notably

AT&T, argued that consolidation in the industry

would foster great efficiency .85

Although most telephone systems remained in

private hands, cities and States increasingly expected them to operate for the public’s convenience. 86 And State Courts upheld the extension of the

public utility commissions’ jurisdiction.87 Responding to a serious movement for government ownership, AT&T came out in favor of its own regulation,

Mounting a nationwide public relations and advertising campaign, perhaps the first of its kind in the

United States, AT&T argued that regulation was the

only way to reduce the “wasteful competition” that

had earlier plagued telegraphy .88 Congress agreed. I

gave the Interstate Commerce Commission regulatory authority over the medium in 1910, and shifted

jurisdiction to the Federal Communications Corn

mission in 1934.89

Implementing Efficiency and

Interconnection Goals

The regulatory agreement that Theodore Vail,

General Manager of AT&~ worked out in 1910

gave rise to the Bell System, which had as it

operational goal, “one system, one policy, universal

service."90 Comprised of AT&T and its subsidiaries

and affiliates, the Bell System offered a complete

range of telecommunication services including re83Po01, op. cit., fwtnote 17, p. 95.

Wbid., p. 102.

g5J~ V. L~g~e, “me Growth of ~ng-DisUnce Telephony in the Bell System, 1875 -1907,” Journal of Historical Geography, No. 2, 1978, PI

145-159: Harry B. MacMeal, The Sto~ of /dependent Telephony (Chicago, IL: Independent Pioneer Telephone Association, 1934).

~~cm~ng]y ~pic~ w= the point made by the Michigan Public Utilities Commission, for example: “Competition resulted in duplication c

investment, the necessity for the businessman maintaining two or more telephones, economic waste to the company, increased burden, and continuo[

loss to the subscriber. The policy of the state was to eliminate this by eliminating, as far as possible, duplication.” Michigan Public Utilities Comrnissiol

Citizens Telephone Co. of Grand Rapids, P.U.R. 1921E 308,315.

871t sho~d & ~~em~r~ that c~cerns about the ~wer of tmsts and l~ge Coprations were at fieir height dufing this pefiod. one increasing]

common way of dealing with large utility-type corporations was not to break them up, but to control them through regulation. See Douglas D. Andersol

“State Regulation of Electric Utilities,” James Q. Wilson (cd.), The Politics of Regulation (New York, NY: Basic Books, 1980), pp. 3-41. For a discussic

of this period, see also Ellis Hawley, The New Deal and the Problem of Monopoly (Princeton, NJ: Princeton University Press, 1989), chs. 12, 15-1;

88pml, op. cit., fmm~e 17, pp. 102-103. @ A’r&T’s advertising and public relations campaign to demonstrate that telephony W* anatur~ monoPO!

see Marvin N. Olasky, Corporate Public Relations: A New Historical Perspective (Hillsdale, NJ: Lawrence Erlbaum Associates, 1987), ch. 4; an

Quentin J. Schuhze, “Advertising and Public Utilities, 1900-1917,” Journa/ of Advertising, vol. 10, No. 4, 1981, pp. 4144,48.

89Ga~el Kolko, T~ Tri~h of co~ematism: A Reinte~retation of American History, 1900-1916 (Chicago, IL: @a~an@e Books! 1963

According to Kolko: “AT&T realized that its long-term objectives of political stability and economic rationality could be attained only by federa

regulation.” Ibid., p. 180.

W.A. Schlesinger et al., Chronicles of Corporate Change (Lexington, MA: D.C. Heath, 1987), p. 8. In 1913, AT&T agreed to the Kingsbu

Commitment in which AT&T divested itself of Western Union, which it had acquired in 1909. In addition, AT&T agreed not to acquire any addition

competing independent telephone companies and to allow “qualified” intercomection with the Bell System. N.C. Kingsbury to J.C, McReynolds, J.(

McReynolds to N,C. Kingsbury, and W. Wilson to N.C. Kingsbury, Dec. 19, 1913, in FCC, Docket No. 1, vol. 65, pp. 34-40.
Chapter 4--The Impact of New Technologies on Communication Goals and Policymaking ● 91

search and development, equipment manufacturing

and sales, local and long-distance services, as well as

access to international transmission service.91 Having a total of $150 billion in assets in 1983, prior to

divestiture, it constituted the world’s largest corporation.

The regulatory framework that governed the Bell

System, which remained intact for more than half a

century, was decidedly American. While operating

in a capitalist framework, it provided some social

control over the negative impacts of the singlemindedness of the marketplace.92 Moreover, taking

the form of a monopoly, the Bell System provided

for interoperability and was able to take advantage

of economies of scale and scope.93 Characterizing

the Bell System as the apogee of the U.S. telecommunication “regulatory idea,” Manley Irwin describes its basic form as follows:

Bell’s holding company organization, its integration of utility and manufacturing, the institution of

state and federal regulation, emerged as the U.S.

response to the dilemmas of natural monopoly.

Boundary lines separating telephone from other

industries appeared immutable and long established,

and the industry paced, if not controlled, the state of

the communications art. . . The relationship between state and federal regulatory institutions was

marked by harmony. To accommodate the state

commission’s desire for minimal telephone rates, the

FCC embarked on an esoteric accounting process,

separations and settlements, that transferred revenues from interstate toll to local subscribers. In a

word, toll subscribers subsidized local subscribers.

In an era of regulatory good feeling, the telephone

company was, essentially, given the power to tax.

Private monopoly subject to public regulation was

held as a policy model worthy of emulation if not

envy.

94

By most accounts, this system worked well. As

Glen Robinson has pointed out:

She [Ma Bell] was held in fairly high regard. In

contrast to other monopolists we’ve loved to hate—

railroads, gas utilities, broadcast stations, and countless other enterprises with protected market positions--AT&T’s monopoly seemed not only natural

but relatively benign . . . The system pioneered and

developed by AT&T was justly acclaimed the

world’s finest. Telephone rates were comfortably

affordable; furthermore, in the heyday of the telephone monopoly the rate system was generally

perceived as fair. Service innovation, while not

rapid, nevertheless did proceed more rapidly than in

other sectors of the economy .95

Given this generally favorable impression of the

Bell Telephone System, it is clear that its breakup

had less to do with the perception that it had failed

to implement its primary objectives, and more to do

with the fact that it suddenly found itself operating

in a greatly altered technological, economic, and

regulatory environment. All and all, there were three

major factors that contributed to its demise.%

Technological developments, for one, had a major

impact on the traditional Bell System. Given the

convergence of information and communication

technologies, there was no longer a clear distinction

between what constituted a monopoly—and hence

regulated—service, and what constituted a competitive service to be provided in the marketplace. This

convergence led to a changing network architecture,

with the intelligence being increasingly dispersed.

As a result, network unbundling was greatly facilitated. In addition, as new technologies both increased in capability and declined in cost, the

barriers to entry into the telecommunication market

were greatly reduced. Under these circumstances,

many newcomers were able to make significant

91 Ange~a A, Gj~y, The American Telephone ad Telegrqh Company Divestiture Background, Provisions, and Restructuing, Library of con~ss~

Congressional Research Service, CRS Report No. 84-58 E, Apr. 11, 1984.

!lz~~hapl D. Re+m, Regu@ion. The politics of po/icy (Boston, MA: Little, Brown, and Co., 1987). For a tistory of the emergence and evolution

of the Bell System, see Gerald Brock, The Telecommunications Industry: The Dynamics of Market Structure (Cambridge, MA: Harvard University Press,

1981).

g3As Ri~hard ASK. Victor w~~ out, “Altho~@ tie [Communications] Act itself did not condone monopoly, legislators at the time aCkflOWldged

AT&T’s monopoly power as they discussed provision of the bill. ‘This vast monopoly, ’ reads the Senate Report, ‘which so immediately serves the needs

of the people in their daily and social lives must be effectively regulated.’” See Richard A.K. Victor, “AT&T and the Public Good: Regulation and

Competition in Telecommunications, 1910- 1987,” Harvard Business School, unpublished paper, April 1987, revised March 1988, p. 17.

g4M~e~ R. ~~, “Te]&ommufications and Gove~ent: The u-s, ExWrience,” in S,S. Wilks and M. wright (C&,)$ comparative Government:

Industry Rektwns (Oxford, London: Clarendon Press, 1987).

gsG]en 0. Robinson, “The Titanic Remembered: AT&T and the Changing World of Telecommunication, “ Yale Journal on Regulation, VOI. 5, 1988,

pp. 517-518.

%For accouts of tie Bell ~~up, see peter Temin, The F~/ of the Bel/ System (New York, NY: Cambfidge university press, 1988); and Steve COil,

The Deal of a Century (New York, NY: Atheneum, 1986).
92 ● Critical Connections: Communication for the Future

inroads into AT&T’s traditionally protected market.

Their chances for success were greatly enhanced,

given that AT&T was required to provide universal

service while its competitors could target products to

the most lucrative business markets, and offer them

at a lower price. Thus, their entry put pressure on the

system of subsidy pricing that had been so elaborately constructed over the years.97

Economic developments also greatly increased

the incentives for others to try to enter the telecommunication/data communication market. In particular, as information came to play an enhanced and

more strategic role in the realm of business, large

users began to seek alternative, more efficient ways

of purchasing telecommunication services.98 Where

their needs were great or where they wanted more

strategic control over their operations, users established their own internal telecommunication networks. In other cases, business users were able to

make the best deal by bypassing the Bell System and

purchasing services and equipment in the unregulated market. Because telecommunication could

serve as a strategic business weapon, and since

expenditures on these services constituted an increasing portion of their overall business expenses,

large users had tremendous stakes in how the

telecommunication regulatory structure evolved.

Recognizing this fact, they joined forces with the

burgeoning new service providers to press for

greater competition.99

Changes were also taking place in the way the

regulators thought about the regulatory structure.l00

As early as 1962, a number of regulatory economists

began to question the public-utility concept. Together, their work—if it did not itself give rise to the

new deregulatory climate—served at least to legitimate it.lO1 This changed attitude was evident at the

FCC. As former FCC Commissioner Nicholas

Johnson commented on the occasion of the FCC’s

decision to approve MCI’s application to establish a

long-distance, private-line service:

On this occasion three Commissioners are urging

a perpetuation of more Government regulation of

business, and four want to experiment with the

market forces of American free private enterprise

competition as an alternative to regulation.

No one has ever suggested that Government

regulation is a panacea for men’s ills. It is a last

resort. a patchwork remedy for the failings and

special cases of the marketplace . . . I am not

satisfied with the job the FCC has been doing. And

1 am still looking, at this juncture, for ways to add a

little salt and pepper of competition to the rather

tasteless stew of regulatory protection that this

Commission and Bell have cooked up.102

Although perhaps not fully cognizant of the

ultimate outcome of its actions,l03 the FCC, in 1959,

took one of its first steps toward divestiture and the

Modified Final Judgment (MFJ) with its “above

890” decision. This decision, which greatly liberalized the licensing of private microwave systems,

allowed the newly created Microwave Communications, inc. (MCI) to offer a new product--discount

— -—-——.

gTFljr ~ diScWsion, ~ Separations Procedures in t~ Telephone r~wtv. The Hist(,,r[[a[ Qrigins of a p~lic poli~ (Carnbrid~, ~:Center for

Information Policy Research, 1981).

98For a di~c~sion of the changing role of tie lwge bu~lness ~sem, ~ Dan Schil]er, “Business Users and the Telmornmunication Network,” Joiu/d

of Commum”cation, vol. 32, No. 4, Autumn 1982, p. 35.

yyIbid.

l~or me di.s~usslon, ~ Alfred E- K~n, “me pmslng of tie public Utility Concept A Reprise,” Eli Noam (~.), Te/ecorrurtunications Regulation

Tbday and Tomorrow (New York, NY: Harcourt Brace Jovanovich Publishers, 1983), ch. 1. For an account of these changes in attitude as seen from

within me re~ati industry, see Temin, op. cit., footnote %, who argues that changes ]n ideology were in many ways more important than changes

in technology. He notes, moreover, that with the emergence of competitors, the nature of’ the relationship between the FCC and AT&T was radically

changed.

101 As Roger Nell h= descn~d: “fionomists gener~ly enter~ the ~udy of regulation wi~ the naive view that ~~]atory institutions Wem set Up fOr

thepurposeof rectifying market failures. Unfortunately, and ahnost without exception, the early empiricat studies—those commencing in the late 1950s

and continuing into the 1970s-found that the effects of regulation correlated poorly with the stated goals of regulation. By the early 1970s, the

overwhelming majority of economists had reached consensus on two poirm. First, economic regulation did not succeed in protecting consumers againsl

monopolies, and indeed often served to create monopolies out of workably compet~tive mdusmies or to protect monopolies against new firms seeking

to challenge their position. Second, in circumstances where market failures were of endunng Importance (such as environmental protection) traditional

standard-setting regulation was usually a far less effective remedy than the use of markets and incentives, ” Roger G. Nell, “Regulation After Reagan,”

AEIJournal on Government and Society, No. 3, 1988, pp. 13-20.

lmMicrWave co~~icatio~, inc., 18 FCC 2d, 953,971-972. As cited in Victor, op. cit., fOOUIOt.e 93, P. 46.

103 Althou@ AT&T ~rotest~ ~ls sequence of events, cla~lng that they s~fer~ damage ~ough cream-skimming, the FCC minimized this problem.

For a discussion, see Temin, op. cit., footnote 96. Commenting on the FCC’s naivete in these matters, Steve Coil points out that it was an AT&T lobbyist

who first explained the implications of the Execunet dceision to the FCC. See Coil, op. It., footnote 96, pp. 83-85.
Chapter 4---The Impact of New Technologies on Communication Goals and Policymaking ● 93

private-line service.104 With the subsequent Carterphone decision in 1969, the FCC also opened the

customer-premises market to entry. And finally,

with the decisions on Execunet in 1976 and 1978,

requiring AT&T to provide connections to MCI, the

FCC struck a final blow to the 100-year-old” AT&T

monopoly by opening the long-distance telecommunication market to competition.

Continuing Tensions Under the New

Regulatory Regime

After the divestiture of AT&T on January 1,

1984,105 the MFJ replaced the old regulatory framework that had governed the Bell System for so long.

Based on the antitrust settlement that had been

negotiated between William F. Baxter, Assistant

Attorney General, and Charles L. Brown, Chairman

of AT&T,l06 the MFJ was approved and revised by

Judge Harold Greene.

107 The basic premise underlying the MFJ is that regulated monopoly needs to be

isolated from potentially competitive, and hence

potentially unregulated, markets. ’08 Accordingly,

AT&T was divested of its local telephone operations. However, it was authorized to provide longdistance telephone service and to retain Western

Electric, the dominant telephone equipment manufacturer. In addition, it was to keep all of its

international subsidiaries as well as Bell Labs. As a

quid pro quo for its losses, AT&T was permitted to

offer data transmission and processing service.

The 22 divested Bell operating companies were

consolidated to form 7 regional holding companies,

but they were prohibited from offering long-distance

and information services and from manufacturing

customer-premises equipment. In recognition of the

fact that communication technology and markets are

in a state of flux, the MFJ established a waiver

process as well as a process for reevaluating the

structure of the market on a triennial basis. Serving

as a blueprint for bringing competition to the

telecommunication industry, this new arrangement

was considered to be much more in keeping with the

times.

While the MFJ settled the Department of Justice’s

antitrust suit, it could not resolve the tension

between the goals of efficiency and competition that

are inherent in telecommunication regulatory policy.

No sooner had the affected parties agreed to the MFJ

when these issues began to reemerge in the waiver

process, the triennial review, and more recently in

the debate about the open network architecture

process and integrated services digital networks

(lSDN). l09 Perhaps this is to be expected. For, as

Roger Nell has emphasized:

Pending regulatory issues reflect an enduring

characteristic of telecommunications policy: neither

the pricing nor the structural issue has ever been or

is likely to be resolved. The telecommunications

system IS not, and never was, broken. Rather, its

underlying technical and economic characteristics

create an enduring policy dilemma. One can regulate

prices and structure to encourage maximum feasible

competition, or to promote an integrated monopoly.

What is infeasible is a “neutral” formulaic policy

regarding prices and structure that will assure the

right mix of monopoly and competition. The current

policy agenda continues the futile search for better

regulatory instruments, and also includes rear guard

l~A]location of Frequencies in the Bands Above 890 MHz., 27 FCC 359 (1959J 29 F[’~’ l~f) (1960).

105~e stow of the AT&T divestiture has been ~idely doc~ented, and it wil] no( & revl~wed here. For discussions and accounts, see Temin, Op. Cit.,

footnote %, and Coil, op. cit., footnote 96.

106~ 1974, tie Jwtlce ~p~ment brou@t an anti~st suit ~ga~s[ AT&T, accusing i[ of having illeg~ly manipulated its dominant position in all three

segments of the telecommunication market in order to monopolize the whole indust~ It was not until 6 years later, however, that it brought the suit

to trial. Moreover, no sooner was it under way when the trial was postponed in an effort to reach a settlement. By agreeing to settle out of court, AT&T

did not have to admit to any wrongdoing. In December 1981, without notice, AT&T made a settlement offer, volunteering to divest itself of its operating

companies and to limit its business to long-distance and overseas operations, tc the manufacture and sate of telephone equipment, and to

telecommunication research. In the final agreement that was worked out, AT&T agreed m competition in long-distance serwce and in the

customer-premise market in exchange for the freedom of entering into unregulated markels For a detailed history, see Coil, op. cit., footnote 96.

Ioi’Concerned abut fie eventu~ fate of the Bel] re~on~ ho]dlng ~ompanles, the Coufl added ]() amendments to the ~J, @e of these provided for

the waiver process; another transferred the lucrative yellow-pages business to them.

108Roger Nell, “Telecommmicatlons Re@ation in the 1990s,’” Paula R Newberg (cd.), ,vr~ Directi~ns in Tefeco~m’cationsPoficy (D~ham, NC:

Duke University Press, 1989), p. 16. Describing what is called the “quarantine theory, “ Nell notes: “In its purest form, it means preventing a regulated

monopoly from participating in potentially competitive markets in order to protect the latter from the abuses encouraged by rate-of-return/residual-pricing

regulation. It accepts the danger of protecting inefficient competitors who legitimatel~ should be destroyed by the local service monopolist. In return

it guarantees that inefficient monopolists WI]] not retain a market solely by taking ad% antage of their regulated status. Of course, such a stark choice,

one way or the other, is required if one accepts the premise that price regulation must creat[ lm entives [o engage m such behawor and that regulators

are ineffective (and perhaps uninterested) in prcventmg it. ” Ibid., p. 31.

lmThese is~es are described and discussed m detail in ch. I].
94 ● Critical Connections: Communication for the Future

actions by the people who lost the last time

around-who are not, and probably cannot be

convinced that deregulated competition is the best

policy.110

Universal Service and Equitable Access

Universal service and equitable access are relative

terms whose meanings change in different times and

circumstances. In the United States, for example, it

was clear by the turn of the 20th century that the

notion of universal service entailed equitable access

to the postal system, the mass media, and the

educational system, as well as to the existing

services that could be provided by the telegraph and

telephone. However, as the United States moves

further away from an industrial era into an age where

knowledge and information play a greatly enhanced

role, it is no longer clear what these terms should

mean. In this new environment, where the number

and variety of information and communication

services are continually evolving, it will be necessary to reconsider, as a society, which opportunities

should be made available on a universal basis.

Establishing the Goals of Universal Service and

Equitable Access

Although the goal of universal service was not

formally adopted until after enactment of the Communications Act of 1934,111 government policymakers have promoted information distribution

since the earliest days of the Republic. Officials in

the newly constituted government were acutely

aware that if they were to build a nation they had to

establish a communication infrastructure. It was, in

fact, for this reason that the Founders authorized

Congress to establish a communication public utility

or common carrier in the form of the postal system.

And the development and evolution of American

postal policy also reflect this goal.

A sense of the post office’s intended mission can

be gleaned from the extensive policy debates that

began with the First Congress. *12 Most of these

debates dealt with underwriting the dissemination of

public information, especially newspapers. Federal

officials and political theorists of the time, including

Washington, Jefferson, and Madison, recognized the

fragile nature of American nationalism. They

doubted that a republic as geographically and

socially diverse as the United States could maintain

sufficient popular consensus to remain one nation.

Thus Federalists and Republicans alike set aside

their factional differences to rally behind a postal

policy that encouraged the widespread circulation of

newspapers.

113 Towns clamored for their own post

offices to facilitate commerce and reduce isolation,

and Congress usually obliged.l 14 However, favoring

the exchange of political and business information

over interpersonal transactions, Congress set postage rates several times higher for letters than for

newspapers. 

1

15

Another provision of postal policy—postage-free

exchanges among newspaper editors—reflected

similar societal values and concerns. Long before

the advent of press associations, editors obtained

nonlocal information by culling out-of-town newspapers, their so-called “exchanges.” In an arrangement that today’s journalists might find foreign and

offensive, the government in essence operated the

Nation’s newsgathering service. This postal privilege was of particular importance to political parties

and government. Early parties maintained their

cohesion and coordinated activities by sharing

like-minded papers. And through exchanges, a

IIONOH, Op. cit., foomote 108, p. 233.

11 IAs Ken Gordon and .lohn Haring note, “T’he term ‘univers~ service’ appears in no public law and there is no authoritative source defining p~isely

what it means . . . it is a shorthand expression generally used to refer to [the policy articulated in] Title I of the Communications Act of 1934, ” See Ken

Gordon and John Haring, “The Effects of Higher Telephone Prices on Universal Service,” FCC Office of Planning and Policy working paper series, 1984.

112some Sc.olmShave descri~the ew~y ~st office ~ ~~ of tie revenu~.r~singmac~ne~ of government because of its p]acement in the Treasury

Department (it did not become a Cabinet-1evel agency until Andrew Jackson’s administration). But, as the following discussion makes clear, this

administrative arrangement was highly deceptive. For the former perspective see, Pool, op. cit., footnote 17, p. 77. See also Wesley E. Rich, The History

of the United States Post O#ice to the Year 1829 (Cambridge, MA: Harvard University Press, 1924), p. 113.

113~e whjskcy Rebelljon ~d o~er slwS of the frmtler’s disenchantment wj~ tie centr~ government underscored the severity of this problem.

Keeping readers apprised of political intelligence, the staple of all but commercial newspapers, justified below-cost postage. For a discussion, see Richard

B. Kielbowicz, “The Press, Post Office, and Flow of News in the Early Republic,” Yournuf of the Eurfy Repul.die, vol. 3, Fall 1983, pp. 255-280.

114s= Rjchmd B. Kjel~wlcz, ~W~ in the Ma”/: Tti Press, Post Ofice ad P&/[c [nfor~rion, )69@186J (westPort, n: Greenwood ~SS,

forthcoming), ch. 3.

lls~id.
Chapter 4-The Impact of New Technologies on Communication Goals and Policymaking ● 95

small-town paper was tied to the county seat, the

State capital, and the seat of Federal Government.l16

The public school movement also served to boost

the notion that information and knowledge should be

made universally available. 1

17 Emerging in the wake

of the Civil War, the commitment to public education was so intense that it gave rise to a national

crusade to establish public schools. Concerned about

the problems of reconstruction in the south, the

influx of Catholic immigrants, and the advent of

industrialization in the north, Americans saw public

schooling as a way of preserving the social, economic, and political system. By educating American

youth in common, public schools, they hoped to

inculcate a common set of patriotic, Protestant, and

republican values.118 With the industrialization and

urbanization of American society, it was expected

that schooling would serve not only to prepare

American youth for a common political role as

citizens, but also to prepare a growing number of

people from increasingly different social, economic,

and ethnic backgrounds for an increasingly differentiated set of economic roles.l19

Concerns about equity of access continued to

grow in the late 1800s with the emergence of a mass

society and the mass media. The media became the

most important mechanism, cutting across structural

divisions and linking heterogeneous publics.120

Moreover, with the trend toward national distribution and the growth in advertising as the basis for

media distribution, access to the media came to be

equated with access to national cultural fare and

national consumer goods and markets.121 The mails

were crucial in delivering these publications, and the

inauguration of Rural Free Delivery (RFD) in the

1890s enabled magazines to flow from publishers in

urban areas to farms on country lanes. 122 The high

cost of building roads and maintaining regular

deliveries in sparsely populated areas made RFD

unpopular with some lawmakers, and revenues from

country post routes rarely, if ever, covered their

expenses But rural advocates pointed to the social

and economic benefits derived from universal access

to the postal system and, in turn, the information and

goods that came by mail.123

Support for the idea of equitable access also came

from social reformers, many of whom were associated with the Progressive Movement. Believing that

the press mediated the flow of information and

symbols among segments of society, they looked to

116RiC~d B. ~l~wlCz, ‘tNew~ga&ering by ~nte~~’ E~~h~g~S Before tie Telegraph,’’Journa/iSm Hiszory, VO1. 9, summer 1982, pp. 42-48. At

atimeoflimitedcanmcrcial activity and a small pool of potential subscribers, anewspapr’s continued sutwival always seemed in doubt. Political parties,

often using government resources, buttressed the press. As long as the political system remamed dynartm-that is, a variety of factions and viewpoints

were represented in different branches of government--the system worked.

llTRush Welm, Poptir Etiation and Democratic Thought in America (New York, NY: Columbia University press, 1962).

llgDavid Tyack and Elisabeth Hansot, “Conflict and Consensus in American Public Education,” America’s Schools: Public and Private, Daedalus,

summer 1981; Robert A. Carlson, The Questfor Conformity: Americaw”zation Through Edu~at~on (New York, NY: John Wiley & Sons, 1975); “Public

Education as Nation Building in America: Emollients and Bureaucratization in the American States, 1879- 1930, ’’American Journal of Sociology, vol.

85, No. 3, November 1979.

I ~%wrfom ~seconomic function, the public schools were restructured in accordance with business principles. Vocational education and guidance

were introduced as part of the educational Curncuhun. Assuming that the majority of Americans would be working at industrial jobs, educators believed

that vocational education would serve not only the best interests of the individual, but also the best interests of society. For a discussion, see David K.

Cohen and Barbara Neufeld, “The Failure of High Schools and the Progress of Education,” America’s Schools: Puldic and Private, Daedaha, Summer

1981; Tyack and Hansot, op. cit., footnote 118; Sol Cohen, “The Industrial Education Movement, 1906- 1917,” American Quarter~, Spring 1969, pp.

95-1 10; and Martin Trow, *’The Second Transformation of American Secondary Education, “ International Journal of Comparative Sociology, VOI. 7,

1%1.

1mJ~esW. Cwey, “TheCornmunications Revolution and the Professional Communicators.’” SocioiogicaiReview Monograph, vol. 13, January 1%9,

pp. 23-28; C. Wendell King, Social Movements in the United States (New York, NY: Random House, 1956), p. 24.

lzl~ trend tow~nation~ distribution of printed matter culminated with the emergence of inexpensive popular magazines. Entrepreneurs launch~

natiunal magazinesin the 1880s and the 1890s expressly to serve as vehicles for advernsing brand-name consumer items featured by mass retailers. This

new geme of magazines, epitomized by Curtis Publishing Co. Saturday Evening Post, Ladiev’ Home Journal, and Country Gentleman, cut subscription

rates to attract a mass middle-class audience. With advertising-filled periodicals blanketing the NatIon, the heavily subsidized second-class mailings grew

20 times faster than the population in the four decades after 1880. See Theodore Peterson, Magazines in the Twentieth Century (Urbana, IL: University

of Illinois Press, 2d cd., 1964), pp. 1-49.

l~~le city and village residents enjoyc.d daily Ctier service, farm families typically plckcd up their mail in a weekly trip to town. The Grange and

other rural groups complained about this inequality. Once RFD began in 1897, daily newspapers could be delivered to the countty, alleviating rural

isolation and drawing farm families into regional, national, and even international communities. For a discussion of the history of RFD, see Wayne E.

Fuller, RFD: The Changing Face of Rural America (Bloomington, IN: Indiana Univcrs]ty Press, 1964).

l~~id.The~ly2~.century roads movement, which finally won Federal appropriations for road construction, was both directly ad indirectly link~

with rural postal service. See also Daniel J Boorstin, The Americans” The Dernocraf/c E’xpertence (New York, NY: Random House, Vintage Books,

1973), pp. 118-136.
96 ● Critical Connections: Communication for the Future

the mass media to foster peaceful social reform by

connecting segments of society with the whole.

They claimed that access to mass circulation publications was necessary to get their concerns placed on

the national agenda. To reach a cross-section of

society and influential policymakers it was no longer

enough to simply issue one’s own publication. To be

effective, they argued, one had to get the message

into the commercial press, which at the time usually

meant making the groups’ concerns newsworthy

enough to attract the attention of reporters.l24

It was within the context of these growing

concerns about access to information and communication services and the uneven deployment of the

telephone that regulatory issues surrounding the

telephone first emerged.125 Not surprisingly, Theodore Vail faced little opposition when he proposed

tying the goal of universal service together with a

regulatory structure legitimizing AT&T as a natural

monopoly. As Vail described his vision of the

telephone industry in the Annual Report of 1910:

The position of the Bell system is well known . . .

The telephone system should be universal, interdependent and intercommunicating, affording opportunity for any subscriber of any exchange to communicate with any other subscriber of any other

exchange . . . annihilating time or distance by use of

electrical transmission.126

Nor, given the environment, is it surprising that

Congress incorporated this goal in the Communications Act of 1934, which states:

It

IT]o make available, so far as possible, to all the

people of the United States, a rapid, efficient,

nation-wide and world-wide wire and radio communications service with adequate facilities at reasonable charges .. .127

should be noted, moreover, that this goal takes on

special significance because it represents the only

major change from past policy that the Communications Act brought about. As Richard Victor has

pointed out:

The most significant change in the Communications Act may have been its statement of purpose. If

Congress meant what it said, then national policy

was redirected towards a single, great social objective.128

This general mandate reappeared more concretely

in a 1949 law that directed the Rural Electrification

Administration (REA) to promote telephone service 129

Implementing the Goal of Universal Service and

Equitable Access

Prior to the telephone’s development, the government had relied heavily on Federal subsidies to

124For im~m,cltixn ~oupS working for ~ban change tied to forge ~liances wi~ city newspapers in the 1 t390s. where ~OUpS were able to get their

messages into a city’s papers, reforms resulted; where papers closed their columns 10 reformers, change was stalled. For a brief period at the beginning

of the 20th century, social crusaders enjoyed remarkable success in working with reform-minded reporters-the muckrakers. On the importance that

social theorists of the Progressive Movement attached to communication, see Jean B. Quandt, From the Small Town to the Great Community ~ The Social

Thought ofl’regressive [intellectuals (New Brunswick, NJ: Rutgers University Press, 1970). On the importance of communication to reform movements,

see Richard B. Kielbowicz and Clifford Scherer, “The Role of the Press in the Dynamics of Social Movements, ’’Research in Social Movements, Conj7icts

and Change: A Research Annual (Greenwich, CT: JAI Press, 1986), and David P. Nerd, Newspapers and New Politics: Midwestern Municipal R@orm,

1890-19~ (Ann Arbor, Ml: UMP Research Press, 1981). One of the better accounts of muckraking and its relationship to early 20th-century reform

is Louis Fuller, Appointment at Armageddon: Muckraking and Progressivism in Ameri(an Life (Westport, CT: Greenwood Press, 1976).

l~At leat for tie first ~veral dec~es of telephony, businesses headqu~er~ in the no~eastern cofidor stood to m~e he best use of the new

technology. Although patented in 1876, it took 12 years for the lines to reach Chicago, and transcontinental service wa.. not inaugurated until 1915. The

telegraph, in contrast, had linked both coasts in a mere 17 years. Of course many communiques outside the northeast developed their own local and regional

systems, but for the most part they were not effectively integrated into the network. The pattern for establishing telephone links, in fact, largely followed

the deployment of postal and telegraphic services: first major trunks linking northeastern cities, followed by lines to smaller towns in their immediate

hinterlands, then comec.tions to major Midwestern cities, and so forth-a sequence of connecting ever lower-order cities. For discussions, see Kenneth

J. Lipartito, “The Telephone in the South: A Comparative Analysis, 1877- 1920,” Ph.D. diss., Johns Hopkins University, 1986; and John V. Langdale,

“The Growth of I.mng-Distance Telephony in the Bell System, 1875 -1907,” Journal of Ifistoricul Geography, vol. 4, No. 2, pp. 145-159.

l~As cited in Victor, op. cit., footnote 93, p. 3.

lzTAs Vletor hm W1nt~ out, a nwbcr of States had already adopted subsidies encouraging residential service. As he notes: “During the 1920s, public

utility commissions throughout the country adopted value-of-service pricing and statewide average rate-making. Under the value-of-service concept,

business users paid more than residential customers, since the benefit of setvice to them was greater. Likewise, rates were higher in large exchanges

(despite lower costs) than in small ones, since service (the number of possible connectrons~ was superior. Similarly, statewide averaging of rates (for

like-sized exchanges and toil calls of equal distance) appealed to public utility commissions on several counts: it encouraged new residential service

through cross-subsidization, simplified administrative procedure, and gave the impressmrr of fairness. Ibid., pp. 10-11.

12%id., p. 17.

lzgFor a discussion, see Don F. Hadwiger and Clay Cochran, “Rural Telephones in the L~nited States.” Agricultural History, vol. 58, July 1984, pp.

221-238.
Chapter 4--The Impact of New Technologies on Communication Goals and Policymaking . 97

promote the goal of universal service. In accordance

with the regulatory framework established by the

Communications Act, however, major responsibility for the task of implementing universal telephone

service was shifted to AT&T, although the FCC and

the State regulatory commissions were charged with

assuring that overall costs were equal to overall

prices, and that rates and profit levels were kept

within a reasonable range.

To encourage the development of universal service, AT&T needed to develop a subsidy system of its

own. Left to the determination of the marketplace,

telephones were deployed quite slowly and in a very

uneven fashion. In 1921, only 35.3 percent of

American households had telephones. This figure

climbed to 41.6 percent in 1929, dropped to a

Depression-era low of 31.1 percent in 1933, and

rebounded slightly to 39.3 percent in 1941 .130 Costs

of terminal equipment deterred some households

from purchasing telephones, and fees proved too

steep where expensive lines had to be strung in

sparsely settled areas.

To subsidize the expansion of telephone services,

AT&T adopted a pricing structure that was based not

on cost of usage, but rather on value of use.131 Such

a system assured that toll users (disproportionately

represented by business users) would pay some

proportion of the nontraffic-sensitive costs of the

local exchange. Because the formula for establishing

the amount and distribution of these costs was to a

large extent arbitrary, the tendency over time was to

shift more and more of the costs of service from local

exchange users to toll users. To an ever increasing

extent, this formula fostered the development of

residential service at the expense of long-distance

users.

132

In the early years of the telephone company, State

regulators adopted what was called a “board-toboard” approach to allocating costs between local

exchange and interexchange services-that is, between State and Federal jurisdictions.133 According

to this formula, the entire cost of the local exchange

was recovered from local rates, while interexchange

costs equaled the cost of toll interconnection from

one switchboard to another.

A new formula was adopted in 1930, after the

Supreme Court ruled, in the case of Smith v. lllinois

Bell, that toll users should pay some proportion of

the local exchange’s fixed costs. The Court declined,

however, to specify what a fair proportion would be.

To determine how to allocate costs based on the

Court’s prescribed “station-station” formula, the

National Association of Regulatory Utility Commissioners (NARUC) established a task force with

the aid of AT&T. The separations manual that

NARUC subsequently released called for accounting procedures that provided station-to-station separations based on actual usage. Using this formula:

. . . state by state, non-traffic sensitive plant actually

used to make long distance calls would be allocated

to the interstate jurisdiction in proportion to interstate, long-distance usage. 134

Pressure from State regulators to revise this

formula developed, however, when advances in

transmission technology allowed the cost of longdistance service to decline more rapidly than that of

local service. To adjust for this situation, NARUC

sought to add a “subscriber plant factor” to the —. —..

ls~ich~d A. !jchw~lose, “Technology and the individual: The impact of Innovation on Communication,” Catherine L. Covet and John D. Stevens

(eds.), h-fuss Media Between the Wars (Syracuse. NY: Syracuse University Press, 1984), ~; 96.

ISITO establish just and reasonable rates in accordance with the Communications Act ot 1934, some formula had to be worked out to allocate @sts

and to separate the rate base (including the fixed, nontraffic-sensitive plant) between Federal and State jurisdictions. However, as Anthony Oettinger

has pointed out, since any formula is to some extent mbitrary and will have a different effect on stakeholders, the decision about what pricing and cost

strategy to adopt will depend to a considerable degree on the prevailing public policy goals For a discussion, see Anthony G. Gettinger, “The Formula

Is Eve~ng: Costing and Pricing in the Telecommunications Industry,” Program on Information Resources, Center for Information Policy Research,

Harvard University, Cambridge, MA, P-88-2, October 1988.

Iszsomehave argu~t,hat, titie long run, given technologlcalchanges and efforts to upgrade the network forthebusiness user, this subsidy hm actually

worked in reverse. According to Patricia Aufderheide, for example: “Cost shifting is Justlf%d on the grounds that the individual user is the ‘cost-causer’

and that the local loop must now ‘pay for iLself. ’ This rationate ignores the changing pattern of technological costs. More elaborate and sophisticated

digital switching equipment, making possible services of” great immediate value to large users and increasing capacity to carry huge data transmission

demands, incurs tremendous investment costs whale lowering the cost of switching and transmiwuon. Technological innovation challenges the traditional

(though traditionally arbitrary) distinction between non-traffic-sensitive (NITS) and traffic sensitive (TS) costs and poses challenges of separating costs

of rate-based and nonrate-based services. Certainly the residential and small-business user has not caused these problems. The need for reassessment

of cost allocation is being interpreted as a problem requiring cost shifting to ‘end users. “ Patricia Aufderheide, “Universal Service: Telephone Policy

in the Public Interest,” Journal of Communication, vol. 37, No. 1, Winter 1987, p. x3.

lssFor a discussion, see VietOr, Op. cil , foomote 93, pp. 20-30. See also Oettinger, OF cil , foomote 131.

134vietor, op. cit., fOOmOte 93, P. 22.
98 ● Critical Connections: Communication for the Future

measure of relative usage, the effect of which would

have been to transfer approximately $200 million

from the State to the interstate jurisdiction.135 At

first, the FCC refused to approve this change. Later,

under pressure from Ernest McFarland, Chairman of

the Communications Subcommittee of the Senate

Commerce Committee, it agreed to a compromise

that went a long way toward accepting NARUC’S

original position.136 By continuing to adjust the cost

allocation formula in favor of the local exchange, the

FCC and AT&T created a situation over the years

whereby the costs and prices of telecommunication

services were increasingly dissociated from one

another. Contributing to this situation, the FCC, in

1941, adopted a policy of “equal charges for equal

service,” which was designed to eliminate interstate

rate differentials.137

These subsidies served well as means of fostering

the development of universal telephone service. By

1952, AT&T operated almost entirely under a

nationwide average pricing system. 138 Moreover, b y

1950, the prospect of attaining the goal of universal

service was well in sight, with 80 percent of

American homes equipped with telephones.

However, for political as well as economic

reasons, a system of subsidies such as this could only

be sustained given the conditions of a regulated

monopoly. As Gerald Faulhaber has described the

unique relationship existing between the Bell System and its regulators:

By announcing a common goal, universal service,

Bell gave the regulator the political justification to

brush aside potential competitors, barring their entry

into the regulatory game. Only two players were

involved: Bell and the regulators. They often

scrapped over who would get how much, but they

seldom argued over who was to sit at the table. Over

the years, Bell’s regulatory compact with the commissions was broadened to include key parties: rate

averaging greatly benefited rural and small-town

customers at small cost to urban customers; separations benefited local residential users at the expense

of toll and business users; settlements benefited the

independents in return for political support for the

system as a whole. Just as Bell sought to deny others

access to its markets, it sought to deny access to the

regulatory game. In fact, the nature of regulation

demanded that it do so to maintain its monopoly

market position.139

The system was also increasingly untenable from

an economic point of view. As new competitors

entered the telecommunication market, they were

able to price their products much closer to real costs,

and hence to undercut AT&T. AT&T’s strong

reaction to even minor threats of competition make

it clear that AT&T was well aware of its inherent

vulnerability in this regard.

Tensions in Achieving the Goal of

Universal Service

In the minds of some, the goal of achieving

universal service has, by and large, already been

achieved. l40 And, in fact, it was precisely because

this goal seemed to have lost much of its urgency

that many began to question the old regulatory

arrangements.141

Assuming that the goal of universal service has

essentially been accomplished, the role of government would appear to be greatly simplified. Under

such circumstances, for example, all that needs to be

done is to assure that everyone can continue to afford

“plain old telephone service.” And this objective can

best be achieved, according to many of those who

adhere to this view, either by providing direct

subsidies to the poor—as in the case of lifeline

service-or by adopting special pricing schemes

such as social contracts that cap, or limit, price

increases for basic services. Moreover, each of these

approaches is basically compatible with a deregulated, competitive, telecommunication environment.

Others, however, question the basic premise that

universal service has already been achieved. Emphasizing the relative nature of the concept, they view

the basic task for government as one of redefining

the notion of universal service to take into account

1351bid., p. 23.

1361bid.

1371bid., p. 25.

138~id,

13gGer~d R. Fa~ha~r, Te/eco~nicafions in Turmoil: Technolon and Public Policy (Cambridge, MA: Ballinger Publishing CO., 1987), P. 46.

l@As of JutY 1989,93.3 Wrcent of Americans had access to a telephone in their homes Universal penetration statistics are compiled Wriodically in

“Telephone SubscriberShip in the United States,” Industry Analysis Division, Common Carrier Bureau, FCC,

IAIFaulh~r, op. cit., footnote 139, ch. 3.
Chapter 4--The Impact of New Technologies on Communication Goals and Policymaking ● 99

the greatly enhanced role of information in society. 142 However, if this latter perspective were

eventually to prevail, new kinds of pricing mechanisms and subsidy schemes would need to be

developed, since those presently under discussion—

such as incentive-based pricing, for example—

would most likely be unworkable, given an expanded definition of essential services.

Communication in Support of National

Defense and National Security

In most countries, national systems of communication were developed only after the authority of the

State had been firmly established. Under such

circumstances, it was quite natural for communication systems to serve, frost and foremost, as appendages of government. The goal of establishing a

communication system in support of national defense and national security was much less problematic than in the United States where first amendment

concerns called for maintaining a wide breach

between government and the communication system. Today, the difficulties entailed in providing

integrated communication in support of national

defense and national security are even greater, given

the enhanced role of communication in defense,

together with an increasingly deregulated, competitive, communication environment.

Establishing the Goal of Communication in

Support of Defense and National Security

In the United States, given the value placed on

frost amendment goals, the government’s involvement in promoting communication for defense and

national security has historically been much more

sporadic and indirect than in other countries. Perceived threats to the Nation’s survival in the 20th

century have led to a greater emphasis on the goal of

national security, an emphasis that has at times

collided with the goals of free speech, the free flow

of information, and the ideal of a free market.

The exigencies of war have often given rise to a

short-lived reordering of national values. In autumn

1918, for example, Congress directed the Postmaster

General to take over operation of the Nation’s

telephone and telegraph companies. The traditional

preference for private enterprise in communication

gave way to concerns about the importance of the

wires for national security. Those who had long

sought to convert the U.S. Post Office Department

into an agency along the lines of the postal,

telegraph, and telephone ministries common in

Europe seized the opportunity created by exaggerated fears of domestic subversion. Under the post

office’s management, the telegraph and telephone

systems worked smoothly, although rates increased.

Shortly after government took control, however, the

war ended and Congress restored the wires to their

companies. As Wayne Fuller has described:

The Post Office once more assumed its traditional

nineteenth-century role: a supporter of free enterprise but never a competitor.143

Clearly recognizing the defense potential of radio,

the government also played a critical role in its

development.

144 The U.S. Navy, in Cooperation with

AT&T, helped to develop the emerging technology,

and it spearheaded the corporate-government alliance that consolidated and centralized radio during

and after World War 1.145

World War I spurred intensive wireless research.

Armed forces all over the world demanded radio

units for airplanes, ships, and infantry. After America entered the war in April 1917, the government

142For thiS ~~t of view, see, for ~~tance, U.S. ~p~ment of c~mmerce, Nation~ Telecommunications and Information Administration, NT/A

Te/ecorn2000: Cham”ng the Coursefora New Century, NTIA Special Publication 88-21 (Washington, DC: U.S. Government Printing Office, October

1988).

14sWayne Fuller, The~~canMail (Chicago, IL: Chicago University ~ss, 1972), pp. 187-188. ~oponents and opponen~ of public OWlerShip Of

the means of communication pointed to this short-lived experiment as evidence supporting their positions. See also Lindsay Rogers, The Pos&a/ Power

of Congress: A Study in Comwitutional Expawion (Baltimore, MD: John Hopkins University Press, 1916), pp. 156-157.

144~atew~mless oWrators, by interfering with nav~ and commercial ~rvice, made gove~entregulation im~rative. The report Of dte SO-Gdltd

Roosevelt Board in 1904 recommended a three-way division of authority over the American wireless. The Department of Labor and Commerce would

supervise commercial stations, the War Department of Labor and Commerce would supervise commercial stations, the War Department would have

charge of military stations, and, most importantly, the Navy would control coastal stations. This report, while not law, established the dominance of the

U.S. Navy in the American wireless field, enabling it to build its own system and pour millions of dollars into research. Not until the Radio Act of 1912

did government produce a comprehensive plan with the goal of regulating wireless. Czitrom, op. cit., footnote 27, p. 23.

lqs~e ~fiwtion of tireless te]ephony-the transmission of speech without wires-grew largely out of research and development by wver~ large

caporations and the Federal Government. AT&T, wary of possible competitive threats from wireless telephony, launched a massive research and patent

purchasing effort, acquiring all rights covering the use of vacuum tubes in wire and wireless telephony. AT&T and the U.S. Navy cooperated in 1915

in the fm Successful tests of transcontinental wire telephony and transoceanic radio telephony. General Electric also entered the field in these years,

focusing on the construction of high-frequency transmitters for long-distance wireless and on the perfection of vacuum tubes. Ibid., p. 24.
100 ● Critical Connections: Communication for the Future

took over all wireless stations, and, more importantly for future events, guaranteed manufacturers

protection against legal action over patent infringements. This action permitted a vast coordinated

effort in the manufacture of radio parts and stimulated a boom in radio research.146

The Federal Government also took a strong

interest in radio’s postwar future. The Wilson

Administration’s goal was to challenge British

domination of international communication and to

protect U.S. military and commercial interests. After

failing to get Congress to pass legislation that would

make wartime government control of wireless stations permanent, the administration pursued a different strategy. In 1919, British Marconi was the only

company negotiating with General Electric (GE) to

buy exclusive rights to the Alexanderson Alternator,

a high-powered radio transmitter used for transoceanic work during the war. Through a series of long

and delicate negotiations, the government stepped in

and served as the midwife to the birth of the Radio

Corp. of America (RCA). RCA, with GE as the

major stockholder, bought out American Marconi

(which had been controlled by the British), thus

assuring America a powerful position in world

communication. 147

The military’s role in the development of the

computer was also critical, even if indirect and

behind the scenes. As Kenneth Flamm notes:

It was no accident that the military services largely

financed the postwar development of the computer

in the 1950s, for computing technology had played

a pivotal role in the Allied war effort. The military

indirectly bankrolled even the Eckert and Mauchly

computer projects, and these relatively open projects

were only the tip of a much larger, and sometimes

hidden, technological iceberg.148

The role of the Navy was particularly important.

Its interest in computing and advanced communication technologies went back as far as World War I

when technological advances in naval warfare created a whole range of new technical problems for

military strategists. 149 As Flamm points Out:

By the end of 1948, the ONR (Office of Naval

Research) employed one thousand in-house scientists, funded about 40 percent of basic research in the

United States, and was working on research contracts amounting to $43 million ($20 million of its

own money, $9 million from other federal agencies,

and $14 million of university money .)150

Defense support for the computer industry was

also directed through the National Bureau of Standards (NBS) which, as in the case of other government agencies, was redirected towards military

objectives during World War II. Although NBS

played a significant role in the development of the

computer, its funding was drastically cut in 1954.

Not surprisingly, this timing coincided with the

emergence of a burgeoning commercial computer

industry. Much in keeping with the U.S. Government’s historical approach to dealing with the

communication industry in times of peace, Secretary

of Commerce Weeks justified these budget cutbacks

on the grounds that “the National Bureau of Standards has not been sufficiently objective because

they discount entirely the play of the marketplace ’’151

Issues involving limits on expression for national

security reasons have also become exacerbated

during times of war. They first arose when opponents to World War I, in particular socialists and

German immigrants, risked prosecution under State

or Federal sedition laws. The laws were premised on

the notion that speech could undermine the war

effort and hence endanger the Nation’s security. A

number of cases wound their way to the Supreme

Court and convictions were common because the

Court often applied a “reasonable tendency” test.

Using this standard, expression opposing the war

was found punishable merely for having a tendency

to produce behavior that Congress or a State

legislature proscribed. At the same time, however,

some justices began fashioning a standard that was

more protective of free speech rights, the “clear and

l~suwn J. DOUgl~, ~~ve~~~g American Broadcasting, 1899-1922 (Baltimore, MD: The Johns Hopkins University Press, 1987), chs. 7 and 8.

147sW Danjel J. czi~om, Media ad the American Miti.” From Morse to McL.uhun t Chapel Hill, NC: University of North Carolina press, 1982), p.

70. See also Hugh G.J. Aitken, The Continuous Wave: Technology and American Radi,~ /900-/932 (Princeton, NJ: Princeton University Press, 1985).

lqgKenne~ Fl~, cre~zng th CoWuter: Govermnt, lnhtry undl-ligh ~echn~)logy (Washington, DC: The Brookings Institution, 1988), ~h. 3.

Quote at p. 29.

]d%id., p. 34.

ISOIbid., pp. 4243.

lslAs cit~ in ibid., p. 73.
Chapter 4----The Impact of New Technologies on Communication Goals and Policymaking . 101

present danger” test. This test, which would only cut

off speech that was highly likely to pose an

imminent and substantial danger to some vital

interest, proved more influential in the long run.152

On rare occasions during peacetime the government has sought to enjoin the press from publishing

information whose disclosure was seen by some to

undermine national security. The government’s

attempt to invoke national security to stop publication of the Pentagon Papers failed when the Supreme

Court, acknowledging that national security was

sufficient reason to impose a prior restraint on

publication, ruled that in this instance the government had failed to show that anything more than

embarrassment would result. In effect, the door was

left ajar. Where atomic secrets have been involved,

the government has been better positioned to justify

a prior restraint. In 1979, for example, the government obtained a district court injunction that stopped

publication of an article by The Progressive magazine that depicted the making of a hydrogen

bomb. 153

Implementing the Goal of Providing

Communication in Support of National Defense

and National Security

The government’s ability to balance first amendment and free market goals against national security

goals was greatly aided by the existence of a

government-regulated telephone monopoly, which

was renowned for the quality and extent of its

research in all communication-related fields. The

importance of the Department of Defense’s (DoD’s)

dependence on AT&T stems from the fact that

national policy has required the Federal Government

to procure all of its telecommunication services,

including those for national defense, from the

commercial sector, unless special circumstances

dictated otherwise. Thus, 85 percent of Federal

Government and 94 percent of critical U.S. national

security needs within the continental United States

(CONUS) are reported to be leased from the

commercial telecommunication carriers. In total, the

Defense Communications Agency (DCA) leased

approximately $530 million in long-haul domestic

telecommunications in 1981.154

As the only company effectively supplying endto-end telecommunication services to DCA, AT&T

has historically been closely and directly involved in

the formulation of national security telecommunication specifications and requirements; telecommunication research and development; the planning,

routing, and installation of networks; and in making

adequate provisions governing robustness, ubiquity,

and restorability. With AT&T having a monopoly, it

could guarantee end-to-end connectivity. In addition, the sheer size of AT&T, and the extent of its

network, meant that it was able to meet the more

demanding requirements of the U.S. Armed Services. The relationship that thus developed between

AT&T and DoD was strictly one-to-one. Thus,

infrequently, AT&T would install a telecommunication line or circuit for DCA, reroute or harden a cable

to enhance survivability, or retain redundant lines

without managing a direct charge to the defense

budget; the cost would be defrayed by being

absorbed in the overall rate base to AT&T subscribers. 

155

The operational advantages to DCA of having a

single, central communication system were summed

up by William Taft IV, General Counsel to DoD,

when testifying about the prospect of divestiture

before a Senate Judiciary Committee on August 6,

1981. As he said:

The central system has incentives to respond and

plan in a coordinated manner that a fragmented

system would not . . . divestiture could cause

substantial harm to our national defense and security

and emergency preparedness capabilities . . . the

telecommunications network cannot properly be

artificially divided between inter-city and local

exchange functions.156

Surprisingly, little attention was given to the

national security aspects of the AT&T divestiture

during the 1974 antitrust suit. The Department of

152Fora&c~sion, see~hariah Chafee, Jr., Free Speech in the United States (Cambridge, MA: Harvard University Press, 1941 ); and Paul L. Murphy.

The Meaning of Freedom of Speech: First Amendment Freedoms from Wilson to FDR (Wewport, CT: Greenwood Press, 19’72).

153A circ~t court eventu~]y dismissed the case as moot, but many observers thought that government could have satisfied a cOUrt that “grave md

irreparable darnage” to the Nation would have resulted from publication. Sec New York Times v. United States 403 U.S. 713, 1971 (Pentagon Papers

case); see also A, De Volpi et at., Born Secret The H-Bomb, the “Progressive” Case wtd /katlonal Security (New York, NY: Pergamon Press, 1981).

15’4M@n Edmonds, “Defense Interests and United States Policy for Telecommunication \,” OTA contractor report, June 30, 1988, p. 19.

155u.s. Senate, Committ= on the Judici~, hearings on DoD Oversight: U.S. v. AT&T 97th Cong., Aug. 6, 1981. p. 42.

1561bid.
102 ● Critical Connections: Communication for the Future

Justice’s (DOJ's) case was based almost exclusively

on AT&T’s past anticompetitive behavior, with

supporting evidence being sought only from telecommunication and data-processing companies

such as IBM and MCI—all eager to see AT&T’s

domination of the domestic market reduced or

terminated. However, it was not as though DOJ was

unaware of DoD’s position. In March 1981, at an

early stage in the AT&T antitrust case, Secretary of

Defense Weinberger wrote to Attorney General

William French Smith urging that the suit against

AT&T be dropped on national security grounds. At

the least, according to Weinberger, DOJ should:

. . . not require or accept any divestiture that would

have the effect of interfering with or disrupting any

part of the existing communication facilities or

network of the AT&T Company that are essential to

defense command and control.157

Notwithstanding these concerns, the divestiture of

AT&T basically followed DOJ’s vision, giving

antitrust concerns priority over national security

goals. Moreover, this set of priorities was established at the very same time that the Administration

was revising strategic policy, shifting its focus from

one of deterrence to one that placed the very highest

importance on military Command, Control and

Communications and Intelligence (C3

I) invulnerability, with respect to both strategic policy and

national security emergency preparedness.

Failing to prevent divestiture, DoD responded in

a pragmatic way by seeking waivers from the

regulatory agencies and structural modifications to

the terms of divestiture to ensure the integrity of the

public switched network on which it had relied so

heavily. To make certain that the President had the

necessary telecommunication capability to fulfill his

statutory obligations in times of war or emergency,

an all-industry advisory committee, the National

Security Telecommunications Advisory Committee

(NSTAC) was established by Executive order, to be

supported by the National Communication System.

Comprising 27 of the chief executive officers of the

telecommunication and data-processing industries,

and reporting directly to the President, NSTAC is in

a unique position to find consensus not merely on

national security issues, but on the health and

direction of the communication industry as a whole.

Present Tensions With Respect to

Defense-Related Communication Goals

How long the present arrangements involving

NSTAC, and the partnership between government

and industry, can continue is uncertain. So, too, in

the longer term, is the effect of national security

considerations on the commercial U.S. telecommunication scene. There are legal implications if the

current arrangements are taken further, and there is

a limit to how far the umbrella of national security

interests can be extended. The implications are

therefore clear: in the absence of any explicit

guidance on telecommunication priorities for the

United States (other than the further encouragement

of open competition), and given the polycentric

nature of telecommunication policymaking and the

uncertainty that still surrounds the industry, some

central policy initiative will be needed in the future.

ISTG. Boiling, AT&T: @e~Ao~AMi-Trmf (Washington, DC: National IXfenae University, 1984), p. 51; and COII, op. cit., foomk 96 P. 187.
Part II

Opportunities and Constraints

Provided by New Communication

Technologies in the Business Arena
Chapter 5

Communication and Comparative

Advantage in the Business Arena
CONTENTS

Page

INTRODUCTION ... ... ... .. . . =. . . . . . . . . . . . . - ~ - ... ”’” ”. ”107

THE ECONOMIC REALM . . . . . . . . . . . . . . . . . . . . . . . 108

COMMUNICATION TECHNOLOGIES AND ECONOMIC ACTIVITIES :::::::::: 108

Socioeconomic Context: Enhanced Economic Stakes Communication and

Information-Related Activities . . . . . . . . . . . . . . . . . . . . .”-”....”.”””””’ 112

Key Business Activities . . . . . . . . . . . . . . . . . . . . . ~ . ..””.””’”’””””.””” 116

Framework for Thinking About the Business Opportunities Presented by

New Communication Technologies . . . . . . . . . . . . . . . . . . .. . . ...”.”.”” 116

ANALYSIS OF BUSINESS ACTIVITIES...... . . . . . . -. . .. =. . . . . . . . . . . . . . . 117

Operations . . . . . . . . . . . .. .. .. .+ . . . . . . . . . . . . . . . ..-.S. .$ O+......’”” 117

Service .. .. .. .. . 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ,........”...+.” 120

Technology Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..“.... 120

Human Resource Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

Firm Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

Inbound Logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........’”’.”. 123

Outbound Logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........,....”” 124

Marketing and Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

IMPACTS ON ECONOMIC PLAYERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

Players and Role Relationships introduction Activities . . . . . . . . . . . . . . . . . . . . . 126

Potential Impacts of New Business Opportunities on Players in the

Production Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

Roles and Relationships in Market Activities . . . . . . . . . . 132

KEY FACTORS AFFECTING OUTCOMES . . . . . . . . . . ..~’;~:~~::::::::.. 135

Compatibility and Interconnectivity of Information Systems -... . . . . . . . . . . . . . . . 136

Legal Framework for Employing Information in the Business Environment . . . . . . . . 137

Economic and Technical Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

Corporate Culture and Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . 138

International Trade and Foreign Communication Policies . . . . . . . . . . . . . . . . . . . . . . 140

Domestic Communication Regulatory Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

Box

BOX

5-A. Selected Innovations in Information processing and Communication.

Figures

Figure

Page

1830-87 . . . 110

Page

5-1. Structural Change and the Information Economy . . . . . . . . . . . . . . . . . . . . . . . . 113

5-2 Impact/Value Framework . . . . . . . . . . . . . . . . . . . . . . . . ~ . . . . . . . . . . . . . . . . . . . . . . 118

5-3. The Cast of Players. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

5-4. Spending for Communications by Large Users. 1983-1993 Comparison .. ...+... 138

Tables

Table Page

5-1. Key Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

5-2. The Internal Influencers and Their Play of Power . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

5-3. Main Obstacles to Effective and Strategic Use of Internetworking . . . . . . . . . . . . . . . 136

5-4. Top 50 U.S. Communication Users . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Chapter 5

Communication and Comparative Advantage

in the Business Arena

INTRODUCTION

The U.S. economy has fared reasonably well over

the past few years. However, many observers are

beginning to have serious reservations about the

future of the U.S. economy and its ability to compete

in an increasingly global environment.l They point

out that economic growth in the United States has

been fueled by borrowing foreign capital. Export

growth in the manufacturing sector has been increasing at a much slower rate than import growth, which,

rising precipitously, reached about $160 billion in

1986. Experts note, moreover, that the continued

decline of the U.S. economic position in world trade

is likely to have serious consequences for labor.

Between 1980 and 1984 alone, the number of jobs

generated by exports fell from over 6 million to 4.5

million.2 Pointing to the apparent success of the

Japanese model of business organization, some have

even suggested that the United States may also need

to develop and adopt new ways of organizing for

production if it is to be competitive.3

Many of those who are concerned about the U.S.

economy look towards the communication and

information sectors to provide the impetus for future

growth.4 This focus on “telematics” is not surprising, given the trend toward a greater role for

information in advanced industrial societies, and the

fact that the United States has traditionally had a

comparative advantage in this area. Communication

is regarded, moreover, not only as a source of

economic growth, but also as a means of reconfiguring work relationships to make them more effective.5

Just as the growth and development of the

communication sector is considered to be critical to

the well-being of the economy as a whole, so too is

it considered a strategic factor in competition among

firms. Increasingly, companies need to take communication into account in developing their overall

business strategies. As Clemens and McFarlan have

pointed out:

The new technologies of communication have the

power to change the competitive game for almost all

companies of all sizes.6

Given the linkages between communication regimes and economic activity, the way in which the

U.S. communication infrastructure evolves over the

next several years is likely to have significant

impacts on the business world and the economy as

a whole. To determine these impacts, and to suggest

possible policy choices about them, this chapter will

examine the nature of the opportunities and constraints presented by new communication technologies in the economic realm. To this end, it will:

. characterize the economic realm,

IFor a discussion, Sw Robe~ Z. Lawrence, Can America Compete? (Washington, DC’ The Brookings Institution, 1984); President’s Commission

on Industrial Competitiveness, Globa[ Competition: The New Reality (Washington, DC’: ( S. Government Priming Office, 1985); George Cabot Lodge

and William C. Crurn, “U.S. Com~itiveness: The Policy Triangle, ’’Harvard Business Rev{ew, VOI. 63, January -Febmary 1985, pp. 34-36,38-39,4142,

46,48, 50, and 52; and Peter G. Peterson, “The Morning After, ’’Atlantic Monthly, VOI 760, October 1987, pp. 43-50,52-55.

@TA staff, personal communication, Mar. 14, 1989. The labor content of exports alsi~ fell from 30,300 jobs per $1 billion of exports to less than

25,000.

sFor ~w Vew different discussions, sw Bob Reich, Tales of a New America (New York, NY. Time Books, 1987), especially Ch. 10; David H.

Bernadin and Michael A. Harrison, The Techrudogy War A Casefor Competuivenes.~ (New York, NY John Wiley & Sons, 1987); and Michael J. Piore

and Charles F. Sabel, The Second industrial Divide (New York, NY: Basic Books, tnc., 1984).

4S=, for exmple, Charles JOnsCher* “Information Resources and Economic Productivity,” Information Economics and Policy (North Holland:

Elsevier Science Publishers, 1983), pp. 13-35. Note that telecommunication industry shipments are expected to grow to an annual rate of 9 percent, in

real (deflated) terms, for the next 5 years. International Trade Administration, U.S Depwtment of Commerce, 1987 U S Industrial Outlook for Over

350 industries (Washington, DC: U.S. Government Printing Office, January 1987). pp 30-37.

sFor exmple, see Shoshana Zuboff, In The Age “f t~ Smrt Mac~ne, The Fumrt, oj Work and power (New York, NY: Basic Books, 1988); SW,

also Rarnchadran Jaikumar, “Postindustrlal Manufacturing, ’’Harvard Business Re\iew, November-December 1986, pp. 69-76.

6EHC K. C]emons and F, Wmen McF~lan, “Telecom: Hook Up or Lose Out,” Hurvurd Business Review, July-August, 1986, pp. 91-9’7; see ~so

PeterG.W. Keen, Competing in Time Using Telecommunications for Competitive Advantugc (Cambridge, MA: Ballinger Publishing Co., 1986); Donald

A. Marchand and Forest W, Horton, Jr., lnfotrends: Profiling From Yourlnformalion Resources (New York, NY: John Wiley and Sons, 1986); and James

I. Cash, Jr., F. Warren McFarlan, and James L. McKenney, Corporate Information S’vsttrns Management: The Issues Facing Senior Executives

(Homewood, IL: Irwin, 1988).

–lo7–
108 ● Critical Connections: Communication for the Future

. describe how communication technologies

have affected economic activity in the past, and

Q provide a framework for analyzing economic

impacts in the future.

This framework will be used to analyze the potential

uses and impacts of communication technologies in

several key business activities, and to identify the

major factors and related policy issues that will

determine the impact of communication technologies in the economic realm.

THE ECONOMIC REALM

The economic realm is that sector of human

activity in which the production and exchange of

goods and services takes place. In modern capitalistic societies, it is the market system that serves, for

the most part, to manage the processes of economic

activity, coordinating supply and demand and allocating goods and services. To the extent that the

structure of the market replicates a state of perfect

competition, that each producer selects the combination of factors of production that will maximize

profits, and that each consumer seeks to maximize

preferences, the price system can be assumed to

distribute goods and services in the most efficient

fashion.7

In the economic realm, behavior is considered to

be governed by self-interest. Hence, self-interest is

the criterion that is most likely to be used in

evaluating economic outcomes.8 Accordingly, producers will seek higher profits; workers better wages

and an improved quality of work life; investors

higher returns on their investments; and consumers

higher quality products at a lower price.

From a more general perspective, the performance

criteria of a firm, industry, or national economy are

generally those of efficiency and growth.9 As the

sociologist, Daniel Bell, has noted, the principal

value underlying the economic realm is that of

“fictional rationality ’’—that is, each individual

and each group in the system carry out rationally

conceived, specified roles that, taken together, are

designed to maximize production. The principal

means of achieving this value is by economizing;

decisions are made on the basis of cost/benefit

analyses, and technology is applied to substitute

more efficient processes for less efficient ones.10

Communication is inherent in the coordination

required for all economic activity. The exchange of

information, for example, is at the heart of the

market system.ll Capitalism depends on the communication of information to efficiently allocate

resources. Within firms, the delivery of timely and

accurate information is key to decisions about

whether to enter or exit markets, how to secure

financing, how to organize and manage workers

effectively, and how to distribute and market goods.

Firms without access to such data, and the communication networks required for their use, will be at a

severe disadvantage when competing with other

firms that have such access.

COMMUNICATION

TECHNOLOGIES AND

ECONOMIC ACTIVITIES

Given the link between communication and

economic activity, it is not surprising that communication technologies have historically played an

important role in economic development and

growth. At one time, market relationships consisted

almost entirely of face-to-face exchanges. Today,

mediated communication has replaced most of this

primary contact. Now, an exchange of information

——

often precedes or inheres in an economic transac-

.——

TFor a discuwionof tie resumptions and v~ues underlying the economic realm, see Dunc an MacRae, Jr., The Sociai Function of Sociaf science (New

Haven, ~andhmdon: Yale University Press, 1976), p. 160. See especially chs. 5 and6. See also Robert Heilbroner, TheiVarure undhgicofCap!fa/ism

(New York, NY: W.W. Norton and Co., 1985).

s~id. It ~ould be not~ fiat self-interest IS ass~ed to be a driving motivation only insofar as individuals are operating in eCOnOIIIIC rOleS. ~ red

life individuals play many, and often conflicting, roles, Hence, in other contexts individuals’ motivations and values might be quite different.

g~onmic ~wqh WaS hemain concern of classical Wonomists. By economic growth wc mean the process by which real national income increases

over a very longtime period. For a discussion, see Gerald M. Meier and Robert E. Baldwin, Lconom”c Development: Theory, History, Policy (New York,

NY: John Wiley & Sons, Inc., 1961). It should be noted, however, that the focus on growth may exhibit historical and cultural biases. For a comparison

of U.S. and Japanese perspectives on economic growth, see James Fallows, More Like 1’s: Making America Great Again (Boston, MA: Houghton Mifflin

Co., 1989).

I@mlel Bell, The C~~ra/ Contradictions of Capitalism (New York, NY: Basic Books, 1976), PP. 10-11,

llFor an in-depth discussion of the role of communication in the market system, see James R. Beniger, The control Revolution: Tt?Chno100 Uti the

Economic Origins of the /#ormution Society (Cambridge, MA: Harvard University Press, 1986). As Steiner has pointed out, fundamentally a market

can be defined as the “entire web of relationships between buyers, sellers, and products that is revolved in an exchange.” Peter Steiner, “Markets and

Industries,” International Encyclopedia of Social Science (New York, NY: Macmillan), vol 9, pp. 575-581.
Chapter 5---Communication and Comparative Advantage in the Business Arena ● 109

tion. Advertising, for instance, alerts consumers to

the availability and characteristics of products and

services, and information alone virtually drives

securities and commodity markets.12

The deployment of communication technologies

has increased economic activity and fostered economic growth in a number of interrelated ways.

First, communication technologies have dramatically increased both the speed and the number of

economic transactions that can take place. Second,

by diminishing the relevance of geographic distance,

communication technologies have facilitated the

expansion of trade and markets. At the same time,

the development of mass media technology served

to reinforce national markets by helping to mold

tastes and preferences into a more uniform cast. In

turn, this increase in market size led to greater

specialization, standardization, and economies of

scale. By enhancing intrafirm coordination, communication technologies allowed businesses to grow

vertically and horizontally, and thus to exploit these

economies.

The important role that communication and information technologies have played in economic terms

can be seen by tracing their development in conjunction with industrial development in the United

States. Box 5-A provides a chronological list of

these technological developments from 1830 to

1887.13

From the 15th century until the development of

the railroad and the telegraph in the last half of the

19th century, material goods were transported very

slowly—at the speed of draft animals if they traveled

by roadway or canal, or “at the whim of the winds”

if they traveled by sea. 14 Because transportation and

communication over long distances was difficult

and slow, trade was discouraged and markets were

geographically limited in size. At such distances,

merchants did not have a great deal of information

on which to base their sales. Prices differed significantly from market to market, and considerably

exceeded the costs associated with distribution. As

a result, most merchants refrained from longdistance trading. When they did engage in such

trade, they generally remained at home, relying on

merchants in other trade centers to sell their goods

on a commission basis. To minimize and spread the

sizable risks involved, they sold a wide variety of

products rather than specializing.15 Given the 4-

month lag in transatlantic communication, as well as

European mercantilist policies, it is not surprising

that trade between the American colonies and Great

Britain was generally limited,

Although the speed of transportation and communication did not greatly increase in postrevolutionary America, the volume of trade did grow

as a commercial infrastructure was gradually established and as more effective means of transportation

and communication were deployed.16 Equally important to the development of trade was the establishment of a network of people who, in their various

roles as middlemen, helped to convey market

information and goods across both the North American continent and the Atlantic Ocean. Included

among them were shippers, financiers, jobbers,

transporters, insurers, brokers, auctioneers, and retailers. 17

The impacts of these developments were cumulative. Trade gave rise to more trade. *8 As markets

expanded, so did the density of merchant exchange

networks and the amount of available market

information. As a result, distribution costs declined,

and merchants were further encouraged to engage in

trade. Moreover, with larger markets and better

information, merchants faced fewer risks, and thus

they were able to specialize in particular aspects of

trading such as importing, wholesaling, retailing, or

exporting. This increased specialization led, in turn,

12Ric~d B. Kiel~wicz, “me Role of Communication in Building Communities a~~d Mi~kets An Historical CNerview,” OTA contractor repon,

November 1987, p. 2.

13 Beniger, Op. Cit., foo~ote 11”

IdIbid., p. 219.

IsIbid., p. 174.

l%c-erci~ ~ra~tmcture WM compri~~ of commercl~ banks ( ]78~), a F~er~ bating system (1791), State insurance regldations (1799),

Federal bankruptcy law (1800), and joint stock companies (1810). The new technologies included a Federat postat service (1791), the fust turnpike

(1795), coastat steamboat travel (1809), maii delivery by steamboat (1813), regular packet setvice to England (late 1810s), steam railroads and Atlantic

clipperships (early 1830s), local postal delivery service (1836), regular transatlantic steamship service (1 847 ), and regular steamboat to California ( 1849).

Ibid., p. 130.

‘71bid., pp. 155-165.

181bid., pp. 173-174.
110 ● Critical Connections: Communication for the Future

Box 5-A-Selected Innovations in Information Processing and Communication, 1830-87

Year Innovation

1830s

1837

1839

1840s

1842

1844

1847

1851

1852

1853

1855

1858

1862

1863

1864

1866

1867

1874

1876

1878

1881

1883

1884

1885

1886

1887

Wagon lines carrying freight between rural towns and ports begin to operate on regular

schedules.

Telegraph demonstrated, patented.

Express delivery service between New York and Boston organized using railroad and

steamboat.

Freight forwarders operate large fleets on canals, offer regular through-freight arrangements

with other lines.

Railroad (Western) defines organizational structure for control.

Congress appropriates funds for telegraph linking Washington and Baltimore; messages

transmitted.

Telegraph used commercially.

Telegraph used by railroad (Erie).

First-class mail rates reduced 40-50 percent.

Post Office makes widespread use of postage stamps.

Trunk-line railroad (Erie) institutes a hierarchical system of information gathering, processing,

and telegraphic communication to centralize control in the superintendent’s office.

Registered mail authorized, system put into operation.

Transatlantic telegraph cable links America and Europe, service terminates after 2 weeks.

Federal Government issues paper money, makes it legal tender.

Free home delivery of mail established in 49 largest cities.

Railroad postal service begins using special mail car.

Postal money order system established to insure transfer of finds.

Telegraph service resumes between America and Europe.

“Big Three” telegraph companies merge in single nationwide multiunit company (Western

Union), first in United States.

Railroad cars standardized.

Automatic electric block signal system introduced in railroads.

Interlocking signal and switching machine, controlled from a central location, installed by

railroad (New York Central).

Telephone demonstrated, patented.

Commercial telephone switchboards and exchanges established, public directories issued.

Refrigerated railroad car introduced to deliver Chicago-dressed meat to Eastern butchers.

Uniform standard time adopted by United States on initiation of American Railway

Association.

Long-distance telephone service begins.

Post Office establishes special delivery service.

Railroad track gauges standardized.

Interstate Commerce Act sets up uniform accounting procedures for railroads, imposes control

by Interstate Commerce Commission.

SOURCE: Reprinted by permission of the publishers from The Confrol Revolution by James R. Beniger, Cambridge, MA:

Harvard University Press. Copyright 1986 by the President and Fellows of Harvard College. All rights reserved.
Chapter 5--Communication and Comparative Advantage in the Business Arena ● 111

to greater coordination of markets and reduced costs,

making trade even more attractive.19

Also critical to the growth of markets was the

development of mass media technologies such as

power-driven, multiple rotary printing and the national postal system. By drawing audiences into

larger and larger communities, these technologies

accelerated the marketing of consumer goods on a

national scale. The increasing use of syndicated

material in newspapers and the advent of nationally

circulated magazines in the late 1800s anticipated

true mass communication.20 Catalogs also became

popular as an advertising medium. In 1887,

Montgomery Ward distributed nationally a 540-

page catalog that offered more than 24,000 items for

sale.21

Despite the development of national markets and

greatly increased trade, specialization and rationalization of production was limited until the late 1800s

by the relatively low speed of transportation and

communication technologies. As both Alfred

Chandler and James Beniger point out, specialization can only take place, and productivity can only

be increased, to the extent that goods can be moved,

processed, and distributed and that the production

process itself can be coordinated.22 It was only with

the development of the railroads in the 1830s and the

telegraph in 184 that the requisite speed and control

in the processes of production and exchange could

be achieved. By increasing the speed of communication and extending the range of possible control, the

railroad, the telegraph, and later the telephone

facilitated the growth of large-scale organizations

with modern management structures, a first step in

the centralization of production and distribution.23

Given the speed of the new technologies, the

growth of the modern corporation was not limited by

national geographic boundaries. Employing communication technologies to coordinate their activities, a number of these new enterprises invested

abroad in what proved to be very successful international ventures.

Although communication technologies affected

all economic relationships, their impact was not

distributed equally nor experienced uniformly. As

Joseph Schumpeter has pointed out, technology

gives rise to economic growth through the process of

“creative destruction."24 Thus, although the economy as a whole prospered as a result of communication and information technologies, some segments

within society found themselves worse off.

For example, one group whose fortunes changed

radically as a result of the vertical integration of

many marketing tasks was the numerous middlemen

who had performed the function of transmitting and

distributing market information and goods. As

Beniger notes, the decade of the 1880s:

. . . saw the wholesalers challenged by new mass

retailers--department and chain stores and mailorder houses—that purchased from manufacturers

directly and thereby integrated still further the

processes of distribution and marketing. Although

the total number of wholesalers continued to grow

into this century, increasing six- to eightfold between 1880 and 1925, their market share began to

decline in the early 1880s. Between 1869 and 1879

the ratio of wholesale to direct sales rose to 2.40 from

2.11, with only $1 billion worth of goods passing

directly from manufacturers to retailers in the latter

year, while some $2.4 billion worth went by way of

wholesalers. After 1889, however, when wholesaling’s predominance had already declined slightly to

2.33, the ratio began to fall evermore sharply: to 2.15

in 1899, to 1.90 in 1909, and to 1.16 by 1929. 25

lg~ld. The ~itive effwt that inc~~ information exchange had on trade was clearly exhibited, fOr ex~ple, with tie devel~ment of the

transatlantic cable in 1866. Before the completion of the Atlantic telegraph, New York financiers were unwilling to trade in Imndon markets, unless prices

were very attractive, because it took 6 weeks to clear prices and have their orders executed there. The completion of the undersea cable radically changed

the situation, bringing about an immediate convergence of prices on both sides of the Atlantic. Kenneth D. Garbade and William L. Silber, ‘Technology.

Communication, and the Performance of Financial Markets 1840-1975,” Journal of Finance, vol. 33, June 1978, pp. 819-832.

zmtire pe~rson, Mag~i~s in the Twentieth Century (Urbana, IL: University of lllinois Press, 1964, 2d d.)-

21 Beniger, op. cit., footnote 11, pp. 18-19.

221bid., p. ~g; ~dAl~ D. ~andler, Jr., The Vi3~leHa~: The Ma~gerialRevolution in A~ricanBusi~ss (Cmbridge, MA: Harvard University

Press, 1977).

zs~ide, ad Ben@r, ~c cit., f~tnote 11. Before the development Of ~ese t~~lOg@ businesses Wem USU~lY ~n by tieir owners who, fOCUSing

on a single line of products, generally operated either a single unit of production or a single unit of distribution. ‘here were only a few salaried managers

who typically worked directly with the owners. Alfred D. Chandler, Jr., “The Evolution of Modern Global Competition,” Michael E Porter (cd.),

Competition in Gbbafhdustries (Boston, MA: Harvard Business School Press, 1986), p. 405.

24J=@ sch~~ter, The Theo~ of E~o~mic Deve~pment, u~slated by R. opie (c~bridge, MA: Hw~d University preSS, 1934).

2S*niger, op. cit., footnote 11, P, 258”
112 ● Critical Connections: Communication for the Future

The new technologies also favored large firms at

the expense of small ones, contributing to the growth

of oligopoly. As the scale of operations also grew,

size served as a barrier to entry because most small

firms lacked the resources needed to function

nationally or regionally. With the development of

national advertising, the small, local retailers, who

had once served their communities with little

competition, found themselves facing a succession

of challengers—department stores, mail-order

firms, and chain stores.26 Compounding the advantages reaped by large firms was the slow, uneven

diffusion of the telephone. Although patented in

1876, it took 12 years for lines to reach Chicago, and

another 17 for a transcontinental service to be

inaugurated. Thus, businesses headquartered in the

northeastern corridor had a considerable advantage

in using the new technology .27

Just as the telegraph, telephone, and broadcast

media have affected economic activities and relationships in the past, so, too, will today’s technological advances have a profound effect on the economy

of the future. To gain a better understanding of what

this impact might be, we need to begin by characterizing the socioeconomic context in which new

technologies are emerging.

Socioeconomic Context: Enhanced Economic

Stakes in Communication and InformationRelated Activities

The impacts of new communication technologies

on economic activity will be due not only to the

inherent nature of the technologies themselves, but

also to the development of two major and interrelated trends: the trend toward a society that is

information- or knowledge-based, and the trend

toward a global economy. Driven in part by technological advances, these trends serve to increase the

economic stakes in how new communication technologies evolve and are deployed; hence, they may

intensify many of the policy issues that relate to their

development. To fully anticipate the impacts of the

new technologies, it is necessary to look more

closely at these two trends.

Trend Toward an Information-or KnowledgeBased Society

Today, the new information technologies provide

numerous ways of enhancing the values of the

economic realm. They can improve efficiency and

increase productivity, thus engendering economic

growth. Information itself is reusable and, unlike

capital resources such as steel or iron, its production

and distribution require very few physical resources.

Not only can information be used to substitute more

efficiently for labor; it can also be used to improve

the overall efficiency of the productive process

itself. And, as productive processes become increasingly complex in advanced industrial societies, the

largest reserve of economic opportunities will be in

organizing and coordinating productive activity

through the process of information-handling.28

Given these characteristics and capabilities, information is likely to become more important as a

resource in the economic realm.

This increasing importance of information to the

economy is evident from the continued growth of the

information sector of the economy, a trend that has

been paralleled in other advanced industrial societies. In fact, it was to highlight this change that terms

such as the “information society” and the “information age” were first employed.29 A recent analysis

estimates that the information sector constitutes 34

percent of the gross national product (GNP), and

accounts for 41.23 percent of the national labor

force .30

The changing economic role of information can

also be seen by examining how information technologies are being used by business and industry.

Businesses are now applying computer technology

to almost all of their activities—from recruiting to

laying off workers; from ordering raw materials to

2bKie]bo~cz, op. cit., footnote 12.

271bid.

28 Jon5cher, op. cit., fOOtnOte 4, PP. 13-35.

29Ffi~ Machlup ~m one of the first t. note thew changes and t. mew~e tie information sector in his pioneering work, now a classic, entitted The

Productwn and Distribution of Knowledge in the United States (Princeton, NJ: Princeton University Press, 1962). Others have followed this tradition.

sOMiCh~l RoWr Ruben and ivl~ Taylor Hu~r, The Knowledge industry in the Unued States.” 1960-1980 (Princeton, NJ: Ptinceton Ut’dvenlty ~ess,

1986). This volume updates the work done by Fritz Machlup. In their breakdown of the information sector of the economy, Rubin and Huber note that,

leaving education aside, the contribution of knowledge-production to the GNP increased from 17.9 percent in 1967 to 24.5 percent in 1980. The

contribution of education, on the other hand, fell from 16.6 percent to 12.0 percent during (he same period, a decline that accounts for the fact that the

overall contribution of knowledge-production remained relatively stable at about one-third of t hc GNP.
Chapter 5---Communication and Comparative Advantage in the Business Arena ● 113 — .

manufacturing products; from analyzing markets to

performing strategic planning; and from inventing

new technologies to designing applications for their

use. The extent of this deployment can be seen

clearly from figure 5-1, which shows the compositional trends in capital spending in terms of the mix

of the work force.31 As the upper half of the figure

illustrates:

From the mid-Sixties through last year (1983),

high-tech spending as a portion of total business

fixed investment almost tripled-rising from about

1290 to roughly a third. Similarly, over the same

period, the employment share of information workers is estimated to have risen around 10 percentage

points to about 5570 of the nonfarm workforce.32

In contrast, from the lower half of the figure one

can see that along with the decline in production

workers, there was a decline in the basic industrial

share of capital spending.

As a portion of total expenditures in plant and

equipment, such outlays dropped to almost 12% in

1983-down almost two and a half times from the

peak share of the late Sixties. 33

To take full advantage of new technologies in all

of these activities, many businesses are finding it

necessary to merge the data-processing, office automation, and telecommunication functions. Executing these functions often requires “large capital

investments, large projects, large and complex

implementation, and extensive user training. ”34 But,

given the convergence of information and communication technologies, these three services can increasingly be provided via one network, allowing for

considerable economies.35

Because these tasks were previously carried out

independently of one another, the organizational

changes required to execute this kind of restructuring can be quite extensive. In the past, for example,

telecommunication services were purchased from

AT&T, which constituted a quasi-public utility.

Now, all sorts of purchasing decisions need to be

made in a multi-vendor environment. And, as

Figure 5-l-Structural Change and the Information

Economy (investment and employment shares)

40 “

35 –‘

30 –‘

25 -

20 –“

15 –“

z

a *

v X2

30 –>

25 -rf

20 -’

1

15 1-

10 L

1960 1964 1968 1972 1976 1980

I

’60

55

6

“ 50

– 45

z

a)

Z

u

E

“ 55

—50

\

\45

\

I -40

1984

NOTE. Shaded areas indicate recessionary periods as designated by the

National Bureau of Economic Research. Dashed lines indicate

Morgan Stanley Economics projections.

SOURCE: Adapted from Information Management Review, vol. 1, No. 1, p.

14, with permission of Aspen Publishers, Inc., Copyright

Summer 1985.

McKenney and McFarlan have pointed out, the

situation is complicated by the fact that vendors

from each of the three sectors are seeking to provide

the overall technological base for all these services.

In view of the fact that information plays a strategic

role in configuring interorganizational relationships,

a number of decisions also have to be made about

where in the organization to locate the management,

and whether or not the operations should be centralized or decentralized. How these questions are

answered may have significant consequences for

business since, as once corporate executive has

noted, in an information economy, “a premium is

31 Mwhad ad Hofi~, Op. Cit., fOOmOte 6) p. 16.

32 Ste@en S. Roach, ‘me Industrialization of the Information ECOnOmy,” testimony at hearings before the House Subcommittee on Economic

Stabilization, June 12, 1984, pp. 6-7, as cited in ibid., pp. 16-17.

3sIbid,

qdJ~es L. McK~y and E. Warren McFarlan, “Information Archipelago--Maps and Bridges,” Harvard Business Review, September-October

1982, p. 111.

Wbid.
114 ● Critical Connections: Communication for the Future

placed on managing information and not just on [its]

automation.” 36

Given the enhanced value of information, many

firms and corporations that have never been involved in information-related activities before are,

for the first time, beginning to see themselves as

potential information-providers. A number of these

companies are now repackaging their transactional

data and computer software for sale. Both American

Airlines and the Travelers Insurance Co., for example, have developed subsidiaries that sell software

and training services to external customers. Through

its subsidiary, Travtec, Travelers also markets a

software package for managing IBM’s system network architecture (SNA) networks.37

In an information-based economy such as this, the

role of communication technologies as a competitive weapon is likely to be greater than ever before.

Information has become a key strategic economic

resource, and communication technologies (as they

have been combined with information-processing

and storage technologies) the most effective means

for taking advantage of it. In this context, businesses

are less apt to be satisfied with simple access to a

public communication network. Increasingly, they

are looking for communication options that allow

them greater management and control over their

information resources.

Trend Toward a Global Economy

A second but interrelated socioeconomic trend

that will influence how new communication technologies will be perceived in, and used by, the

business community is the trend toward a global

economy. Like the trend toward an information

economy, this development is likely to reinforce the

inclination of business leaders to increasingly consider their communication needs in more strategic

terms.

From the U.S. perspective, the beginnings of a

global economy can be traced back to the final

decades of the 19th century and the rise of the large,

multifunctional corporation, a number of which

established branches or subsidiaries abroad. Many

of these firms have continued to be highly successful. Taking advantage of being the first of their kind,

they were able to use their size and complex

corporate structures as effective barriers to entry to

discourage potential, latecoming rivals.38 U.S. multinational firms also had an advantage over their

European counterparts, who were constrained in

their operations by their much smaller domestic

markets and, unlike American companies, were

unaccustomed to competing on the basis of efficiency improvements and cost reductions.39

As European and Japanese economies recovered

from World War 11 and managed to overcome the

U.S. technological lead, however, this pattern of

U.S. economic hegemony shifted significantly, and

American multinationals increasingly found themselves competing intensely with their European and

Japanese counterparts. 40 Japanese corporations,

benefiting from their export-oriented industrial policy, have been particularly successful in their efforts

to establish international connections by investing

and producing abroad.

The proliferation of international economic actors

has been facilitated and fostered by a number of

developments. According to Michael Porter, these

include:

. the growing similarity of countries, both with

respect to tastes as well as to infrastructure,

distribution channels, and marketing approaches;

qGM~h~d md Horton, op. cit., footnote 6, P. 24.

sT’fbm Vdovic, “public and Private Networks: Who Will Manage and Control Them?” Tefecommuw”cations, February 1988, p. 42.

ssChandler, op. cit., footnote 23, pp. 408-409.

sg~id., ~. 433-434. & ~~dler has ~oint~ Out, in E~O~, “the lack of anti~st 1e@Slation meant that rn~ket power was achieved md IIItiWiIWd

in the domestic market far more by contractual cooperation than through function~ and strategic differences. In t.tto,se British industries where a singJe

firm did not dominate, federations of relatively small, uswdly family enterprises, normally in the form of holding companies, maintained agreements

ss to price, output, and marketing territories.” Because of the dominant position of American firms, the term “multinational corporation” originally was,

acamding to Robert Gilpin, “a euphemism for the foreign expansion of American giant oligopolistic corporations.” The strength of the U.S. economic

poaition was reflected by the fact that, in 1981, more than two-fifths of the world’s direct foreign investment was accounted for by the United States,

with the bulk of it being invested in advanced manufacturing, Moreover, foreign investment and the activities of American multinationals were

increasingly critical to the U.S. economy in that, in the early 1970s, a sizable number of American corporations held more than $500 billion of their assets

ad gained more than one-half of their earnings abroad. Robert Gilpin, The Political Economy of lnternarion.d Refations (Princeton, NJ: Princeton

University Press, 1987), p. 238.

‘Ibid., p. 240.
Chapter 5--Communication and Comparative Advantage in the Business Arena ● 115

●

●

●

●

●

●

the emergence of a global capital market as

witnessed by large flows of funds between

countries;

declining tariff barriers and the establishment

of regional trading agreements;

shifting opportunities for competitive advantage due to technology restructuring;

the integrating role of advanced information

and communication technologies;

slow and uneven world economic growth that

has fanned the flames of international competitiveness; and

the emergence of new global competitors,

principally from East Asia.

41 -

Together, these developments have given rise to

a global economy in which patterns of international

trade now primarily reflect patterns of international

production. Specialization takes place on the basis

of parts and specialized components, rather than on

the exchange of finished products as in the past.

Today, for example, Japan provides approximately

40 percent of U.S. component parts in electronics

and automobiles.42 As Jack Behrman has pointed

out, specialization has also taken place:

. . . based on different product characteristics: mass

consumption versus high fashion, or low quality

versus high quality, or generic versus trademarked

goods.43

Whereas in the past most multinational corporations tried to exploit comparative advantage by

producing or selling in a single country, in today’s

global environment they are seeking more the

comparative advantage that can be gained by integrating all their activities on a worldwide basis.44 To

compete globally, firms must allocate all their

activities among a number of countries to gain the

optimum advantage.45 As Michael Porter has said:

In global competition, a country must be viewed

as a platform and not as a place where all of a firm’s

activities are performed.46

Thus, depending on the particular case, it might be

best for a firm to disperse many of its production

facilities—such as design modification, fabrication,

and assembly-to foreign countries, and to focus its

own domestic production on the fabrication of key

components.

47 Or, alternatively, a firm might decide

to manufacture a product domestically, but transfer

abroad such downstream activities as distribution,

sales, marketing, and service.48

Vertically integrating all of these activities, modern multinational corporations generally take the

form of large, international oligopolies.49 And where

corporations are not fully integrated at the global

level, they are often becoming linked to activities in

other countries through alliances and contractual

arrangements such as cross-licensing of technology,

joint ventures, orderly marketing agreements, offshore production of components, secondary sourcing, and crosscutting equity ownership.50

In many cases, these multinational corporations

are aided in their competitive endeavors by the

increasingly protectionist and interventionist policies of their home governments. Whereas in the past

protectionist policies generally were designed to

protect an infant or declining industry, today they are

calculated to enhance or even create a comparative

advantage--especially in high technology, high

value-added industries-by, for example, establishing export subsidies, tax incentives, or credit guarantees. 51 To the extent that governments can alter

41po*r (~.), op. cit., fOOtnOte 239 PP. 2-3.

421bid., p. 255.

dsJack N. Behrman, [ndustrial Policies: International Restructuring and Transnah”onal.! (hxington, MA: kxlngtOn Books, Igw). P. 72.

44porter (~.), op. cit., footnote 23, P 19

4sIbid., p. 23.

Wbid., p. 45.

471bid.

41bid.

49Gilpin, op. Cit., fmmo~ 39, p. 241. & Gl]pin h~ pointed Out, the key factors accounting for the eXpZUKiOn and SUCCeSS of this vertical fo~ of

multinational enterprise are similar to those that led to the domination of the Nation’s economy by large oligopcdistic corporations.

5~oWra& ~centives t.m~e such internation~ ~angements we Vev swong. fiey stem from a number of technological, political, and economic

factors, including: 1) a rapidly changing, high-cost technology that rquires large fms to spread their risks; 2) new economic protective measures,

making joint agreements a requisite for gaining market access; 3) the enormous capital requirements needed to operate globally; and 4) access to new

technology. Ibid.

511bid., p. 216.
116 ● Critical Connections: Communication for the Future

industry advantages, one can no longer speak of

comparative advantage in the classic, economic

sense, which calls for free trade.52 Furthermore,

these competitive policies are self-reinforcing. Because many countries are focusing their industrial

policies in the same high-technology and service

sectors, there tends to be overproduction in these

areas and, hence, increased pressure for protectionist

policies.53 In the light of these developments, it is

understandable why the international system of

industrial production has been characterized as “a

complex web of interlocking relations among nation

states and the world’s giant corporations.”54

In such a highly competitive, global economy,

companies must choose a worldwide strategy if they

are to survive. Just as the railroad, telegraph, and

telephone were essential to the development of the

national corporation in the late 19th century, so, too,

advanced communication technologies and networks will be essential to the modern corporation

that seeks to pursue a global competitive approach.

As the staff vice president for worldwide telecommunications at Unisys Corp., Detroit, has described

it:

Networking on a global scale is now mandatory

for Fortune 100-sized companies. . . We agonized

over buying some expensive circuits in some countries, but we don’t have that issue anymore. It’s too

expensive not to order the stuff.55

Key Business Activities

To examine concrete situations in which new

communication technologies might give rise to

opportunities and constraints, it is necessary to

divide economic activity into a number of subcategories. In selecting these subcategories for analysis,

this chapter borrows heavily from the work of

Michael Porter, who has identified nine generic

“value-generating activities” that all businesses

carry out in the course of their operations.56 Each of

these activities entails the formulation, exchange,

and interpretation of information, and, hence, each

might be significantly affected by the introduction of

new communication technologies. As can be seen

from table 5-1, Porter has divided the nine activities

that he has identified into two groups: primary

activities, which relate directly to the specific work

that a firm does, and support activities, which are

carried out on behalf of all activities.57 For the

purposes of this chapter, we will divide these

activities into those of production and exchange.

Framework for Thinking About the Business

Opportunities Presented by New

Communication Technologies

As we have seen from our historical account,

communication technologies can affect:

● the speed of economic transactions;

. the distance that, within any given timeframe,

economic information can travel; and

. the relationships and interdependencies among

economic actors.

These three mechanisms for change are also

employed by Michael Hammer and Glen E. Mangurian in the framework they have developed for

analyzing how new communication technologies are

expanding the realm of business opportunities.58

In addition to these mechanisms, Hammer and

Mangurian also define three different kinds of value

that might be created by the use of new communication technologies. These values are: 1) improvements m efficiency, 2) effectiveness, and 3) innovation. Changes in efficiency reflect new or modified

means for accomplishing tasks. Such modifications

typically signify alteration in the speed or cost of

operations. Effectiveness measures the fit between

means and ends—how well or how poorly an end or

goal is realized by a particular means. Organiza-

%id., p. 277.

53Be~an, op. cit., fOOtnOte 43> P. 1 1“

540fien focusing ~ ~w involving adv~ced technologies, many of these coprations we ve~ powerful. Their worldwide foreign dti~t investment

in 1981 amounted to approximately one-half a trillion dollars, and the resources that many of them possess far exceed those of most nations. Ibid., p.

260.

5sM~gie Semilof, “Fo~e 1OQ’” ComnutnicationsWeek, CLOSEUP, June 13.1988, PP. C12.

56~~h~l po~er, CoWetitiVe Ad~a~ta8e: Creating ad s~~ining SWerior peflo~nce (New York, NY: The Free Press, 1985), ch. 2.

s71bid., pp. 3943.

58~ch=l H-er ad Glem E M~gll~i~, “me chang~g v~ue of Commticatlons T~hncI]ogy,” Sloan Management Review, VO1. 28, No. 2,

Winter 1987, pp. 65-71.
Chapter 5---Communication and Comparative Advantage in the Business Arena ● 117

Table 5-l-Key Business Activities

Production

●

●

●

●

●

Operations, consisting of all those activities associated with

the compilation of a product or a service, including design,

manufacturing, and assembly.

Service, entailing activities designed to maintain or enhance

product value.

Technology development, entailing the activities involved in

research and development of all of the technological

applications and know-how required by the firm.

Human resource management, entailing all of the activities

required for recruitment, hiring, and training.

Firm infrastructure, entailing all those activities required for

the planning, coordination, and management of a firm.

Exchange

● Inbound Logisfics, entailing the activities involved in receiving, storing, and distributing product inputs.

. Outbound logistics, entailing activities used in gathering,

sorting, and disseminating finished products to buyers.

● Procurement

. Marketing and sales

SOURCE: Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York, NY: The Free Press,

1W5), pp. 39-43.

tional and managerial controls are especially important here. Innovation signifies modified ends.59

Pairing impacts and values, Hammer and Mangurian have developed a matrix for identifying

changes in business activities, as can be seen in

figure 5-2. In the discussion that follows, no attempt

will be made to fill in all of the nine boxes in the

matrix; however, this framework is helpful for

thinking about and classifying the changes in the

economic realm that might be brought about by the

use of new communication technologies.

ANALYSIS OF BUSINESS

ACTIVITIES

Operations

Business operations entail all of the activities that

are associated with the compilation of a product or

a service, including design, manufacturing, and

assembly.

Improvements in the Efficiency of

Business Operations

Computer-based communication can yield more

efficient business operations by reducing interaction

time in the exchange of information between persons, between persons and machines, and between

machines. In manufacturing, for instance, the introduction of computer links between machines speeds

up production and assembly.60 In service firms, such

as insurance companies and banks, communication

systems increase the efficiency of transaction processing.61 A well-known example from banking is the

reduction of time required to process letters of credit

using computerized files accessible from workstations in several departments. In retailing, the use of

machine-readable product codes and automatic

scanners in supermarkets yields increased efficiency

in store operations. Checkout time, inventory control, and accounting operations can all be improved

by linking the cashiers’ stations to the store’s

computer and automatically capturing sales information at checkout.62

With enhanced speed, the time required to communicate across geographic distance is greatly

reduced, which allows businesses to integrate and

coordinate activities distributed in space and create

additional efficiencies. In the case of automobile

5~o identify ~1 new bu~ine~~ ~pw~unltles, it is necessq t. employ the values of effectiveness and innovation, in addition to efficiency. AS Parker

and Benson have noted, traditional cost-benetil analysis is no longer adequate for most information systems’ applications that are innovative or that

produce or enhance revenue. Rather, to fully assess new business opportunities, one needs to take into account a diverse range of values such as

nonfinancial returns on investment, the establishment of a strategic match, greater competitive advantage, improved information management, a better

competitive response, and a more strategic reformation systems’ architecture. Marilyn M. Parker and Robert J. Benson, “Information Economics: An

Introduction,” Datamation, Dec. 1, 1987, pp. 86-87. All of these aspects of value can be subsumed under Hammer and Mangurian’s three terms.

~or example, if several machine tools are linked to the same mini- or micro-computer, a sequence of machine operations can be executed

automatically. When one machine completes an operation, a signal IS sent to the control computer, which then initiates the next machine operation m

the sequence. In this fashion, overall processing time can be significantly decreased. Such intermachme communication is being facilitated by the

deployment of the communication standard known as Manufacturing Automation Protocol (MAP). Barnaby Feder, “How the System Works at a GM

Plant,” The New York Times, June 15, 1988, p. D8. For a discussion of technology and business operations, see Abbe Mowshowitz, “Communication

and Comp~ative Advantage in the Business Arena: Operations and Technological Developments,” OTA contractor report, July 1988.

61 Keen, Op, cit., fmmoted,Pp,49,51, For cx~p]e, an application for automobile or life insurance can be processed b entering client data at a remote

terminal linked 10 the company’s computer system. The information on the application ~an then be transmitted electronically to the underwriting

department. After processing--determining risks, computing premiums, etc.--a completed policy document can be produced on the computer by entering

the appropriate parameters in a file contaimng the basic policy form, and then directing the completed form to a printer.

62Judi~ Graham, “BW Codes Becoming Universal,” Advertising Age, Apr. 18, 19~8, p ~fi.
118 . Critical Connections: Communication for the Future

Figure 5-2--impact/Value Framework

Impact Value

Efficiency Effectiveness Innovation

I Accelerate I Reduce I Create I

Time I business I information I service I

I process I float I excellence I

Recapture Ensure global Penetrate

Geography management new scale control markets

Bypass Replicate Build

Relationships scarce intermediaries umbilical

knowledge cords

SOURCE: Reprinted from “The Changing Value of Communications

Technology,” by Michael Hammer and Glenn E. Mangurian,

S/oan Management Review, vol. 28, No. 2, Winter 1987, p. 66,

by permission of the publisher. Copyright 1987 by the Sloan

Management Review Association. All rights reserved.

manufacturing, for example, transportation and

computer-based communication technologies have

allowed companies such as General Motors to

produce components in different regions of the

United States and in other parts of the world and

assemble them in a variety of locations. By distributing these operations, manufacturers have been able

to take advantage of the special conditions in

different regions, such as lower wage rates, cheaper

material prices, less expensive power, and more

liberal financing, etc., and thus reduce their production costs. Communication technologies, moreover,

provide the links between central management and

the various field units.63 In addition, data communication facilities allow for real-time movement of

information to and from computers, which is required to determine optimal, or near optimal, production schedules, resource allocation schemes,

etc. 64

The changed relationships brought about by the

deployment of new communication technology have

also resulted in greater efficiencies. This is evident

in information systems where virtually all transaction processing begins with data entry. Since this

function is usually dependent on human operators, it

tends to be slow and error-prone. The efficiency of

data entry can be improved by bringing the data

closer to the database, as the power utilities are

trying to do by equipping meter readers with

hand-held computers. These instruments store the

readings gathered in the course of a day’s rounds.

Periodically plugging the portable device into the

telephone network through a modem, the meter

reader transmits the data to the company’s computer

system for processing. This procedure eliminates a

whole link in the data-processing chain. In bypassing the data-entry clerk, the time between reading

and billing is reduced, and the opportunity for

recording erroneous information is diminished.65

Improvements in the Effectiveness of

Business Operations

The increased speed of communication can contribute to increased effectiveness by facilitating

timely control, either periodically or on a real-time

basis. Rapid information transfer figures prominently in the drive to improve effectiveness in

manufacturing companies, for example. One such

system is a network of machines in a factory. Instead

of having to physically oversee operations on the

shop floor, the foreman can get regular status reports

from a computer in his office, as can the factory

manager. Such reports might include, for example,

an inventory of production volume for the whole

factory, a list of equipment problems, or information

on the work force.66

A more advanced application of computer-based

communication technology would involve a factory

cell designed to produce all parts to specification.

Such a scheme is feasible when the machines in the

cell are networked together and controlled by a

computer, With continual machine reports on operations, the computer can determine, for example,

whether a tool must be changed or some adjustment

63~ incre=~g ~-r offim5 we using VeV Sma]] Apert~e Terminal (VSAT) technology to provide these links. These firms include J.C

and Prudential Bache. David Meyer, “Pru-Bache Invests in VSATS,” CormnunicacionsWeeL Feb. 8, 1988, p. 1.

~~ tie ~wice ~tor, comrn~ication technology is more closely associated with the end-product. Brokerage f~s such as Merrill Lynch

Prudential Bache buy and sell securities for millions of customers all over the United States and throughout the world. These customers are ser

sales persomel in geographically dispersed offices. In banking, the automated-teller machme makes it possible for the retail banks to offer their

in a variety of locations and settings, some of which are not traditionally bank sites at all. For a discussion of the communication needs of f

institutions, w Deborah G. Turney, “Financial Institution Communication Systems,” OTA contractor report, December 1986.

65~@ew L. w~d, “E]tiinating the Meter Reader,” The New York Times, May 4, 1988, p, D7, The banking industry ako ex~plifk’ eff

gains due to restructured relationships. For example, the automated-teller machine alters the relationship between the customer and the bank. T

result is that the customer performs some of the tasks that used to be done by bank employees.

%ese systems are commonly called Executive Information Systems (EIS). Mary dee Ojala, “Wiring the Top Execs,” Online Ac

January/February 1988, pp. 3740.
Chapter 5--Communication and Comparative Advantage in the Business Arena ● 119

made before the given machine begins to turn out

defective parts. Comparable network applications

occur in all types of business.67

Effectiveness is also enhanced as a result of the

greater control that technologies afford in directing

and coordinating geographically dispersed activities

and objects. In the pharmaceutical and chemical

industries, for instance, companies have to coordinate the movement of an enormous variety of raw

materials and end-products with hundreds of different classifications, as well as different packaging,

stability, distribution mechanisms, and production

constraints. Managing this geographically distributed body of information requires an information

system with terminals or workstations linked by data

transmission lines to databases in one or more

computers.68

The ability to network communication among

disparate locations also provides businesses with

greater flexibility and, in so doing, improves their

effectiveness. Because computer-based communication can monitor operations on a real-time basis,

management can respond immediately to changes in

demand and issue orders to one or more manufacturing plants to reduce or increase output accordingly.

Moreover, because programmable machine tools

can rapidly be redirected to machine cams, for

example, instead of gears, new communication

technologies permit manufacturers to tailor highly

differentiated products to customer specifications.69

Altered relationships brought about by technology can also contribute to effectiveness. An important manufacturing example relates to the linkage

between product design and engineering. To the

dismay of many engineers and managers, the traditional separation of these two functions has often

created a mismatch between product specifications

and manufacturing processes. With the introduction

of computer-aided design and computer-aided manufacturing, these two departments can be joined by

setting up a networked database containing part

specifications that is accessible to both design and

engineering departments. Such an arrangement

would improve effectiveness by eliminating intermediate operations, thereby facilitating a tighter

coupling of means and ends.70

Innovative Business Operations

In addition to stimulating improvements in efficiency and effectiveness, the speed of computerbased communication makes it possible to do things

that would otherwise be impossible. The distinctive

features of the new communication technology in

this regard are memory and processing power.

The financial services industry, for example,

abounds with new products that are dependent on

rapid computer-based communication. Retail banks

offer electronic checkbooks to ordinary clients;

merchant banks offer somewhat more sophisticated

instruments to wealthy individuals and corporate

customers. But all of these new products—portfolio,

cash, and treasury management systems, as well as

electronic checkbooks—require real-time access to

market information.

71 An entirely new business that

is being brought into existence by computercommunication is that of online vendors, such as

Lockheed Data Systems, System Development

Corp. (SDC), and Mead Data Central, who provide

bibliographic, financial, legal, and many other types

of data to a variety of business and government

clients .72

In addition to speed, the distributive capabilities

of the new communication technologies give rise to

new opportunities for innovation. One such innovative product is a financial-industry offering called

treasury management systems. These are designed

to assist corporations in managing assets and liabilities—such as cash, notes, bonds, and debts—in

various currencies throughout the world. Workstations and software are supplied by the bank. The

corporate client can obtain account information and

a variety of other data, such as currency exchange

rates, from the workstation that is connected to the

6TG~s in ~S mea can ~ ~~nSiderable, In tie United SmteS, for ex~ple, one. foufi Of ~1 manufacturing costs goes into maintaining quality. The

costs tend to be high because product defects are generally only detected at quality-control stations at the end of the assembly line. Manfred Kochen,

“Advanced Information Technology and Small Manufacturers,” Science, April/May 1986 p. 26.

@Semilof, op. cit., fOOmOte 55, pp. C12-C13.

@Ibid.

TOJohn WOW, “Enginetxing Without Paper,” High Technology, March 1986, pp. 38-46.

71Kmn, op. cit., footnote 6> P. 45.

T2sW pekr w. Huber, T~ GeodeJic Ne~ork. 19g7 Report on Competition in the Telephone Industry, Antitrust Division, U.S. DeP~ment of ‘Ustice

(Washington, DC: U.S. Government Printing Office, January 1987), ch. 7.
120 ● Critical Connections: Communication for the Future

bank’s computer. Apart from providing “electronic

checkbook” services, treasury management systems

offer decision support on the choice of investment

vehicles.

Restructured relations can also affect innovation.

New shipping services, for example, involve installing computer terminals in customers’ offices.

Through these terminals, shippers can communicate

with a shipping company’s computer, both to initiate

transactions and obtain information about shipments. This direct connection between shippers and

shipping companies reduces dependence on intermediaries such as freight forwarders and customs

boarders. 73 The cash management and treasury

management systems offered by banks also allow

customers direct access to banking computers.

These new offerings exemplify the substitution of

products for traditional services.

Service

Providing after-sale service includes activities

that enhance the value of one’s product, such as

installation, repair, training, parts supply, and product adjustment.74

Efficiencies in the Provision of Service

With rapid computer-based communication, producers can now design systems that speed and

facilitate service. Some systems provide instructions

for repair and service; others repair problems as they

arise. Many new photocopying machines, for example, display a coded message indicating a problem

and what it entails. Some products even have

instructions for repair embedded in them. Machines

can also be linked to fault-analysis computers

operated by producers. In this fashion, one heavymachine manufacturer has designed its system so

that when a customer’s machine fails, it automatically sends a signal to the manufacturer and diagnostic information is returned immediately. Meanwhile,

spare parts are dispatched and the firm’s field service

unit is alerted.75 In some cases, repairs can be made

online, as in an automated factory.76

More Effective Service Provision

By improving customer service, these gains in

efficiency also give rise to greater effectiveness.

Using a computer-based communication network,

Mercedes Benz, for example, not only provides car

owners with a toll-free 800 number to call for

service; it also helps the driver to find a service

provider, no matter where in the United States the

driver might be. Mobile telephone and paging

services also improve service delivery by linking

repair personnel to their offices while they are on the

road. 77 With continual access, they can easily learn

about schedule changes and hear directly from

clients. Improvements of this kind make firms more

competitive.

Innovations in Customer Service

By allowing producers to maintain records that

are more accessible and detailed, computer-based

communication technologies give manufacturers a

chance to create new service products. For instance,

one pharmacy uses its database to analyze the

combination of drugs sold to individuals to discover

whether they might create dangerous synergisms.78

Service providers can also provide ancillary services

based on the data they collect about buyer purchases.

For example, one national drug company offered

their pharmacy customers detailed analyses of their

sales, including the profitability and turnover ratios

of different items, based on their orders over a period

of time.79 The company also offered to print price

labels for pharmacies. Bar-code scanners allow

retailers to sell producers special “maintenance”

services, detailing information about buyers’ purchasing habits.

Technology Development

Technology development is a support function

within the firm. It consists of all of the activities that

73~e trucking fm, pm Nationwide, [nC., updates its customers’ computer three times a day, giving the location of each shipment and listing anY

problems. David Wessel, “Computer Finds a Role in Buying and Selling, Reshaping Business,” The Wall Street Journal, Mar. 18, 1987, pp. 1, 10.

yApo~r, op. cit., footnote 56, P. 40.

TSK~n, op. cit., footnote 6, p. 54.

T6Cmh et ~., Op, Cit,, foo~ote 6, p, 52; see also Clemens and McFarlan, oP. ci~., f~~ote 6J P’ 95-

77sW Alan A. Reiter, “New Pagers Put a Mailbox in Your Pocket,” High Technology Business, Aptil 1988, P. 32.

78Dav1d Stipp, “Scientl~t~ use Medic~.Record Data Bases t. Det~~t Adverse Side Effe~~ of Dregs,” The Wa//,$tree/Jour@ Mar. 24, 1988, p. 33.

7gKWn, ~pc ~lt., fw~ote 6, p. 47. A major dls~ibutor of magaines to newsstands and stores u~ its sales r~ords to produce sales aIlalySt?s fOr ltS

small, unsophisticated customers about their absolute and relative standings. Cash et al., op. cm. footnote 6, p. 46.
Chapter 5-Communication and Comparative Advantage in the Business Arena ● 121

are associated with research and development with

respect to all technological applications and specialized knowledge required by the firm.

Efficiency Improvement in

Technology Development

The increased speed of transmission and processing contributes greatly to efficiencies in technology

development. For example, online retrieval systems,

such as those offered by Lockheed and SDC, greatly

facilitate and reduce the costs of tracking developments in any given subject area. Electronic mail and

computer-conferencing are also important in maintaining research networks. Not only does electronic

mail have the virtue of speed, like the telephone; it

also frees parties from having to be simultaneously

connected to a common communication channel.

Such informal exchanges keep those in the network

abreast of latest developments long before the

appearance of formal publications and presentations. Computer-conferencing couples the messagehandling capabilities of electronic mail with the

file-management facilities of a computer system,

enabling groups of researchers to participate in

seminars that have neither a fixed schedule nor a

fixed location.

By overcoming geographic restrictions, new communication technologies allow businesses to take

advantage of the economies of global technology

development. Efficiency gains are particularly evident in two areas: intelligence gathering and professional networking. One way of carrying out these

two activities is to set up and maintain listening

posts to monitor R&D centers throughout the world.

One example is the program setup by the Advanced

Products Manufacturing Engineering Systems group

(APMES) at General Motors’ Technical Center in

Warren, MI. Designed to systematically follow all

technological developments related to automobile

manufacturing, listening posts that report back to

headquarters regularly have been established in

most major R&D centers.

Changed relationships also create new efficiencies in technology development. High-speed data

transfer between computer systems eliminates the

need for human intermediaries to transmit information. This improves efficiency in joint projects that

involve more than one research center, as well as in

projects consisting of a sequence of tasks that share

the same database. In the first case, efficiencies

would result from the timely exchange of data; in the

latter case, from better coordination.

Enhancements in Effective

Technology Development

Enhanced effectiveness associated with time

compression is most evident in the area of R&D

management. By making it possible to monitor

activities on a real-time basis, computer networks

allow managers to track the progress of various

teams and subgroups in a large project. By using the

technology to implement a matrix system of organization, management can use all of the organization’s

resources to their best advantage. This ability is

especially useful for technology development because of the difficulty in anticipating and concentrating all of the expertise required for a complex

research project.

More effective technological development can

also be brought about through changed relationships. In some companies, research data are now

being integrated into other corporate information

systems, allowing for their more effective use

throughout an entire organization. For example, the

integration of systems at the Marion Laboratories

Inc. allows the R&D department to send the formula

for a new drug, along with the engineering process

control data, directly to the manufacturing department. This same information is sent to the sales and

marketing department where it is used to help create

educational materials for physicians to use when

testing the drug.80 Similarly, the R&D department at

a Detroit auto-parts manufacturer has developed a

computerized performance program that allows the

department to evaluate bearings and transmit specifications to their automotive customers via the

corporate mainframe.81

Human Resource Management

Human resource management entails all of those

activities required for recruitment, hiring, and training of company personnel.

80Davld Smps, $$~ Semch of SverH: Liking R&D to Covrate IS,” Durumation. July 1, 1988, p. 71. For a discussion of o~~ication

technology and technology development, see Mowshowitz, op. cit., footnote 60.

8’Ibid.
122 ● Critical Connections: Communication for the Future

Efficiencies in Human Resource Management

One way to reduce the cost of training is to reduce

the travel time and costs necessary to aggregate

trainers and trainees in a single geographic location.

Transmission media allow for this by linking dispersed trainers and trainees via satellite and wire

lines. Live presentations can be communicated to

trainees who can ask the trainer questions via voice

links. Interactive training sessions may take the form

of teleconferences or video conferences especially

tailored for a single company or to address a narrow

issue. 82 Hewlett-Packard was one of the first to

design such a program in 1983, installing satellite

receivers at 50 field offices.83 By the end of 1987,

about 40 companies had followed suit, setting up

private video networks linking more than 6,000

sites. In addition, a number of companies joined

together to establish one entity, the National Technical University (NTU), which offers regularly scheduled videoconferencing courses.84 The costs of

videoconferencing are declining, due to new compression and slow scan video technologies that allow

pictures to be sent over a handful of telephone

lines.85

Effectiveness in Human Resource Management

While communication networks can bridge geographic distances between trainers and trainees, the

use of new storage media, given their portability, is

often more effective. Like books, stored media can

be consulted at the convenience of trainees, at their

workplace or even at home. Moreover, difficult

portions of the material can be repeated, with

trainees working at their own pace. Videotapes are

also being used to tape the actions of trainees so their

behavior can be observed and critiqued. Trial

lawyers, athletes, salespeople, and managers are

among those who have found such devices beneficial.

The interactive capabilities of computers also

enhance training effectiveness. Computer simulations, for example, allow trainees to interact with

others on two levels—indirectly through the computer program, and directly as part of the simulation.86 Using computer-based training, the Department of Defense has been particularly pleased with

how it has helped teams of tanks to work together in

maneuvers.

87 Other evidence suggests that when

course-work is well designed, incorporating simulation and expert analysis or supervision, computerbased training can raise the productivity of training

significantly .88

Interactive video/CD-ROM has also proved to be

an excellent training device. Its high visual quality,

features such as touch-screens, and ability to simulate actual equipment and situations and focus on

individual learning problems make this technology

particularly engaging. 89 As the cost of producing

interactive video software declines, videodisks are

become more competitive with videotapes.

Firm Infrastructure

The infrastructure of a firm entails all of those

activities required for planning, coordination, and

management.

Enhanced Efficiency and Effectiveness in

Maintaining the Firm’s Infrastructure

Just as computer-based communication can make

business operations more efficient and effective,

they can also be employed to plan, coordinate, and

gzHerb Brody, “Business TV Becomes Big Business, ” High Technology Business, May 1988, pp. 26-30; U.S. Congress, Office of Technology

Assessment, Technology and the American Economic Transition Choices for the Future. OTA-TET-283 (Washington, DC: U.S. Government Printing

Office, May 1988), p. 251; and B. Zimmer, “A Practical Guide to Video Con ferencing,” Training and Development Journal, May 1988, p. 84.

ggBrody, op. cit. footnote 82, p. 26.

84He~qu~ered ~ Fofi Colllns, CO, NTU now coordinates more than 450 courses offered by faCUhy frOm mOre tian 24 PtiiciPating universities!

to students at more than 40 companies (in more than 60 sites equipped with satellite dish receivers) as part of a Master’s degree program. NTU fills two

channels (on a Ku-band satellite) 24 hours a day with both live and taped courses, Other business-TV networks that provide training services to multiple

companies include Automotive Satellite Television Network, Food Business Network, and Hospital Satellite Network. Ibid.

85su=n Dilll@m, “Vid~conferencing May Get I-XXS Costly,” tnsighr on th~’ N~~s, May 9, 1988> P. 47.

~Shlomo Maital and Kim Morgan, “Playing at Management,” Across the Board, ApriI 1988, pp. 54-62.

STIbid.; w alSO Office of Technology Assessment, op. cit., fOO~Ote 82, P. 59.

88~other fom Of ~ompu ter-based trfilng, called embedded instmction, involves (,he design of microchips within machines SO that workers Cart be

automatically instructed about how the machines should be used and repaired, Office of Technology Assessment, op. cit., footnote 82, p. 246; see also

U.S. Congress, Office of Technology Assessment, Technology and Structural Unemployment: Reemploying Dispiaced Adults, OTA-ITE-250

(Sprin@leld, VA: Nationat Technical Information Service, February 1986), p. 292

891bid., Techm~fl a~structura/ ~newfoymenr, p. 2$)8, The capability of interactive feedback not only permits Uainees tO nlininllze repetltlOn and

to repeat difficult materials at their own pace; it also means that trainee programs can be custom-tailored to each trainee’s progress.
Chapter 5---Communication and Comparative Advantage in the Business Arena 123

manage the affairs of the entire firm, no matter how

dispersed the operations are or where they are

carried out. The OTIS elevator company, for example, which was previously comprised of 100 local

offices, now employs a computer-based communication network to centrally coordinate the activities

of its repair force. When clients call, they report their

problem to a highly trained and perhaps multilingual

operator, who records the information in a computer

and dispatches repair personnel via a telephone/

beeper system. When the repair is made, the

information is again stored in the computer so that

senior management can track repair efforts and deal

with special problems, perhaps requiring specialists,

as they arise. Moreover, the recorded fault data,

which are also immediately available to the company’s engineers and designers, can be analyzed by

management to see if there are any recurring

problems that might require more general corrective

action. With a system such as this, problems can be

dealt with much more expeditiously than previously

when up to five levels of management stood between

the problem and the solution.90

Similarly, a major hospital center in Boston uses

a relational database to carry out day-to-day management, to perform retrospective analysis, and to

plan for the future.9l This database keeps track of the

“products” the hospital provides (such as a particular

kind of operation), as well as the hospital resources

that will be required to provide them. Using this

product/resource list for annual planning purposes,

the hospital will multiply each set of resources by the

number of patients expected in each category. The

hospital can also keep track of the use of resources—

in terms of resource category, department, product,

or physician-on a day-to-day basis, as patients are

cared for. Moreover, the hospital can improve its

budget planning process by making detailed comparisons of past budgets.92

Inbound Logistics

In the past, businesses that did not want to risk

running out of particular materials or products were

forced to stockpile large quantities of inventory,

which not only tied up their money but also

increased their physical storage costs. Today, they

use computers to store inventory data and optical

scanners and other input devices to instantly adjust

inventory levels, significantly reducing their costs.

Even more significant may be the ability of suppliers

and customers to share such inventory data in a

common database. For when suppliers have access

to customers’ inventory levels, they can institute

just-in-time purchasing.93

Outbound Logistics

By employing new communication technologies

to help provide delivery service of both tangible

goods and less tangible information products and

services, producers and retailers can expand their

markets. The greatest difficulty in coordinating

delivery is the task of handling the data of multiple

buyers and sellers, and developing the most efficient

schedules to accommodate multiple needs. These

tasks can be easily handled with standardized forms

and computer-based communication, as overnight

delivery services, such as Federal Express and

United Parcel Service, have clearly demonstrated. A

less centralized form of online coordination is being

used by truckers in France who consult a special

Minitel “deliveries needed” database when they

have extra space in their trucks.

Where the cost of home delivery is inherently

expensive due to low population densities or poor

traffic conditions, another delivery alternative might

be to use network arrangements to set up central

pick-up locations, much as banks have done with

automated-teller machines. “Enhanced private post

offices” such as these already exist.

The delivery of information products and services

can be made still more efficient by using new

communication technologies that provide video

entertainment to the home for a fee. Moreover, with

optical fibers, video entertainment could be delivered on demand in the form of what might be best

described as a video jukebox.

~Joh F. Rock~ “me Line T~es the Leadership--IS Management in a Wired Soc)ety.” Noun Management Review, Summer 1988. P. 58.

91~1do

Wbid.

~ Ric~d J. Schonbrger and J~es P, Gil~r, “Just-in-Time Purchasing: A Challenge for U.S. Industry,” California Management Review, vol. 26,

1983, PP. 54-68.
124 ● Critical Connections: Communication for the Future

Procurement

Efficiency

The new communication technologies are permitting firms to improve the efficiency and effectiveness of their procurement processes. Already, many

firms are using electronic data interexchange (EDI)

networks to place orders, and thus avoid the time and

trouble of filling out procurement forms.94 In fact,

some firms even refuse to purchase from suppliers

who are not equipped with EDI.95

Firms are also using electronic networks to do

better and more economic comparative shopping.

Using electronic market networks to connect with a

number of sellers, businesses can, first, eliminate

those suppliers whose products are clearly inappropriate, and second, compare the rest of the offerings

quickly and economically.96 For this purpose, some

firms insist on having access to their suppliers’

inventory records and prices.

Procurement might eventually even be automated. As James Cash has pointed out, the combination of computers and standard communication

protocols facilitates comparison shopping, and hastens the day when manufacturers will use their

computers to scan suppliers’ computers and automatically place orders for the best deals.97

The opportunities for efficiency gains in procurement are especially great when firms are purchasing

information services. The use of electronic networks

to share databases greatly reduces information costs.

Law firms that need immediate access to a wide

range of judicial decisions can now secure this

information by subscribing to Lexis or Westlaw at a

fraction of the cost of stocking a firm law library.

And high-speed, high-capacity data links make it

possible for firms to have data processing services

conducted off-site by firms such as Electronic Data

Systems. In this fashion, geographically dispersed

firms can share the benefits of a supercomputer for

their processing needs. In addition, with access to

long-distance suppliers, firms can now treat quality

and expertise as more important selection criteria

than geographic location.

Marketing and Sales

Efficiency

Rapid, computer-based communication allows

for increased efficiencies in both marketing and

sales. And, with reduced costs, producers and

retailers are able to carry out their operations much

more effectively than ever before.

Given cost constraints, for example, producers

and retailers try to limit their advertising audiences

to those who, on the basis of some preestablished set

of characteristics, would be the most susceptible to

it. Identifying the appropriate audience requires

market research analysis about past buying habits

and consumer tastes. The better the data, the more

cost-effective the advertisement. Improved storage

and reprocessing capabilities make it economical to

collect more of these market research data and to

combine them with other data for quick and effective

analysis.

Manufacturers can also target their advertising

using narrowcasting cable systems. For example,

advertisers can now reach young people through

MTV, the highly educated through Cable News

Network, or the sports-minded through the Entertainment Sports Programming Network.98 And, for

advertisers who lament the days of fewer but larger

audiences, there is the option of making a single call

to make a cross-buy—that is, to place a single

message on multiple channels to reach all audiences.

99

As the penetration of personal computers and

modems increases, there will be another way to

distribute advertising. Already messages can be sent

via electronic mail, but new videotex systems offer

opportunities that are much more novel. The Prodigy

system introduced by Trintex is an example. Advertisements are included within other messages along

the lines of a newspaper ad, but with a number of key

gdWillieS&a~,’’ED1: ~tting~eMuscle in commerce and Industry, ’’D@zmution, Mar !5, 1988, pp. 56-64. See ZLW Michel Ball, “EDI Takes Root.”

Compurerworld, Sept. 7, 1988, pp. 23-26; Paul Korzeniowski, “User Push Is on for Lnternailonal EDI,” CorrvnunicatlonsWeek, Jan. 9, 1989, pp. 1, 40;

and Mitch Betts, “Lawyers Fret Risks Over EDI Growth,” Computerworld, Jan. 16, 1989, p 17

gs~ld.

WWesgel, op. cit., fOOtnOte 73, pp. 1, 10.

9TD~iel Bell, “ne World and the United States in 2013,” Daetilus, vol. 116, No. 3, summer 1987, P. 12.

g8Joa~eLi~a,“Fo~H Cab]e Networks Form Alliance to offer A&e~ising Time ]n package,” The Wa//S~eetJour~/, Feb. 19, 1987, p. 12.

991bid.
Chapter 5---Communication and Comparative Advantage in the Business Arena ● 125

differences. First, the ads are presented as “ticklers”

that viewers may ignore or pursue further by request.

Second, the ads can be stored so that they are only

offered to viewers whose personal profiles meet the

target requested by the advertiser. Third, the advertiser can be charged based on the number of viewers

that actually choose to see the ad.

New communication technologies are also reducing the cost and effort required to produce advertising. Desktop publishing equipment permits manufacturers to create and send printed materials more

easily and less expensively. Even more savings can

be obtained using automatic-dialer, recordedmessage-player machines.

In addition to generating savings in marketing,

new technologies also give rise to more costeffective sales. Computer-based communication

permits simple orders to be taken by automated

systems 24 hours a day, and more complex orders to

be placed and processed more quickly and efficiently. Simple orders, for instance, can be taken by

basic audiotext systems that employ branching

programs to query customers and, on that basis,

create individualized orders. More complex orders,

entailing large amounts of data and difficult forms,

can be handled using computerized, standardized

purchase orders sent via dedicated EDI lines.

Effectiveness

Some commercial information that changes rapidly—such as financial data or information regarding the availability of items in limited supply—is

extremely time-sensitive. Moreover, making purchasing choices on the basis of such information

often requires simultaneous comparison of data. To

deal with such situations, networking technologies

are proving very successful because they can be used

to create virtual markets.l00 These networks are

being established in a number of different ways. In

some cases, sellers, such as airlines, are creating

their own systems and offering buyers access to their

databases. lO1 In others, independent third parties are

establishing network markets to connect multiple

buyers and sellers. Comp-U-Card, for example,

connects more than 500 manufacturers, wholesalers,

and retailers on one computer database for home

shopping. 102

Manufacturers and retailers are also using transmission and storage technologies to extend the

geographic reach of their markets. The increasing

number of video transmission channels< able,

multichannel multipoint distribution service

(MMDS) [also called wireless cable], and lowpower television (LPTV)--permits sellers to let

buyers browse through products on live or taped

home-shopping television programs. However, because these media are not interactive, this form of

teleshopping is limited in how responsive it can be

to buyers’ specific needs. By far, the most effective

technologies for storing and accessing large quantities of commercial information are compact disks,

floppy disks, video cassettes, and even digital paper.

These storage media permit tens of thousands of

pages/frames of information to be distributed to

consumers, and trends suggest that storage levels

will significantly increase over time. With the

penetration of VCRs to 53.8 percent of U.S. households, sellers are encouraged to produce full-motion

video catalogs or videologs of their products.

Although even more advanced storage media are

now available, the hardware required for their use is

too costly for consumers. One way of decreasing

display costs is by information-sharing via an

electronic network.

Changed relationships can also lead to improved

marketing and sales effectiveness. By offering

buyers hardware and software that facilitate electronic data interexchange, the seller can cement his

relationship with the buyer because he makes it more

expensive for the buyer to switch to other suppliers.

103 Some sellers have gone one step further,

helping buyers to determine what orders to place,

given their past ordering record and general industry

sales. The McKesson drug company, for example,

uses such a system to encourage the sale of its drugs

to pharmacies.l04

loORo~fi I. Benjamin, Thomas W. Malone, and JoAme y~tes, “Electronic Market\ and Electronic Hierarchies,” Sloan School of Management

Working Paper, #1770-86, April 1986.

lol~ fact, ~rlines we now joining toge~er to share the costs and to facilitate buyers’ access. Helen Wheeler, “New Savvy in the skies,” Wh

Technology, November 1987, p, 36.

102Russel] Mitchell, “HOW Comp-U-@d Hooks Home Shoppers,” Business Week, May 18, 1987, P. 73.

103scha~, op. cit., footnote 94, PP. 56-@.

104c*~ J7]m@o~c piwllne ~at’S Changing tie Way That Am~rica D~s Business,” l)~iness week, Aug. q, 1987, p. 80.
126 ● Critical Connections: Communication for the Future

Innovation

The widespread use of storage and reprocessing

technologies in business is creating new sources of

marketing data for advertisers. Many businesses

initially adopted computers to improve the speed

and accuracy of billing as well as coordination.

However, given the decline in information-storage

costs and the growing value of transactional data,

many of these businesses now recognize the market

value of their records.105 Most travel agents, hospitals, banks, universities, insurance companies, and

cable television systems, among others, record their

marketing data for their own purposes or to sell to

others. The development and widespread use of

optical scanning technologies by retailers will undoubtedly stimulate this trend.l06 Also, singlesource research firms are now monitoring the TV

shows people watch, where they shop, the coupons

they use, the brands they buy, and even the

newspapers they read.l07

IMPACTS ON ECONOMIC

PLAYERS

The deployment of new communication technologies in the past has given rise to uneven effects.

Similarly, the uses of communication technologies,

as described in this chapter, will entail losses for

some and create benefits for others. Commenting on

the differential impacts of new technologies with

respect to competition among firms, Michael Porter

has noted, for example:

[Technology] is also the greatest equalizer, eroding the competitive advantage of even well entrenched firms and propelling others to the forefront.

Many of today’s great firms grew out of technological changes that they were able to exploit. Of all the

things that change the rules of competition, technological change is among the most prominent.108

To determine the structural impacts of new

communication technologies and how their costs

and benefits might be distributed within the economic realm, it is necessary to identify the players

involved in economic activities and describe the

basis on which they are they related to, or dependent

on, one another. As before, production activities will

be treated separately from exchange activities to

reflect differences in players, the environments in

which they operate, their roles, and their motivations.

Players and Role Relationships in

Production Activities

Production entails the acquisition, coordination,

and use of labor, capital, and technology to create

goods or services. The ways in which people have

organized to carry out these activities, and the

socioeconomic or philosophical principles that have

served to legitimate particular kinds of work relationships, have varied considerably over time and in

different historical and cultural circumstances.l09 In

preindustrial societies production was carried out,

for the most part, within the family system.l10 With

industrialization and the expansion of markets, the

tasks that comprised the production process became

highly differentiated and specialized, requiring that

bureaucratic organizations, in the form of corporations, be established to integrate them.lll

Because most business organizations are formalized and relatively structured, their members’ roles

and relationships are reasonably well defined. Using

the schema developed by Henry Mintzberg, as

depicted in the shaded area in figure 5-3, we can

identify five major players involved in the internal,

productive activities of a corporation. They are the:

1. chief executive officer, who assumes the

position at the top of the hierarchy of authority;

2. operators, who are responsible for producing

goods and services, and those who provide

IOsEil~n Norn.s, “Da~b@ Mmketing sets Enticing Bait,” Advertising Age, Jan. 18, 1988, p. S10.

l~stew~ Br~d, The Medti Lab: Inventing the Future at MIT (New York, NY: Viking Press, 1987).

107Joame Lipmm, “single Source Ad Research Heralds Detailed kok at Hou~hold Habl~> “The Wall StreetJournal, Feb. 16, 1988, p. 39. Of course,

as already mentioned, this information is made more valuable by reprocessing technologies that enable market researchers to analyze the massive amounts

of data collected.

108po~er, op. cit., foomote 56, P. 1~0

l~u~ff, op. cit., fOOmOte 5$ PP. 2W-2W.

1 IOForades~fiption of & pr~xtlon of textiles in England bo~ before and titer industri~ization, see Neil J. Sme]ser, Sociai Change in the /ndUStriU/

Revolution: An Applicatwn of Theory to the Lancashire Cotton Industry 1779-1840 (London: Routeledge & Kegan Paul, rid.).

IllFor a ~Giolo@c~ accomt of tie role of b~eaucratic Organization in ~onomic developments, ~ Beniger, op, cit., footnote 11. For ~ historical

account of the emergence of the modern industrial corporation, see Chandler, op. cit., foomote 22.
Chapter 5--Communication and Comparative Advantage in the Business Arena ● 127

Figure 5-3--The Cast of Players

\\.-, ,/[ Ideology \) I I

I \ Lppllk

‘MpLOyEEAssOc’AT’(’Ns .-/’J

/ l \

. . — .-=

/’/

/11

H

\/’’’’:rtner’ /~y/ Compehtors

ASSOCIATES

—.——

\:

——

Special Interest groups-3

SOURCE: Henry Mintzberg, Power In and Around Organizations, Copyright 1983, p. 29. Reprinted by permission of Prentioe-Hall, Inc., Englewood Cliffs, NJ.

direct support for them;

3. line managers, “who stand in the hierarchy of

line authority from the CEO down to the

first-line supervisors to whom the operators

formally report;”

4. analysts of the technostructure, whose work

entails the design and operation of planning

and control systems; and

5. support staff, including secretaries, researchers, and legal counsel. 112

Table 5-2 summarizes the roles and relationships

among these five different sets of players in business

organizations, and describes how members of each

group typically use their influence within different

spheres to achieve their primary goals. By examining how the deployment of the new communication

112HeW ~ntz~rg, PWer [n ad ArO~~ Organizations (Englewood Cliffs, NJ: Prentice-Hall, ~c., 1983), PP. 232-233.
Table 5-2—The Internal Influencers and Their Play of Power

Their main reasons

Their role in the The goals they Their prime means for displacement Their fields of play Their favorite

Internal Coalition favor of influence of legitimate power of internal power political games

Chief Executive Officer ., ., Overall management of it. Survival and growth. Authority (personal and Maintain personal power. Decisionmaking. Strategic candidate,

bureaucratic), privi- counter-insurgency.

Ieged knowledge, privileged access to the influential, political skills,

sometimes ideology as

well.

Line managers ., . . . . . . . Management of its indi- Growth above all (of units Authority (decreasing as Distortions in objectives, Decisionmaking, advice Sponsorship, alliance and

vidual units. and organization), sur- descend hierarchy), suboptimization, direct giving, and execution empire building, budgetvival, balkanization. privileged information, links to external influ- (with respect to upper ing, line v. staff, strategic

political skills, some- encers. levels). candidate, rival camps,

times expertise. sometimes Iording, insurgency, and young

Turks.

Staff analysts .,.. , Design and operation of Bureaucratization, eco- Bureaucratic controls, ex- Means-ends inversion, di- Advice giving. Expertise, line v. staff, straits systems of bureau- nomic efficiency, per- pertise. rect links to external in- tegic candidate, somecratic control and petual but moderate fluencers. times whistle blowing

adaptation. and well-regulated and young Turks.

change, professional

excellence.

—

Support staffers Indirect support of its For professional staff col- Expertise (for profes- Suboptimizatlon, means- Advice giving Expertise, strategic canoperating functions Iaboration, perpetual sional staff), Political ends reversion, direct didate (for professional

but moderate change, will (for unskilled staff, links to external influ- staff).

professional excel- when act in concert). encers.

Ience, for unskilled

staff: protection of

social group.

Professional operators . Provision of its operating Autonomy, enhancement Expertise. Means-ends inversion, di- Decisionmaking, execu- Expertise, strategic canfunctions, of specialty, profes- rect links to external in- tion. didate, sometimes

sional excellence, mis- fluencers,

sion.

young Turks.

Unskilled operators Provision of its operating Protection of social group. Political will (when act in Group means-ends rover- Execution. Insurgency, Iording, whistle

functions. concert). sion. blowing.

SOURCE: Henry Mlntzberg, Power/n and Around Organizations, Copyright 1983, pp. 232-233, Reprinted by permwslon of Prentice Hall, Inc. Englewood Cliffs, NJ.
Chapter 5--Communication and Comparative Advantage in the Business Arena ● 129

technologies, as they are applied to create new

business opportunities, might affect each set of

players’ roles, goals, and means of influence-as

they are described in this table—we can draw some

conclusions about how improvements in efficiency,

effectiveness, and innovation might affect those

involved in the production process.

Potential Impacts of New Business

Opportunities on Players in the

Production Process

Chief Executive Officer

In the discussion of business opportunities, we

have seen how computer networking and decisionmaking tools can provide managers with greater

control and more timely and convenient information. At the same time, however, if these communication systems are poorly planned and deployed,

they can contribute to poor decisionmaking and the

deterioration of top management’s authority.

Within a business firm, communication has traditionally been channeled and controlled by the people

occupying positions in the management hierarchy.

The rules governing communication reflect the

organizational patterns of authority. Managers up

and down the line interpret and pass on messages to

those above and below them in the hierarchy. In the

process, messages are sorted out, refined, and

tailored to the organizational needs of the receiver.

In this fashion, the chief executive maintains and

supports his privileged position as the most knowledgeable—and, hence, the most powerful-person

in the organization.

Bypassing many of these organizational gatekeepers, computer networks open the doors to both

unauthorized communication and information overload, making it harder for chief executive officers to

perform their roles. The distribution of electronic

information is hard to control, and it can be

exchanged or destroyed without a trace. Moreover,

on computer networks, information tends to be

distributed casually, to everyone, so that all receivers have to read each message and determine its

particular value for them. Communication over

computer networks also tends to be very informal

and imprecise.

113 Electronic mail is, moreover,

subject to considerable misinterpretation, because it

“does not provide the receiver with any contextual

clues about the sender’s intent. ’’114 Given so many

possibilities for distortion, the information the chief

executive receives through electronic channels may

be greatly inferior to that which is filtered through

the organizational hierarchy.

Recognizing the linkages between electronically

mediated communication and the quality of information received, many top executives are now

becoming increasingly involved in the design of

corporate communication systems.

Operators

Operators carry out the basic work of a business

organization. Being the furthest away from the

center of authority, they have minimal personal

leverage, especially if they are unskilled.115 To have

an effect on the organizations for which they work,

and to be able to influence their roles within them,

operators have had to band together to act in concert.

Given their lack of personal influence and their

dependence on their cohorts, it is not surprising that,

of all of those who are involved in production

activities, operators identify the least with the

organization’s formalized goals, and value very

highly their established social relationships with

peers.

To the extent that operators have no organized

base of power, they will have little control over how

communication technologies are employed in the

work environment. Much will depend, therefore, on

how management regards the opportunities presented by new communication technologies. As the

OTA report, Computerized Manufacturing Automation: Employment, Education, and the

Workplace, pointed out:

Depending on how tasks are arranged and jobs

designed, programmable automation has the potential to decrease the amount of autonomy, control, and

challenge available to the worker, or it can increase

variety and decisionmaking opportunities.

Management’s strategies and motivations for

introducing programmable automation are key in

determining its impacts. In addition, the nature of

113Sua Kiesler, “The Hidden Mes~ges in computer Networks,” Harvard Business Review, January/February, 1986, AS Kiesler nOtes, whe=

employees may take great care in composing paper memos accounting for their activities, tiwy are much more inclined to send electronic mail messages

in haste and without much reflection.

llAIbid., p. 47.

115~~&g, op. cit., fOOmOte 112, PP. 13 0

-131

.
130 ● Critical Connections: Communication for the Future

labor-management relations will affect the implementation of new technology and its consequences for

the work environment 116

For many who view the new technologies through

the lens of an industrialized past, the primary value

of communication technologies lies in their ability

to reduce costs and to enhance control over operations. While such opportunities surely exist, an

approach that is based solely on this perspective is

likely to have the most detrimental impact on

operators. It could lead, for example, not only to

problems of deskilling and displacing workers, but

also to increased monitoring of the work force.117

Moreover, by adhering to such a perspective, businesses may forego other economic opportunities

that, in the long run, may prove more productive. For

as Paul Strassman has noted:

The sum of many efficient activities may not add

up to an effective information service.118

Alternative views, which in no way demean the

importance of efficiency, focus on the technology’s

ability to both restructure and enhance work relationships. According to Michael Piore and Charles

Sabel, for example, because new technology allows

business to carry out flexible manufacturing, many

workers no longer need to be organized on assembly

lines; rather, they will be able to work more in

accordance with what, in the long run, is a more

productive arrangement-that is, an arrangement

based on craft principles.l19 

Similarly, from the perspective of Shoshana

Zuboff, computer-mediated communication technologies need not be used to undermine or reduce

job-related skills, as they have in the past; on the

contrary, they can be used to “informate” the

operator about the entire productive work process.

As she describes it:

Action-centered skills . . . are built into the technology as it substitutes for bodily presence—that is

automation. At the same time, activities are made

transparent. They are exposed in detail as they are

textualized in the conversion to explicit information-that is informating. In principle, the technological substitute for bodily presence frees the

human being from having to participate in the

immediate demands of action (and the lengthy

investment in the associated skills). However, the

technology not only frees individuals “from” but

also frees them “to.” The automating capacity of the

technology can free the human being for more

comprehensive, explicit, systemic, and abstract

knowledge of his or her work made possible by the

technology’s ability to informate.120

To be successful, such an approach would require

investments in human beings as well as in technology. It would, moreover, entail risks for management; for a technology that “informates” is bound to

diminish hierarchy. Posing this dilemma for management, one corporate vice-president reflected:

What has been managerial access to information

is not as comfortable a notion as it may seem. There

has been a fear of letting it out of our hands—that is

why information is so carefully guarded. It could be

misused or misinterpreted in a way that cannot be

managed. Traditionally, we have thought that such

data can only be managed by certain people with

certain accountabilities and, I hesitate to say, endowed with certain skills or capabilities. But with the

new technology it seems there is an almost inevitable

kind of development if you have a goal of maximizing all business variables and maximizing the entire

organization’s ability to contribute to that effort. I

don’t think you can choose not to distribute information and authority in a new way if you want to

achieve that. If you do, you will give up an important

component of being competitive. 121

Line Managers

Like the CEO, line managers are responsible for

executing the formal goals of the business corporation, and they, too, derive much of their authority

from their position within the bureaucracy and the

access to privileged information that this position

affords. In contrast to top management, however, the

line manager is concerned not only about the overall

growth and survival of the firm, but also about

l16u.s. con-=, ~fice of T’hnoIogy Assessment, Computerized Man@acturing Automation. En@oyment, Education, and tk workla~’e~

OTA-CIT-235 (Washington DC: U.S. Government Printing Office, 1985), p. 10.

llTFor ~ ~~ysis of the issues involved in work monitoring, see U.S. Congress, Office of Technology Assessment, The Electronic Swenisor: NW

Technologies, New TeWons, OTA-CIT-333 (Washington DC: U.S. Government Printing Office, September 1987).

llgpaul s~msma, T/w ]~or~ion Payoff: The Tran@oMtion of Work in the Electronic Age (New York, NY: The Free Press, 1985), p. 117.

11%~ and Sabel, op. cit., footnote 3.

lz~u~ff, ~. cit., foomote 5, p. 181.

lzlAs quot~ in ibid., p. 289.
Chapter 5--Communication and Comparative Advantage in the Business Arena ● 131

preserving his or her own particular department, or

sector of responsibility, within the organization.

The widespread deployment of computer-based

communication technology within the business corporation may undermine the line manager’s position

in a number of different ways. Many of the simpler

functions that managers perform can be executed

electronically, as we have seen with respect to both

business operations and procurement activities.122

Equally, if not more, threatening to the manager’s

position is the fact that electronic networks may

replace him in his role as chief communicator.123

Communication networks may also weaken the

manager’s control over his own domain, since one of

the benefits of the new technologies is their ability

to create flexible interdepartmental arrangements

that can be constituted on an ad hoc basis for

different tasks.

Not all prognoses of the manager’s future role are

so bleak, however. Paul Strassman, for example,

argues that the business opportunities afforded by

new communication technologies do not necessarily

entail losses for middle management. In fact, he

predicts that future organizations will need more, not

fewer, managers.l24 In his scenario, however, the

role of management will be completely overhauled.

Instead of acting as coordinator and information

intermediary, the future manager will devote him/

herself to staff development, training, and guidance.

l25 Similarly, Ralph H. Kilman, professor of

business administration and director of the program

on corporate culture at the Graduate School of

Business, University of Pittsburgh, anticipates that

the successful corporation of the future will be a

network organization built around a hub of people

and information, each acting on the other. Under

these circumstances, each company:

. . . will have to nurture its own unique culture and

develop the quality of its human resources [since]

competitive advantage will rest increasingly on the

way each network organization gathers and accesses

information, makes its decisions and then carries out

those decisions.126

Reflecting some of these developments, we find,

for example, that the General Motors parts plant in

Bay City, MI, recently dismissed one-quarter of their

middle managers. Characterizing the organizational

changes that followed their dismissal, Patricia Carrigan, plant manager, notes that:

[Before the cuts] the production manager. . . sort

of stood over the factory and cracked the whip. Now,

hourly workers are monitoring their own time,

authorizing their own payroll and setting their own

vacations . . . Some managers have had to change

their style. ’27

Analysts of the Technostructure

The analysts of the technostructure include professionals such as planners, accountants, budget

analysts, operation managers, and MIS analysts.128

Although analysts have no bureaucratic authority of

their own, they have influence in the firm, given their

expertise. As a reflection of their professionalism,

their primary goals are:

. . . professional excellence, perpetual but moderate

and well-regulated change in the organization, ever

increasing bureaucratization, and, as the criterion for

choice, economic efficiency.129

As we move forward into a knowledge-based

society, it is the analysts of the technostructure who

have the most to gain from the organizational

changes taking place within the business firm.

According to Drucker, it is the knowledge worker

who will replace the mid-level manager in the firm,

giving rise to organizations that are much less

lzzs& ~W Ehe~r &isler, “~ificial Management and the Artificial Manager,” Business Horizons, July/August 1986, pp. 17-21.

lzspeter D~Ckerp~CtS, for example, that in future organizations “both the number of management levels and the number of managers can ~ shqly

cut. The reason is straightforward: it turns out that whole layers of management neither make decisions nor lead. Instead their main, if not their only,

function is to setve as ‘relay s’--human boosters for the faint unfocused signals that pass for communication in the traditional pre-information

organization. ’’Peter Drueker, “The Coming of the New Organization, ’’Harvard Business Review, January/February 1988, p. 45. For a discussion of how

these changes are taking place, see Sally Lehrman, “Middle Managers Face Squeeze as Firms Try New Structures, “ The Wwhington Post, Sept. 4, 1988,

p. H2.

lzQS~-an, op. cit., footnote 118, pp. 196-199.

125 fbid.

126Ralph H. Ki~~, “1’’omorrow’s Company Won’t Have Walls,” The New York Times, June 18, 1989, p. 3.

lzT~~an, op. cit., footnote 123.

lzg~n~~rg, op. cit., foomote 112, p. 136.

1291bid., p. 137.
132 ● Critical Connections: Communication for the Future

hierarchical than they are today.130 The technical

analyst will also benefit from the increased opportunity for professional contact and collaboration that

electronic networks provide.

One group of analysts that is playing an increasingly important role in business is the information

systems managers.131 Responsible for integrating

and controlling corporations’ distributed databases,

the manager is becoming more and more involved

with issues involving corporate strategy at the

highest levels of management.132

Support Staff

The support staff includes members of all groups

who provide services in support of the basic

operational function of a business firm. Including

both skilled and unskilled workers, they range from

cafeteria workers and secretaries to public relations

specialists and legal counsels. 133 Because new

communication technologies allow many of their

services to be easily purchased outside of the

corporation, members of the support staff are among

the most vulnerable to technological change. Moreover, with a worldwide communication system,

there is a much larger pool of potential workers to

draw on, reducing the leverage of U.S. workers even

more. In this situation, as in the case of operations

workers, the unskilled are at the greatest disadvantage.

Given the growing importance of the service

sector of the economy, one group that could suffer

disproportionately from the widespread deployment

of computer-based communication systems is office

workers. A 1985 OTA study on office automation

found, for example, that there will be a significant

reduction in the hours associated with a given

volume of information-handling. This will entail a

reduction of jobs primarily in clerical/support occupations, but also in low-level supervisory or management jobs.134 Moreover, because women and

minority groups are disproportionately represented

in these kinds of jobs, they are likely to be affected

most. For those who retain their jobs, automation

may have more beneficial effects, reducing the more

trivial aspects of work and requiring workers to

acquire broader, more process-oriented skills.135

Communication technologies will also allow

workers more freedom and flexibility in determining

the time and location of their work. Much office

work, for example, can be done in the home using an

electronic network. The work-at-home option is not

without controversy, however. To date, there have

been a number of failed experiments, which illustrate some of the problems that might arise.l36 Many

fear that working at home may create a growing pool

of contingent workers who will have neither job

security nor benefits.137 Moreover, trade unionists

have pointed out that an increase in the supply of

contingent labor will depress the wage rates and

reduce the bargaining power of the full-time employed.

Roles and Relationships in Market Activities

Exchange activities entail the transfer of goods

and services, either as inputs or outputs of production. In capitalist societies these activities are

regulated by the mechanism of the market. Thus, to

understand the roles and relationships involved in

such exchanges, it is necessary to begin by looking

at the dynamics of the marketplace.

In the most general sense, the market is the entire

web of interrelationships that comes into play in the

buying and selling of products.138 For a market to

exist and for an exchange to take place, two roles are

essential: those of the producer and consumer. More

often than not, however, other players perform the

role of intermediaries, facilitating the exchange.

lso~ker, op. cit., footnote 123.

131 Ron ~U1ne, “why MS Managers are Becoming Network Exwrts! “ Telecommunications, January 1988, pp. 103-104.

lszIbid. S= alSO Rockart, op. cit., fOOtnOte 90.

133 Min~~rg, op. cit., footnote 112> P- 137.

134u.s. Conmss, Office of Tw~oloa Assessment, A~to~fion of America’s Ofices, OTA-CIT-287 (Sprin~leld, VA: National Technical

Information Sexvice, 1985), p. 15.

Iss[bid.

136For a discussion, ~ Barbara Tzivanls Behham, “mere 1s No place Like Home,” Best’s Review, May 1988, pp. 33-38.

lsTRichmd S. &loUs, me Conference Bo~d, “me Telecommunications Indust~, Contingent Workers, and the House of Labor,” paper presented ti

The George Washington University Conference on Telecommunications: An American Industry Under International Pressure, Airlie, VA, May 9,1988.

lsgste~er, op. cit., foomote 11, p. 575.
Chapter 5---Communication and Comparative Advantage in the Business Arena ● 133

Intermediaries include, for example, wholesalers,

retailers, advertisers, and media-owners.

In contrast to a business organization in which

roles are hierarchically structured and relatively

stable, the relationships in a market are dynamic,

changing in accordance with the specific set of

circumstances in which economic actors come

together. These circumstances can be classified as

those of monopoly, oligopoly, competition, or monopsony, depending on five basic forces:

. threat of entry by new firms,

● threat of substitution,

. bargaining power of buyers,

. bargaining power of suppliers, and

● the rivalry among current competitors. 139

The structure of the market, and hence the

relationships between producers and consumers, can

be significantly altered by the introduction of new

technologies. The deployment of a new technology

may give rise to significant economies of scale and

scope, providing a producer with a quasi-natural

monopoly. Thus the mom-and-pop electronic stores

that set up community antennas in areas where

broadcast television reception was poor enjoyed

near-monopoly status in their markets. On the other

hand, new technologies can also undermine an

existing monopoly; for example, VCRs, MMDS,

and direct broadcast satellites (DBS) may have this

effect on cable television’s monopoly on delivery of

commercial-free movies to the home.

Consumers

To make “optimal” buying decisions—and hence

to maximize their leverage vis a vis producers—

consumers require perfect information about products and their costs. However, they generally depend

on producers and retailers for the information they

need to make purchases. Such information, which is

designed primarily to promote sales, is often incomplete and biased. The search costs of obtaining

accurate information about all competing products,

in terms of time and travel costs, are often so high

that consumers rarely pursue such searches. Instead,

they accept a choice that is satisfactory but suboptimal.

New technologies can greatly reduce the consumer’s information and transaction costs.l40 By

making it possible for producers and retailers to

deliver large amounts of commercial information

directly to the home or office, new communication

technologies may benefit consumers in a number of

different ways. These include allowing them to

make purchases without traveling; helping them to

locate the specific products they want; providing

them with more timely, and more perfect, comparative information about their choices; and facilitating

the ordering process.

The new technologies will also reduce the consumer’s dependence on traditional intermediaries,

such as advertisers and retailers. At the same time,

however, the consumer will become more dependent

on the media companies that control the new

pipelines through which commercial information

flows.

The kinds of benefits that the consumer derives

from the new technologies will depend on several

factors. Incompatibility may limit their usefulness.

Moreover, the cost and complexity of equipment and

services may limit their availability. Those without

the technology could suffer badly, if exits from the

traditional retailer market led to increased travel

time, decreased service, and higher prices based on

lower volumes. In addition, all consumers may be

worse off, to the extent that the cost of the service

exceeds previous travel and transaction costs.

Consumers may also have mixed feelings about

unsolicited advertisements. Some may find them

valuable as sources of commercial information, and

some may find them entertaining. Others, however,

will find unsolicited commercial messages intrusive. Those most offended by this kind of advertising

can, to some extent, evade it by using technologies

such as the remote control devices for TVs and

VCRs and telephone services such as Customer

Local Area Signaling Service (CLASS). CLASS

indicates whether or not incoming calls are from

numbers the customer has previously stored in a

computer

Consumers may also have concerns about their

rights to privacy and the data that are collected as a

result of their economic transactions. On the other

hand, some may be concerned if data about them are

not collected and stored, in that they might, as a

lsgpo~er, op. cit., footnote 57, d. 1.

l~or a more dc~l~ accomt of the opportunities for consumers, scw ch. ~.
134 ● Critical Connections: Communication for the Future

result, be excluded from certain economic opportunities. 141

Producers

The new technologies will provide producers with

more pathways to access consumers directly, substantially reducing their dependence on retailers and

perhaps even advertisers. These technologies will,

moreover, help producers to collect, store, and

analyze market data in a much more cost-effective

way. To the extent that the delivery of tangible items

is facilitated by communication technologies, it will

be easier for producers to promote teleshopping.

At the same time, however, producers may

experience much greater competition. Consumers

will have much more information, and markets will

be much broader in geographic scope.

To defend against consumer cost comparisons,

producers might use incompatible catalog systems,

as a number of them are presently doing in the area

of business-to-business sales. 142 If pursued to considerable success, however, such a strategy might

come into conflict with antitrust law as it is

embodied in the “essential facilities doctrine.”

Intermediaries

Local retailers manage the forums through which

a considerable amount of product information

passes. One of their key functions in the exchange

process is a selective one. Because the space used to

display products is not without costs, retailers must

choose carefully what they sell. Thus, they reduce

the range of products available to consumers. As

intermediaries, however, they are dependent on both

producers and consumers. Their success depends on

their ability to both attract the right products and

correctly anticipate consumer needs.

With the development of electronic shopping

centers and malls, local retailers will face much

greater competition both in terms of the number of

their competitors as well as prices. Their ability to

succeed will depend on the popularity of electronic

shopping, the extent to which they can reduce costs,

and/or their ability to differentiate their products and

enhance the value of traditional shopping. For

example, retailers might use their knowledge of

market demand to select the most likely big sellers

and secure cost-justified volume discounts from

producers. Or they might offer enhanced services

such as an entertaining environment or salespeople

with special expertise.

Large, national retailers that collect transactional

data-like credit-card and telephone companies,

banks, and airlines-and local retailers employing

scanning technologies will gain market power by

virtue of their data. Producers and retailers wanting

that data will become more dependent on these

retailers, and, to the extent that laws of privacy and

property permit, they may seek greater access to it

either by sale, joint agreement and joint ventures, or

by acquisition. Access to this kind of data can

constitute significant barriers to entry.

Owners of real estate used by retailers have also

played an intermediary role in the process of making

and executing purchasing decisions. They serve as a

physical “pipeline” through which product information passes. In much the same way as the retailers,

owners of shopping centers are vulnerable to the

development of electronic shopping.

The new technologies are significantly decreasing

the dependence of producers, retailers, and advertising agencies on the traditionally dominant communication media such as newspapers, television, radio,

and magazines. As new communication media such

as VCRs and tapes, videotex, and cable television

gain larger audiences, the traditional media will lose

a share of the total. Similarly, as improvements in

the use of market research data permit personalized

contacts via the mails and electronic media, and the

use of desktop publishing and automatic-dialer and

recorded-message players become more economical, the position of the traditional media will

deteriorate even further.

141For a discussion of how this kind of economic segmentation might reinforce class segmentation, see Terry Curtis, “The InfOITnatiOn Society: A

Computer-Generated Class System?” Vincent Mosco and Janet Wasko (eds.), The Po/itica/ Economy of Information (Madison, WI: University of

Wisconsin Press, 1988), ch. 5.

142For exmple, one of mom imP~mt reasons why McKesson Drug and the airlines established their purchasing syStems was to cement heir

relationships with their buyers. If these proprietary systems are economically impractical to duplicate, and yet are essentiat to effective participation in

a market, then competitors would have a legal right to reasonable access under the “essential facilities doctrine.” This doctrine prohibits firms with

monopoly control over an essential facility from using this control, without a legitimate business reason, to foreclose competition in a market in which

they participate. For a discussion, see Peter Marx, “The hgal Risks of Using Information as a Competitive Weapon,” Internutwnaf Corqputer Law

Advisor, vol. 2, No. 5, February 1988, pp. 18-24.
Chapter 5--Communication and Comparative Advantage in the Business Arena ● 135

The electronic media will also be favored over

traditional media to the extent that consumers shop

on electronic networks rather than by traveling to

stores. Since those who supply storage and transmission will have so much to gain, there is likely to be

greatly increased competition between existing

cable and telephone companies for the right to

provide these services. Such traffic will allow

suppliers to collect and compile valuable marketing

research data.

Advertisers have traditionally helped producers to

identify the most likely buyers, create presentations

to attract them, and identify the most efficient media

for sending these messages. To the extent that

producers use new technologies to execute these

functions and to link themselves directly to consumers, advertiser may be displaced.

As already mentioned, new technologies also

allow consumers to evade advertising. The loss of

television audience resulting from consumers using

remote control devices for zipping, zapping, and

flipping is still being investigated, but advertisers

have expressed considerable concern. 143 One approach they might adopt is to produce short mini-ads

that are difficult to zap, or ads that are incorporated

into entertainment programs. Absent an effective

strategy, advertisers may be unwilling to pay the

media as much for delivering audiences, and producers may be induced to deal directly with consumers.

Another intermediary to be affected is that of

delivery services. This area will experience increased demand if more buyers use communication

technologies to make purchase decisions and place

orders, rather than traveling to retailers.

KEY FACTORS AFFECTING

OUTCOMES

Notwithstanding the numerous business opportunities that new communication technologies afford

and the extensive publicity they have received, most

corporations have been slow to adopt these new

technologies, or to employ them in strategic ways.

Instead of viewing the new technologies as a way of

rethinking and restructuring their activities, most

firms still regard technology primarily as a means of

reducing costs and expanding markets.l44 Not surprisingly, large companies that can afford to develop

their own networks, as well as service companies

whose primary activities entail data-processing and

data exchange, are the most advanced and sophisticated in their use of communication and information

technologies.

145 As Margie Semilof has described

the situation:

When it comes to communications, the country’s

largest users vary widely in levels of expertise.

For example, there’s the fortunate few who aren’t

on the same technological learning curve as the rest,

because their business is in computers and/or communications. This group includes IBM, AT&T,

Digital Equipment Corp., Hewlett-Packard Co.,

Unisys Corp., and the regional Bell holding companies.

A second class is comprised of stellar users—

companies with strong engineering departments that

for years have been using communications to solve

their business problems. This group includes such

well known technology leaders as General Dynamics Corp: Eastman Kodak Co.; Ford Motor Co.: and

Sears, Roebuck and Co.

But many Fortune 100 companies have no inhouse expertise and—as does the rest of the user

community-rely on pluck and luck to solve their

networking problems. This class of users, analysts

say, typically lags about three to five years behind

the rest of the Fortune-sized pack. These companies

generally develop other aspects of their businesses.

146

The full impact of new technologies in the

business arena will depend on how and under what

circumstances they are deployed. Just as these

technologies give rise to benefits, so they may also

create a number of new social problems for policymakers. These problems can be summarized as:

worker displacement and retraining, a problem

that will no longer be confined to the lower

levels of the employment scale, but will extend

to the realm of management as well;

defining the privacy rights of individuals in an

environment-in which information about individuals can be easily compiled and distributed,

14~The~aCtionshave kmferr~to as “Vidm~~ing.” For a discussion, w Peter Ainslie, “Confronting a Nation of Grazers,” (%tznnek, September

1988, pp. S4-62; and “Zapping the TV Networks,” US. News and Workl Report, June 1, 1987, p. 56.

l~ste~m ~yd, ‘~el=om’s @eSt,” Cmnmunhmkwsll%ek, CLOSEUP, Feb. 29.1988, PP. 14-15 -

145D~amation, Sept. 1, 1987, p. 47.

146M@e Stiof, *’Comuictiion Gap,” CorrwnunicarionsWeek, CLOSEUP, June 13, 1988S P. C9.
136 ● Critical Connections: Communication for the Future

●

●

and in which the value of personal data has a

high market value;

equity for small businesses, given the growing

strategic value of communication systems in

the business arena, and the economies of scale

entailed in developing, deploying, and operating such systems; and

maintaining and modernizing the public communication infrastructure, as more and more

businesses find it to their advantage to develop

their own communication networks as part of

their competitive strategies.

OTA identified a number of key factors that, over

the long run, will determine whether or not, how, and

with what effects U.S. businesses will exploit the

opportunities afforded by new technologies. These

include:

●

●

●

●

●

●

●

the compatibility and interconnectivity of information systems,

the laws concerning the use of information,

economic and technical resources,

corporate culture and organizational structure,

developments in international trade and international telecommunication regulation,

domestic regulatory policies, and

the availability of a skilled work force.

Compatibility and Interconnectivity of

Information Systems

Electronic mail, local- and wide-area networks,

programmable manufacturing, and relational databases all require interconnection. Hence, one of the

most significant factors determining whether businesses can take advantage of new communication

technologies is the degree to which the various

systems being developed and used by businesses can

communicate effectively with one another. Thus, as

depicted in table 5-3, we see that in a recent survey

of large-business users the lack of standards was

cited as the most critical factor inhibiting the

strategic deployment of new communication technologies. 147

Table 5-3-Main Obstacles to Effective and

Strategic Use of Internetworking

Percentage of

respondents

mentioning problem

Obstacles

Lack of unifying standards . . . . . . . . 90.1

Vendors’ inadequate understanding

of users’ needs . . . . . . . . . . . . . . . 83.5

Service limitations . . . . . . . . . . . . . . . 82.6

Product limitations . . . . . . . . . . . . . . . 82.2

Total Responding: 568

NOTE: No other “obstacle” was mentioned by more than half the survey

respondents.

SOURCE: Corrrrrrunicatior?sk’lleek’s Fifth Annual Communications Managers Survey, Communications14@ek, CLOSEUP, Sept. 12, 1968,

p. Cl O. Copyright 1986 by CMP Publications, Inc., 600 Commumty Drive, Manhasset, NY 11030. Reprinted from Communkxtiom#Veek with permission.

To obtain the kind of communication required by

business will necessitate more than simple physical

interconnection; it will:

. . . require the logical interconnection of a corporation’s dispersed information processing assets—

hardware, systems software, user applications and

data bases. 148

With this kind of connection, users will find it

easy to negotiate their way through the entire

corporate communication system-which will appear to be a single, integrated whole—accessing a

wide array of resources and data.149

Perhaps the most important reason why many

businesses have been unable to achieve this state of

interconnectivity is the lack of some key technical

standards. A number of these standards, such as

those for Open Systems Interconnection (OSI) and

Integrated Services Digital Networks (ISDN), are

now being negotiated in international standardsmaking fora. Other more or less de facto standards,

such as IBM SNA, are evolving in the marketplace. 150 However, because standards significantly

affect competitive relationships, the process of

establishing them can be long and contentious. Thus,

a number of gaps in the area of technical standards

still exist, some of the most critical of which are:

lqTFor a discussion, see Steven Titch, Margie Semilof, and John Berrigan, “Missing Links,” CO~icationsWeek, CLOSEUP, Sept. 12, 1988, pp.

C6-C7; and Christine Bontileld and Paul Korzeniowski, “Neither Standards, Nor Understanding,” CommunicationsWeek, CLOSEUP, Sept. 12, 1988,

pp. Clo-cl 1.

1413LW ~BmVer, “Twk Toward Connection,” Computerworfd, Nov. 16, 1987, pp. S1 S 1:3.

149~idc

Isolbid., p. S2.
Chapter 5--Communication and Comparative Advantage in the Business Arena ● 137

●

●

●

●

●

●

protocols supporting cooperative processing

applications in peer relationships;

standards for local area networks, which to date

are still relatively immature;

broadband ISDN standards;

network management standards;

document interchange standards; and

standards for electronic data interexchange.151

This issue of network interoperability affects not

only the realm of business, but also all other realms

of communication. It is analyzed in depth in chapter

11.

Legal Framework for Employing Information

in the Business Environment

Just as a commercial and legal infrastructure was

required in the 19th century for businesses to exploit

the economic advantages afforded by the railroad

and the telegraph, so too will new information laws

be required if corporations are to employ information and communication technologies as part of their

competitive strategies. As Peter Marx has noted, the

use of new technologies for business gives rise to

considerable legal uncertainty, since:

. . . the legal system has yet to generate a body of law

capable of resolving the legion of questions posed by

information--questions that have only recently surfaced as user capabilities, expectations, and use of

information and information technologies have dramatically changed.152

One major area of uncertainty is that of privacy

law. When Congress passed the Privacy Act in 1974,

it declined to include the private sector within its

provisions. 153 With more and more businesses

seeking to package and distribute transactional data,

the pressure to extend to corporations the rules

regulating government’s use of personal data, or to

create new rules, is likely to mount.154

Another gap in information law relates to product

liability and the negligent use of information. The

courts will need to determine, for example:

. Who has rights to damages incurred because of

inaccurate information?

. What responsibility does a corporate-user have

to ensure the reliability and accuracy of the data

that it uses, even when they are supplied by

someone else?

. When should information be classified as a

service and when as a product? and

. Should the standard of liability be negligence,

and or might strict liability apply? 155

Other areas that are likely to require legal

attention include antitrust law, tax law, intellectual

property law, as well as laws governing electronic

filings for regulatory purposes. In a global economy,

moreover, these gaps will need to be filled in, not

only with respect to domestic law, but also, and

increasingly, with respect to international law as

well.

Economic and Technical Resources

Whether or not businesses will be able to make

strategic use of new technologies will also depend

on the extent of their financial and organizational

resources. One D3 circuit, for example, which

provides a transmission pipeline that operates at the

rate of 45 megabits-per-second, costs approximately

$1 million per year. Thus, the costs of operating a

large-scale telecommunication system can be great.

It has been estimated, for example, that the annual

expenditures of the top 100 communication users

range from between $1 billion at the top of the list to

about $20 million at the bottom, with the average

expenditure falling between $50 million and $100

million. 156 Moreover, as can be seen in figure 5-4, by

1993, telecommunication expenditures are likely to

constitute approximately 10 percent of the Fortune

1511bid., pp. S9-S1O.

152*, op. Cit., f~O@ 142$ p- 19”

153The~vacy~tof 197A ~m deSign~to ~~essthetemion ~twnthe individu~’s interest in ~son~ information and the Federal Government’s

collection and use of that information. For a discussion, see U.S. Congress, Office of Technology As*ssment, Feder~ Gover~nt Jtiomtion

Technology: Electronic Record Systems and /ndividuul Privacy, OTA-CIT-296 (Springfield, VA: National Technical Information Service, June 1986).

See also Deborah G. Johnson and John W. Snapper, Ethical issues in the Use of Computers (Belmont, CA: Behnont Publishing Co.), part 3.

154~meff~~ foma~l s~h anoccmnce, ~mecompanies, such ~w~ner-~ex,havework~ tow~ddevelopingvol~~ standards with which

businesses might comply.

155 M=,0P0 cite, fmmote 142. S= ~W Johnson and Snapper, op. cit., foomote 153; and Jaap I-t. Spoor, “Datab=c Liability: some Gener~ R~*S~”

International ComputerLaw Adviser, vol. 3, No. 7, April 1989, pp. 4-9.

156Jim Foley, ‘{~ First ~k at the Top 100 Comufication u~rs,” co~~”cutionsweek, CLOSIXJP, May 1, 1989, p. C3.

89-148 0 - 90 - 4 QL 3
138 ● Critical Connections: Communication for the Future

1000 companies’ budgets, up from 8 percent

today.157

Given such costs, it is clear why it has been

primarily the largest companies that have made the

greatest use of the new communication technologies.l58 As can be seen in table 5-4, all of the top 50

telecommunication-users in the United States earn

annual revenues of more than $3 billion. In this

context, it is clear why a number of companies,

citing cost as well as the lack of technical expertise

as the reason for their decisions, have given up their

efforts to deploy and operate their own private

communication networks.159

Large businesses have a number of advantages

over small companies in deploying new technologies. By buying in much greater quantities, they are

often able to negotiate higher-quality service and

lower prices either from the traditional telephone

companies or from others. As the Chief Executive

Officer of one network management company has

noted:

Here is where large companies and their fat

contracts have two key advantages over a smaller

user. Small companies are often stuck with buying

vendor vanilla. Nothing can set them apart from the

competition, strategically. Large companies, however, can do some substantial tailoring, which can

give them an edge. This is a distinct reversal of the

concept that says smaller companies can be more

innovative than big companies. 160

The same is true with respect to gaining access to

market data and strategic information. Large conglomerates, which are able to aggregate multiple

data sets from multiple sources, are better off than

smaller fins. If, as in the past, new communication

technologies increase the minimum efficient scale of

operations generally, the large multinational enterprise may have the most to gain. Large users also

have more clout than smaller companies in negotiating standards.

Small manufacturers, moreover, are confronted

by a number of problems that are unique to them. For

Figure 5-4-Spending for Communications by Large

Users, 1983-1993 Comparison

(Percent of Total Operating Budget)

1 20A ,- – . – —

- .“

’83 ’88 ’93 ’83 ’88 ’93 ’83 ’88 ’93 ’83 ’88 ’93

Composite Fortune Services- Services-Non Industrial

1000 finance finance

[~ Telecom = DP\MI S

SOURCE: Copyrght 1969 by CMP Publications, Inc., 600 Community

Drive, Manhasaet, NY 10030. Reprinted from Comrnunicatiorisk$’eek with permission.

example, it is much harder for them to obtain

financing for new technologies. And while large

manufacturers may be able to absorb the cost of

$70,000 for computerized tools, it is much more

difficult for any of the 200,000 small manufacturers

in the United States who view $10,000 as a major

investment. Even more important is the fact that

small companies rarely have the know-how required

to take full advantage of the new technologies.l6l

Corporate Culture and

Organizational Structure

Existing corporate culture and organizational

structure may also inhibit the use of communication

technologies for strategic advantage.162 For, as

Howard Anderson of the Yankee Group has noted,

the strategic use of telecommunications is:

. . . not a hardware issue; it is a mind-set issue. The

communications user today has a wide range of

technical options from which to choose solutions.

The problem is that there is a pattern of corporate

behavior based on repeating certain established ways

of doing things that can be a real impediment to

15Tc~ti wil~, 4’h~ysts sw Happy New Year: Budgets Up,” CommunicationsWeek, Jan. 2, 1989, pp. 1,29.

IsgPeter Cowhey, “T21eGlobalization of Telephone Pricing and Service, ’’Te/ecommunicarions, January 1988, p. 30. StR also Semilof, oP. cit., f~mote

55, pp. C6-C8.

15qzor ~ discu=ion, ~Jo~ Foley, “Problems Force Users to Retrench,” COmmunicatwnsWeek, Nov. 7, 1988, pp. 1, 62; and John Foley, “Merrill

Shifts Gears; Solicits Network Bids,” ComrnunicationsWeek, Get. 31, 1988, pp. 1,55.

l~semilof, ~, cit., footnote 146. P. C13-C14.

161 Kochen, Op, ~it., fwrnote 67; ~~W Kirk Victor, “Help Wantd, Badly,” Natio~ JOZUML MM. M, 1989, pp. 73f)-734.

162sW cl~mn Wilder, “CoWorate Culwe IS Key to IS Success,” co~ute~orfd, May 22, 1989, p. 61.
Chapter 5--Communication and Comparative Advantage in the Business Arena ● 139

Table 5-4-Top 50 U.S. Communication Users

Employees Revenues

Rank Company Primary business (in thousands) ($billions)

1.

::

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20,

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

33.

34.

35.

36.

37.

38.

39.

40.

41.

42.

43.

44.

45.

46.

47.

48.

49.

50.

General Motors Corp., Detroit, Ml . . . . . . . . . . . . . . . . . . . . . . .

General Electric Co., Fairfield, CT . . . . . . . . . . . . . . . . . . . . .

Citicorp/Citibank N.A., New York, NY. . . . . . . . . . . . . . . . . . . .

IBM, Armonk, NY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

American Express Co., New York, NY . . . . . . . . . . . . . . . . . . .

Westinghouse Electric Corp., Pittsburgh, PA . . . . . . . . . . . . .

McDonnell Douglas Corp., St. Louis, MO . . . . . . . . . . . . . . . .

Sears Roebuck and Co., Chicago, IL . . . . . . . . . . . . . . . . . . .

Ford Motor Co., Dearborn, Ml . . . . . . . . . . . . . . . . . . . . . . . . .

Boeing Co., Seattle, WA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rockwell International Corp., El Segundo, CA . . . . . . . . . . . .

Prudential Insurance Co. of America, Newark, NJ . . . . . . . . .

Lockheed Corp., Calabasas, CA . . . . . . . . . . . . . . . . . . . . . . .

Xerox Corp., Stamford, CT . . . . . . . . . . . . . . . . . . . . . . . . . . . .

United Technologies Corp., Hartford, CT . . . . . . . . . . . . . . . .

ITT Corp., New York, NY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unisys Corp., Blue Bell, PA . . . . . . . . . . . . . . . . . . . . . . . . . . .

Union Carbide Corp., Danbury, CT . . . . . . . . . . . . . . . . . . . . .

Texas Air Corp., Houston, TX . . . . . . . . . . . . . . . . . . . . . . . . .

United Parcel Service of America Inc., Greenwich, CT . . . . .

BankAmerica Corp., San Francisco, CA . . . . . . . . . . . . . . . . .

E.I. du Pont de Nemours & Co., Wilmington, DE . . . . . . . . . .

Raytheon Co., Lexington, MA . . . . . . . . . . . . . . . . . . . . . . . . .

Allied Signal Inc., Morristown, NJ . . . . . . . . . . . . . . . . . . . . . .

Caterpillar Inc., Peoria, IL . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chase Manhattan Corp., New York, NY . . . . . . . . . . . . . . . . .

J.P. Morgan & Co. Inc., New York, NY . . . . . . . . . . . . . . . . . .

General Dynamics Corp., St. Louis, MO . . . . . . . . . . . . . . . . .

Chrysler Corp., Highland Park, Ml . . . . . . . . . . . . . . . . . . . . .

USX Corp., Pittsburgh, PA . . . . . . . . . . . . . . . . . . . . . . . . . . . .

First Interstate Bancorp., Los Angeles, CA . . . . . . . . . . . . . .

Honeywell Inc., Minneapolis, MN . . . . . . . . . . . . . . . . . . . . . .

Digital Equipment Corp., Maynard, MA . . . . . . . . . . . . . . . . . .

AMR Corp., Dallas/Ft. Worth, TX . . . . . . . . . . . . . . . . . . . . . .

Eastman Kodak Co., Rochester, NY . . . . . . . . . . . . . . . . . . . .

J.C. Penney Co. Inc., Dallas, TX . . . . . . . . . . . . . . . . . . . . . .

Pepsico Inc., Purchase, NY . . . . . . . . . . . . . . . . . . . . . . . . . . .

Metropolitan Life Insurance Co., New York, NY . . . . . . . . . . .

Chemical New York Corp., New York, NY . . . . . . . . . . . . . . .

Amoco Corp., Chicago, IL . . . . . . . . . . . . . . . . . . . . . . . . . . . .

May Department Stores Co., St. Louis, MO . . . . . . . . . . . . . .

Minnesota Mining & Mfg. Co. (3 M), St. Paul, MN . . . . . . . . . .

Merrill Lynch & Co. Inc., New York, NY . . . . . . . . . . . . . . . . . .

Texaco Inc., White Plains, NY . . . . . . . . . . . . . . . . . . . . . . . . .

Cigna Corp., Philadelphia, PA . . . . . . . . . . . . . . . . . . . . . . . .

UAL Corp., Chicago, IL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Federal Express Corp., Memphis, TN . . . . . . . . . . . . . . . . . . .

R.H. Macy & Co. Inc., New York, NY . . . . . . . . . . . . . . . . . . . .

First Union Corp., Charlotte, NC . . . . . . . . . . . . . . . . . . . . . . .

Mobil Corp., New York, NY . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Automotive

Manufacturing

Banking

Computer

Finance

Manufacturing

Aerospace

Retail

Automotive

Aerospace

Manufacturing

Insurance

Aerospace

Manufacturing

Manufacturing

Manufacturing

Computer

Manufacturing

Airline

Transportation

Banking

Manufacturing

Manufacturing

Manufacturing

Manufacturing

Banking

Banking

Aerospace

Automotive

Manufacturing

Banking

Manufacturing

Computer

Airline

Manufacturing

Retail

Manufacturing

Insurance

Banking

Oil

Retail

Manufacturing

Finance

Oil

Insurance

Airline

Transportation

Retail

Banking

Oil

813

302

90

389

84

112

112

500

350

136

116

66

99

99

190

120

93

43

70

192

65

140

77

115

54

42

164

105

141

54

36

79

111

65

124

181

225

36

29

47

143

82

43

50

48

66

41

54

20

121

1 01.78

40.52

119.56

54.22

17.77

10.68

13.34

48.44

71.64

15.36

12.12

14.05

11.32

15.13

17.17

19.53

9.71

6.91

8.48

9.68

76.29

30.47

7.66

11.12

8.18

68.58

3.99

9.34

26.28

13.90

37.57

6.68

9.39

7.20

13.31

15.33

11.49

13.96

55.51

20.17

10,31

9.43

10.87

34.37

16.91

8.29

3.20

5.21

17.43

56.72

SOURCE: Copyriiht 1969 by CMP Publications, Inc., 600 community Drive, Manhasset, NY 11030. Reprinted from CornrnunicatiorwWeek with

permission.
140 ● Critical Connections: Communication for the Future

using technology to solve, not aggravate, business

problems. 163

Explaining why U.S. managers have had difficulties reaping the advantages of new technologies,

Robert Hayes and Ramchandran Jaikumar echo this

same point of view. They note:

For years, manufacturers have acquired new

equipment much in the way a family buys a new car.

Drive out the old, drive in the new, enjoy the faster,

smoother, more economical ride-and go on with

life as before. With the new technology, however,

“as before” can mean disaster. Executives are

discovering that acquiring an FMS [flexible manufacturing system] or any other advanced manufacturing system is more like replacing that old car with a

helicopter. l64

All too often, senior managers tend to view

communication technologies merely as operational

tools, or as a means for improving productivity.165

The tendency to see technology from this narrow

perspective stems in part from budgetary practices

that look for benefits within a 2-year payback

period.l66 Organizational resistance to deploying

new technologies may also emerge as traditional

titles and roles are redefined, skill-mix requirements

are broadened, and the traditional bases for measuring performance are reevaluated.167 As Anderson

has pointed out, in the future, communication

managers are going to have to become chief network

officers, and as such they will need to have a much

greater grasp of basic business objectives.l68

Compounding the problems of organizational

adjustment is the fact that taking advantage of new

technologies will require interorganizational as well

as intraorganizational changes. Turf problems are

likely to emerge insofar as technological developments serve to favor some jobs over others. For

example, one group that has benefited from the

enhanced role of information and communication in

business is the management information systems

(MIS) manager. As one industry observer describes:

The 1980s are seeing the rise of a new breed of

computer managers. The new MIS managers capitalize on the mystery surrounding the computer as an

advantage to maintain their positions. The new MIS

managers are more expansionist; they are more

willing to take risks than their data processing

predecessors.

These managers have also discovered a new and

powerful tool to further their positioning-the local

area network.l69

International Trade and Foreign

Communication Policies

Foreign trade policies and the telecommunication

policies adopted in other countries will also be a

factor determining the extent to which U.S. businesses can take advantage of the global opportunities presented by new communication technologies. 170 As described in chapter 12, many countries

throughout the world are, like the United States,

reevaluating the strategic role of communication in

their societies and, in that light, their telecommunication policies as well. One change that is likely to

have a significant impact will be the development of

a single European market by the year 1992.171

Depending heavily on their own private networks,

many international business-users have a consideral@ How~d --,“using Tel~ornm~ications Strategically,” Telecornnaum”cations, JanuaIY 1989, p. 41.

163 Howmd ~~, “Using Telecommunications Strategically,” Telecommunications, January 1989, p. 41.

164Ro~ H. Hayes and Ramchadran Jaik~ar, “Manufacturing’s Crisis: New T~hno]ogies, obsolete ~ganizations,” Harvard Bwiness Review,

September/October 1988, pp. 77-85.

IGSjo~ potdos and Fritz Ringling, “Communications As a Strategy Tool,” CommunicationsWeek, Feb. 29, 1988, p. 6; see also Michael L.

Sullivan-Trainer, ’’The Push for Proof of Information Systems Payoff,” Compurenvorh.i, Apr. 3,1989, pp. 55-57; and Stephen Boyd, “Telecom’s Quest,”

c ommunicatiomWeek, CLOSEUP, Feb. 29, 1988, pp. 14-15.

166~yd, op. cit., footnote 165? P. 50”

167Jo~ poulos ~d Fri~ Ri@ing, “swking an ~gafization~ Fit,” Comunicatiomweek, CL(3SEUP, Feb. 29, 1988, p. 18.

lm~derson, op. cit., foomote 163, p. 42.

l@@@fie, op. cit., fOOmOte 131.

170For me disc~sion, s~ bland L. Johnson, “Internatio~ Tekco~~cations Regulation,” Paula R. Newberg (cd.), New Directiorw in

Teleconunun icarforu Policy, vol. 1, Regu@o~ Policy: Telephony und Mms Media (Durham, NC: Duke University Press, 1989), pp. 92-122.

IT IFormediscussim, see HeWGo]d~rg, ‘*A U-S, Obsewer’s View of tie Gr~n paper, ’’Te/e~ic~, May 1988, pp. 1-8; see alSO Oswald H. Ganley,

International Communications and Information in the 1990s: Forces and Trends, Program on Information Resources Policy, Center for Information

Policy Researeh, Harvard University, Cambridge, MA, 1988; and N.P. Costello, “The Green Paper and the Regulatory Environment,” International

Computer Luw Adviser, vol. 3. No. 6, March 1989, pp. 13-18.
Chapter 5--Communication and Comparative Advantage in the Business Arena . 141

ble stake in the outcome of these international

developments. 172 Ideally, these big users would like

to have access to these dynamic markets and be able

to configure their networks on an international basis

to suit their own particular needs. To achieve this

they will need to have the freedom, for example, to

create their own mixture of synchronous and asynchronous data traveling at different speeds, using the

best codes and protocols.173 Moreover, American

businesses want to be able to freely choose their

customer-apparatus and value-added network services, and to have access to the public network when

their own systems are overloaded. Under present

circumstances, it is unlawful in many countries to

exercise such freedom.174 As one industry observer

has noted:

. . . there’s almost no end to the interference by

European governments. Private microwave networks, which are all but taken for granted in the U. S.,

are virtually outlawed all over Europe. Satellite

networks are O.K.—if you use the PTT’s equipment

and let the International Telecommunications Satellite Organization (Intelsat), which is jointly owned

by the U.S. and 113 countries, perform the transmission . . .

In the meantime, it can take years just to get

approval from a government phone authority such as

the Deutsche Bundespost to hook equipment such as

modems or data multiplexer to the public network. 175

American businesses will also be affected by

international trade and communication policies.

These rules and regulations are now being negotiated in a number of international fora such as the

General Agreement on Tariffs and Trade (GATT),176

the International Telegraph and Telephone Consultative Committee (CCITT),177 and the World

Administrative Telephone and Telegraph Conference (WATTC). One event that bodes well for

American business, for example, was the recent

meeting of WATTC in Melbourne, Australia, whose

purpose was to establish new rules for international

telecommunication. After intense negotiations

among the participants, a compromise was reached

that-while allowing foreign telecommunication

administrations to continue to authorize international services offered to the public—also permits

private network operators to be exempted from all

coverage through special arrangements.178

Domestic Communication Regulatory Policies

Domestic communication regulatory policies affect business users in many ways. Pricing decisions,

for example, will affect not only the costs of

purchasing services, but also decisions about

whether or not to establish a private telecommunication network. Regulatory decisions about tax policies, depreciation rates, and R&D support will affect

the rate of modernization within the public communication infrastructure, and hence the availability of

advanced services for small as well as large businesses. These and similar kinds of issues are

discussed and analyzed in detail in chapters 9

through 13.

Human Resources

Whether or not U.S. businesses will be able to

fully exploit the numerous opportunities that communication technologies now afford will depend, in

the final analysis, on the quality of its work force. As

many labor analysts have noted, skill requirements

in a knowledge-based or information society will be

much higher than ever before. At the present time, it

would appear that the prospects for meeting these

ITZFor a discussion, see John Foley, “Border Crossings,” ConvnunicatwnsWeek, CLOSEUP, Aug. 29, 1988, pP. C3-C5.

173G~geM~Ken~ck, “~ternation~Telecom use~sse+ the Tools to Add~ss Their s~cial Ntx& and Roblems,’’ComwicariomWee&, May 16,

1988, p. 21.

174~id. Fm Cxmple, at present, the CCITT D.~rie~ r~ommendations on tie~ of internation~ lea~ circuits are very It3StriCtiVt5, prWeIl@ he

competitive provision of many services. For a discussion, see John J. Keller, “A Scramble for Global Networks,” Business Week, Mar. 21, 1988, pp.

140-148.

l?51bid., pp. 143, 146.

1?~A~ is ~wn~y mov~g mead t. develop a ~~t ag=ment on trade in ~rvices. For such an agr~ment to act~ly materialize, however, may

IXX@re a substantial revision of existing national and international regulatory practices. One question that negotiators will have to wrestle with, for

example, is which services and facilities might reasonably be designated national monopolies. See Graham Finnie, “GATT Moves Center Stage,”

Teleco??WUUliCdO?lS, March 1989, P. 11.

177s= Graham Finnie, “which way Next for the CCITT’?” Telecornmunzcations, November 1988, pp. 77-79.

17@.RuWIl piv, “WA~CA~eson Ne~Tel~om Rules,” Te/e~o_~m”c~ions, Janu~ 1989, pp. 19-20. S~~soMich~l Nugent, ’’WATTC-88:

Global Harmonization, or Entirely New International Law,” Telemutics, February 1988, pp. 1-6; Graham Finnie, “The World According to WA’ITC,”

Telecomrnunications, November 1988, pp. 73, 88; and Parker W. Borg, “On the Eve of WAITC-the U.S. View,” International Computer L.uw Adviser,

November 1988, vol. 3, No. 2, pp. 11-14.
142 ● Critical Connections: Communication for the Future

requirements are quite slim.179 In a recent study of

young adults, the National Assessment of Educational Progress (NAEP) found, for example, that

while most of those surveyed were not illiterate

neither were they literate,180 in that they were not

equipped to handle complex tasks. According to

NAEP’s findings:

The overwhelming majority of America’s young

adults are able to use printed information to accomplish many tasks that are either routine or uncomplicated. It is distressing, however, that relatively small

proportions of young adults are estimated to be

proficient at levels characterized by the more moderate or relatively complex tasks.181

Looking specifically at the match between jobs

and skill levels, Workforce 2000, prepared by the

Hudson Institute, draws similar conclusions. It

notes:

In 1986, minorities accounted for about 21 percent

of the jobs in the Americanworkforceof115 million.

Between 1986 and the year 2000, the number of jobs

will increase by 21 million—and an astonishing 57

percent of those additional jobs will be filled by

minorities. Yet if present trends continue, a disproportionate number of those workers will lack the

skills needed to do the job properly. Put another way,

unskilled minorities are a growing fraction of the

workforce and unless their abilities are upgraded, the

nation’s overall skill level will not be sufficient for

tomorrow’s economy.182

Businesses are also faced, at least in the short run,

with a dearth of telecommunication talent.183 Before

divestiture, firms looked to AT&T to provide

whatever limited telecommunication expertise they

required. Today, however, their need for expertise is

much greater, and the technologies they use are

much more complex. Firms such as Westinghouse

Electric, in Pittsburgh, PA, for example, have a real

mix of facilities to manage, including T1 lines from

four different carriers, a variety of multiplexer,

channel banks, and AT&T 85 switches.184 To meet

their staffing needs, many companies have had to

establish their own training programs. And the

International Communications Association (ICA),

which 5 years ago spent $50,000 annually in support

of telecommunication education, today spends

$305,000, which it distributes to telecommunication

programs in 17 universities.185

179For me disc~i~, see “H~an capit~: The Decline of America’s Work Force,” Business Week, SpeciaJ Report, Sept. 19, 1988, pp. 1~-141.

lwN~p defm~ literacy as: “using printed and written information to function in society, to achieve one’s goals, and to develop one’s knowledge

and potential.” Irwin S. Kirsch and Ann Jungeblut, Literacy: Projiles of Americans Young Adufts, Report No. 16-PL- 02, p. 3, n.d.

lglIbid., p. 6.

1sZw..~@rce2@0, HudMn Institute, 1988, as quoted in Arnold Packer, “Retooling the American Worker,” The Wahington Post, JldY 10, 1988, p.

C3.

183 David Strops, f~Tough Sewch for Tel~om T~ent,’’D~~tion, December 1987, pp. 65-72. See @I Glen Rifiin, “Facing UP to Hire st~es>”

Computerworld, Feb. 13, 1989, p. 13.

l~lbid., p. 66.

185rbid.
Chapter 6

Communication and the

Democratic Process
CONTENTS

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ● ...’”. 145

THE POLITICAL REALM AND THE ROLEO F COMMUNICATION . . . . . . . . . . . . . 145

NEW COMMUNICATION TECHNOLOGIES AND THE CHANGING

ROLE OF GATEKEEPERS IN HISTORICAL PERSPECTIVE . . . . . . . . . . . . . . . . . . . 147

KEY POLITICAL ACTIVITIES AND ACTORS .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150

SOCIAL/POLITICAL CONTEXT IN WHICH NEW TECHNOLOGIES

ARE EMERGING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ~ . ~ . . . . . . . . . +. . . . . . . . . ● + ● ~. . 151

Declining Political Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +....... .....” 151

Blurring of the Boundaries Between Public Affairs and Entertainment . . . . . . . . . +.. . 152

Increase in the Number and Complexity of the Demands Being Placed

on Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......’. ..+....~..”+.’. 155

Erosion of National Sovereignty in the Context of an Increasingly Global Economy . 156

IMPACT OF NEW COMMUNICATION TECHNOLOGIES ON

POLITICAL ACTIVITIES .. ................+.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

Maintaining National Security and Sovereignty .. .. . .. .. .. +.. . . . . . . . . . . . . . . . . . . 158

Maintaining Internal Security and Social Welfare . . . . . . . . . . . . .. . . . ... ..+. . . . . . . . 163

Providing for Openness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .+. . . . . . . . . . . .166

Providing for Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ... ... .+...... 170

Providing for Representation . .. . . ... +.. . . . . . . . . . . + . . . . ..+...... . . . . . . . . . . . . . . . 175

Box

Box Page

6-A. A Remote Sensing Satellite System.. .. +. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

Figures

Figure Page

6-1. Americans’ Primary Media Sources of News . . . . . . . . . . . . . . . . . . . . . . . . .. .....+. 154

6-2. Which Media Report Is Most Credible? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

6-3. Gallup Poll Results on Government Involvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

6-4. Development of Custom Targeting Database . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168

Tables

Table Page

6-1. Relationships Between Political Activities and Information Gatekeepers. +.+ . . . . 151

6-2. Turnout of Registered Voters in 24 Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

6-3. The Main Features of the ’’New’’ Political Economy in Post-Industrial Society . . . 156

6-4. Political Advertising on Television . . . . . . . . . . . . . . . . . . .. .. . . .. .+ . . . . . . . . . . . . . . . 171
Chapter 6

Communication and the Democratic Process

INTRODUCTION

Political theory holds that political organization is

limited by prevailing modes of transportation and

communication and that it changes with improvements in these modes. Before the age of modem

communication and transportation, political philosophers-ranging from Plato and Aristotle to Rousseau and Montesquieu—agreed that size and population served to limit democracy.l Based on the

model of the Greek city-states, the ideal size for a

democracy was a unit “so small that any citizen

could travel on foot from the most remote point in a

city-state to its political center and return in one

day.”2 Similarly, the population of a democracy had

to be small and contained enough to allow interaction among its members. A polity so configured

provided not only for popular representation, but

also for effective government administration.

Given this relationship between the size and

configuration of a community, its transportation and

communication infrastructure, and its political organization, it is clear why the growth and expansion

of the United States went hand in hand with the

advancement and deployment of communication

and information technologies. As James Beniger has

pointed out, the advancement and application of

these technologies were essential in providing the

degree of control necessary for coping with the

organizational complexity and scale of operation to

which the industrial revolution gave rise.3

Today, the United States is taking its place in a

global economy--one that is increasingly information-based. Just as the shift from an agricultural to an

industrial society posed a number of challenges for

the U.S. Government, so too will this most recent

development. These major structural changes will

give rise to problems of representation as well as

problems of control.

Given the centrality of communication to all

political activities, how the United States responds

to such problems of governance will depend, in part,

on the evolution of the U.S. communication infrastructure, and on the rules that establish its development and use. This chapter will examine some of the

political challenges that might arise and discuss how

new communication technologies might be employed to address them. To this end, it will:

characterize the political realm and describe the

role of communication in it,

discuss the past role of communication in the

American political system,

identify key political activities and actors,

describe the political context in which the new

technologies are emerging, and

identify and analyze the opportunities afforded

by new technologies and the major factors

determining the political outcomes that these

technologies might have.

THE POLITICAL REALM AND

THE ROLE OF

COMMUNICATION

The polity is the realm of power. It is the area of

social activity where disputes are resolved and social

justice is defined, and where resources and values

are allocated in accordance with the general idea of

justice. The basic value that maintains the polity is

“legitimacy“—the general adherence of the people

to the conception of justice embodied in the society’s traditions or constitution, and acknowledgment of the authority that governs on its behalf.4 In

the political realm, change comes about somewhat

haphazardly through the competition for power and

influence. In a democratic polity, the means of

bringing about change are participation and persuasion; individuals and groups seek to gain access to

resources and values by shaping attitudes and beliefs

about what constitutes justice. To be effective, they

must have the right to obtain information as well as

the right to distribute it.

ljme~ wCwey, CoMWlcation as cul~re: Essays on Media and Society (Boston, MA: Unwin Hyman, 1989)> P. 3

21bid.

3Jaes R. Benlger, T~ co~rol Re~olUrion: Technolo~ ad the Eco~mic Origim of the l~ormaf~n Sociely (Cambridge, w: Harvmd hlVe13ity

Press, 1986).

dDanie] Bell, The C’~~ral contradictions of Capitalism (New York, NY: Basic Books, 1976), P. 1.

–145 –
146 ● Critical Connections: Communication for the Future

Communication and information pervade political life. Without them there could be no Nation, for

it is through the process of communication that

people first develop a sense of community and a

shared set of values that legitimize political authority.5 By magnifying and amplifying some actions,

the communication process distinguishes between

what is a private act and what is a public affair. It

organizes what appear to be random activities to

show how individuals and groups are related to one

another in the pursuit of power, providing a roadmap

for individuals who want to influence the course of

political events.6 Citizens rely on the communication process to gather information, to identify

like-minded people, to organize their forces, and to

articulate their political preferences. Furthermore,

because it generates a common fund of knowledge

and information, the communication system facilitates productive and rational debate. Without some

knowledge and understanding of how others are

informed and what they believe, individuals could

not make reasoned and sensible arguments and

decisions.7

The communication process also provides guidance to political leaders. Because communication

channels flow in two directions, communication

serves not only to inform citizens about political

events; it also provides feedback to political leaders

about the values and attitudes of their constituents.

Political activities not only depend on communication; they also require constraints on the manner in

which communication occurs. Thus, those in powerful positions have always attempted to control, or

even restrict, access to communication paths.8 As

Donohue et al. have noted:

When man devised the first rudimentary form of

mass communication centuries ago, he immediately

developed ways of controlling it. Printer, king,

teacher and merchant were almost equally inventive

in contriving ways to bring information under

control. Their diligence arose from man’s historic

recognition of a fundamental social principle:

knowledge is basic to social power.9

While limitations on communication may not

accord with some characterizations of democracy,

many political theorists have argued, in fact, that

some constraints on participation are necessary in

order to preserve democracy. Aristotle, for example,

favored “constitutional government” but was opposed to “direct democracy,” which he called

perverted because it failed to protect the rights and

interests of the rninority.10 James Madison made

much the same case in Federalist Paper 10, when he

argued on behalf of “a government in which a

scheme of representation takes place.” Such concerns have also been echoed more recently by social

scientists such as Joseph Schumpeter and B.R.

Berelson. According to Schumpeter, for example:

“The electoral mass is incapable of action other than

a stampede.”ll Similarly, Berelson contends that,

given the wide variety of citizens and their values,

the range of issues on which public choice is allowed

must be limited, if political democracy is to survive.12

Democracy depends, then, on the establishment of

a delicate balance between “too little” and “too

much” political communication. In negotiating this

balance, “communication gatekeepers” play a criti51@l Deutsch, N~ional&n and Sociaf Commum”cation (New York, NY: Free mSS, 1963).

6LWian w. me (~.), co~nzcatiom ad Po/itica/ Dev&pme~, Studies in Political Development (Princeton, NJ: princeton University press?

1%5), p. 6.

71bid.

8Such ~onmol cm ~ ~ac~ ~ tie &-@m@s of r~ord~ history. F~ ex~p~e, in 213 B. C., the chine= Emwror b~ed ~] the books in his kingdom

and buried alive every scholar he suspected of having memorized them. John H. Gibbons, “Future Directions for Information Technology Policy,”

Leaders, February/March 1987, vol. 10, No. 1, p. 84. For more modern examples, see Ben H. Bagdikian, The I#ormation Machines: Their impact on

Men and the Media (New York, NY: Harper and Row Publishers, 1971); Ithiel de Sola Pool, Technologies ofFreedorn (Cambridge, MA: The Belknap

Press of Harvard University Press, 1983); and Brian Winston, Misundersmnding Media (Cambridge, MA: Harvard University Press, 1986). For a

theoretical discussion of why restricting access to communication paths is important, see Martha Feldman and James March, “Information in

Organizations as Signal and Symbol,” Administrative Science Quarterfy, 1981, vol. 26, pp. 171-186.

9G~rge A, M*W, Phillip J, Tichenor, and Cltice N, olien, “Gatekeeping: Mass Media Systems and hfOMtatiOn Control,” F. Ger~d Kline

and Phillip J. Tichenor (eds.), Currenr Perspectives in Mass Commun ication Research (Beverly Hills, CA: Sage Publications, 1972).

IOAristOt/e in Twenfy-Three Volumes, XXI Politics, translated by H. Rackham (Imndon: Heinemann, 1977), Book III, P. 207.

llJ~ph A. ~humpter, capitalism, Socialism and Democracy (New York, NY: Harper Twchbooks, 1950), P. 283.

IZB.R. ~~lson, p.F. L~~sfeld, and W.N. McPhee, “Democratic Theory and ~ocratic Ractice,” Voting (Chicago, IL: University of Chicago

Press, 1954).
Chapter 6--Communication and the Democratic Process . 147

cal role.13 Gatekeepers are the individuals or groups

in a society who execute decisions about the

formulation, exchange, and interpretation of information and knowledge. A gatekeeper might include,

for example, a parliamentary representative, a government bureaucrat, or a member of the press. As

Donohue et al. have noted, gatekeepers have an

“immense potential for developing power over other

human lives.”14 The gatekeeper decides who has

access to communication pathways, and thus who

can actually play political roles and place issues on

the political agenda.

How, and to whom, the role of communication

gatekeeper is assigned varies across cultures, in

different historical contexts, and in different

organizational settings. Technological developments can also determine where and how gatekeeping takes place, and who will assume this role.

For example, in western societies, before the age

of print, the church played a major role in controlling

access to and the distribution of knowledge, as

Umberto Eco’s novel, The Name of the Rose,15 

so

intriguingly illustrates. With the development of

print technology, a new system of information

control was established, namely copyright, and new

communication gatekeepers were required. Seeking

to end the dissemination of heretical and seditious

literature, while at the same time continuing to profit

from the burgeoning printing trade, the British

Government assigned publishers the role of gatekeeping. In exchange for the publishers’ agreement

to enforce the censorship laws, the government

granted the publishers’ guild, known as the Stationers, a monopoly right to print, publish, and sell their

works. 16

In the United States, the role of communication

gatekeeping, and the rules governing the flow of

information, were set early in American history in

the first amendment to the Constitution, which

protects freedom of speech, the freedom of the press,

and the right of people to peaceably assemble. *7

Although these freedoms are not absolute and must

be balanced against other political and social values,

freedom of expression, especially for political purposes, has been recognized by the Supreme Court as

being in a “preferred position.”18

NEW COMMUNICATION

TECHNOLOGIES AND THE

CHANGING ROLE OF

GATEKEEPERS IN HISTORICAL

PERSPECTIVE

Given the importance of communication to political affairs, is is not surprising that as new technologies provided new communication pathways, policymakers had to reconsider the rules for access and

gatekeeping. Before considering what policies

might be appropriate for the new communication

technologies, it is useful, therefore, to begin by

examining how new technologies historically have

affected access and gatekeeping.

The issue of control over access to communication pathways was already apparent during the

colonial period, when, as in England, the British

Government manned the gateways to communication paths. The working out of this issue during the

course of early U.S. history illustrates a long,

historical appreciation of the political relevance of

communication policy.

Newspapers were plentiful and very important in

the daily life of the colonies. Describing their central

role, the Rev. Samuel Miller wrote in 1785:

A spectacle never before displayed among men,

and even yet without a parallel on Earth. It is a

spectacle, not of the learned and the wealthy only,

but of the great body of the people; even a large

portion of that class of the community which is

lame tem “ga~k~~r” is borrowed from the field of jo~n~ism, For a discussion, see D.M. White, “The Gatekeeper: A Case Study in the Sektion

of News,” Journalism Quarterly, vol. 27, Fall 1950, pp. 383-390.

14~ohue et al., op. cit., footnote 9.

15u~~ ~o, The N- o~the Rose, translated by William Weaver (New York, NY: Harcourt Brace, 1983).

lbLyman Ray p-son, co~rig~ in Historic~ Perspective (Nashville, TN: Vanderbilt University Press, 1968), ch. 4.

IT~= fi~~~at the cm of what Thomm ~erson terns “the system of fr~om of expression.” For a disc~sion, we Thomas I. Emerson,

The System of Freedom of Expression (New York, NY: Vintage Books, 1970). For a good review of the rules and regulations that establish the rights

and responsibilities of the press as gatekeeper, see Doris Graber, Mass Media and American Pofirics (Washington, DC: CQ Press, 1984), ch. 2.

18* JustiW Stme’s fm~ote 4 in us. “. C’aroliW ~rodWt~, co, 304 U-S. 144 (1938), Some constitution~ schol~s, most prominently Alexander

Meiklcjohn, have argued that the first amendment is designed to give absolute protection to speech related to self-government. He argues that: “The

primary purpose of the First Amendment is, then, that all the citizens shatl, so far as possible, understand the issues which bear upon our common life.”

See Alexander Meiklejohn, Free Speech and Its Relation to Se~-Government (New York, NY: Harper & Bros., 1948), pp. 88-89.
148 ● Critical Connections: Communication for the Future

destined to daily labor, having free and constant

access to public prints, receiving regular information

of every occurrence, attending to the course of

political affairs, discussing public measures, and

having thus presented to them constant excitements

to the acquisition of knowledge, and continual

means of obtaining it. Never, it may be safely

asserted, was the number of political journals so

great in proportion to the population of a country as

at present in ours. Never were they, all things

considered, so cheap, so universally diffused, and so

easy of access.19

Although extremely popular and of high quality,

colonial newpapers were decidedly conservative in

their political outlook. This conservatism was due

not only to the threats of censorship and libel action,

but also to the fact that, as the printers’ largest

customers, the colonial governments basically subsidized the very first newspapers.20

British concerns about the distribution of seditious literature in the colonies were not unfounded,

however. Newspapers and pamphlets served as the

primary vehicles for public protest and revolt,

providing a network of political communication that

was crucial to revolutionary activities. And, with the

onset of the revolution, printers, functioning as

editors and publishers, took over the gatekeeping

role. 21 In fact, it was in their shops that many a

political story and idea were exchanged. It is

interesting to note that, although much of the

political opposition to British rule was directed at

British restrictions on communication paths within

the Colonies,** these new gatekeepers were as

adamant as their predecessors in suppressing dissident ideas.23

This appreciation of the power of the pen, together

with their concerns about potential opposition, may

account for the reluctance of the Constitution’s

authors to have journalists interpret the events of the

Constitutional Convention for the public. For even

though they prohibited newspaper coverage of the

proceedings, they made effective use of newspapers

and other communication paths to build support for

the ratification of the Constitution. Disguised as the

columnist Publius, Alexander Hamilton, John Jay,

and James Madison wrote a series of newspaper

articles on behalf of the Constitution. These Federalist Papers proved critical in generating public

understanding of, and support for, the new form of

government.

A more permanent indication of the Founders’

recognition of the political role of communication

can be found, of course, in the Constitution’s

first-amendment provisions, protecting freedom of

speech and press. Reflecting a distrust of government, and an appreciation for the importance of open

communication to popular sovereignty and to maintaining a pluralistic society, James Madison, for

example, wrote:

Popular government without popular information,

or the means of acquiring it, is but a prologue to a

farce or tragedy, or perhaps both. Knowledge will

forever govern ignorance, and a people who mean to

be their own governors must arm themselves with

the power which knowledge gives.24

The Founders also fostered the development of

the post system, recognizing its importance in

developing the widespread public exchange of

information necessary to create a sense of nationhood. Thus, as early as 1792, both political parties

agreed that the government should subsidize newspapers. Also recognizing their own postal needs to

communicate with constituents, the Members of the

First Continental Congress granted themselves free

postage. This franking privilege was continued after

the Constitution was adopted.25

With the development of different political

groups in the 19th century, political parties began to

19As quotd in D~el J. Boorstin, The Americans: The Colonial Experience (New York, NY: Vintage Ress. 1958), P. S*T.

Wbid., pp. 233-234.

21s= Rich~d Buel, Jrc, “Fr~dom of the ~es~ in Revolutionary America: The Evolution of Li~rt~afism, 1760-1820,’” Bernard Bailyn and John

B. Hench (eds.), The Press and the American Revolution (Worcester, MA: American Antiquarian Society, 1980), pp. 59-97; and Frank Luther Mott,

American Journalism (New York, NY: The Macmillan Co., 1941).

22E4-JWM Emery, The press and America (Englewood Cliffs, NJ: Prentice-Hall hc., 1962).

23 BWstin, op. cit., footnote 19.

Zdsaul K, padover (cd.), The Complete Madison: His Basic Writings (Millwood, NY: Kraus Reprint, 1953), P. 337.

Zi]mide congress (W=tingon, DC: Congresslond Quarterly, 1979), p. 127. Franking still provides an important means for Mem~rs of Congress

to communicate with constituents, as reflected by the fact that on July 21, 1989, the House Appropriations Committee, Subcommittee on Ugislative

Appropriations, approved areeord $134 million for 1990 for mailings by Members of Congress. “Panel Votes Record $134 Million for Growing House

Mailings,” The Wurhingfon Post, July 22, 1989, p. A2.
Chapter 6--Communication and the Democratic Process ● 149

serve as gatekeepers, linking the public and the

government. Party newspapers became a:

. . . major force for factional or party cohesion,

communicating partisan information and views from

the centers of power to the outlying communities.26

At the same time, through postage-free printers’

exchanges, the party papers received political information from States and localities. Thus, their editors

helped to synthesize a national political community

that transcended local orientations.27 Print communication remained relatively open throughout the

1800s, largely because of government efforts to

ensure access. Subsidized postage rates allowed

readers to subscribe to distant publications. Any

town with a newspaper and post office could become

a source of news for the rest of the Nation.

Although the telegraph dramatically increased

people’s ability to communicate quickly across the

country, its high cost restricted access,28 and thus its

primary impact on the public was through the

mediation of the press as gatekeepers.29 Nevertheless, newspaper-owners feared that the telegraph

companies themselves might enter the news business, thus usurping the owners’ gatekeeping role.

And, in fact, a new group-telegraph reporters--

tried to establish itself as a gatekeeper, selling news

to newspapers. However, within a short time these

reporters joined the Associated Press (AP).30 The

telegraph did alter newsgathering and dissemination, however, and press associations such as AP

were formed to share the costs of these activities.

By the late 1800s, some believed that AP and

Western Union had become too powerful as gatekeepers, exploiting their monopolies to make it

difficult for new papers and journals to get started.

Congress considered over 70 bills for reforming the

telegraph system. One would have given the government ownership and control of the telegraph system,

while another would have subsidized a competitor of

AP and Western Union. With the decline of the

Populist movement, however, calls for telegraph

reform diminished in the face of strong lobbying

from Western Union.31

Although telephones increased people’s opportunities to communicate with one another in an

informal and unmediated way, their expense limited

widespread use for political purposes. At the turn of

the century, telephones cost $200 a year, a sum well

beyond the means of most workers.32

Politicians gradually came to see telephones as

being central to their activities. In 1878, Congress

set up the first telephones in Washington to connect

the Public Printer’s Office with the Capitol so that

members could order extra copies of their speeches.

William McKinley was the first President who was

comfortable with the telephone, using it in his 1896

campaign and later in the White House. With the

deployment of telephones in more and more homes,

they began to be used to canvass voters. By 1910,

one commentator noted: “In apolitical campaign the

telephone is indispensable.”33

Radio initially provided a local or regional path of

communication. However, it soon became more

national through the use of telephone networks and

commercial advertising. Throughout the 1930s and

1940s, commercial radio was the primary communication path by which politicians and national leaders

could reach the Nation. President Roosevelt used his

“fireside chats” to lift spirits during the depression

and to rally Americans behind the war effort.

Early broadcasting law tried to ensure equal

service and prevent a few urban centers from

dominating radio. In an attempt to lessen the power

of commercial radio as the gatekeeper for reaching

zGWilliarn N. Chamkrs, Politica/ Parties in a New Nation (New York, NY: Oxford University Press, 1%3), p. 42. Chambers credits the press with

forging national links among like-minded partisan factions.

zTRichard B. Kielbowicz, “Newsgathering by Printers’ Exchanges Before the Telegraph,” Journufism History, VO1. g, Summer 1982. PP. 42-48; and

Samuel Kernell, “The Early Nationalization of Political News in America,’’Studies in American Political Development (New Haven, CT: Yale University

Press, 1986), pp. 255-278.

28~ Ewop, Whm the telegaph was a government monopoly supervis~ by the postal authorities, pple made greater USC? Of it. hl the UnitC$d StateS,

if Samuel Morse had had his way, the telegraph would have become a government monopoly. Congress did subsidize the first experimental line, but

decided not to buy the system, despite the recommendations of the House Ways and Means Committee (1845) and the postmaster general (1845, 1846).

See Daniel J. Czitrom, Media and the American Mind (Chapel Hill, NC: University of North Carolina Press, 1982), p. 22.

z%id., p. 14.

s%id., pp. 1617.

JIIbid., pp. 28-29.

321~el de Sola p~l, ~oreca~ring tfi Te/ep~~: A Retrospective Tech~lOgyAssessment (Ncxwood, NJ: Ablex ~blisting CO., 1983), p. 82.

33AS quo~ in ibid., p. 79.
150 . Critical Connections: Communication for the Future

the Nation, the Wagner-Hatfield amendment, proposed in 1934, would have required the Federal

Communications Commission (FCC) to broaden

radio station ownership. The amendment called for

the redistribution of all broadcasting channels and an

allotment of one-fourth of all the radio broadcasting

facilities to education, religious, labor, and other

nonprofit associations. The amendment was defeated in the face of intense lobbying by commercial

broadcasters. 34

Television’s critical role as a gatekeeper for

communication in the political realm was recognized as early as 1948 when the Republican,

Democratic, and Progressive parties all held their

conventions in Philadelphia to take advantage of the

coaxial cable, which allowed them to broadcast the

proceedings over 4 networks to 18 stations in 9

cities. 35 The first daily network newscasts began

later that year. Since that time, TV has become the

most important path for national political communication. Network television coverage, as well as its

production, of national political events has had a

profound influence on the course of politics. As

Christopher J. Matthews, the principal assistant to

former House Speaker Thomas P. O’Neill, has

described these changes:

At a dizzying pace, the TV news networks have

absorbed many of the democratic functions traditionally held by political parties: the elevation of key

public issues, the promotions of new leaders, the

division of executive and legislative authority, and

the constitution of political opposition.36

As the role of gatekeeper of political communication was shifted from the local newspaper proprietor,

to the legislative representative, to the political party

leader, to the television news analyst, politics in

America was transformed in a number of significant

ways. Local issues were superseded by national

ones, while the production of political events began

to take precedence over political debate. Changes on

this order are also likely to occur in the future, given

the widespread deployment of the new communication technologies. In fact, as described below, many

such changes are already under way.

As new communication technologies come to

play an enhanced role in the political realm, the key

political questions that emerge are:

. Who will assume the gatekeeping role with

respect to new communication technologies?

. What values and rules will govern the gatekeeper’s behavior?

. Where will the balance between “too little” and

“too much” information be set? and

. What will be the consequences for governance?

As Ithiel de Sola Pool has noted in this regard:

The important point about the way in which

electronic and mass media operate is the fact that, as

new sources of information or belief, they create

counterweights to established authorities. Simultaneous radio coverage of war, a moon walk or

whatever absorbs and fascinates the mass audience

directly, cuts out traditional local purveyors of

information and interpretation. It is not the imam or

the chief of state who tells the people what happened

and what it means. The people were there, along with

the camera crew. The broadening of the arena of

action transfers authority from the village bigwig

returned from a visit to the district town, to nouveau

powerful national leaders and eventually beyond

them to world figures.37

KEY POLITICAL ACTIVITIES

AND ACTORS

Derived from the rich philosophical and cultural

roots of the American past, political activities in the

United States often call for different, and occasionally conflicting, values and role requirements. One

philosophical tradition relates to the maintenance

and operation of the minimal requirements of a

government, and stresses the need for internal

stability, integrity of the borders, and national

sovereignty. A second fundamental American tradition is that of ensuring a democratic system—that is,

providing for openness, participation, and represensqD~iel J. Cziwom, “GOaIS of the U.S. Communication System: An Historical perspative,” OTA contractor report, September 1987, p. 32.

ssReuven Fra~, “1948: Live ., . From Philadelphia . . . It’sthe National Conventions, “The New York Times Magazine, Apr. 17,1988, pp. 37,62-65.

The networks’ motivations were somewhat less than public-spirited, as gavel-to-gavel coverage was cheaper than carrying entertairunent from studios,

and TV-set manufactttrers, who were also owners of two of the networks, saw this as a way of increasing sales. Sponsorship of the gavel-to-gavel coverage

of three political conventions came to less than $250,000. Life Magazine was the sole sponsor of NBC’s coverage of all three conventions.

36AS cited in Evere~ CM]] Ladd, The American Polio: The People and Their Government, 3d ed. (New York, NY: W.W. Norton & CO., 1$W, p.

17.

sTIthiel de Sola pool, “Dir~t-Broadcast Satellites and Ctdturtd Integrity,” Arthur Asa Berger (cd.), Televiswn in Sociery (New Brunswick, NJ:

Transaction Books, 1987), p. 231.
Chapter 6--Communication and the Democratic Process ● 151

Table 6-l-Relationships Between Political

Activities and Information Gatekeepers

Political activity Information gatekeepers

National security/ President; Congress; State

national sovereignty Department; foreign

governments

internal security/ Federal agencies, both

social welfare law enforcement and public

assistance; Congress;

State & local governments

Providing for openness Congress; news media;

interest groups; Federal

agencies

Providing for participation Political parties; media;

Congress; Interest groups;

political consultants

Providing for representation Political consultants; interest

groups: electorate; parties

SOURCE: Offics of Tsehnology Assessment, 1989.

tation. A third philosophical tradition, which stems

from the American liberal heritage, requires government to protect individual rights and to preserve a

free-market system. And a fourth, and more recent,

tradition commits the government to providing for

the social welfare of the people, requiring government to devise and effectively administer or implement public programs.38

Drawing on these traditions, five basic political

activities are identified for analysis in this chapter:

1. maintaining national sovereignty and national

security,

2. maintaining internal security and social welfare,

3. providing for openness,

4. providing for participation, and

5. providing for representation.

Communication is essential to all five, although

the gatekeepers of information and communication

pathways may differ in each case. For example, the

President and the Departments of State and Defense

have long been the primary gatekeepers over the

flow of messages between the United States and

officials in other countries. But in providing for

openness, the traditional press--daily newspapers,

radio, TV, and national magazines-have played the

primary role. In political campaigns, political parties

have been the most important gatekeepers for the

flow of messages.

The relationships between political activities and

information gatekeepers are laid out in table 6-1.

Together, these activities and actors constitute much

of the political realm. By examining how new

communication and information technologies are

affecting these relationships, it is possible to draw a

rather comprehensive picture of what the future

impact of these technologies on American politics

might be.

SOCIAL/POLITICAL CONTEXT IN

WHICH NEW TECHNOLOGIES

ARE EMERGING

The values and rules about access and gatekeeping change in response to the development of new

communication technologies and changing communication pathways. They are also affected by the

societal context in which political activities are

carried out. Thus, to understand the impact of new

communication technologies on the political realm,

it is necessary to look first at the context in which

these technologies are being developed and deployed.

Declining Political Participation

One development that has colored the perceptions

of, and expectations about, communication technologies in politics is the general decline of political

participation in the United States over the past

several years. Because technologies can offer new

modes of participation, they have sometimes been

viewed as a potential means of reengaging the public

in political affairs.39 On the other hand, some

technologies, such as television, have been faulted

for being the major contribute to the decline in

public activism.40

Political participation can entail any number of

activities ranging from keeping abreast of public

affairs to running for public office. However,

regardless of the activity involved, it is clear that

political participation in the United States has been

on the decline. Looking at the minimum level of

38For -e&ScuSSiom of ~encan “~ue~, ~G~ Willis, E@~”ning A~rica The Federalist p~er~ (Garden City, NY: Doubleday, 1981);

Robert N. Bellah et al., Habits of the Heart: Individualism and Co~”tment in American L#e (Berkeley, CA: University of California Press, 1985); and

Louis Hartz, The Liberal Tradition in America (New York, NY: Harcourt, Brace and Co., 1955).

39* Richard Hollander, VMeodemocracy (Mt. Airy, MD: Lomond Publications, kC.. 1985).

~Sw A-tin Ramey, C~nnel~ ~fpower The Iwact of Television on American Politics (New York, NY: Basic B~ks~ 1983).
152 . Critical Connections: Communication for the Future

participation--that of political awareness--we see,

for example, that of the adults polled by the Roper

Organization in 1982, only one-third had even a

rough idea of the size of the current Federal deficit.41

The results are similar with respect to voting.

Despite the fact that most of the institutional barriers

to voting have been removed, the percentage of

those voting in elections has actually been falling.

For example, in the 1984 presidential election only

53 percent of those eligible voted; in 1988, the figure

was only 51 percent. Voting for seats in the House

of Representatives has been even lower, with only

38 percent of the voting-age public participating in

1986. 42 These low voting levels are even more

striking when compared to voting levels in other

advanced industrialized countries (see table 6-2).

Political analysts have offered a variety of explanations-some of them contradictory-for the low

level of political participation in the United States.

Some say that low participation reflects a general

feeling that voting provides no real payoff. According to Ruy Teixeira, for example, “quite simply, for

many Americans voting just doesn’t seem worth the

bother.”43 Similarly, but with a slightly different

twist, Seymour Martin Lipset has attributed poor

turnout to the stability of the system, and to the

public’s confidence that nothing too monumental, or

extreme, will occur. 44 Others have explained the

decline of public interest in terms of a loss of

confidence in the system,45 while still others believe

that the need to actively register to vote has served

to inhibit the uneducated and the poor.46

Although there are no single or definitive explanations of why many Americans do not vote or

become active politically, there are some clues to

suggest why people do. Correlations of socioeconomic factors with voting behavior show that

education and affluence are the most important

explanatory variables, with strong religious and

moral beliefs also playing a role in encouraging

participation. 47 Considered in light of the explanations cited above about nonvoting, these correlations

are not surprising. The more educated and affluent

people are, the more likely they are to feel they have

something important at stake and can make a

difference.

These observations suggest that the extent to

which new communication technologies serve to

foster or to discourage political participation will

depend in large measure on whether or not they

provide people with a greater sense of empowerment. If they are difficult to use or hard to come by,

people will be discouraged and may be even less

willing to take political initiative. On the other hand,

if new technologies are employed to provide people

with a greater sense of control over their lives, they

could serve to generate an interest in politics.

Blurring of the Boundaries Between Public

Affairs and Entertainment

News has been treated as an economic commodity

since the days of the telegraph.48 However, the

economic value of public affairs information was

greatly enhanced by the development of more

technically advanced ways to package and process

it. This increase in economic value has been

accompanied by a blurring of the boundaries between what constitutes entertainment and what

constitutes public affairs.

Nowhere is this development more evident than in

the televised, political, media event. With television,

in fact, some would say that politics has become a

dlA~ ~it~ ~ ~d, ~. cit., fm~ote 36, ~. 342. s= ~so Norm~ ~stein, Andrew Kohut, ad L~McC~y, The people, the Press, ~nd politics:

The Times Mirror Study of the American Electorate (New York, NY: Addison-Wesley Publishing Co. Inc., 1988), p. 54. In this survey, participants were

asked: 1) whether they knew that the U.S. Government was in support of the opposition in Nicaragua; 2) whether there had been an increase in the Federal

budget deficit over the last 5 years; and 3) whether the White House Chief of Staff was Howard Baker. Although 76 percent of those questioned said

that they were aware of political issues, only 26 percent were able to correctly answer all three questions, while 32 percent were able to answer two out

of three, and 42 percent could give only one or no correct answers.

42LWICj, op. cit., footnote 36, p. 417.

43RUY A. Te~eira, “will& Red Nonvoter p]ea~ Stand up?” Public Opinion, vol. 11, No. 2, J~Y/August 1988! pp. 42? ‘.

44seymoW Mm LiWt, political Man (Garden City, NY: Doubleday. 19@)> P. 181.

45s=, fw Cxmple, CCW End of American Exceptionalism, “ The Public Interest, Fall 1975, pp. 197-198.

46* Fr~ces Fox Piven, Why Americans Don’t Vote (New York, NY: PWltheOn, 1988).

47se ~~in et al., op. cit., footnote 41, pp. 2-5.

4S~ tie late 187(J~, when tie AsWclat~ ~ess w= criticized for ~king control, it Ngud that col]~ting news WM a business just like my other.

As the AP general agent, James W. Simonton, said in 1879: “I claim that there is a property in news, and that property is created by the fact of our

collecting it and concentrating it.” As cited in Czitrom, op. cit., footnote 28, p. 27.
Chapter 6-Communication and the Democratic Process ● 153

Table 6-2--Turnout of Registered Voters in 24 Countries

Vote as a percentage Compulsion Automatic

Country of registered voters penalties a

registration

Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . 94.6 Yes Yes

Australia . . . . . . . . . . . . . . . . . . . . . . . . . . 94.5 Yes No

Austria . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91.6 No(some) Yes

Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . 90.7 No Yes

Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90.4 Yes Yes

Iceland . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89.3 NA NA

New Zealand . . . . . . . . . . . . . . . . . . . . . . . 89.0 No(some) No

Luxembourg . . . . . . . . . . . . . . . . . . . . . . . 88.9 NA NA

West Germany . . . . . . . . . . . . . . . . . . . . . 88.6 No Yes

Netherlands . . . . . . . . . . . . . . . . . . . . . . . 87.0 No Yes

United States... . . . . . . . . . . . . . . . . . . . 86.8 No No

France . . . . . . . . . . . . . . . . . . . . . . . . . . . 85.9 No(some) No

Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . 84.2 NA NA

Denmark . . . . . . . . . . . . . . . . . . . . . . . . . 83.2 No Yes

Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . 82.0 No Yes

Greece . . . . . . . . . . . . . . . . . . . . . . . . . . . 78.6 Yes Yes

Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78.5 No Yes

United Kingdom.. . . . . . . . . . . . . . . . . . . 76.3 No Yes

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74.5 No Yes

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . 69.3 No Yes

Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68.1 Yes Yes

Finland . . . . . . . . . . . . . . . . . . . . . . . . . . . 64.3 No Yes

Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.2 No Yes

Switzerland . . . . . . . . . . . . . . . . . . . . . . . 48.3 No(some) Yes

NA=notapplicable

a %compulsion penalties” refers to whether or not law in each country provides for penalties (fines, etc)fOrnOtWing.

SOURCE: David Glass, Peverill Squire, and Raymond Wolfmge~”Voter Turnout An international Comparison,” Pub/ic@inion, December/January 19S4,p.

52. The authors based this table on the most recent election hetd in each countryas of19S1. Reprinted with the permission of the American

Enterprise institute for Publii Policy Research, Washington, DC.

spectator sport, with the public playing the role of choices made,”50 

a development that has negative

passive audience. As one newspaper columnist has implications for democratic government.51

written:

Television has produced a couch-potato constituency... In some curious way, the most experienced

political viewer becomes expert at one thing: television criticism. We become better equipped to

criticize performance than policies. It is, after all,

easier. . . I cannot prove that the rise of politics-astelevision is responsible for the decrease of actual

real, live voters. But how many viewer-voters have

learned from television that they can reject politics

because the program is boring? . . . In front of the

television set, citizens are transformed into an

audience.49

How the media can serve to structure public

affairs events can be seen by looking at recent

political conventions. In the past, such events were

designed primarily to provide a public forum for

choosing a presidential candidate, and the party

platform on which the candidate would run. Discussion and debate were essential to the process, and

delegates were active participants, often stomping

and whistling in accompaniment to long-winded

speeches.52 Today, in contrast, candidates are chosen prior to the convention and party discussions

take place off-camera, allowing producers to create

Given this development, some are concerned that a more pleasing, unified picture for their viewing

television news now “sets the terms by which audiences .53 While such programming may be more

political judgments are rendered and ‘political appealing from the perspective of entertainment, it

@Ellen G-an, “Couch-Potato Camp~WS,” The Wddngton Post, Mar. 8, 1988, p. A19.

S%hartto Iyengar and ~n~dR. Kinder, News ThulMarters: Television and American Opinion (Chicago, IL: The University of ~cago ~ess, 1987),

p, 4. For a discussion of how media can distort the news, see David L. Altheide, Creuring Rea/i~: How TV News Distorts Events (Beverly Hills, CA:

Sage Publications, 1976).

51sW David L. Althei&, ilfed~ Power (Beverly Hills, CA: Sage Publications, 1985).

szNichol~ von Hoffm~, “Conventional History,” The New Republic, Aug. 1, 1988, p. 27.

531bid.
154 ● Critical Connections: Communication for the Future

Figure 6-1—Americans’ Primary Media Sources of

70

60

so

40

30

20

10

0

“

News (multiple responses permitted)

Television 65%’.

%9.@*- -*o.**.**===%*

.

---\4---- Magazines

~-nw.,e-.e--+. 4Y”

r 1 , , r , ! 1 T 1 i

’59 ’61 ’63 ’64 ’67 ’68 ’71 ’72 “74 '76 ’78 ’80 “82 ’84 ’86 ’88

SOURCE: Reprinted with permission of the National Aesoeiation of Broadeaaters from “Ameriea’s Watching, The 19S9 TiO/Roper Report,” p. 14.

can also distort the public’s perception of politics

and public affairs.

Whether or not such effects will be problematic

for democracy will depend, in part, on the extent of

the public’s exposure to this kind of programming,

the existence and availability of alternative media

presentations, and the degree to which television

substitutes for more active forms of political engagement. To date, most analyses suggest that television

does have a significant political impact, although the

relationship is much more complicated than was

once believed.54

According to a recent survey by the Roper

Organization, for example, television continues to

serve as the “public’s primary window on the

world.”

55 As can be seen in figure 6-1, about

two-thirds of all adults generally get their news from

television; 42 percent use newpapers as their major

source of news; while 14 percent of the respondents

rated radio tops and 4 percent named magazines.

Moreover, as depicted in figure 6-2, almost one-half

of the adult public view television as being the most

credible media for news. In addition, more people

cite television, as opposed to any other media, as

Figure 6-2-Which Media Report Is Most Credible?

Television

4 9%

News pap

26%

Radio 5%

7%

SOURCE: Reprinted with permission of the National Aaeooiation of Broadcasters from “Amerioa’s Watching, The 1989 TIO/Roper Report)” p. 15.

their primary source of information about political

candidates.56

Comparing media choices in terms of socioeconomic and demographic data, a recent Gallup Poll

finds that different kinds of voters rely on different

kinds of media. According to this poll, those who

turn to newspapers rather than to television for

information on national affairs are:

. . . more sophisticated and, on balance, more Republican than the nation as a whole. Newspaper

readers are more tolerant, less alienated, yet less

religious and less in favor of social welfarism.57

. . . [T]hose who rely on newspapers, in

contrast to those who rely on television for providing

information on national affairs, are better educated,

possess a higher level of interest and involvement in

politics and are more likely to vote.58

Data such as these raise the possibility that, instead

of serving to provide a common, national political

perspective, the role of broadcast media in politics

may actually be to reinforce socioeconomic differences.

Despite concerns about the negative impact of

television in politics, some people believe that new

sq~e re]atiom~p ~tw~n media and the audience is discussed in more detail in ch 7.

sSA~rica’s w~c~”ng, tie 1989 Television Information ~fke Repofl, P. 14.

5%id., p. 18.

57~stein et al., op. cit., footnote 41, P. 5.

581bid., p. 61.
Chapter 6--Communication and the Democratic Process ● 155

communication technologies could actually serve to

reawaken the public interest. They emphasize,

however, that if technologies are to play such a role,

they will need to be much more engaging than they

have been in the past. As one communication scholar

points out:

The public will begin to reawaken when they are

addressed as a conversational partner and are encouraged to join the talk rather than sit passively as

spectators before a discussion conducted by journalists and experts.59

Increase in the Number and Complexity of the

Demands Being Placed on Government

Although the government has always played

some role in sustaining the Nation’s economy,60 it is

only in the wake of the Depression and World War

II that government began to intervene on a large

scale, not only in economic affairs but in all phases

of social life. This shift in the Federal Government’s

role is depicted in table 6-3,

Given the growing responsibility of government,

some social scientists fear that the government may

become overloaded. Problems of overload could

take a number of forms. Anthony King predicts, for

example, that in the future:

●

●

●

●

government policies will fail more often,

political arrangements will be called into question,

there will be problems of complexity in addition to those of scale, and

the state will have to compete with other groups

and institutions for power.6l

Similarly, Richard Rose postulates that big

government is likely to lead to:

. a loss of effectiveness due to the lack of explicit

and tested techniques for realizing social goals;

● more conflicts among policy programs, given

the interdependencies among problems; and

. less consent for government to act beyond its

traditional responsibilities.62

And, according to Claus Offe, with the emergence

of such problems, citizens will withdraw from

official channels for resolving conflicts and articulating their preferences. As he predicts:

Politics as the struggle over substantive issues and

politics as the institutional form of conflict resolution degenerates into informal and mutually disconnected modes of struggle and decision. The constitutional bridge that democratic theory takes for granted

is in the process of breaking down.63

A significant sector of the public also registered

concern about the growth in size and poor performance of government, as illustrated by opinion polls

conducted over the past two decades.64 The number

of those rating the government’s performance favorably has increased considerably since hitting a low

point of 21 percent in 1980. However, after the stock

market crash in October 1987, this number fell 11

points to 58 percent from a high of 69 percent in July

1986. 65 One paradoxical feature revealed in these

surveys is that, while the public is often critical of

the government’s size and performance, a great

many people continue to view the government’s role

as one of providing public support, as can be seen in

figure 6-3. Thus it would appear that, even in the face

of continued protests, the trend toward greater

demands on government is unlikely to disappear.

Communication and information technologies

contributed solutions to problems of control generated during the course of industrialization. Similarly, new communication technologies offer potential solutions to the problems of governing a

post-industrial society. However, to the extent that

the demand for technological solutions increases in

the face of greater demands on government, extra

attention will need to be paid to maintaining the

appropriate balance between communication access

and control.

5gJames W. Cwey, “The Press and the Public Discourse,” The Center Magazine, March/April 1987, p. 14.

-le in theory thegovernment’s role under a laissez-faire arrangement is merely to provide a stable legal framework in which business relationships

can take place, in practice, the government has played a much more substantial role, providing the social overhead capital-canals, roads, railroads,

communications, education, and training-that aJlowed businesses to flourish, See Bruce L. I?. Smith (cd.), “The Public Use of the Private Sector,” The

New Political Economy: The Public Use of the Private Sector (Umdon: Macmillan Press Ltd., 1976), p. 4.

61~&ony King, “@erload: ~oblems of G~vcrning in the 1970s,” Political Studies, vol. 23, NOS. 2-3, June-September 1975, PP. 162-174.

6zRichard Row, “what If Anything IS Wrong With Big Government,” Journal of Publ[r Poiicy, VO1. 1, No. 1, pp. 5-36.

63C]aW offe, “me Sepwation of Forrn and Content in Liberal Democratic politics,” Studies in Political Economy, Spring 1980, p. 11.

~Ladd, op. cit., footnote 36, p. 366.

%id., p. 368,
156 ● Critical Connections: Communication for the Future

Table W-The Main Features of the “New” Political Economy in Post-lndustrial Society

Early industrialization Managed economy “New” political economy

Early and Middle 19th century in U.S. and Late 19th and early 20th centuries Post-World War II

U.K.

Government intervention in the provision Laissez-faire gradually replaced by regu- Massive governmental intervention in all

of social overhead capital lation phases of social and economic life;

public-private tines blurred

Episodic ad hoc interest groups, begin- National trade unions and manufacturing Looser interest groups; “military-indusning of mass-based political parties associations, strong parties trial complex,” environmental lobby;

weakening of parties

Gentlemen amateur and/or ‘common Emergence of highly disciplined, hierar- Permeable civil service drawing its proman” tradition in civil service chical, and professionalized civil serv- fessional energies outside of governice ment

Stakes of government law and order, land Conditions of labor, curbing of industrial Preoccupation with quality of life, “univergrants, special charters, and other fa- abuses, promotion of economic growth sal entitlement,” Spaceship Earth,

vors (distributive politics) and employment, preoccupation with price stability and “delicate tinkering”

standard of living (regulatory politics) with economy (consumer politics)

SOURCE: Bruce L.R. Smith, The Abw Po/itjcal E@nomv: The PI,Jb/k Use of fhe Ptivate Sector(New York, NY: The Macmillan Press, 1975), p. 4. Reprinted

with permission.

Erosion of National Sovereignty in the Context

of an Increasingly Global Economy

The notion of national sovereignty began to take

form in the 16th century, in conjunction with the rise

of the nation-state system.66 It implied that, within a

given territory, a sovereign power was selfcontained and autonomous, and enjoyed mutually

exclusive jurisdiction over all activities.

In the United States, the idea of national sovereignty found support among the Founding Fathers

who, in writing the Constitution, sought to improve

on the failings of the Articles of Confederation. In

Federalist Paper Number 23, Alexander Hamilton

described national sovereignty as being necessary to

provide for:

. . . the common defense of the members; the preservation of the public peace, as well against internal

convulsions as external attacks; the regulation of

commerce with other nations and between the states;

[and] the superintendence of our intercourse, political and commercial, with foreign countries.67

Many shared Hamilton’s view that the United States

needed a strong national government capable of

taking direct action to protect and develop U.S.

interests. 68

Today, many of these traditional assumptions

about national sovereignty are unraveling. In a

global community and global economy, nationstates are more interdependent in terms of the kinds

of problems they face. In addition, new forms of

business enterprise have altered the nature of private

power and its relationship to public sovereignty.

Together, these developments weaken national authority, both domestically and abroad, exacerbating

government problems of control.

Just how interdependent nation-states have become was first made clear with the development of

nuclear weapons and their potential for mutual

destruction. 69 More recently, governments have had

to join together to address a broad range of issues,

including those having to do with the environment,

international trade and finance, health, and communication. In some cases, such as that of the European

Community, nations have had to formally renounce

aspects of their sovereignty in order to cooperate

effectively.

66For an accountof tie rise of tie nation-sta~ system, see John H. Herz, The Nutwn-State and the Crisis of World Pofirics (New York, NY: D. McKay,

1976).

s7F~er~~ Paper, #23.

~wil]i~ N. Eakrid~, Jr., “Sovereignty and the Constitution in the Era of Multinational and Translational Business Enterprises,” OTA contractor

report, April 1987.

@For a discussion of the impact of nuclear weapons on the nation-state system, see Herz, op. cit., footnote 66.
Chapter 6-Communication and the Democratic Process . 157

Figure 6-3-Gallup Poll Results on Government Involvement

The federal government

should run only those things

that cannot be run at the

local level

The federal government

should be very Involved or

only somewhat Involved in

Helping people meet

their health needs

I.xE-J 1 24% I

When something is run by

the government, it IS usually

inefficient and wasteful Helping people who

are poor

I

29% I

The federal government

controls too much of

our daily lives

1 37% I

❑

Agree

Disagree

Helping people receive

an affordable education

30%

❑

Very

involved

Somewhat

SOURCE: Survey by the Gallup Organization for Times-Mirror Co., Apr. 25-May 10, 1987; and survey by 7“m#ankelovich Claneey Shuylman, Feb. 17-18,

1987. Reproduced from The American Polity, 23rd ect., by Everett Carll l-add, by.

 permission of W.W. Norton& CO., Inc. copytiqht (c) 1989, 1985

by WiW. Norton & Co., Inc.

National sovereignty has also been weakened by

the rise of the translational corporation.70 Given

their size and resources, translational corporations

have their own bases of power. Such corporations

are now big enough to compete with government as

buyers, and they are dispersed enough to play

nation-states off against one another. Moreover,

corporate actions can constrain the ability of the

state to act, especially in such areas as the balance of

payments, income distribution, and regional development. 71 Characterizing this situation, Barnet and

Muller point out:

When we say that the new international economy

now being built by global corporations threatens the

sovereignty of the nation-state, we mean that its

principal domestic powers and functions-the

power to raise revenue, maintain employment

provide adequate social services, encourage the

equitable allocation of income and wealth, maintain

sound currency, keep prices and wages in line; in

short the power to maintain a stable social equilibrium for the greater majority of its population-is

being seriously undercut.72

Serving as the means for organizing and interconnecting business operations, communication technologies continue to play a key role in facilitating the

development of a global economy. Recognizing this

fact, businessmen are now seeking to become more

active in the design and development of the international communication infrastructure. The Society

for Worldwide Interbank Financial Telecommunications (SWIFT’), for example, was set up by the

banking community to simplify international electronic funds transfers. And private companies are

T~ ~meextent, fiem~erncoWratim hm ~ways~n prob]em~ic with resptxt to the question of national 50verei@y, given i~ size and tie b

range of its activities. As one observer has described: “Those who own economic goods exercise a kind of governmental power. Being entitled to

their property or part with it as they choose, the owners like petty sovereigns can dictate the terms and conditions their neighbors must perform to

access to the property. In this sense every lawful economic power becomes a type of political power.” Edrnond Cabn, as cited in Arthur S. Miller

Modern Corporate State: Private Governments aria’ the American Constitution (Westport, CT: Greenwood Press, 1976), p. 41.

71Raym~d v-n, “sovereignty at Bay Ten Years After,” International Organization, No. 3, Summer 1981, Pp. 517-529.

72Richard J. Barnet andRonald E. Muller, Gfobal Reach: The Power of the Multinatwnal Corporatwns (New York, NY: Simon & Schumer. 194),

p. 373.
158 ● Critical Connections: Communication for the Future

increasingly viewing international standards-setting

problems from the perspective of the translational

corporation rather than from the perspective of the

nation-state.

Taken together, these four political trends set the

context in which new communication technologies

are emerging. The first two trends highlight the need

for government to keep in mind, when considering

policy relating to new technologies, the problem of

political access. The latter two focus on problems of

effective governance and control.

IMPACT OF NEW

COMMUNICATION

TECHNOLOGIES

ON POLITICAL ACTIVITIES

Maintaining National Security and

Sovereignty

To maintain its sovereignty and security, a

nation-state needs to:

●

●

●

●

communicate with the heads of other countries

(diplomacy),

influence public opinion in other countries

(propaganda),

gather information on what is occurring in other

countries (intelligence), and

be able to assume control of national communication in a national emergency (emergency

preparedness).

Central to the performance of these activities is a

global communication system that provides for

secure and reliable communication and is invulnerable to outside interference or jamming.

Before rapid global communication, communication for state purposes, such as diplomatic functions,

took place through ordered channels, usually at the

highest levels of governments. Communication was

generally rather slow, with time for deliberation on

both sides. It was, moreover, somewhat hidden from

the view of those without a “need to know.” The

traditional gatekeepers in the area of national

sovereignty--exercising control over access to

state-related information, the means of communication, and the audience or receiver of the message—

have been the President, the Department of State,

and the Department of Defense. AT&T, as the

dominant domestic and international telecommunication service provider, has operated in concert with

the Federal Government as the gatekeeper for the

flow of communication between countries and

within the United States defense community. The

national and international press, as reporters and

interpreters of national and international events,

have also played important gatekeeping roles.

Today, these gatekeepers are changing in response to two major communication-related developments-the proliferation of telecommunication

networks and the use of remote-sensing satellites.

Altering communication pathways on a global scale,

these developments will have a significant impact on

the Nation’s sovereignty and security.

Proliferation of Telecommunication Networks in

a Competitive Environment

Because the government is a major user of

telecommunication services, and because it must be

able to “take over” telecommunication in case of a

national emergency or war,73 any changes in the

ownership and management of the network will

affect the government and its ability to maintain

security. Two recent developments raise concerns in

this regard-the growth in competition with the

divestiture of the Bell telephone system,74 and the

proliferation of private telecommunication networks, many of which now operate on a global scale.

One of the largest government users of the

commercial telecommunication system is the Department of Defense (DoD), which uses nongovernment lines for about 95 percent of its data and voice

TsSwtion 706 of the Commmications Act of 1934 allows the President to commandeer the communication industry during a crisis that he believes

threatens the sovereignty of the Nation. See Harold Relyea, “Stretch Points of the Constitution: National Emergency Powers,” Ralph S. Pollack (cd.),

Renewing the Dream (Imtham, MD: University Press of America, 1987), pp. 75-91; and Robert L. Chartrand and Trudie A. Punaro, “Information

Technology Utilization in Emergency Management,” Library of Congress, Congressional Research Service, Report No. 85-74S, Apr. 9, 1985.

TdS~singly, litde at~ntion Wm given t. the nation~ sW@ty implications of the AT&T divestiture during the AT&T antitrust suit. The ~Partment

of Justice case was focused almost exclusively on AT&T’s past anticompetitive behavior, although DoD testified on AT&T’s behalf. See Martin

Edtnonds, “Defenselnterestsand United States PolicyforTe/ecommunications,” OTA contractor report, June 1988, pp. 22-26, for the role of DOD during

the antitrust settlement,
Chapter 6--Communication and the Democratic Process ● 159

communication at a cost of over $1 billion annually.75 DoD, moreover, is not an ordinary customer;

it has special needs. To fulfill its mission, DoD must

have access to a communication system that, among

other things, provides:

●

●

●

●

●

●

the connectivity required to join the National

Command Authority with the U.S. Armed

Forces before, during, and after an attack;

support for mobilization;

operational control during conflict;

support for the continuity of the government

after attack or a natural disaster;

the capability to be reconstituted after such

events; and

the ability to protect sensitive and secret

information at all times.

In the past, AT&T, as the only company effectively supplying end-to-end telecommunication

services to the Defense Communications Agency

(DCA), was able to meet these needs. To do so,

however, it played a major role in designing and

managing the system. For example, AT&T was

directly involved in the formulation of national

security telecommunication specifications and requirements; in telecommunication research and

development; in the planning, routing, and installation of networks; and in making provisions to govern

system robustness, ubiquity, and restorability.

Given AT&T’s monopoly, end-to-end connectivity

was assured. Not infrequently, AT&T would install

a telecommunication line or circuit for DCA, reroute

or harden a cable to enhance survivability, or retain

redundant lines without making a direct charge to

the defense budget; the cost would be absorbed in

the overall rate base to AT&T subscribers.76 Finally,

the sheer size of AT&T and the extent of its network

meant that it was able, as a company, to meet the

more demanding requirements of the U.S. Armed

Services. For example, because of the spare capacity

that AT&T had, and the “last-mile” provision that

linked out-of-the-way military units and command

posts, it was possible to have a fast emergency

response.

77

Breaking up this highly integrated telephone

system, the Modified Final Judgment (MFJ) completely restructured the communication environment for defense. However, some provisions for

national security coordination were made. The MFJ,

for example, required the regional Bell operating

companies to establish a single point of contact

through Bell Communications Research Inc. Moreover, with Executive Order 12382, President Reagan

formally established the National Security Telecommunications Advisory Committee (NSTAC). Comprising the chief executive officers of the major

telecommunication companies-27 in all--NSTAC

was charged with the task of advising the President

on national security emergency preparedness

(NSEP) telecommunication matters. Moreover, in

1984, responding to one of NSTAC’s first

recommendations, the government also set up the

National Coordinating Committee, comprised of

industry and government representatives, to coordinate their respective companies’ efforts in conjunction with government agencies such as DCA and the

Federal Emergency Management Administration in

the event of an emergency .78

Now that the telephone system is no longer one

“network,” managed by one company and supplied

from a limited number of equipment providers, the

government must provide for its own communication needs, dealing with a variety of new telecommunication service and equipment providers.79 This

management problem can be quite complex, as the

National Research Council (NRC) has described

with respect to the case of customer premises

equipment (CPE). As NRC notes:

The bewildering diversity of available CPE can

seriously complicate NSEP management. When

Western Electric was the sole CPE manufacturer for

751t j5 amat~rof~io~ po]iW that Feder~ Government requirements for telecommunication services, including those of defense, sho~d~ Pmc~~

from the commercial sector, unless special circumstances dictate otherwise. In 1981, it was estimated that 85 percent of the Federal Government and

94 percent of critical U.S. national security communication needs within the continental United States were leased from the commercial

telecommunication carriers. Ibid., p. 18.

76u.s. Senti, Cornrnitt= on the Judiciary, Hearings on Department of Justice Oversight, U.S. v. AT&T, 97th cong., Aug. d. 1981, p. 42.

77G, Boiling, “A’’&T: Aft~ath of Anti-Trust,” National Defense University, Washington, ~, 1984, PP. 2’7-28.

7aIbid.

Wh most CWS, Cmputer 1] prevents any user, including DoD, from acquiring a complete system of equipment and manumission from AT&T.

although for reasons of natioml security/emergency preparedness, AT&T is permitted to manage end-to-end control for 21 communication systems. For

discussion of the changing communication environment, see John Horgan, “Safeguarding the Nationat Security,” IEEE Spectrum, November 1985, pp.

84-89; and Wey R. Irwin, “National Security and Information Technology: The New Regulatory Option?” Government f~ormution Quurter/y, vol.

4, No. 4, pp. 359-369.
160 ● Critical Connections: Communication for the Future

the integrated Bell System, Bell System managers

were fully acquainted with the characteristics of the

CPE connected by wire to the network. By contrast,

today, and even more so tomorrow, no networkbased company is likely to have knowledge of more

than a few major CPE systems. Customers are free

to interconnect the equipment of their choice to the

network, without even notifying the telephone companies. Further, the proliferation of interfaces between the customer’s premises and the public and

private networks will complicate loop testing and

billing verification. Other future uncertainties would

include CPE configured to be voice activated by

specific users only.80

Competition in the telecommunication sector can

also give rise to new problems for defense. In a

highly competitive environment, there is less incentive for providers to build redundancy into their

networks, and users, facing their own competitors,

are more inclined to choose efficiency over robustness. Thus we see, for example, that a number of new

technologies are being deployed—such as fiber

optics, digital switching, and software control—

that, while making a communication system much

more efficient, also make it much more vulnerable.81

Deregulation and competition also facilitate the

proliferation of private networks, a trend that, as

discussed in chapter 5, is being reinforced by the

enhanced role of information in the business realm.

Although private networks could conceivably provide greater redundancy in the national communication network, they are not being set up to play

this role. In fact, as NRC has pointed out:

Many private data networks, both circuit and

packet switched, are not fully interoperable with the

public switched networks. Thus, as a source of

potential network redundancy they are extremely

limited, unless linked to the public networks by

gateway architectures.82

To the extent that there is a wide variety of network

providers as well as some very large private users,

the government, in the future, may no longer be able

to set its own priorities for the network. Private users

may have their own set of communication needs

apart from national security, and they may be

unwilling to subsidize the government’s requirements for network security and reliability.

Problems of security may be exacerbated, moreover, if government regulatory policies that foster

competition provide widespread access to the internal workings of the public switched network. One

area where this might happen, for example, is in

open network architecture (ONA). As NRC cautions:

ONA can increase network vulnerability to such

disruptions in two ways. First, ONA increases

greatly the number of users who have access to

network software. . . Second, as more levels of

network software are made visible to users for

purposes of affording parity of network access, users

will learn more about the inner workings of the

network software, and those with hostile intent will

learn more about how to misuse the network.83

Remote Sensing Satellite Systems

Remote sensing refers to photographing Earth

from space. First carried out in the 1960s with the

launch of the TIROS weather satellite, the process

entails a number of steps:

taking a picture from space,

transmitting it in the form of raw data to a relay

satellite,

communicating the information to a receiver on

the Earth,

converting the raw data into photographic

images or computer tapes,

processing and removing geometric and other

distortions, and

interpreting and analyzing the images.

components of a remote sensing system are

described in box 6-A. At present there are two

operational remote sensing systems: Earth Observation Satellite Co. (EOSAT)--formerly the U.S.

Government’s Landsat system—and SPOT, a

French system that is responsible for marketing data

from the satellite owned by the French Government.84

~Nation~ Rese~ch council, Growing Vidnerabili(y of the Public Switched Networks Implications for Natwnal Security Emergency preparedness

(Washington, DC: National Academy Press, 1989), pp. 70-71.

811bid., pp. 4647,

821bid., p. 29.

831bid., p. 36.

S4EOSAT (Ed Observation Satellite CO.) is a private company that now handles the operation and marketing of data for LandSat, fo~erly ownd

by NASA. For a history of the transfer of the Landsat system to the private sector, see U.S. Congress, Office of Technology Assessment, Remote Sensing

and the Private Sector: lssuesfor Discussion, OTA-TM-lSC-20 (Springfield, VA: National Technical Information Service, March 1984).
Chapter 6-Communication and the Democratic Process ● 161

Box 6-A—A Remote Sensing Satellite System

A remote sensing satellite system consists of four major components, each of which is critical to producing

useful data:

1. The Spacecraft, Sensors, and Transmitters: The spacecraft provides a stabilized platform and power for the

sensors and their optics, the receiving and transmitting antennas, and the associated electronics necessary to

control the spacecraft and to deliver data to Earth. Some remote sensing spacecraft may also carry tape recorders

to store data until the spacecraft is within sight of a receiving station.

2. The Receiving Station and Other Communications Components: A ground station may receive data in digital

form directly from the satellite as it passes overhead, or, if the satellite is not in a position to communicate with

the ground station, through a system equivalent to NASA’s 3-satellite Tracking and Data Relay Satellite System

(TDRSS).* In the latter case, data are passed from the remote sensing satellite to a communication satellite in

geosynchronous orbit and then retransmitted to a ground facility. From the ground facility, the data are then

passed directly to a processing laboratory.

3. The Data Processing Facilities: Before the raw data can be converted into photographic images or computer

tapes capable of being analyzed by the end user, they must be processed to remove geometric and other

distortions inevitably introduced by the sensors. For the purposes of newsgathering, high-speed mainframe

computers may be required to process the data from current spacecraft.

4. Interpretation of the Data: After the raw data are processed and converted to computer tapes or photographs,

they must be interpreted. Part of the interpretation process may involve merging or integrating other data either

directly on the computer tape, or comparing such data with photographs. At this stage, computer analysis could

be performed by micro- or mini-computer. A variety of advanced techniques are available to turn remotely

sensed data into new products for different users.

*Only one TDRSS satellite is currently in orbit.

SOURCE: U.S. Congress, Office of Technology Assessment, Commercial Newsgathaing From Space+l Technical Memorandum,

OTA-TM-ISCW (Springfield, VA: National Technical Information Service, May 1987), p. 8.

As the cost of such systems declines and the number of benefits for the public-at-large. Circumresolution of satellite data improves, the value of venting geographic and political barriers to the free

remote sensing for intelligence; environmental, and

commercial purposes will increase, raising the

question of who should have access to remote

sensing data and on what basis. While greatly

enhancing access to information, an increase in the

use of remote sensing systems could also impair

national security and constrain the government’s

ability to exercise national sovereignty. One instance in which such a conflict might arise, for

example, is in the case of the use of remote sensing

by the press.

With declining costs and increased quality, remote sensing could prove to be an especially useful

means of newsgathering. For example, it would

allow the media to gain access to remote places or

sites to which access has been denied; to perform

real-time data recovery; and to provide the kind of

repeated coverage of an area that is necessary to

monitor changes.

Were the media to make use of remote sensing

satellites for newsgathering, there might also be a

flow of information, for example, remote sensing

might encourage the development of a global

village. Using such systems would, moreover, increase public information on world affairs, as

happened in the case of the Chernoble nuclear

accident. In addition, to the extent that nations

temper their behavior in the face of world opinion,

such transparency might have a stabilizing influence

on world affairs. Used by the U.S. Government to

gather intelligence, remote sensing satellites could

also serve to enhance national security and national

sovereignty .85

Such transparency, however, could also be destabilizing. Nation-states have traditionally served as

the gatekeepers of international information, and

they would certainly be reluctant to renounce such

control. At the very least, they would not want to risk

increased visibility of their military operations.

Moreover, media coverage on such a scale might

reveal sensitive information; complicate foreign

relations and reduce diplomatic channels; lessen the

ss~r a ~scu~ion, ~D~e] ~~les, “Spy Satellites: Entering a New Era,” Science, Ma. 24, 1989, pp. 1541-1543.
162 ● Critical Connections: Communication for the Future

government’s control during a crisis; and erode

citizens’ expectations of privacy.86

Recent events in China demonstrate some of the

benefits and problems that might result from this

kind of enhanced international news coverage. The

international media coverage of the Chinese student

protesters generated international support for their

cause. However, by rallying such support, the media

coverage may have actually provoked the Chinese

Government to take more extreme retaliatory measures.

A number of factors will determine how the

balance between access and national security will be

struck in the case of remote sensing. Two important

factors are the further development of the technology and a reduction in its costs. With respect to the

media’s use of remote sensing, the OTA technical

memorandum, Commercial Newsgathering From

Space, points out:

To be financially viable, a mediasat would have to

generate revenue sufficient to offset the costs of the

system. Experts have estimated that a complete one

or two satellite mediasat system capable of 5 meters

resolution, designed to operate about 5 years, could

cost between $215 million and $470 million to

establish, and $10 million to $15 million a year to

operate, Even if each network used satellite images

every day, only a few thousand images would be

used per year; hence the system’s development and

operating costs could only be paid back if networks

were willing to pay $35,000 to $73,000 per “story,”

an order of magnitude more than existing expenditures for daily news coverage.87

Technological factors will also determine the vulnerability of a system to manipulation or interference from other countries or hostile forces, or the

possibility that it might be targeted and destroyed in

space.

The impact of remote sensing on national security

will also be determined by the rules governing its

use. One important set of rules will be those that

govern commercial ownership. Until 1984, U.S.

satellite remote sensing services were governmentrun, first by the National Aeronautical and Space

Administration (NASA) and then by the National

Oceanic and Atmospheric Administration (NOAA).

However, in 1984, Congress privatized remote

sensing, and EOSAT won the contract for offering

these services within standards determined by national security .88

Other rules that will affect the use of remote

sensing technology are those pertaining to the first

amendment. However, these rules are unclear at

present. One source of confusion is that the Supreme

Court has not determined whether newsgathering is

itself a protected first-amendment activity, separate

from speaking and publishing.89 Nor has the Court

decided whether the government has a positive duty

to allow journalists special access to information.90

As the OTA report, Science, Technology, and the

First Amendment, points out, technology is likely to

blur distinctions between gathering information and

publishing it, and hence the Court will eventually

have to confront the question of whether the press

interest in gathering news merits constitutional

protection under the first amendment, and whether

remote sensing constitutes a tool that should be

made available to the press for such purposes.91

S6For ~ djWussim, ~I-J*S. Con-, offjce of Technology As=ssment, Commercial Newsgathering From Space, OTA-TM-ISC-40 (Sprintileld!

VA: National Technical Information Service, May 1987), p. 4.

87 fiid.

88kwin, op. cit., footnote 79, P. 363.

s-SuPeC-Wd in Branz~urg V. Hayes that “it is not suggested that news gathering does not qualify for First Amendment Protection: wi~out

some protection for seeking out the news, freedom of the press could be eviscerated.” Brunzburg v. Hayes, 408 U.S. 665 (1972).

-press has access to government proceedings, records, or other information that is available to members of the public generally. And presumably

theconvenw is also true: acce.ssdenied to the general public may also be denied to the press, but the government may not close down avenues for gathering

and acquiring news that am generally available to the public, without a compelling reason. See Pe/i v. Procunier, 417 U.S. 817 (1974); Saxbe v.

Wmh”ngton Post CO., 417 U.S. 843 (1974); Houchins v. KQED, 483 U.S. 1 (1978). See also Rita Ann Reimer, Library of Congress, Congressional

Research Service, “Ugal and Constitutional Issues Involved in Mediasat Activities,” CRS Report No. 86-823A, 1987, pp. 6-8. When the United States

invaded Grenada in 1983, the government imposed a total news blackout and prohibited members of the public and the press from traveling to Grenada.

The press sought prospectively to enjoin the Executive from imposing any such future ban. The case was dismissed as moot, but the court went on to

say that “[the] decision whether or not to impose a press ban during military operations and the nature and extent of such a ban if imposed are matters

that necessarily must be left to the discretion of the commander in the field.” Flynt v. Weinberger, 588 F. Supp. 57,61 (D.D.C. 1984) affirmed (on the

basis of moomesa), 762 F.2d 134 (D.C. Ck. 1985).

g]u.s. Cm=es, offi= of TechnOIO~ As=sment, Sciewe, TeCh~@, ad t~ First h~m~, OTA-C1l’-36g (Washington, DC; U.S.

Government Printing Office, January 1989), pp. 9-10. In July 1987, the Department of Commerce issued a final regulation for licenses for private

ownership of satellites such as Mediasat, which is owned by the electronic and print news media, on national security grounds. See Ramon L. Lopez,

“Remote Sensing and the Media,” Space A4arkets, Autumn 1987, pp. 148-151.
Chapter 6-Communication and the Democratic Process ● 163

Maintaining Internal Security and

Social Welfare

To maintain internal stability and social welfare,

government must provide for law and order, collect

revenue, and administer programs. The growth in the

number and scope of these activities has been

accompanied by the growth of an administrative

state.92 The large bureaucracies that carry out these

activities are organized in a hierarchical fashion and

operate in accordance with set rules and procedures.

To perform internal security and social welfare

activities, the collection, retention, and exchange of

information on individuals is critical.

To assure that such practices are consistent with

democratic ideals, agencies are required to perform

these functions in accordance with the principles of

limited government and government accountability.

In the American Federal system of government,

these principles require that power be shared among

Federal, State, and local agencies. Thus, most social

welfare programs, while funded primarily at the

Federal level, are administered at the State or local

level. In addition, in carrying out its functions, the

government must respect individual rights such as

the right to freedom of expression, the right to

privacy, and the rights of the accused.

Before large-scale computerization of agency

record systems, the information gatekeepers, in

carrying out internal security and social welfare

functions, consisted primarily of the government

bureaucrats in the Federal and State operating/line

agencies, and individual citizens themselves. Individual citizens were able to perform this gatekeeping

function because the difficulties involved in transmitting data from manual record systems via the post

and telephone constrained agency exchanges of

information.

Advances in computer and communication technologies have greatly transformed this situation.

Today, computers linked to telecommunication

networks have become central to modern law

enforcement, revenue collection, and program administration. Enhancing the government’s ability to

communicate nationally on a real-time basis, these

systems are being used to store, retrieve, manipulate,

and exchange billions of pieces of data necessary for

investigations, audits, histories, etc. In the process,

individual citizens have lost control over information about themselves.

To understand how these developments might

affect the realm of government, two rapidly growing

technological applications will be considered here:

networked computerized information systems and

online financial systems.

Networked Computerized Information Systems

Telecommunication linkages between and among

government agencies allow for direct online inquiries from one agency terminal to a computerized

database of another agency. Although online databases are electronically linked and therefore are

distributed in a physical sense, they constitute a

centralized database in a practical sense. As computer and telecommunication costs decrease, more

and more agencies will automate their files and have

the capability to communicate online, allowing this

virtual centralized database to grow.

A number of computerized databases are now

accessible online. The Federal Bureau of Investigation’s (FBI’s) National Crime Information Center

(NCIC), for example, has a number of computerized

files, including the Interstate Identification Index

(Triple I). The Department of the Treasury has

developed an online system, the Treasury Enforcement Communications System (TECS), for identifying people coming into the country. Both the

Immigration and Naturalization Service and the

Social Security Administration maintain a number

of databases that other government agencies can

access electronically. Additionally, private sector

fins, such as credit bureaus and medical insurers,

maintain a number of centralized databases that are

accessible by government agencies.93

These networked computerized information systems have created a de facto national database,

maintaining up-to-date and complete information on

all individuals. Using such a system, the Federal

Government could centralize control at the expense

of State and local agencies. Moreover, it could use

these networked systems for surveillance purposes

92sW Benige., op. cit., fm~ote 3; and StePhen SkoW~nek, BUj/ding ~ NW AmeriCan Srure (Cmbridge: c~bridge university Press, 1982).

93u.s. Con@e=, ~fice of Tmhnolo~ A5ses~ment, Federal G~~erme~ ]nfo~fjon Tech~~gy: Elecponjc Record systems and Individual

Privacy, OTA-CIT-296 (Springfield, VA: National Technical Information Service, June 1986).
164 ● Critical Connection: Communication for the Future

to exercise more subtle and invisible means of

control over citizens, thereby shifting the relationship between the government and the governed. And

decisions about the scope and use of networked

computerized systems could be driven by technological possibilities rather than by program needs, so

that the costs of the systems exceed their benefits.

Yet, under some circumstances, the networking of

computerized information systems could benefit

individuals in several ways. In fact, this kind of

networking could allow people to have more control

over information exchanges. Individuals could access their own records through online networked

systems, and perhaps even prevent unnecessary

exchanges of information. If agencies were required

to do cost/benefit analyses before network systems

were deployed, these systems might also increase

the efficiency of government operations. Moreover,

if standards were established for record quality,

inaccurate and incomplete information could be

purged from agency files.

How such systems will operate in practice will

depend on a number of factors. The design of the

systems will, of course, be critical; for systems can

be constructed to foster either centralization or

decentralization of data. In the case of the NCIC and

the National Driver Register, for example, policymakers gave primary control to the States by

deliberately designing the system to serve as an

index for the State systems. Thus the NCIC’s Triple

I contains only the names and locations of files-the

actual content of the records is maintained by the

FBI or State agencies. This design preserves State

control over its records, while allowing other States

and Federal agencies to become cognizant of additional records.94

The quality of the data in the systems is also a

critical factor in their operation. Setting quality

standards would assure that the data contained in

agency databases are accurate, timely, and complete.

Without a way to judge the reliability of database

information, agencies will have to spend considerable time verifying it. Setting quality standards is

particularly important with respect to collecting

information about individuals, who may be unaware

that data about them are being compiled. The need

for such standards has been formally recognized in

the Privacy Act of 1974, which establishes requirements for data quality. The Federal Government

might also influence the quality of data, and the care

with which they are treated, through financial

incentives. For example, the funding of such networks could be made contingent on the adoption of

particular standards or the use of specific software.

A third important factor in determining the

system’s effects on maintaining internal security and

social welfare are the rules for gaining access to data

contained in it. The fact that systems are, or can be,

networked should not drive decisions about who

should use them, and for what purposes. Privacy,

national security, and program integrity may all be

legitimate reasons for limiting access.

Automated Financial Transaction Systems

Today, there are more than 70 different Federal

benefit programs that provide care, goods, and

services to people who meet eligibility requirements

based on income level or need. Almost 75 percent of

these programs are funded by the Federal Government, with funding for the remainder provided by

States and localities. These programs are generally

administered at the State and local levels in accordance with Federal guidelines that may be very

detailed or quite general.95

Although the processes by which these programs

are administered can vary significantly, there are

five steps that are more or less common to them all.

These are:

1. determining eligibility and benefits;

2. verifying the eligibility of recipients;

3. issuing benefits;

4. verifying the receipt of benefits; and, in some

cases,

5. redeeming benefits.

Because these steps all entail the storage, retrieval, and exchange of information, each could be

automated using state-of-the-art communication and

information technologies. With automation, for

example, tax authorities could electronically collect

financial records from banks, employers, investment

94u.s. Congress, office of Technology Assessment, An Assessment of Alternatives for a Natwnal Computerized Cri~”?@Histoq SYstem,

OTA-CIT-161 (Springfield, VA: National Technical Information Service, October 1982).

$’s~e major ~PS of ~nefit progrms include: medical (e.g., Medicaid and Maternal and Child Health Services); cmh (e.g., Aid to F~ilies Witi

Dependent Children (AFDC) and Supplemental Security Income (SS1); food (e.g., Food Stamp and School Lunch Programs); housing (e.g., “Section

8“ and public housing); education (e.g., student loans); jobs and training (e.g., under the Job Training Partnership Act); and energy assistance.
Chapter 6--Communication and the Democratic Process ● 165

houses, and mortgage lenders; determine a person’s

tax assessment; and then electronically credit or

debit his or her account. In similar fashion, government agencies could employ new technologies to

electronically deliver public assistance benefits such

as cash, food stamps, and Medicaid benefits.

There are at present a number of pilot projects

automating the issuance and/or redemption of public

assistance programs. For example, New York State

has established an Electronic Medicaid Eligibility

Verification System in order to verify, at the time of

issuance, clients’ eligibility for certain treatments or

medications. And Ramsey County, MN, has begun

to use automatic-teller machines and point-of-sale

terminals to issue cash for certain public assistance

programs.

96 The impetus to take advantage of such

systems is likely to mount in the future, given

growing concerns about government expenditures,

fraud, waste, and program abuse.

Automated financial transaction systems that

would provide such capabilities could be devised as

online systems in which a real-time communication

link to a centralized database is used to make a

transaction. Or they can be systems constituted of

smart cards containing a microchip that can be

inserted into a read/write terminal to conduct a

transaction. Both systems require a reliable and

secure identity card with a unique personal identifier. Some systems, however, might be designed to

be dedicated to a specific government program,

while others might be setup to be used by more than

one program or in conjunction with commercial

systems.

Automated systems could help to streamline the

administration of government programs, while improving the accuracy and completeness of financial

records. However, if they are poorly instituted, these

systems could easily deteriorate to become bureaucratic mazes where the lines of authority among

program officials and between the public and private

sectors are very unclear. And, without clear lines of

authority, such systems could not be held publicly

accountable.

One factor that will affect the costs, use, and

impact of automated transaction systems is the

technological choice about how these systems

should be devised. Although online systems are less

costly than smart cards and could be more readily

put into place, they are also more vulnerable and are

subject to counterfeiting. Choosing the technology

is also complicated by problems of technological

uncertainty. The technology is changing so rapidly

that, even if the government were to begin now to

deploy online electronic systems using magnetic

stripe cards, these systems might become obsolete

before they are fully implemented. On the other

hand, a commitment now to a microchip smart-card

system might be premature not only for technical

reasons, but also because as yet there is no commercial basis for such a system in the United States.

Careful consideration will also need to be given to

the privacy and security implications of using such

automated systems, since their development and

widespread deployment will result in the establishment of a de facto national database. At a

minimum, the operation of such systems would have

to comply with the requirements of the Privacy Act

of 197497 and the Computer Security Act of 1987.98

In addition, proposals for establishing an electronic

system for distribution and redemption of public

assistance benefits, which depend on the use of a

magnetic stripe card or smart card, would give rise

to concerns about the adoption of a national identity

card. Americans have traditionally been adamant in

their opposition to the use of a single identity card,

associating it with authoritarian forms of government.99 This concern would loom particularly large

MFor a discussion, see U.S. Congress, Office of Technology Assessment, Electronic Delivery of Public Assistance Benejits: Teclmdogy OPtio~ ati

Pohky issues, OTA-BP-CIT-47 (Springfield, VA: National Technical Information Service, April 1988).

gTPerWn~ ~formation in Feder~ agency datab~es r~eives some protection under the Privacy Act of 1974, which gives individuals Certti fights

to exercise some control over the content and uses of personal information about themselves. They have the right, for example, to see and correct

information, and to challenge secondary uses of that information. The act also requires agency staff to handle personal information in a manner consistent

with individual privacy. Thus, they must ensure that information is current and accurate, that it is collected directly from the individual, and that adequate

safeguards are provided to prevent its misuse. To ensure agency compliance with these principles, the act lets individuals bring civil and criminal suits

in cases where information was willfully and intentionally handled in violation of the act. In addition, the Office of Management and Budget was assigned

responsibility for overseeing agency implementation of the act.

ggThe Cmputer Security Act of 1987 assigns to tie Nation~ Institute of Standards and Technology the responsibility for developing tdmical,

management, physical, and administrative standards and guidelines for the security of sensitive information in FederaJ computer systems, and for

developing guidelines for training in security awareness and practice for personnel operating Federal computer systems,

g~e mmt rment nation~ debate on tie creation of an identity card took place in the early 1980s. It wm generated by a ProPosal of tie Select

Commission on Immigration and Refugee Policy to create an employee-identification card.
166 ● Critical Connections: Communication for the Future

if the Social Security Administration were included

in a national, automated system. Moreover, if the

card were used only by those participating in benefit

programs, it might be opposed on the grounds that it

stigmatized an economic and social subset of the

population.

Providing for Openness

In the United States, open communication is

considered to be fundamental to maintaining democracy, as is indicated by the first amendment’s

protection of freedom of speech and press. At the

very least, openness requires a two-way flow of

information from the government to the public and

from the public to the government. Openness will

truly flourish, however, only when there is an active

exchange and debate of information and ideas—

what Justice Holmes termed a “marketplace of

ideas.” As Holmes said:

The ultimate good desired is better reached by free

trade in ideas-that the best test of truth is the power

of thought to get itself accepted in the competition of

the market.l00

The primary gatekeeper mediating the exchange

of messages between government and citizens and

providing a forum for the “marketplace of ideas” has

been the traditional press-daily newspapers, national magazines, radio, and TV networks.lO1 Because the press has played such an important

gatekeeping role,102 a number of rules and regulations have been adopted that establish its rights and

responsibilities. The first amendment recognizes the

watchdog role of the press and thus protects it

against prior restraint,libel, etc. The Fairness

Doctrine requires that broadcasters meet a “public

trustee” standard by allowing the public to respond

to broadcasts involving personal attacks or political

editorials. The press has also benefited from the

Freedom of Information Act, which requires agencies to make nonclassified records available on

request. In addition, there are rules restricting

concentration of media ownership, which are designed to maintain diverse sources of information.

New technologies directly affect these points of

public access, and hence they will help to determine

how open the American political system will be.

Two new technological applications are considered

here: the use of satellites by local and regional news

outlets, and the political uses of electronic bulletin

boards.

Use of Satellites for Local and Regional

Newsgathering

New satellite technology and portable transmission equipment have made it possible for television

stations to videotape news events, relay them to a

satellite, and then transmit them to receiving stations

for direct broadcast or editing so they can be

included in a later newscast. To do this, stations use

Ku-band satellites and a van with video equipment,

together with a dish that allows the van to send and

receive TV signals via satellite.

Network television no longer serves as the primary gatekeeper covering public events.l03 Using

satellite technology, for example, Cable Network

News, other news stations, and local network

affiliates can now send their own crews to cover

stories. There are, moreover, a number of news

services, such as Conus’s Washington Direct, that

use satellite technology to feed members of their

cooperative live, unedited coverage of events and

press briefings from the Nation’s capital. Taking

advantage of these services, local stations may have

access to more sources of news, and may also find it

easier to cover national and international news with

a local slant.l04 Ideally, local viewers will be able to

lOOAbrm V. Um”ted States, 250 U.S. 616, 630 (dissenting).

IOIAddition~ly, F~eral agencies and depository libraries have been important gatekeepers for disseminating public information. SCC U.S. COnfYes&

Office of Technology Assessment, I~orming the Nation: Federal lnjorrnation Dissemination in an Electronic Age, OTA-CIT-396 (Washington, DC:

U.S. Government Printing Office, October 1988).

lms~ La~ence p~~~ “Attitu& About tie M~ia: A Five coun~ Comptison,” P~/ic opi~on, Janu~/Febm~ 1988, pp. 18-19, 60; RobtxI

MacNeil, “The Mass Media and Public Trust,” Occasional Paper No. 1, Gannett Center for Media Studies, April 1985; and “The Media and the People:

Americans’ Experience with the News Media: A Fifty-Year Review,” Gannett Center Working Paper, 1985.

103sW “’rheFu~~t in ~wge at NBC New~” (intewiew ~~ NBC News Resident L~ Grossman), Bro~casting, Feb. 29,1988, pp. 44-54; Alfkd

J. Jaffe, “Early News Surge Continues,” Television/Radio Age, May 16, 1988, pp. 39-40; David G. Shaffer, “By Van and Satellite, Local Newscasts Are

Going National,’ ’The New York Times, Dec. 21, 1986; Eliot Tiegel, “Independents Find News Niches,” TelevisionJRadio Age, Jan. 25,1988, pp. 70-71,

99-100; and “The Business of News:’ Gannett Center Journal, vol. 1, No. 1, spring 1987.

104~ ]e~~ than 10 YW, tie nw~rof Press mem~rs in tie Sena(e Radio and TV galle~ has gK)WII from 750 in 1W9 to overz,soo in 1987 (3:1 ratio

of support personnel to correspondents). See Howard Fields, “D.C. Crowded As Stations Elbow In For News Feds,” Te/evision/Radio Age, Sept. 14,

1987, pp. 51-52, 84; and Dan ~den, “Hometown TV Coverage Is Booming,” Natwnaf Journal, Aug. 29, 1987, pp. 2174-2175.
Chapter 6-Communication and the Democratic Process ● 167

watch national and international news with an

analysis of how events affect their local area.

Notwithstanding these potential benefits, some

fear that widespread use of satellite newsgathering

will reinforce the trend of treating “news as entertainment.” 105 Others are concerned about the 10SS of

network control and its effect on the role of the news

media in shaping a national agenda. As a former vice

president and director of news for CBS asked:

Are the networks soon to become a kind of

electronic Associated Press, simply feeding stories

to affiliates who will then repackage them in their

own newscasts?106

Some are concerned that the cost of satellite uplinks

may lead to further concentration in the industry. At

present, a number of satellite newsgathering services

have developed to compete with the networks in

selling feeds to local and regional stations, among

them Hubbard’s Conus, Turner’s CNN, Westinghouse’s Newsfeed, and the Chicago Tribune’s Independent News Network.l07 However, in covering

certain events, such as the 1988 national political

conventions, there may be too many vans and not

enough transponder time, which may lead to further

cooperative action in purchasing satellite time and

sharing vans on location.l08

The role of satellite systems in delivering the

news will depend in part on the conditions and rules

of access to them. If, for example, access to satellite

uplinks is very expensive, some stations will probably be excluded. Access could also be limited due to

geographic location.

Regulatory policies will also determine access to

satellite uplinks. In the fall of 1987, the FCC relaxed

restrictions governing the use of transportable Earth

stations, which eased operations for satellite

newsgathering vehicles. Previously, FCC licenses

had required 5 days’ notification of intent to use a

transportable uplink. However, networks, independents, and associations argued that “news” does not

give such notice. Agreeing, the FCC began to allow

operations without notifications within a reasonably

small geographic area.

If competition among news programs were to

become greatly accelerated, advertisers might play

a greater role as information gatekeepers, in some

cases even dictating programming. Under such

circumstances, networks and affiliates might be

more reluctant to air straight political material, such

as Presidential speeches or news conferences, as

proved to be the case when President Reagan

delivered his February 1988 speech on Contra aid.l09

Under highly competitive circumstances, gaining a

percentage point becomes more important than

preserving the integrity of political events. Such a

conflict took place, for example, during the 1980

election when the race to be first led the networks to

project Ronald Reagan as the winner even before the

polls on the west coast had closed.

Electronic Bulletin Boards

To effectively champion one’s views, individuals

do not just act alone; they act in concert. The new

technologies, with their capabilities to store, manipulate, retrieve, and network, are optimally suited to

help them in this regard. With a personal computer

and a modem, individuals can collect and store

information related to their concerns; they can

maintain lists of potential supporters and contributors and target specific messages to them; they can

match organizational resources with organizational

needs; and they can gain constant feedback about the

progress being made. Figure 6-4 illustrates, for

example, how the new technologies can be used to

manipulate and structure information in a way that

will improve both the efficiency and effectiveness of

a political campaign.

1OSS= ~~el~, op. cit., foomote 50; b Bogart, “Television News as Entertainment,” Percy H. Tannenbaum, The Entertainment Functions of

Television (Hillsdale, NJ: Lawrence Erlbaum Associates, 1980); and K. Lang and G.E. Lang, Po/itics and Television (Chicago, IL: Quadrangle, 1968).

l~B~n B~jamin, “Tec~ology and the Bottom Line Create Profound Challenges, ” The NW York Times, Aug. 17, 1986.

lmIbid.

lm’’SNV’s t. play Major Ro]e in 1988 Campaign Coverage,” Broadcasting, July 20, 1987, pp. 46,48, 52.

109’whi~ HOW Fa~ts Networks for Sklpplng Reagan Spch,” ~ro&ast@, Feb. 8, 1988, pp. 113-114. There are other times when network IKZ&

dictated scheduling of Presidential speeches. In February 1978, CBS delayed President Carter’s address on ratification of the Panama Canal treaty

because it had a made-for-TV movie scheduled. President Reagan’s 1986 State of the Union speech was delayed because of the Challenger disaster and

had to be rescheduled during the fwst week of February, which is also the time for the network ratings sweeps. To avoid interfering with scheduled

programs (e.g., NBC’s Peter the Great miniseries), President Reagan began his speech an hour earlier, which required passage of a joint resolution of

Congress. This meant the people on the west coast were still at work during the President speech, and resulted in more people watching the Democratic

response to it.
168 ● Critical Connections: Communication for the Future

Figure 6-4-Development of Custom Targeting Database

~

Survey

data.

r

Custom targeting database

. Rank “neighborhoods’f from the most to least

attractive on vote intention

* Select best “neighborhood” targets

* Determine appropriate message appeals

*

I

Registered voter file

* Name and address ● Carrier routes

● Phone numbers ● Party affiliation

* Vote history o Date of birth

Phone banks

‘i’L “’

Direct mail Party building

Computer tape Check off lists

Mailing labels Precinct lists

Clerical needs

SOURCE: Kevin L. Kramer and Edward J. Schenelder, “Innovations In Campaign Research, Finding the Voters m the 1980s,” Robert G. Meadow (cd.), New

Communications Technologies m Po/Mcs, (Washington, DC: The Annenbarg Washington Program, 1985), p. 24. Reprinted with permission.
Chapter 6-Communication and the Democratic Process ● 169

One does not need to be a seasoned political

activist to take advantage of these new capabilities.110 Acting on his own, one man in Colorado

Springs, for example, led a successful campaign to

block a local ordinance placing restrictions on

home-based entrepreneurial activities. Surprised

that he was the only citizen to attend the first hearing

on the ordinance, he brought the issue to the

community’s attention by publishing it, together

with a list of his concerns, on his computer bulletin

board. A small notice in the local newspaper helped

to advertise his plan. A number of people contributed their comments via the computer bulletin board.

When a second hearing was held several weeks later,

175 people appeared to defeat the ordinance.111

To provide citizens with a new means of learning

about government activities, some electronic bulletin boards have been established by State or local

governments. In May 1987, for example, the Utilities and Commerce Committee of the California

State Assembly set up an electronic bulletin board

system, “The Capitol Connection,” which enabled

participants to learn about legislative and regulatory

issues and to engage in debate with other participants on these issues.

112 Accessible via four telephone lines, forums were set up to comment on

various pieces of legislation. Although this bulletin

board had about 1,000 registered users, it was

recently discontinued for lack of funding.l13 

These experiences illustrate how electronic bulletin boards could give rise to new electronic communities, promoting discussions and the exchange of

information on a range of public issues. Moreover,

with software that provides text on demand as well

as sophisticated graphics, bulletin boards could

lower the barriers of entry into the world of

publishing. In addition, by taking advantage of the

interactive nature of this technology, individuals

could also use electronic bulletin boards to become

their own media gatekeepers, structuring the content

of the information they receive.114

But the deployment and use of electronic bulletin

boards for political purposes could also have some

less positive effects. Not only will new groups be

established outside of traditional political channels;

within existing groups, there is likely to be a shift in

the chain of command. In addition, to the extent that

electronic bulletin boards are employed to target

specific people, they could lead to the fragmentation

of the body politic.

The rules and conditions governing access will be

a major factor affecting the impact that electronic

bulletin boards have on political life. Access, for

example, could be limited by the costs of such

systems or by the lack of skills to use them. Some

groups have sought to address these problems by

making computer terminals available in public

places. For example, the Community Memory Project in Berkeley, CA, installed public access terminals in a food cooperative, cultural center, and

community store. 115 Similarly, recognizing the importance of public access to such systems, Assemblywoman Gwen Moore introduced legislation into

the California State Legislature designed to make

computer terminals more widely available in public

libraries. 116 

For electronic bulletin boards to be widely accessible, they must be able to interconnect with the

public telecommunication network and/or with private networks. The development of, and agreement

on, standards is therefore also important.

Ownership of systems, registration requirements,

and system gatekeepers will also be important

determinants of the openness of such communication systems. Thus, a number of questions will need

to be answered with respect to rules of access and

use:

ll~or a p~= on how to ux such systemsto achieve political objectives, see Pacific Bell, Electronic Citizenship, OCtObtX 1988.

lllDave Hughes, “me Neighborhood ROM, Computer-Aided Local Politics,” Whole Earth Review, VO1. 45, Mmch 1985, p. 89.

112DavidW. B~~n, “me Capitol ConnWtion,’’CoW~er curre~, Aug. 25. Sept. 7, 1987, p. 20; and M~ Eixnh~, “CaliforniaLawmakers M@

the Electronic Age,” h4icrotimes, February 1988, p. 118.

llsper~~ Commfication, Robert Jacobson, consultant to the California Assembly Utilities and Commerce Committee, Feb. 5, 1988.

114A suey of U=m of a ~lltica] computer bulletin bored system, me politic~ Fo~—located in a university comm~ity near a State capitol ~d

carrying two interactive programs, Messages and Issues, in which a State senator provides a weekly legislative update-revealed that overall use was

motivated equally by surveillance (finding out what was going on), personal identity, and diversion. See Gina M. Garramone, Allen C. Harris, and Ronald

Anderson, “Uses of Political Computer Bulletin Boards,” Journal ofl?roadcusting & E/ecrronic Mediu, vol. 30, No. 3, Summer 1986, pp. 325-339.

1 IS’’ New CM Network Gets Good Response,” Community Memory News, No. 2, pp 1-2,7.

116’$Sta@AWmbly Ex@ments ~~ ‘El~@onic~mocracy’ via Computer Bulletin Bo~d, ‘~ecapitol Cmection. ’ “Pressrelea.sefrom CalifOmia

Assemblywoman, Gwen Moore, Sacramento, CA, May 27, 1987.
170 ● Critical Connections: Communication for the Future

●

●

●

●

Should anyone be allowed to get on a bulletin

board?

Would open access on such a scale lead to

problems of information overload?

Are there ways to set quality standards for

content or provide some form of evaluative

review?

How are agendas set, and who has the authority

to set them?

Providing for Participation

Classical political theory posits that a democracy

exists when all citizens actively participate in public

affairs. In reality, all democracies limit citizenship

and the ways in which citizens can participate in

politics. ll7 In addition, people differ with respect to

the ways and the extent to which they participate,

depending on estimations of their own effectiveness.

118

Although direct participation is possible—

through letter-writing, visits to government officials, testifying at meetings, demonstrations, and

running for elected office-most participation is

indirect, as in the case of voting for representatives.119 This indirect participation has been mediated primarily by political parties and interest

groups, both of which articulate and aggregate

preferences, recruit members and candidates for

political office, persuade voters and government

officials, and disseminate information on public

issues. l20

Allowing people to circumvent parties and interest groups, new communication technologies are

certain to affect the American political system and

how people participate in it.121 Two applications are

examined here: the use of cable television to target

potential voters, and the use of networked computer

systems in political campaigns.

Use of Cable Television to Target Potential

Voters

In political campaigns, advertising has been a

traditional mechanism for persuading voters. Campaigns have advertised in newspapers, on radio, and

on television. Between 1980 and 1988, the total cost

of running Senate and House campaigns has almost

doubled, from $239 million to an estimated $540

million. A significant proportion of this increase has

gone to advertising, as can be seen in table 6-4.122

With programming provided by cable channels

now accounting for 33 percent of total viewing

among cable households, this medium has become

a very cost-effective means by which advertisers can

target political messages to specific audience

groups. Not only has the cable audience increased

considerably over the last several years; in addition,

of all television viewers, cable viewers are the most

politically active. The Cabletelevision Advertising

Bureau notes, for example, that according to some

studies:

Cable subscribers are 26 percent more likely to

support a political group or a candidate than noncable viewers. By a 30 percent margin, cable

subscribers are more likely to engage in political

fundraising; they are 36 percent more likely to be

involved in local issues, 56 percent more likely to

have personally visited an elected official in the past

year and 34 percent more likely to have expressed an

interest in writing to public officials.123

Moreover, a candidate’s message can be targeted to

specific geographic and demographic audiences. As

Sabato and Beiler describe this advantage:

The process of “targeting” involves cross-

-referencing polling and census data to enable a

campaign to send key voters the precise message

they want to hear. Until recently that has meant

1 ITSee Caole Pateman, participation and Democratic Theory (Cambridge, MA: Carnbndge University Press, 1970); and Benjamin Gins~rg, The

Consequences of Consent (New York, NY: Random House, 1982).

1 ls~ws Cmp~Il, phillip E. Converse, W~en E. Miller, and Donald E. Stokes, The American Voter (Chicago. IL: The University of Chicago p~ss~

1960); and Herman H. Nie, Sidney Verba, and John R. Petrocik, The Changing American Voter (Cambridge, MA: Harvard University Press, 1976).

119Sl&ey Verba ad Noman H. N1e, partlclpat~n inAmeric@olitica/De~crucy u~~ociuf Eq~/@ (New York, NY: Harper md ROW, 1972).

l~olltic~ p~es can ~ distin~lshed from interest groups by the broader base of their membership and their much greater role in st~ctfing

elections. See Clinton Rossiter, Parries and Politics in America (Ithaca, NY: Cornell University Press, 1%0), for an account of political parties in the

United States. For a general account of the role of interest groups, see Jeffrey M. Berry, The Interest Group Society (Boston, MA: Little Brown, 1984).

121 For a Collmtion of ~ic]es and materl~s relating to fis subject, we J~] M. Swerdlow (cd.), Media Technology and tk Vote.” A SoiUce BOOk

(Boulder, CO: The Westview Press, 1988).

122~cordingto ~is G~s: “In 1$)74, fie average over~l cost ~r vote w= 67 cents. In 1984, it W= $7.74. h 197A, the average media cost per vOte

was 12 cents. In 1984, it was $3.S4. Overall campaign costs have increased since 1974 about fivefold. Media costs have increased tenfold.” As cited

in Swerdlow (cd.), op. cit., foomote 121, p. 81.

lzsLloyd Trufelman, “Audio/Visu~ Targeting Through Cable Television,” ibid., p 27.
Chapter 6--Communication and the Democratic Process ● 171

Table 6-4--Political Advertising on Television

Year Network Spot/local Total

1970 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $260,900 $11,789,000 $12,049,900

1971 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 5,490,000 5,520,000

1972 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,519,100 18,061,000 24,580,100

1973 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,199,000 7,865,800 9,064,800

1974 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,466,200 21,781,600 23,267,800

1975 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,744,200 6,251,000 7,995,200

1976 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,906,500 42,935,700 50,642,200

1977 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 14,992,600 14,992,600

1978 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,065,800 56,545,000 57,610,800

1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,000 16,891,700 17,146,700

1980 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,699,700 69,870,300 90,570,000

1981 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713,100 20,114,300 20,827,400

1982 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 861,900 122,760,300 123,622,200

1963 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,739,700 24,609,700 27,349,400

1964 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,652,500 110,171,500 153,824,000

1985 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 22,680,500 22,680,500

1986 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459,300 161,164,000 161,643,300

1987 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,923,200 24,923,200

1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,520,700 189,379,500 227,900,200

BOURCE: Television Bureau of Advertising, Broadcast Advertisers Reports. Spending fgures compiled by the National Association of Broadcasters.

ReprintedwithpermissionoftheTelevtsion Bureau ofAdvertising,

defining demographic “clusters” that react with

supposedly predictable political behavior, identifying their geographic presence and then exposing

them to highly specific and often dramatic direct

mail... Cable services are becoming more segmented, but the expanding scope of system “interconnects’’--computer networks organized by groups

of local cable systems that can facilitate placement of

messages innumerous demographically homogeneous communities simultaneously-will further"fine

tune’’ the audience. The cost Per thousand viewers is

as much as one-third lower than the shotgun

approach of network television.i24

Given this ability to offer the visual and audio

impact of mass media advertising with the specificity of point-to-point communication, one media

lawyer has characterized cable advertising “as a

perfect merger between TV and direct mail.’’125

Another attractive feature of cable is its flexibility. Cable stations accept longer advertising spots

than do broadcast stations, allowing candidates to

prepare personality profiles or pieces on specific

issues.

Although cable companies have only recently

targeted political candidates as a new source of

advertising revenues, as early as the 1960s they

recognized that political candidates were potential

advertisers. In 1968, Presidential candidates were,

for the first time, given free time on cable, and the

National Cable Television Association (NCTA)

urged them to take advantage of cable’s special

features.126 In 1987, the Cabletelevision Advertising

Bureau and NCTA held a workshop on Capitol Hill

designed to promote political advertising on cable.

More recently, focusing on their targeting advantage, some cable systems and/or cable programmers

are now designing systems in which messages can

be addressed to a particular viewer.

Assessments of how cable advertising might

affect American politics differ markedly. Noting

that American politicians have only rarely been able

to directly engage the electorate, Frank Luntz, in his

evaluation, emphasizes how television and television advertising now permit political figures to do it.

As he says:

Integration of television into the political environment in the 1960s and 1970s enabled candidates, for

124L~Sabatoand David Bei]er,’’Magic, . ,or Blue Smoke and Mirrors? Reflections on New Technologies and Trends inthe Political COnsllh~t

TradeJ’Swerdlow (ed.),op.cit. footnote 121,pp.7-8.

12SJo~ Wo]fe, “T~sing Its Hat Into Political Ad Ring,” Cablevision, Feb. 1, 1988, p. 31; and “Cable Delivers the Electorate, Says Panel,”

Broadcasting, Jan. 15, 1988, pp. 76-77.

IZcIthiel de Sola pool and Herbert E. Alexander re~rt, in “Politics a Wired Nation,” lthiel de Sola Pool (cd.), Talking Back: Citizen Feedback ad

Cub/e Technology (Cambridge, MA: MIT Press, 1973), that: “Both the Nixon and Humphrey campaigns made organized efforts to solicit cablecssters

to present their candidates. The Nixon campaign reported that 415 systems with a potential audience of 4.7 million people carried the Republican

materials, while the Humphrey campaign reported that 303 cable systems representing a potential audience of 3.5 million people earned the Democratic

materials.”
172 ● Critical Connections: Communication for the Future

the first time, to appear in bodily form, in the homes

of constituents. In the next decade, the typical

statewide campaign will spend at least half of its

dollars on political advertising, and will reach more

voters more often with more information. Although

still far away in Washington, DC, elected officials

have become less obscure and more accountable

figures. . . Television advertising has given many

American voters the ability to recognize the candidates’ names and faces—and learn something about

the background of the people they are electing.127

Alternatively, others view cable advertising as

providing one more device for media professionals

to more effectively “market” their candidates, a

development that they fear can only serve to make

political figures more, and not less, remote from the

general public. As voiced by former Senator Charles

McC. Mathias:

Under the current system, few candidates relish

the task of getting elected. There is increasing

awareness that modern campaign technologies have

fostered a remoteness from the voters . . . The

expertise of campaign professionals-political consultants, media advisors, pollsters, direct mail specialists-lies in the technique of mass marketing, not

in fostering personal contact between candidates and

the voters.128

There is also concern that cable’s targeting ability

might serve to fragment the body politic. Because

politicians can vary their messages according to

what particular audiences may want to hear, voters

may be less informed about alternative points of

view, and less inclined to consider their own

opinions in light of a larger, national context.

Cable targeting may also reduce the politicians’

dependency on traditional political information

gatekeepers —in particular the press and political

parties-a development that could have major

consequences for public policy. As Swerdlow notes:

Public policy is closely tied to this fragmentation.

Politicians and public officials, following the lead of

advertisers promoting goods and services, now

target messages at groups such as DINKS (double

income, no kids). This is far different than addressing Democrats or Republicans or conservatives or

liberals, and is becoming the best way to mobilize

voters in modern America.129

How cable advertising will affect American

politics will depend on the development of the

technology and its strength of appeal among media

buyers. It will also depend on the costs of campaigning and the nature of campaign financing rules,

as well as on the ability of parties, the press, and

other media to continue to play their traditional

political gatekeeping roles.

Success in using cable to target voters depends to

a considerable degree on the quality of data employed. In the past, the demographic data about

particular audiences within a specific cable system

were fairly sketchy and often out of date. Lately,

however, data have improved. NCTA has recently

merged its databases, creating an online service that

can identify cable advertising possibilities according

to congressional district, together with demographic

indexing and a list of current open ad slots.130 As the

quality of these tools increases so will their use by

political media professionals.

Although media buyers in political campaigns are

just beginning to recognize cable’s potential, many

are still unfamiliar with how to buy media time.

Others are reluctant to use cable because they want

to avoid the problems of having to make a number

of different, separate deals with local franchises in

order to buy time for a statewide or national race. In

their efforts to attract political advertising, cable

companies are now trying to alleviate some of these

problems. To help media buyers plan and coordinate

advertising for political candidates, a number of

multiple system operators are planning to establish

a nationwide “buyers service. ’’131

Campaign financing and campaign-financing

laws will also affect how cable advertising impinges

on democratic politics. With campaign costs skyrocketing, politicians will increasingly be inclined to

seek out the most cost-effective means of influencing voters, such as cable advertising.132 Limits

on campaign expenditures might constrain the

lzTFrank Lunw, “Campaign Technology and American Democracy,” Swerdlow (cd.), op. cit., fOOmOte 121, p. 100.

12sAS ci~ in ibid., p. 94.

129JW1 sw~~ow, “Fragmentatiort of the Electorate,” Swerdlow (cd.), op. cit., footnote 121, p. 107.

l~stiato attd Beiler, op. cit., footnote 124, p. 9.

lslJe@ne Av~, “Unit~ Cable TV Among MSO’S Considering Political Ad Service,” Multichannel News, Jan. 18, 1988, p. 4.

1321t sho~d ~ n~~ hat ~der provisions adopt~ in 1972 to ~tion 315 of tie Communications Act, statio~ we to chtige the “10We5t llllitr~e”

for political advenising. In the 1980s, this rule has not been diligently enforced by the FCC.
Chapter 6--Communication and the Democratic Process ● 173

amount of money spent on political advertising.133

However, it might also induce politicians to spend

their limited advertising budgets on cable TV, since

cable costs less per voter and is rapidly becoming

equal to network TV in effectiveness, if not more so.

Whether or not cable advertising will serve to

fragment the public and displace traditional gatekeepers will depend not only on what happens

within the cable industry itself; it will also depend on

the development of other media and the deployment

of new technologies. Thus, it is evident that political

parties have not remained passive in the face of

technological change.

134 In many cases, they have

assumed the role of technological expert, offering

their incumbents and candidates high tech services

to help them make their cases to the public. These

services might include, for example, the development of computerized voter lists, targeted appeals to

get out the vote, and even video and satellite

facilities. 135 To the extent that traditional gatekeepers find new niches-and there remain a number of

different, although equally effective, paths by which

politicians and the electorate can communicate-the

impact of cable targeting is likely to be diminished.

On the other hand, to the extent that cable advertising proves to be far superior to other means of

political communication, its impact on American

politics is likely to be considerable. Under such

circumstances, the government may want to assure

that other effective communication pathways not

only remain available, but can also be accessed in an

equitable manner.

Networked Computer Systems

All major and most minor political campaigns

now use computers for scheduling, fundraising,

speechwriting, demographic analyses, profiles on

competitors, communication with field offices, direct mail campaigns, targeting swing voters, organizing volunteers, budgeting, and financial reporting

to the Federal Elections Commission. Computer

systems and software vary dramatically in sophistication and cost, with the price of campaign software

packages ranging, for example, from $135 to $7,500.

One political consultant estimated that in the 1985-

86 congressional campaigns, about $2 million was

spent on software and about $20 million on computer hardware, software, and services, including the

purchase of voter lists.136 It was estimated that by the

spring of 1988, more than $19 million had been

spent in Federal campaigns on computer programs,

voter lists, and computerized fundraising.137

In addition to using their own computer networks,

campaigns also subscribe to online information

services that allow them to follow and analyze not

only coverage of their own campaigns, but that of

others as well. One of the most ambitious of these

services to date is the “Presidential Campaign

Hotline,” which provides summaries of political

news from electronic and print sources for a fee of

$150 to $350 per month.138 Subscribers include

campaigns, new organizations, lobbyists, and political consultants who depend on this service for an

“insider’s news summary.’’139 Hotline also offers

“Campaign Reports,” an electronic bulletin board

133Al~u@ tie ~er of money t. ifiknce c~p~~s and ~us ~f~t tie outcome of’ el~tions is well doc~ented, it has been difficult to fashion

public policies to address this problem. All other democracies establish some regulation over the use, timing, and/or format of political advertising on

television by, for example, allocating free time, limiting time and money that can be spent, and applying restrictions on format. In the United States,

however, the Supreme Court has protected campaign contributions, treating them as being equivalent to “speech.” For discussions, see David H. Remes,

“Mernorandurn on Constitutional Issues Raised by Proposed Restriction on Television Advertising in Federal Election Campaigns,” appendix to

testimony of Curtis B. Gans, Vice President and Director, Committee for the Study on the American Electorate, before the Senate Committee on

Commerce, Science and Transportation, Sept. 10, 1985, p. 12. See also J. Skelly Wright, “Money and the Pollution of Politics: Is the First Amendment

an Obstacle to Political Equality?” Columbia Law Review, vol. 82, No. 4, May 1982, reprinted in Political Economy and Constitutional Reform, hearings

before the U.S. Joint Economic Committee, 97th Cong., 2d sess., Nov. 9, 17, 18, and Dec. 15, 1982, p. 173.

lsQFor a g~~ discussion of how Pties are adapting, see paul S. Herrnson, Party Campaigning in the 1980s (Cambridge, MA: I-kirvwd university

Preas, 1988).

13sForadis~ussion, ~ibid. s= ~so Robefi B]~mire, “me p- as cons~t~t,” ca~aig~ & E/ections Magazine, July/August 1987, fi reprinted

in Swerdlow (cd.), op. cit., foomote 121; and Stephen Frantzich, Political Parties in the Technological Age (New York, NY: Imngman Satellite

Communications, April 1988).

136JOIUI fi~ode phillips, president, Aristode lndu~ries, as quoted in Elizabeth Tbcker, “Computers Enter the World of Politics,” The Washington

Post, Washington Business, Mar. 7, 1988, p. 9.

137-W Ro~n~, “politicians Yield to Computers,” The New York Times, May 9, 1988, p. D5.

138Forad=cription~ his ~Wice’s fo~der, ~L~ Checco, “The~esidenti~ c~pai~ HOtline,” Swerdlow (cd,), op. cit., foomo~ 121, pp. 21-25.

ls~le~r Randolph, “A Hot-off-The-Wire Service for Political Junkies,” The Washington Post, wt. 11, 1987, pp. A18-A19.
174 ● Critical Connections: Communication for the Future

for press secretaries, in which each candidate can run

200 unedited words.l40

Networked computer systems could serve not

only to make political campaigns more efficient and

more responsive to citizen concerns; they could also

make it easier for political candidates to network and

share resources. Alternatively, these systems could

increase the cost of political campaigns, enable

politicians to manipulate citizens’ perceptions, and

make politicians more independent of political

parties. The future role of such systems will depend,

among other things, on who develops them, their

costs, and their availability to all political contenders.

One important concern about the growing use of

technology in politics is that it fosters the dependence of politicians on political consultants, rather

than on political parties-a development that detracts from representative government. This concern

derives from the fact that political consultants now

play the pivotal role in engineering the use of new

communication technologies in campaigns. As

David Chagall describes in The New Kingmakers:

These consultants are high-powered professionals

versed in the skills of polling, communication, and

computer planning. They plot the strategies, set the

stages, choose the themes, and mastermind the

interplay of candidate and media in the Klieg lights

of today’s electioneering carnivals.141

Similarly, political scientist Benjamin Ginsberg

argues:

The present-day change in the underlying strength

of American political forces is a result precisely of

the displacement of political party organizations by

new mechanisms of electoral mobilization.142

Responding to the growing demand for political

consultants, one university has established a Graduate School of Political Management. Political consultants have also formed their own trade association, the American Association of Political Consultants. Although in the past political consulting firms

were small, privately held, and often disappeared

with the end of an election cycle, there are now 300

ongoing companies providing computer services for

politics. 143

To the extent that political consultants assume the

role of political gatekeeping, their values, and the

incentives that motivate them, become matters of

public concern. Looking back at the history of recent

electoral campaigns, some political observers have

expressed concerns about the basic ethics of the

consulting profession. In his study of political

consultants, Larry Sabato concludes, for example,

that they “are businessmen, not ideologues.”l”

Although they generally work for one particular

party, political consultants tend to select the candidates they work for not on the basis of their

viewpoints or world views, but rather on the

“revenue-producing potential of a campaign. ’’145 As

characterized by one political consultant:

Democracy is a growth business. The industry is

growing, and the reason is because there is more

money being spent overall by campaigns.146

Others claim that the use of computer networks

and high technology consultants actually contributes

little to the prospects of a campaign, apart from

increasing its overall costs. As described by journalist Fred Barnes:

It’s partly fear that keeps consultants in demand,

fear that your opponent will get a leg up. If one

candidate hires a famous pollster or media consultant, the other candidates have to get expensive

consultants of their own. In the end, the consultants

nullify each other in most races. *47

If campaign costs continue to escalate in response to

each new technological development, some of the

best candidates may be excluded from politics, while

others may become increasingly beholden to political professionals rather than to political parties.

The role of political consultants in American

political life will depend to a large degree on how

effectively the traditional gatekeepers adapt to

l~~jo~e Willlms, ‘me politicos’ Insmnt Fix,” The Washington Post, Feb. 19, 1988, PP. B1-B2.

ldlDa~d ~@l, The NeW King~ers (New York, NY: Harcourt Brace Jovanovich, 1981 ), p. 5.

142~nj~n Gins~rg, The Cwtive public (New York, NY: Basic BOOkS, k., 1986), p. 178.

ldq~~w RoSn~, “Politics Yield to Computers,” The New York Times, May 9, 1988, p. D1.

144Lq J. Sabato, The Rise of po/itica/ Consultants (New York, NY: 1%.4c B~kS, ~C.! 1981)! P. 6,

lds~id.

l~philliP, ~. cit., foomote 136, PP. 1! 9.

147~ B-w, cc~ M@ of politic~ Con5ultant5,” The NW Rep~fic, J~ 16, 198(5, reprint~ in Swerdow (~.), op. cit., footnote 121, p. 190.
Chapter 6--Communication and the Democratic Process ● 175

the new technological environment. As Robert

Blaemire has pointed out American political parties

could employ new technologies to rebuild and

revive the role of parties.

148 By taking advantage of

new technologies to create voter databases, or to

make video production facilities and satellite feeds

available to candidates, the parties could position

themselves to be the lowest-cost consultant to

political candidates. In so doing, they would enhance their own roles as political gatekeepers. Being

in control of political communication services, they

would also be in a position to allocate their

assistance not so much on the basis of a candidate’s

ability to pay, but rather on the basis of a candidate’s

political perspective, which would be more in

keeping with democratic politics.

Providing for Representation

The United States was designed to be a representative or republican form of government.149 This

design reflects the Founders’ belief that, while

government should be based on popular sovereignty,

it should also protect the minority against majority

rule. Thus, while power was given to the people, it

was done in a limited, or restricted, fashion. Qualified participants were defined narrowly to include

only white, property-owning males. Moreover, the

President and Senate were not directly elected by the

people, but rather were indirectly chosen by the

Electoral College and the State legislatures. And

finally, “the people” were themselves divided into

two constituencies --one at the Federal and one at

the State level.

In American politics, political parties have traditionally served as gatekeepers, providing a means by

which representatives can organize their activities

and constituents can hold representatives accountable. However, the widespread use of new technologies in politics is likely to disrupt this relationship,

allowing individuals to circumvent their representatives and make their cases more directly. Although

such a development might allow for a more direct

form of democracy, it could also serve to further

fragment the body politic. To illustrate these possibilities, two technological applications are examined here: the televising of congressional proceedings and the polling of voters/constituents.

Televising Congressional Proceedings

Televising congressional hearings began in 1948

with the Senate Armed Services Hearings on Universal Military Training and the House Committee

Hearings on Un-American Activities. In both instances, committee members allowed television

coverage to publicize both the substance of the

issues and the role of committee members. Throughout the next 40 years, congressional committees

allowed television coverage of a number of key

hearings-the Kefauver hearings on organized

crime in interstate commerce in 1951; the Army -

McCarthy hearings in 1954; the Senate Watergate

hearings in 1973; the House impeachment proceedings in 1974; and, most recently, the Iran-Contra

hearings in 1987.150

The regular scheduling of congressional events

did not begin, however, until much later with the

development of cable television. In 1979, the Cable

Satellite Public Affairs Network (C-SPAN), a nonprofit cooperative of 40 or so cable TV companies,

began covering the proceedings of the House of

Representatives. In 1986, using C-SPAN H, coverage was extended to include Senate activities. To

meet its annual budget of about $12 million,

C-SPAN receives its operating funds from the

affiliate cable companies.

C-SPAN prides itself on its limited gatekeeping

role. Although it selects subjects to be covered, it

provides unmediated accounts in which the camera

simply records the happenings, or the lack thereof,

on the Senate and House floors. In addition, it

provides full campaign coverage, and hosts a morning call-in program where candidates are questioned

by the public. As Phil Roeder, Executive Director of

the Iowa Democratic Party, describes C-SPAN’s

role:

148Bl&mire, op. cit., fOOmOte 135, PP. 171-173.

14~eR have ~n two ~omPting ~WfieS of ~pre=ntafion. me f~st, and the mom wi~]y accep~, is the ~stee tieory. kcording tO this theOf’y,

the representative translates constituents’ views into what, from the representative’s perspective, is in the best interest of the country. The second theory,

the delegate theory, argues that representatives should literally represent the views of their constituents.

15~m Wm n. problem ~ ~fiing access t. the networks beca~, in each of these inst~ces, tie networks decided hat there would & a SubStiUttitd

audience. Following each hearing, there was discussion of the effect that television coverage had with respect to the rights of the wimesses, the stance

taken by congressional members, and the public’s interest in the hearings. For a discussion, see Ronald Garay, Congressional Television (Westport, CT:

Gresnwood Press, 1988).
176 ● Critical Connections: Communication for the Future

C-SPAN brings everything that the candidates are

doing into the people’s living rooms. It’s the high

tech version of retail politics.151

Although C-SPAN was virtually unknown when

it began operation 10 years ago, it has gradually

developed a loyal following, which includes a

number of journalists and political junkies.152 A

1987 survey commissioned by C-SPAN found that

viewership had increased 43 percent since November 1984, from 7.6 million households to 10.9

million households.153 Moreover, C-SPAN recently

released a report claiming that its audience is

competitive with MacNeil/Lehrer, Face the Nation,

Meet the Press, and This Week With David Brinkley. 154

Congressmen are also becoming more aware of

C-SPAN and its potential impact on constituents. As

Rob Stoddard has pointed out:

It was only a short time before members of

Congress realized the power of the satellite-fed

programming. Letters poured in from voters who had

observed their congressman’s actions on the floor or

in an important hearing. And it wasn’t long before

House members began emphasizing issues

important to them in speeches before an empty

House chamber, merely to gain the exposure that

C-SPAN offered.155

One positive outcome of televising congressional

proceedings is that it could enhance the stature of

Congress and its members, as well as revitalize the

public’s interest and participation in political affairs.

Experience with C-SPAN has shown that live

reporting of public events can also serve as an

important source of information for traditional

gatekeepers, such as party leaders and the press,

helping them to monitor and keep track of events.

On the other hand, television coverage could

serve to discourage substantive political debate if

Congressmen chose either to posture before the

public or to become more reticent. Moreover, with

all their actions exposed to the public, Members may

find it more difficult to arrive at compromise.

Television coverage might also detract from the idea

of politics as public affairs by fostering the contrary

notion of politics as entertainment.

One factor that will help to determine the impact

of television coverage of politics will be the rules

and norms that Congress establishes with respect to

it. Both the House and the Senate control the

cameras that cover floor activities, and they make

the video feeds available to the media for their use.

Cameras for hearings are supplied by the television

stations, but the House and Senate Radio/TV Gallery

acts as a gatekeeper to ensure an orderly process. To

date, there have been few problems entailed in

providing television coverage. However, to the

extent that political programming becomes more

popular, the political stakes in how coverage is

allocated are likely to increase, giving rise to issues

about which events should be covered and by whom.

The growth in the popularity of live political

programming will also affect its development and

how it is employed in the political process. In fact,

it was precisely because C-SPAN did not enjoy a

sizable audience that it was able to develop as a

public service without a lot of undo attention. Were

C-SPAN’s popularity to greatly increase, inducing

other networks to provide competing services on a

for-profit basis, C-SPAN might be forced to adopt a

much more commercial, but politically less useful,

format.

Polling of Voter Preferences

Writing in 1916, the English political theorist,

James Bryce, looked forward to the day when:

. . . the will of the majority (would) be ascertainable

at all times, and without the need of its passing

through a body of representatives, possibly without

the need of voting machinery at all . . . To such a

condition of things the phrase, “Rule of public

opinion,” might be most properly applied, for public

opinion would not only reign but govern.156

Moreover, with the development of public opinion

polling two decades later, a democracy built to this

151As cited in Andrew Rosenthal, “C-SPAN’S Spodight Brings Quiet Corners of Campaigning Into View,” The New York Times, @t. 22, 1987.

152As Thomas P. SouthWick points out, members of the press value C-SPAN, which allows them to follow issues in greater depth and to see candidates

operating over time and in a variety of different contexts. “C-SPAN Plays a Pivotal Role in 1988 Presidential Elections,” Multichannel News, Nov. 30,

1987.

153Je~ne Aversa, “study: C-SpAN Viewership Up 43% Since November 1984,” Mulfichunnef NOW, Jm. 25, 1988, P. *O.

ls4Lloyd Trufelman, “Audio/ViSu~ Targeting Through Cable Television,” Swerdlow (cd.), op. cit., foomote 121, p. 27.

lssRob Stoddwd, “T~ng politics t. the Skies,” satellite COMu~”catiom, April 1988, as reprinted in Swerdlow (~.), op. cit., footnote 121, p. 178.

lsGJ~es Bryce, The A~rican Co~onwea/th (New York, NY: Macmillan, 1916), vOI II, pp. *61-262.
Chapter 6-Communication and the Democratic Process ● 177

form appeared reliable. Early public polling techniques, however, proved to be far too inadequate.

Thus, it has been only recently, with the advance of

communication and information technologies, that

proponents of direct democracy have begun to

reemerge. 

157

New communication technologies make polling

not only easier, but also more accurate. Computers

can be used to select random samples of voters or to

target particular demographic groups. They can also

be used to aggregate, analyze, and widely disseminate results.

Although most direct communication with respondents is still conducted by telephone, the

process is now greatly facilitated, given automatic

dialing and voice-stimulated response. Broadcast

and cable stations also conduct polls—generally by

posing a question, together with a range of answers,

and inviting interested parties to respond via an 800

number. With new interactive media, such as cable

TV and electronic bulletin boards, polling can now

be done more directly. For example, with interactive

cable, a viewer can respond to questions by pushing

a button on the cable box, thereby sending a signal

to the station. Conceivably, interactive technologies

would allow polling to take place on every public

issue, permitting one form of electronic democracy. 

158

These enhanced public polling techniques could

be used to provide citizens with greater information

and to stimulate their interest in public affairs. They

could serve, moreover, to provide government

representatives with additional information about

their constituents’ views. According to Christopher

Arterton, who analyzed 13 local experiments in the

use of interactive communication technologies, this

kind of positive outcome is most likely when

technology is not used to bypass government, but

rather to improve citizens’ access to decisionmakers

and broaden participation.159

Others are much more skeptical, and in some

cases even alarmed, about the future prospects of

polling technologies. Many note, for example, that

polling could enhance the voice of a self-selected

subset of citizens. This is likely to be the case when

members of an audience are given the option to

respond. Self-selected participants may either be

more intensely concerned about a given issue, or not

very concerned at all. In either case, their opinions

would not be representative of the general public.

New polling techniques could also be used to

manipulate the public, a possibility suggested by

political scientist, Benjamin Ginsberg. According to

Ginsberg, the power to manipulate public opinion

has affected its nature as well as its relationship to

government. No longer a voluntary activity, but

rather an externally subsidized activity, polling has

been transformed from a spontaneous assertion to a

constrained response, and from a property of groups

to an attribute of individuals. As a result, argues

Ginsberg:

Polling has rendered public opinion less dangerous, less disruptive, and, perhaps, more amenable to

governmental control.l60

Others discount polling as being politically irresponsible because it tends to discourage deliberation

and debate. However, some are more sanguine about

the impact of polling, believing that the public will

not support it. As Pool and Alexander note:

The notion is that the ancient dream of direct

democracy, in which the people themselves vote on

the issues instead of merely periodically choosing

representatives, can at last be made a reality. It rests

upon a total misunderstanding of the legislative

process . . . Clearly any instant referendum scheme

is so destructive as to be inconceivable.l6l

Others agree. They criticize instant polls because

they lack prior debate, provide only a sketchy

presentation of positions and facts, and provide no

overall context in which choices can be made.162

15TFor ~ di~~~~ion, ~e c~~opher Afle~on, TeJede~cra~: Can Tec~~OO p~otect De~cracy? (Beverly Hills, CA: Sage, 1987); Benjamin

Barber, “The Seeond American Revolution,” Chunnefs, February-March 1982, pp. 25, 62; and Pool and Alexander, op. cit., footnote 126.

15sMost ~s~ms have not yet ~n designed to allow real interaction between respondents and the pollster, or to allow discussion among responden~.

Instead, the audience merely responds to preset choices defined by program producers. In 1977, Warner Amex set up a trial system such as this in

Columbus, OH. Called QUBE, this system allowed subscribers to send signals back to the system via a hand-held keypad. It was eventually discontinued

because of low demand and high financial costs. For a description of QUBE, see Everett M. Rogers, Communication Technology (New York, NY: The

Free Press, 1986), pp. 62-64.

159~fion, op. cit., fOOmOte 157.

l~in5berg, ~. cit., fOOmOte 1429 P. 63.

161Po01 and Alexander, op. cit., footnote 1*6, p. 79.

ItiFor me discussion, ~ Barber, Op. cit., footnote 157, PP. 21-25.62.
178 ● Critical Connections: Communication for the Future

How polling is eventually employed, and its democratic norms and rules for its use. Of critical

impact on American democracy, will depend in the importance will be who does the polling, how

long run on whether, becoming cognizant of the extensively it is used, and whether or not it is meant

potential power of polling, government establishes to provide a substitute for other political processes.
Chapter 7

Communication and the

Production of Culture
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Chapter 7

Communication and the Production of Culture

INTRODUCTION

Societies are bound together and adapt to changing circumstances by virtue of the wealth of cultural

resources on which they can draw. Communication

and information technologies have often played a

critical role in developing and enhancing these

resources. Throughout American history, technologies such as the telegraph, telephone, radio, and

television have facilitated the Nation’s expansion

westward; its transformation from a rural, agriculture society to an urban, industrialized one; and the

integration of a wide variety of diverse ethnic groups

into one, unified Nation. Today, many people look

to the new communication and information technologies to help solve some of the social and cultural

problems associated with a postindustrial era, such

as illiteracy, personal isolation, crime, and the

breakdown of families and communal groups.

From a technical standpoint, it is clear that many

of these new technologies have considerable potential. Given their networking capabilities, they can

provide an expanded infrastructure for information

sharing and exchange. In addition to generating

more information and new kinds of cultural forms,

they can also be used to make this knowledge more

accessible and to provide it in more convenient and

suitable ways. Because they are decentralized and

can thus be made more widely available, the

technologies may create opportunities for many new

people to become actively involved in creative

activities. Given their ability to store and retrieve

vast quantities of information, they can also serve as

a storehouse of cultural resources, making them

accessible and available for generations and civilizations to come.

However, just as history testifies to some of the

positive benefits that communication technologies

can provide in the cultural realm, it also illustrates

some past disillusionments and points to some of the

unintended cultural problems and consequences

often associated with the introduction of new

technologies. Above all, it is a reminder that the

impact of new technologies in the realm of culture

depends as much, if not more, on social and

economic factors as it does on technological ones.

With this experience in mind, this chapter will seek

to identify and analyze the cultural opportunities that

new communication technologies engender, and the

factors or obstacles that might limit or preclude their

optimal use.

THE CULTURAL REALM

Culture can be defined as a system of symbols,

beliefs, behaviors, and institutions that define and

reflect the social reality of members of a community.

It refers to the realm of “sensibility of emotion,

moral temper, and of the intelligence [that] seeks to

order these feelings.”l

It comprises all of those

imaginative and spiritual activities (such as painting,

poetry, or music, as well as litany, liturgy, and ritual)

whereby men and women seek to understand their

natures-who they are, as well as their relationship

to others and to the universe.2

Providing a consistent moral and aesthetic frame

of reference, culture serves to develop and sustain

the identities of both individuals and societies.

Without a cultural tradition, individuals’ interactions would be meaningless. In order to define

themselves and to take purposeful action in different

situations and in relationship to others, individuals

need reference to a relatively stable construct of

shared symbols.3 As such, culture can be thought of

as the “glue,” the shared values and practices, that

holds a society together.

To be effective in this role, however, a culture

must sustain a delicate balance between constancy

and change, and between diversity and integration.

An overemphasis on homogeneity, for example, can

lead to repression or stagnation; a lack of integration

can bring divisiveness and disarray. On the other

hand, protecting diversity while encouraging integration allows a society to adapt to change and to

maximize the advantages of its cultural richness.

Reflecting this delicate balance we find, therefore,

that new art forms and new ideas do not replace old

ID~iel Bell, The Cultural Contradictions of Capitalism (New York, NY: Basic Books, 1976), p. 12.

zIbid.

sT~cott Parsons, The Social System (Glencoe, IL: Free press, 1964), pp. 11-12.

–181–
182 ● Critical Connections: Communication for the Future

ones; they become a part of an ever-expanding

source on which individuals can draw to recreate and

reinterpret experience. Thus, although the ways that

people have dealt with their concerns about life may

have changed considerably over time and in different eras, the themes that have preoccupied mankind--death, tragedy, love, sacrifice, heroism, obligation, and redemption-have remained constant.4

Looking at diversity and integration, we see that

cultures are really nested subcultures-groups that,

while sharing a common set of beliefs at one level,

also display distinctive characteristics. Thus, diversity and integration occur on a number of levels and

dimensions, and subcultures can be defined by many

factors, including geographic location, urban/rural

lifestyle, gender, ethnicity, sexual preference, age,

political affiliation, social interest, class, religion,

and race.

In an open and democratic society, the balance

between integration and diversity and the relationship among subcultures are determined by the

degree to which there is access to a wide variety of

cultural forms, as well as by the extent to which the

opportunities to participate in the production of

culture are widely available.5 It should be noted,

moreover, that people can be passive or active in

their participation.6 They can partake of and produce

their cultures through institutions like the family,

work, education, community, religion, and entertainment. These institutions coordinate individuals’

actions, provide role models, inculcate values, and

proscribe behaviors. As people’s experiences are

structured by the institutions in which they live, their

behavior and actions reinforce and reenact their

cultures.

COMMUNICATION

TECHNOLOGIES AND

CULTURAL ACTIVITIES

Communication is the process by which culture is

developed and maintained. Only when people develop language, and thus a way of communicating,

can a culture emerge and be imparted.7 Information,

the content of communication, is the basic source of

all human intercourse.8 Over the course of human

history, it has been embodied and communicated in

an ever-expanding variety of media, including

spoken words, graphics, artifacts, music, dance,

written text, film, recordings, and computer hardware and software. Together, these media and the

channels through which they are distributed form the

web of society that determines the direction and pace

of social development.

From this perspective, the communication of

information permeates the cultural environment and

is essential to all aspects of social life.9 It is the

means by which knowledge is created and shared,

roles are negotiated, and social relationships are

legitimized. Through communication, culture is

both maintained and changed; behaviors, and the

values that underlie them, are accepted, questioned,

or reinterpreted according to circumstances.10

Because communication is linked to all social

activity, it is clear why the emergence of new

communication technologies has, throughout his4Bell, op. cit., footnote 1? p. 15.

5For o~er di~cussiom but how ~oup~ create, m~n~n, and ~ter ~e~ noms, soci~ ~actices, ad instiIu@IM, w Michele Barrett Ct d. (eds.),

Ideology and Cultural Production (New York, NY: St. Martin’s Press, 1979); Alvin GouMner, The Dialectic of Ideology and Technology (New York,

NY: Seabury, 1976); and John Dewey, Human Nature and Conduct (New York, NY: Holt, Rinehart and Winston, 1922).

bSeS A.M . Tlmnberg, K. Norvak, K. Rosengren, and B. Sigurd, Commun ication and Equality: A Swedish Perspective (Stockholm: Almquist &

Wiksell International, 1982).

Tfiid. Fm adiscmsionof tie role of lanWage in ~ultur~ fomation, ~~so J~es R. Beniger, The Confrof Revo/WWn: Technology and the Econo~.c

Origins of the [n$ormatwn Society (Cambridge, MA: Harvard University Press, 1986), pp. 84-91.

8LW1anfie (~.), com~~~.o~ ad Po/itica/Deve~Pment, Studies in po]itic~ ~velopment (Princeton, NJ: Princeton University press, 1965),

p. 4.

gIbid,

l~en ~ple c~~icate, mean~g is ~~ ~s~~ and negotiat&.+ome ~ngs tie t~en for ~antti, and others are interpreted in new ways

or brought up for explicit discussion. When people communicate, they are both differentiating and integrating-displaying their distinctiveness as well

as demonstrating their commonality.
Chapter 7--Communication and the Production of Culture ● 183

tory, had a considerable impact on societies.ll In her

analysis of the impact of the printing press on

European culture,12 Elizabeth Eisenstein describes

how printing-by greatly increasing the speed and

reducing the costs of reproduction —facilitated the

dissemination of ideas. By increasing the general

level of literacy, it also made more people susceptible to, and eager to partake of, such ideas. As a result,

the market for information products and literary

works grew, and their economic value was greatly

enhanced. Later, as books and manuscripts ceased to

be isolated on monastery shelves and became

available to many people simultaneously, they

began to serve as an important forum for public

discussion. Printing and the widespread distribution

of books also fostered new relationships among

scientists, artists, intellectuals, and their geographically distant counterparts. As Eisenstein has pointed

out:

The fact that identical images, maps, and diagrams

could be viewed simultaneously by scattered readers

constituted a kind of communications revolution

itself. 13

Looking in particular at the effect of communication technologies on the balance between diversity

and integration, and among dominant cultures and

subcultures, we see that communication technologies exhibit two basic, and contradictory, tendencies. 14 On the one hand, mass communication

technologies (notably radio, television, and film)

have served to foster unity by providing disparate

groups with a common experience. On the other

hand, some means of communication allow individuals isolated in thousands of different and distant

towns who have kindred interests to associate with

one another and coordinate their activities, encouraging the development of specialized communities.

When the various media allow these dual tendencies

to exist in equilibrium, there is sufficient social

cohesion to sustain a national community, as well as

enough variety to protect the pluralistic quality of

modern societies.

THE IMPACT OF

COMMUNICATION

TECHNOLOGIES ON

AMERICAN CULTURE

The dual tendencies toward diversity and integration are in evidence throughout American history as

new communication technologies were developed

and evolved. The trade routes that bound the

American Colonies to England constituted a communication network, and, naturally, many of the

messages dealt with commerce. Although transports

of the 1600s and 1700s were primitive by today’s

standards, the British merchant fleets forged a fairly

cohesive community that bridged the “English

Atlantic.” 15 Thus, at least initially, communication

tended to strengthen transatlantic feelings of community within the British Empire.

By the mid-1700s, however, communication

among the American colonies was growing more

intensively than communication with England.

Newspapers, which featured nonlocal news, increasingly focused on matters of common interest to

colonists. Thus it has been argued that improved

11~ hiS ~k, The B@ of C’omunicatzon, Hao]d Innis made tie c=hat tie communication regime is tie key v~able determining the nature Of

any culture and society. At one extreme, according to Innis, are bulky, durable media that foster civilizations of limited extent and permit tight control

by a hierarchy of religious and political leaders, often one and the same. These media emphasize the preservation of information over time and are

associated with cultures that treasure religion, stability, tradition, and history. At the other extreme are light, ephemeral media. They foster expansive

civilizations in which control over provinces is centralized in a distant capital. These media emphasize the dissemination of information over wide areas

and are associated with cultures that prize secular matters, trade, and scientific inquiry. Communication technologies, in Innis’s shorrhand, have either

a time or a space bias. See Harold Innis, The Bias of Communication (Toronto: University of ‘Ibronto Press, 1951).

lzEliza~th L. Eisen~ein, The pri~ing Press as anAge~ of Change Communications and Cultural Transformations in Early Modern Ewope, vols.

1 and 11 (Cambridge, England: Cambridge University Press, 1982).

Wbid., p. 56.

ldJohn Carey, “The ~mmunication Revolution and tie Professional Communicator,” Sociological Review Monograph, VO1. 13. JiUNUUY 1969. PP.

23-38.

IS&Wite~ev~dis~nWs ~paatingmem~rs, svcl~lz~ ~Wciation~ communities of different religious groups, political interests, andmerch~ts

enjoyed regular, aibeit slow, transatlantic correspondence. Quakers, for example, exploited the available means of communication to maintain their sense

of community with the faithful in other North American colonies as well as in England, Ian K. Steele, The English Atlantic Z675-Z 740: An Exploration

of Communication and Community (New York, NY: Oxford University Press, 1986), pp. 263-265.
184 ● Critical Connections: Communication for the Future

intercolonial communication—a function of better

roads and more coastwise shipping—heightened

inhabitants’ sense of American community.l6

Revolutionary propagandists did more than just

wait for changing patterns of communication to

foster a new consciousness; they actively took part

in restructuring the communication system to accelerate the emergence of a truly American community.

Three years before the Declaration of Independence,

revolutionaries wrested control of the American

posts from the British. By transmitting news from

New Hampshire to Virginia, the “Constitutional

Post” was designed to fuse colonists, whose interests

and experiences varied widely, into a unified

whole.17

Throughout most of the 19th century, the United

States was a society of “island communities’’--cities

and towns with limited interaction.18 The postal

system provided one bridge, probably the most

important, that connected a widely dispersed population. People wanted access to national news and

market information, but they increasingly realized

that potential economic and cultural influence followed communication routes. A cultural debate

erupted concerning how to foster national integration through communication without undermining

the viability of local communities.

With improvements in printing technology and

the postal delivery system, anew kind of community

was built, bound not by space but by specialized

interests. Thus, for example, as American society

developed different political groups, partisan papers

became:

. . . a major force for factional or party cohesion,

communicating partisan information and views from

the centers of power to the outlying communities.19

Similarly, the various social movements of the 19th

century developed communication mechanisms to

engender a sense of community among adherents.

The telegraph, on the other hand, made social

existence more uniform. Because of high costs,

telegraph use was confined largely to businesses and

the press; few people used it for social communication, at least in the United States.20 However, by

fostering the standardization and the central processing of news reports, the telegraph meant that, for the

first time, Americans were able to read essentially

the same national and international news stories, a

development presaging true mass communication.21

On another level, the telegraph brought a uniformity and large-scale coordination to people’s everyday existence. Before the railroad and telegraph,

society’s “island communities” geared their time to

local rhythms. For example, Michigan had 27 time

zones, Indiana 23, and Wisconsin 39.22 The advent

of the railroad required the coordination of schedules

over large areas, and conducting business via

telegraph required knowledge of precise times

around the world. Hence, standard time zones were

established in 1883. As Carey notes:

The telegraph facilitated the temporal coordination and integration of the entire system for business,

government, and social life.23

The telephone also had a major impact on

American culture. It was the only innovation since

the mails to effectively increase opportunities for

individuals, as opposed to institutions, to send and

WJee Rich~dL. Ivkmitt, SyfiOfS ofAmerican C’ornmunity 1735-1775 (New Haven, CT: Yale University Press, 1966). Analyzing newspaper content

between 1735 and 1775, he found growing coverage of colonial affairs. More important, perhaps, colonial newpapers used more words and symbols

associated with America and fewer associated with England and empire.

ITWmd L. ma, Go&fur& Newspaperman (Durham, NC: Duke University Press, 1962). PP. 111-136.

18Rok~ Wick, The Searchjor Order, 1877-1920 (New York, NY: Hill and Wang, 1967), P. xiii.

l~illim b~m, Poiiticd parties in a New Nation (New York, NY: Oxford University Press, 1963), P. 42.

20~ EWOWW co~~es, Where he telegraph WaS a government monopoly supervised by the Postid authorities, PeoPle m~e greater use of tie ‘ires

for personal correspondence.

21 Before tie telegqh, ~itom obt~n~ nonlocal news Mrou@ tie m~ls es~nti~ly cost-fr~. They CUll~ heir exchanges and .%lect~ aCCOUnts

deemed suitable for local readers. News-gathering by wire, in contrast, entailed more costs; press associations, such as the New York Associated Press,

were organized to spxead the expense of news-gathering and transmitting among many users. News was converted into a commodity to be sold,

discounted, and marketed just like any other product. See Frederick Hudson, Journalism in the United States (New York, NY: Harpers, 1873), for a

history of early news associations. For other discussions of the impact of the telegraph on news-gathering, see F,B. Marbut, News From the Capital

(Carbondaie, IL: Southern Illinois University Press, 1971); and Robert Thompson, Wiring a Continent: The His@y of the Telegraph Industry in the

United States 1832-1866 (Princeton, NJ: Princeton University Press, 1947).

~J~es Carey, “TeChnoIoa and Ideology: The Case of the Telegraph,” Prospects, vol. 8, 1983, pp. 303-325.

‘Ibid., p, 323,
Chapter 7--Communication and the Production of Culture ● 185

receive messages. This radical potential, however,

was only slowly realized. The telephone, much like

the telegraph before it, was initially used only by

business. Ultimately, the telephone vastly increased

personal communication within towns and metropolitan areas and, by all accounts, it was especially

instrumental in enhancing rural life. This success in

fostering local communities was partly the result of

Federal policy mandating universal access.24

The trend toward the national distribution of

printed matter culminated with the emergence of

inexpensive popular magazines. Entrepreneurs

launched national magazines in the 1880s and 1890s

expressly to serve as vehicles for advertising brandname consumer items featured by mass retailers.25

This new genre of magazines, epitomized by Curtis

Publishing Co.’s Saturday Evening Post, Ladies’

Home Journal, and Country Gentleman, cut subscription rates to attract a mass middle-class audience.

26 With advertising-filled periodicals blanketing the Nation, the heavily subsidized second-class

mailings grew 20 times faster than the population in

the four decades after 1880.27

Motion pictures also did much to shape a national

community of tastes, style, and culture. Although

films are not tied directly to the marketing system,

they have nonetheless served as a powerful tool to

promote consumer goods and services. Indeed, they

became one of the first communication instruments

to project American culture throughout the world.28

Some governments reacted to the flood of U.S. films

with quotas as early as 1927, justifying them on the

grounds of protecting their national cultures from

the incursions of the values and products purveyed

by Hollywood. At the other extreme, some foreign

observers welcomed the Americanization of film as

the first step in the development of a true world

community.

Films quickly established themselves as a principal form of entertainment. Weekly attendance in the

United States rose from an estimated 40 million in

1922 to 115 million 8 years later.29 With this

explosive growth, which cut across geographic and

socioeconomic lines, came concerns about the

effects of the new medium.30 While the censors

watched for scenes that seemingly encouraged crime

or sexual promiscuity, they missed a more subtle yet

pervasive effect: film’s power to nationalize tastes

for cultural fare as well as consumer goods.31

Radio augmented the effects of magazines and

motion pictures as agents of national culture. Al-

— though radio was originally envisioned as a local

2.#Telephmy, mom thm Cwlier tw~olo@es, incre~ opportunities for social communication at the 10CSJ leVCl and had dramatic cons~~nces for

residents of rural areas. While AT&T promoted the development of the long-distancx network, towns and cities launched their own systems, especially

after Bell’s major patents expired in 1894. See Malcolm Willey and Stuart A. Rice, Communication Agencies and Sociaf Lije (New York, NY:

McGraw-Hill, 1935). See also Michael Olsen, “But It Won’t Milk the Cows: Farmefs in Colfax County Debate the Merits of the Telephone,’’ New Mexico

Historical Review, vol. 61, Janumy 1986, pp. 1-13; and Ithiel de Sola Pool, Forecasting the Telephone: A Retrospective Technology Assessment

(Norwood, NJ: Ablex Publishing Co., 1983), pp. 48-54.

~-ore peterson, Magazines in the Twentieth Century (Urbana, IL: University of Illinois prCSS, 1964), PP. l~s.

%’hemails, of course, were crucial in delivering these publications, and the inauguration of Rural Frtz Delivery (RFD) in the 1890senabled magazines

to flow from publishers to country lanes. See Wayne E. Fuller, RFD: The Changing Face of Rura/ America (Bloomington, IN: Indiana University Press,

1964).

ZTThe explosive ~o~ Ofwpulm magaines intensifi~ Competition for ~ve~is~g ~ong segmen~ of tie publishing industry and corresponded

to shifts in the Nation’s marketing system. The small, local retailers that had once served their communities with little competition faced a succession

of challengers-department stores, mail-order firms, and chain stores. See Alfred D. Chandler, The Visible Hand: The A4anagerid Revolution in

American Business (Cambridge, MA: Harvard University Press, 1977), pp. 224-235.

2SS= ~~= H. Guback, “T’heatl-ic~ Fi]m,” Benjamin Compaine (~.), Who @ns the Medh? concentration of tinersh”p in the MaSS

c ommwdcatiom industry (White Plains, NY: Knowledge Industry Publications, Inc., 1979), p. 181. According to Guback, World War I disrupted the

European fdm industry and paved the way for American dominance of this medium. As he says: “It was possible for American films to achieve this

dominance because, in part, investments in them were recouped in the home market, which had about half the world’s theatres, and thus films could

be rented abroad at rates often undercutting those of foreign competitors.”

z~illey and Rice, op. cit., foomote 24, p. 179.

3~miel ~l@om,Med~ ad the American Mid (Chapel Hill, Nc: University of North Carolina Press, 1982), pp. 30-59. See ~so Robefi E. Davis!

“Response to Innovation: A Study of Popular Argument About New Mass Media,” Ph.D. dissertation, University of Iowa, 1965.

slob~~ers in tie Uniti Stites and abroad noticed Mat trends in manners, fi.unishings, toiletries, clothing, and even hairstyles followed the Cinema.

Styles and fads that had diffused slowly and unevenly in the ageofprint now pervaded the Nation in a matter of weeks, if not days. Marketers of nationally

distributed eonsttmer goods naturally capitalized on the possibilities presented by film. Willey and Rice, op. cit,, foomote 24, pp. 181-184, The ability

of film to foster a national community of tastes and consumption was abetted by the tight economic controls that lasted through the medium formative

years. A relative handful of companies controlled film production, distribution, and exhibition-especially disrnbution. Producers forced independent

exhibitors to accept certain films (the studios also owned many of their own theaters) through a practice known as block booking. To get highly popular

films, theaters had to accept several others. Garth Jowett, Film: The Democratic Art (Boston, MA: Little Brown and Co., 1976), p. 202.

89-148 0 - 90 - 5 QL 3
186 ● Critical Connections: Communication for the Future

medium, a number of factors promoted the development of national networks. Among these factors

were:

agreements made among key industry players

to divide up the responsibility and opportunity

to develop and exploit the new technology;32

the audience demand for more expensive productions, which only networks could afford;33

the development of a system of financing based

on national advertising, which called for national programming;34 and

regulatory decisions made in radio’s formative

years that inadvertently prompted the formation of national networks.35

Data on station affiliation, programming, and

advertising revenue confirm the national orientation

of radio. As Daniel Czitrom has noted:

In 1937 NBC and CBS owned or controlled 210

of the 685 total stations, but these accounted for

more than 88 percent of the total wattage power of

American broadcasting.36

Ten years later, 97 percent of all radio stations were

affiliated with a network.37 Through the 1930s and

1940s, radio was the preeminent medium of mass

impression, eclipsing newspapers, magazines, and

even film.38

In its centralizing/decentralizing tendencies and

accompanying policies, television’s history reprised

that of radio. As with radio, technical problems

encountered in interconnecting stations initially

spawned a great deal of local and regional programming. While AT&T was laying coaxial cables for

television networking, Chicago and other cities

developed distinctive, innovative programs that

were picked up for national distribution. As

Baughman notes:

Critics spoke of a “Chicago touch”--a creative,

detached, and continually bemused style quite apart

from that of New York or southern California.39

Like radio, television was also conceived in a

regulatory environment that emphasized localism.

According to Nell, Pick, and McGowan, the FCC’s:

. . . vision of broadcasting . . . foresaw a local television station in as many communities as possible . . . Larger communities would have several

stations, but only to the extent that channels were

available for small communities as well. Stations

would be owned and managed by local residents, and

would devote considerable broadcast time to information and commentary on important local issues.

The stations would be instruments for community

enlightenment and cohesion, much like the hometown newspaper of an earlier era.@

3ZSUW Smdym, “’rheRise and Fall of the Happiness Boys: Sponsorship, Technology and Early Radio Programming, ’’papxpresented at the 1985

armuat meetirtg of the Society for Historians of Technology.

qqLi~@ner~ demm~~at~ a fmcination with t~ing in dist~t stations. At f~t, this refl~ted inte~st in the technic~ novehy of radio, but later it

stemmed more from the ability of high-power stations or networks to offer well-known talent in alluring productions. Ibid.

34@ce radio discover~ advertising as its economic bme, ~nsors exe~d a great dea] of i~uen~ on progr~ing. hd~, sponsors created the

most popular programs and controlled the talent. Ibid.

35~c~l~, ~ concelv~ by rewlator5, actu~ly impelled tie ~owth of nation~ networks, When most cities were assigned two, tke, or fOtU StatiOnS,

licensees began looking for a source of programming. Most stations realized that affiliation with one of the three or four networks was the profitable

choice. Control over radio content, therefore, was ceded to New York. The networks capitalized on their relationships with affiliates and forced onerous

contractual obligations on licensees that further circumscribed their choice. Thus, radio did not begin to fully realize its potentia~ as a medium affording

local self-expression until the advent of television altered the media environment. See Bruce Owen, Economics and Freedom of Expression: Media

Sfructure and the First Amendment (Cambridge, MA: Ballinger Press, 1975). See also Christopher Sterling, “Television and Radio Broadcasting,”

Compaine (cd.), op. cit., footnote 28.

36Czi~om, Op. cit., fOOtIIOte 30> P. 80.

37 Sterling, op. cit., fmmo~ 35, p, 66. Affiliate, and even network own~.and-operated stations, could, of COUm, originate IOCd programming, But

in 1938, the FCC reported that national networks furnished 29.2 percent of all programs; regional networks 3.8 percent; local stations 30.8 percent;

electrical transcriptions 20.8 percent; records 11.67 percent; and announcements 3.8 percent. Nearly two-thirds of all radio programs, therefore, came

from nationat or regional suppliers, and probably a disproportionate sh~e of this aired during prime-time evening hours. C.B. Rose, National Policy

for Radio Broadcasting (New York, NY: Harper and Brothers, 1940), p. 145.

38A ~ell.~n ~ciolo~st of tie time en~erated 150 effWts of radio, some ~vi~, others profound. Several de~t with radio’s capacity tO prOmOte

uniformity and diffusion of culture-the “homogeneity of people increased because of like stimuli”; “regionat differences in cultures become less

pronounced”; “penetration of the musical and artistic city cultures into villages and country “; “standards of the city made more familiar to the country”;

“isolated regions are brought into contact with world events,” See W.F. Ogburn, “The Influence of Invention and Discovery,” Recent Social Trends in

the United States: Report of the President’s Research Committee (New York, NY: McGraw-Hill, 1933), pp. 122-166.

WJacs Lm Bau@m, “Television in the ‘Golden Age:’ An Entrepreneurial Experiment,” Historian, VO1. 4’7, Febrwwy 198s, PP. 17$179.

‘%ogerNoll, MertonJ. Peck, and John J, NIcGowan,EconomicAspectsof TelevMonRegdatwn (Washington, DC: The Brookings Institution, 1973),

p. 100.
Chapter 7-Communication and the Production of Culture ● 187

As with radio, attaining localism in television was

partly frustrated by the economics of programming.

With two or three local stations serving most

communities in television’s formative years, only

three networks attracted enough affiliates to thrive.

By 1969, the networks supplied 82 percent of their

affiliates’ prime-time programming, and a good

share of the remaining time was filled with “nonnetwork films and other national programming.”41

Television’s failure to realize its potential as a

local medium was also reflected in its advertising.

From the mid- 1950s to mid- 1970s, local advertising

furnished only between 15 percent and 25 percent of

television’s revenues. The rest came from network

advertising as well as national and regional spot

advertising. Moreover, television’s national advertising had some anticompetitive effects through

discounts to heavy users and the cost barriers erected

by high rates, both of which favored large established firms.42

Network television, then, has become the national

forum without equal, the principal communication

mechanism for maintaining a sense of national

community. Television coverage of certain events—

such as the Super Bowl and major congressional

hearings-focuses people’s attention on the same

subject regardless of location or class.

Television significantly preempted the role of

newspapers, magazines, motion pictures, and radio

as purveyors of information and entertainment to

mass audiences. As a result, the established media

found narrower niches in the communication environment. The trend toward fragmenting the mass

audience was abetted, at least modestly, by the

advent of cable television.

Responding to television, and radio before it,

newspapers emphasized their traditional strength—

local and regional service. National and international news continued to be produced centrally in a

few locations, but in terms of marketing strategies

newspapers increasingly identified their immediate

community as the principal service area.

In its appeal to a large, heterogeneous audience,

television displaced many of the large-circulation

popular magazines.43 Life (at least in its original

incarnation) and Look succumbed when television

became a more cost-effective vehicle to deliver the

mass audience to advertisers. Like newspapers, the

magazine industry has continued to thrive by developing one of its long-standing dimensions—

specialized publications. But unlike newspapers,

which are defined by geography, magazines reflect

continuing differentiation in the realms of work,

cultural interests, religious and ethnic backgrounds,

and the like. Specialized magazines sustain these

interest communities by providing information and

symbolic reinforcement missing in the more general

media.44

Television’s effects on the existing media environment were nowhere more pronounced than in the

radio industry. Radio’s role as a national force

declined, but in the process it became more like the

regulators originally envisioned—a vehicle for local

self-expression. Advertising provides an accurate

barometer of this shift. In radio’s heyday before

World War II, it derived roughly one-fourth of its

revenue from local advertising; now about threefourths of its advertising dollars comes from local

sources.

45 For its programming, radio divided the

mass audience along the lines of age, interest in

news, musical tastes, and activities. The specializa4~~id., p. 109. The perc.eiv~ dominance of tie networks triggered recurrent FCC inquiries and led to the adoption of two remedies. FiM, tie FCC

considered proposals to deintermix ultra high frequency (UHF) and very high frequency (VHF) stations in the same market. Although the most ambitious

deintermixture proposals encountered roadblocks, Congress did empower FCC to require the production of sets that could receive both VHF and UHF.

For a discussion, see Erwin G. Krasnow, Lawrence D. Langley, and Herbert A. Terry, The Politics of Broudcust Regulations, 3d ed. (New York, NY:

St. Martin’s Press, 1982), pp. 176-191. Another policy initiative, the Prime-Time Access Rule, was aimed more directly at the excessive standardization

and national orientation of television fare. The FCC launched this policy in 1970. It required affiliates in the 50 largest markets to broadcast at least 1

hour of nonnetwork programming, with some exceptions, during prime-time. The effect of the rule has been hotly debated.

42N011 et ~$, op. cit., footnote 40! PP. 37-39.

43peterson, op. cit., footnote M.

44S= B~nj~~ c~~p~~, 6’M~@n~s,” in Compfie (~,), op, Cit,, footnote 28. s= ~SO J~w L.C, Fot’d, Maguzines~or Millions: TIw SfO?’)1 Of

Specialized Publications (Carbondale, IL: Southern Illinois University Press, 1%9). In this sense, the magazine’s function has changed little since

abolitionists, feminists, and other 19th-century activists launched some of the first specialized magazines. Marketers also fmd special-interest

publications a cost-effective way to reach specific consumers.

4s@stopher H. S~rling ~d Job M. Mi~os5, Stq T~ed:A Conctie Histo~ OfA~rlCanBro~c~fing (Belmont, CA: Wadsworth Publishing CO.,

1978), pp. 516-517.
188 ● Critical Connections: Communication for the Future

tion forced on radio by television opened the doors

to more educational and public broadcasting, and to

a closer realization of FM’s potential.%

Motion pictures took the longest to rebound from

the effects of television. Although still a mass

medium, film also underwent some specialization of

function.47 Film developed technologies to distinguish itself from the small screen. More important,

it provided more variety, for example, by importing

and emulating foreign motion pictures. Some films

were aimed largely at children, others at teenagers,

still others at adults.

Originating as a means to extend the reach of

television, cable television has grown to supplement

broadcast fare. Its success in providing complementary programming, however, has thus far been

limited. Without a doubt, cable increased the

viewer’s choice. Much of the choice, however,

consisted of Hollywood-made films or former network series in syndication. To some extent, then,

cable has just augmented the supply of nationally

available programming aimed at a general audience.

In other words, it has operated as another medium

conveying material produced far beyond the

viewer’s community.

OPPORTUNITIES FOR USE OF

NEW TECHNOLOGIES IN

THE CULTURAL REALM

Communication technologies have had a significant effect on the cultural realm in the past, and new

technologies are likely to have a major impact in the

future. Communication technologies can serve to

fragment groups as well as bind them together.

Moreover, experience illustrates that although some

technologies appear to foster unity, and others

differentiation, the actual impact they will have in

the cultural realm will depend as much on the social,

economic, and political circumstances in which they

emerge as on the particular attributes of the technologies themselves. Thus, government can take some

steps to affect the outcome if it has an approximate

picture of the alternatives available.

To provide such a picture, this section will

examine applications of new communication technologies in four major cultural settings and institutions: community, education, religion, and popular

culture and entertainment. The focus of analysis in

the cultural realm is on institutions because systems

of symbols, objects, and actions alike are generally

developed, produced, and maintained through institutional frameworks.48 Although any number of

social institutions might have been chosen for

analysis, these four were selected because of their

primacy in terms of issues of national culture and

public policy, and because of the significant changes

that communication technologies are making possible in these areas.

Community and Culture

A community can be defined as a group of people

who are recognized by outsiders and by members as

having a commonality of purpose, who share common patterns of attention and interest, and who

coordinate their activities through patterns or structures of interaction.49 This definition includes traditional communities based on geographic, historical,

and ethnic ties, but also includes “communities of

interest” that grow up around shared activities and

concerns. It also allows us to look at communities

not just as places, but also as social products and

processes.

5o

Communities have been the traditional buildingblocks of American culture. As historian Daniel

Boorstin has pointed out:

Americans reached out to one another. A new

civilization found new ways of holding men together-less and less by creed or belief, by tradition

or place, more and more by common effort and

common experience, by the apparatus of daily life,

by their ways of thinking about themselves. Americans were now held together less by their hopes than

by their wants, by what they made and what they

bought, and by how they learned about everything.

They were held together by the new names they gave

to the things they wanted, to the things they owned,

and to themselves. These everywhere communities

~Ibid., pp. 248-314.

47 Jowe., op. cit., foomote 31, PP. 347-

359.

48Kal Efik RaenWen, tCL~lng ~]ture ~d ~ersoci~ systems,” Sandra J. Ball.Rokeach and Mfiel G. Cantor (eds.), Media, Atiience, and Soci.af

Structure (Beverly Hills, CA: Sage Publications, 1989), pp. 88-90.

dg~s definition condenses a n~ber of definitions found in Merritt, op. cit., f~mote 16) PP. 15-16.

Sosm Jmes w, Cwey, Cownication ~ c~mre: Essqs On Media and Society (Boston, MA: Unwin Hyman, 1989), especi~ly ch. 1, “A cultural

Approach to Communications.”
Chapter 7--Communication and the Production of Culture ● 189

floated over time and space, they could include

anyone without his effort, and sometimes without his

knowing . . . Americans lived not merely in a halfexplored continent of mountains and rivers and

mines, but in a new continent of categories. These

were the communities where they were told (and

where they believed) that they belonged.51

However, as the United States evolved from an

agricultural to an industrial society, and more

recently to a postindustrial one, American communities have undergone considerable change. In their

classic works, Middletown: A Study of Contemporary American Culture52 and Middletown in Transition: A Study in Cultural Conflicts,53 Robert and

Helen Lynd traced, for example, how the town of

Muncie, IN, changed in response to industrialization. They found that industrialization had led to

a division between the business and working classes,

and a breaking down of the quasi-religious ethos of

the individual citizen, which previously had knitted

many diverse groups and interests together. With the

rise of the business class, a new ethic of utilitarian

individualism began to emerge.54

More recent works on American culture trace the

continuation of this trend. As described by Bellah et

al.:

Perhaps the crucial change in American life has

been that we have moved from the local life of the

nineteenth century-in which economic and social

relationships were visible and, however imperfectly,

morally interpreted as parts of a larger common

life—to a society vastly more interrelated and

integrated economically, technically, and functionally. Yet this is a society in which the individual can

only rarely and with difficulty understand himself

and his activities as interrelated in morally meaningful ways with those other, different Americans.

Instead of directing cultural and individual energies

toward relating the self to its larger context, the

culture of manager and therapist urges a strenuous

effort to make of our particular segment of life a

small world of its own.55

A number of demographic trends are likely to

reinforce these developments, critically affecting the

nature of American communities in the future.

Among these trends are:

●

●

●

an increase in the percentage of the population

accounted for by immigrants, and especially by

those immigrant groups that previously were

not strongly represented within the population; 56

changing family and lifestyle patterns, and a

growing diversity among households. Today,

for example, there are fewer American couples

living with children than ever before, more

people live alone or with unrelated adults, and

more children will live at least part of their

childhood with a single parent;57 and

a changing work force, with an increase in the

proportion of women, especially among those

in their prime child-bearing years; as well as an

increase in the age of the work force population, which will lead, in turn, to blurring of the

boundaries between the workplace and the

home. 58

Together, these structural changes within society

are likely to have a radical impact on community

life. Although there is some disagreement with

respect to the nature and extent of these changes,

most observers agree that they will lead individuals

SID~e. Boomtin, The America~: The Democratic Experience (New York, NY: v~~ge Books, 1974), P. 2.

52Ro~~ ad Helen L~d, ~i~&town: A Study of Conteworary Culture (New York, NY: Hwcourt Brace, 1929).

53Ro&xI and Helen Lynd, Middletown in Transition: A Study of Cu/tural Confhcts (New York, NY: HZWCOUrt Brace, 193’7).

54TheSe fi~~~ Wem reinfo~ed by the work of the sociologist, David Riesman. s=, for ex~plc, David Riesrnan with Nathan Glazer ~d Reuel

Denney, The Lonely Crowd: A Study of the Changing American Character (New Haven, CT’: Yale University Press, 1950). See also the study by Herve

Vareme of a small town in southern Wisconsin, entitled Americans Together: Structured Diversity in a Midwestern Town (New York, NY: Teachers

College Press, 1977).

ssRo~ N. Bell~, Rich~d M~sen, Wlllim M. Sullivan, Ann Swidler, and Steven M. Tipton, H~its of th,e Heart(New York, NY: Harper ad ROW,

1985), p. 50. See also Richard M. Merehnan, Making Something of Ourselves: On Culture and Politics in the United States (Berkeley and hxs Angeles,

CA: University of California Press, 1984).

56J~ph Fe Coates and Jennifer J~att, “Forces and Factors Shaping ~ucation,” prepfl~ for the Nation~ Education Association (W~klgtOn, DC:

J.F, Coates, Inc., 1989), pp. 4-5. As the authors note: “Many of the new immigrants will have unfamiliar attitudes toward government, education, work,

social behavior, and other social values. As political power accumulates to these new Americans, there will be effective challenges to schools, public

officials, employers, media, laws, rules, and customs.”

flIbid.

sfhid.
190 ● Critical Connections: Communication for the Future

to find new ways of establishing community ties and

of fulfilling some of the positive functions performed by traditional communities.59

What will provide a sense of continuity, belonging, and responsibility in the “information age?”

One author conjectures:

. . . although the yearning for the small town is

nostalgia for the irretrievably lost, it is worth

considering whether the biblical and republican

traditions that small towns once embodied can be

reappropriated in ways that respond to our present

need. Indeed, we would argue that if we are ever to

enter that new world that so far has been powerless

to be born, it will be through reversing modernity’s

tendency to obliterate all previous culture. We need

to learn again from the cultural riches of the human

species and to reappropriated and revitalize those

riches so that they can speak to our condition today.60

Capable of strengthening and reinforcing human

interactions, and of extending the reach of people

beyond their immediate geographies, communication technologies have played a critical role in

maintaining community in the context of a rapidly

changing and highly mobile society. New communication technologies offer some potential to ameliorate, or at least help people cope with, the loss of

many traditional communal ties. Two kinds of

communication applications will be considered

here: the possibilities for establishing “virtual communities,” and for extending community-access

programming and distribution facilities.

Virtual Communities Supported by

Electronic Networks

Virtual communities, supported by electronic

networks, create the opportunity for providing new

sources of contact and interaction among people,

widening their circle of friends and making it easier

to connect with others like themselves. Like the

“communities of interest” supported by the postal

system and the telephone, virtual communities

comprise groups of geographically dispersed people, united by a common interest or purpose and

supported by computer communication such as

bulletin boards, conferences, and electronic mail.6l

In the United States, virtual communities have

grown up among people with access to computers

and modems. The largest conferencing systems are

on commercial services such as The Source. However, any individual with a personal computer and

conferencing software could establish a gathering

place for others who have personal computers,

modems, and communication software.

The Whole Earth ‘Lectronic Link (WELL), for

example, supports a virtual community in the San

Francisco Bay area. With a local telephone call from

many local communities, subscribers can participate

in hundreds of topically based conferences. Although people from all over the country can and do

participate by paying long-distance charges or using

one of the national data networks, most of the

conversation has a “northern California” perspective. References to local establishments and events

abound, and participants meet periodically for parties and picnics.

The Community Memory Project, also in San

Francisco, has put coin-operated terminals in local

supermarkets and bookstores, allowing users to post

and read messages organized in a relational database.

62 The explicit goal of this project is to

revitalize the traditional notion of community as a

locus of sharing, support, and responsibility, and to

provide a new means for participating in the

production of community-based culture.63

As in the past, communities with specialized

needs are also linking via electronic networks.

Recently, for example, a number of antipoverty

organizations joined online in a network called

HandsNet.64 By paying an initial fee of between $95

and $125, a monthly fee of $25, and an $8-per-hour

online fee, antipoverty organizations trade statistics

and program information. Among the groups inw~g Mw, Co//ective Search~or ldenti~ (New York, NY: Holt, Rinehart, and Winston, 1968)7 P. 17

~llah et al., op. cit., footnote 55, pp. 282-283.

61 For a djscusion, ~ How~d Rhetigold, “vl~u~ comm~ties,” w~/e Earth Revi~, No. 57, w~ter 1987, p, 78. In the computing ~mInUnlty,

“virtual” is a technical term referrirtg to functions realized via computers and software, rather than hardware.

bz~ Fel~~~, co-fom~r of the Community Memory Project, personal communication, Feb. 25, 1988.

63~1d=

Ws= Swn= Rich, “computer Network Links Antipoverty Groups, “ The Washington Post, July 6, 1989, p. A15.
Chapter 7--Communication and the Production of Culture . 191

volved are the Low Income Housing Coalition, the

Food Research and Action Center, and the National

Coalition for the Homeless.65

To participate in a virtual community does not

necessarily require a familiarity with computers and

computing. The French Minitel system, for example,

is extremely user-friendly, linking people through

networks of dumb terminals and providing them

with easy-to-use gateways and menus.66 As a result,

many French people take advantage of the system.

One appeal of virtual communities is their relative

anonymity. Users do not encounter the usual nonverbal cues to help them interpret messages from

others. 67 Because members of virtual communities

can be anonymous, some believe that such electronic

communication can be a “medium without prejudice.” 68 Anonymity also allows users “the risk-free

opportunity to become someone else,” and/or to let

down barriers and face-maintaining behaviors that

exist in face-to-face conversations.69 Online interactions allow individuals to share life concerns and

participate in debates and discussions for which

there is no neighborhood forum. Members sometimes arrange face-to-face meetings, further supporting their relationships.70

Virtual communities, however, are neither a

panacea nor a perfect substitute for face-to-face

contact. 71 To the extent that they replace neighborhood ties, they could contribute to the loss of

sharing, interdependence, and mutual concern that

neighborhoods have traditionally provided. Moreover, if they required users to have a sophisticated

technical knowledge or were available only in a

text-based form, their usefulness would be limited to

those with the requisite skills.

The anonymity of virtual communities also makes

it easier for some people to disregard social norms,

which, if history is a good indicator, will give rise to

issues concerning what constitutes acceptable content and who should be responsible for assuring that

content is within the bounds of propriety. Such

problems have already emerged, for example, in the

case of 976 telephone chat lines.72 Cases of fraud and

issues of liability might also become more frequent,

insofar as electronic communication makes it possible to present a false persona.

To what extent, and under what circumstances,

virtual communities will become more popular and

more prevalent in the future will depend on a number

of factors.73 Cost is an important one. Generally

speaking, telecommunication charges are paid either

by individual callers (on their telephone bills or

through one of the data network providers) or by the

sponsoring organization, if it purchases a toll-free

number. Most commercial services charge an hourly

connection fee to users. This cost would be higher if

information-providers were charged an access fee

equivalent to that charged by other users of the

communication network. To date, users have successfully resisted such a charge, arguing that it

would discourage the development of an information-services industry .74

When they are financed primarily through advertising, however, some network services can be

provided free. In Boston, for example, Citinet offers

users free online information about special interest

groups, hearing schedules for State government, and

financial information on local businesses. Electronic

mailboxes on Citinet cost $19.95 per year.75 The

~Ibid.

66PhiliPW pemon, “M~i~l: The T~hnology of Success,” presentation to OTA, Washfilgton, ~,~t. 6, 1987.

6_lAlfi~Glm~braer, “ANew Medium in the M&lng; How peop]e Are Shaping (and B~lng Sha@ by)@Line cornmunication,’’/?a~~, NovemberIXxxmber, 1985, pp. 28-31.

‘Ibid., p. 29.

@fiid. Sm ~W &m Roxme Hil~ and Murray ~off, T~Ne~orkNation: H~n co~unicat~n Via Cowuter (Reading, MA: Addison- Wesley,

1978). It should be noted, however, that as communities form and users begin to develop stakes in them, norms and sanctions, equivalent to those

governing traditional communities, will emerge.

7~harles W. s~infield and Janet Fullc, “Computer-Mediated Systems as Mass Communication Media,” paper presented to the Telewmtication

Policy Research Conference, Airlie House, VA, October 1988. See also Rheingold, op. cit., footnote 61.

71sW ~y F. phil]i~, “computer Conference s: Success or Failure?” Human Communtcunon Technology, VO1. 7, 1983, PP. 837-855.

72For one ~scu~ion, sw “Dial-a-Porn Case Argued as Preview of Indecency Case,” Broudcasring, Apr. 3, 1989, P. 5’7.

73For a di~cwslm of ~ome of ~ese factors from a Comparative pers~tive, s= Anne W Branscomb, “Vid~tex: Glob~ progress and Comparative

Policies,” Journal of Convnunication, vol. 38, No. 1, Winter 1988, p. 59.

lbAccess Ctigesfor Enhanced Services, 3 FCC Red. 2631 (1988).

75Me1issa C~vo, “Boston-Citinet refers Users Free On-line Information,” lnfoworld, Apr. 28, 1%36, P. M.
192 ● Critical Connections: Communication for the Future

Prodigy Service, offered through a joint venture of

IBM and Sears, is also partially financed through

advertising.

Access to electronic networks can also be facilitated through the use of gateway services, which

help users to identify and connect with groups with

whom they want to communicate. And, in fact, it

was to encourage the development of such services

that Judge Harold Greene relaxed the line-ofbusiness restrictions on the regional Bell operating

companies, allowing them to develop and provide

videotex gateways. The first two such gateways to

be developed are the Transtext-T-Universal Gateway, set up by BellSouth and now operating in

Atlanta, and Info-Look, established by Nynex in

Burlington, VT.76

BellSouth’s gateway constitutes part of an adjunct

and enhanced network infrastructure inserted into

the basic local exchange network. Not only does it

give users unlimited free access; it also provides

some services free. Moreover, aimed at userfriendliness, the system allows customers equipped

with personal computers and a modem to enter the

system by using a 10-digit telephone number. In

addition, it provides simple menus listing databases

and services and handles all billing.

Nynex’s Info-Look is less fancy, but many of the

customer-services are also less expensive. However,

there is a $3 hourly charge for use. Among the

services available on Info-Look are:

. . . a list of biking trails, for 10 cents per minute;

news, interviews, classified ads and ski and travel

information from the Burlington Free Press for 15

cents per minute; condensed news from Vermont

Business Magazine for 10 cents per minute; interactive political debate for 10 cents per minute, a cat

lover’s forum for 10 cents per minute; a mailing list

of Vermont businesses for 10 cents per minute;

skiing conditions for 10 cents per minute; Vermont

travel information for 20 cents per minute; and a

Vermont hunter’s guide for 20 cents per minute.77

The lack of both familiarity and technical skills

has also served to discourage the general public’s

use of electronic networks. These kinds of barriers

can eventually be overcome, however, as is clearly

evident from the successful development of Minitel

in France, cultural differences notwithstanding.

What was critical in France was the government’s

proactive efforts to move the country forward into

the information age by subsidizing and supporting

the development of a national information infrastructure. 78 Having access to easy-to-use terminals

provided by the government, French citizens have

not hesitated to establish online connections.

Cable Community-Access Services

Government policy to encourage the creation and

development of local community-based information

has a history going back as far as the early postal

service. Postal subsidies in the form of letters of

exchange were designed to encourage and support

the development and viability of local newspapers.

In like fashion, early broadcast policy sought to

foster the development of local programming. However, given the economies within communication

industries, most of these policies proved unsuccessful. One after another, each new media industry that

emerged assumed a concentrated and vertically

integrated form.

Cable, however, unlike its media predecessors,

appeared to be an exception, insofar as it provided an

abundance of channel capacity. Thus, with its

development, the hope of fostering local programming reemerged. Having access to cable, anyone,

anywhere, could be a programmer, or so it seemed.79

As Michael H. Dann, a consultant to the cable

industry, characterized his hopes for cable:

. . . nearly all the information services that cable will

specialize in providing will have nothing to do with

watching television as we have known it. You’ll be

using your monitor for something else-for taking

academic courses or for using any or all of the other

information services available. And whether this

takes the form of something with ethnic appeal or of

cooking channels it’s something that you would not

be getting on commercial television. . . . There are

no rules in the cable industry requiring you to have

only so many minutes for commercials, with every

minute so precious, as it is in broadcasting; the cable

companies can be so much looser about the length of

commercials, because they have so much channel

capacity. Everybody can be on cable longer—the

76s= Fr@~ s~~le=, “me fibli~ N~tw~~k G~s ~.L~e,” T’e/ep~ny, Apr. s, 1989, pp. 26-37.

771bid., p. 27.

TgBr~c~b, op. cit., foomote 73, P. 83.

TgJ~es M*, The Wired Society (New York, NY: Prentice Htdl, 1976). P. 46.
Chapter 7-Communication and the Production of Culture ● 193

performer can be on longer, the writer can write

longer, the cook can cook longer, the talker can talk

longer. And cable is so cheap in comparison to

broadcasting that in most communities if you want

to get on a public-access channel and hum you can

go on.

80

To bring such aspirations to fruition, many local

franchise agreements originally required that local

cable systems provide channels for community

programming.81 The different kinds of programming

that can be required in such agreements are outlined

in box 7-A.

According to one recent survey, 57 percent of all

cable operators offer public-access channels, about

one-half of which are managed by cable operators.82

Independent, nonprofit organizations manage an

additional 30 percent, and the rest are run by local

governments, schools, libraries, and for-profit corporations. An estimated total of between 5,000 to

10,000 hours of original programming is produced

for such public access channels each week. One of

the most successful local access channels, located in

Austin, TX, carries 60 to 70 hours of original

programming each week.83 Community-access

facilities are usually funded through a combination

of revenues from commercial operations, grants, and

donations. About two-thirds are under $100,000,

and one-third have annual operating budgets of less

than $25,000.84

Because community-access channels give local

citizens an opportunity to create programs for their

communities, they can provide an opportunity to

influence the local culture and strengthen communal

ties. Broadcasts of local high school sports events,

for example, can garner support for local teams and

reinforce identification with the local community.

Local politicians can increase public awareness by

airing local meetings and public events. Community

members can reinforce their relationships, joining

together to produce media events.

Community-access channels can be especially

helpful to minority groups. Much as the foreign

language press served to both integrate foreign

immigrants and enhance their self-esteem, the production of materials by local ethnic groups can serve

to promote community understanding and create a

sense of pride in local traditions.85 This kind of

access to production and transmission facilities is

critical to minority groups because all too often they

have been unable to gain an economic foothold in

the media,86 and as a result they have been either

very poorly represented or simply ignored.87

Young people can also make particularly good

use of local-access channels. As Action for Children’s Television has pointed out:

For young people, community cable is an opportunity for service that is disappearing from commercial

broadcasting. At a time when the commercial TV

networks fail to provide one daily or even weekly

children’s show Monday through Friday, local cable

channels can supply a fertile environment for

breeding a new variety of children’s television.88

Despite the distinct benefits of local access, many

community-access channels have been underutilized. Moreover, where they have been in operation,

they have often been unable to draw the kinds of

audiences required to have a significant impact. A

80A~ rew~ed to, and cited by, Tom Whiteside, “Onward and Upward With the Arts, Cable HI,” The New Yorker, June 3, 1985, pp. 84-85.

81 Con@sS awrov~ such ~cceSS ~les in ~ctim c1 I of the 1$)84 cable communicati~~ns policy Act, codified at 47 U.S.C. sec. 531.

8~~goV Ep]er-Wood and Paul D’Ari, Cable Progr ~“ng Resource Director 1987 (Washington, DC: National Federation of Local Cable

Programmers, 1987), p. D147.

sssh~on huh~, National Federation of Local Cable Programmers, personal communication, Feb. 23, 1989.

84Epler-W~ and D’%, op. cit., footnote 82, P. Dl~.

85sw Ha~o HMdt, ~~~e Foreiw Lanw~ge ~ess in ~efican~ess History,’’Jo~r~/ ofco~~icutio~, VO1. 39, No. 2, Spring 1989, pp. 114-131.

86At Pnwnt, fiem is o~y a ~~] n~~r of minorities and women in ownership and management positions in the communication industries. This

situation has been atrnbutedto many factors, including: l)minorities were not “at the table” when radio and television licenses were given out; 2) majority

owners and managers continue to discriminate; 3) minorities lack the funding to support stations; and 4) minorities are inadequately trained. For a

discussion, see Vernon A. Stone, “Women Gain, Black Men Imse Ground in Newsrooms,” RTNDA Commu nicator, August 1987, pp. 9-11; Dwight M.

Ellis, “Communications at the Crossroads: Parity and Perceptions of Minority Participation,” paper presented at the Invitational Conference on Minorities

and Communication, Howard University, Washington, DC, June 18, 1987; James Forkay, “Time to Speak Up?’’ Advertising Age, Jan. 4, 1988; and Craig

Kuhl, “Corporate America’s Color Line,” Cablevision, June 6, 1988, pp. 34-43.

87For the ~eat~ent of minofity ~oups in the media, see Eric B~n~uw, A ~~wer In B~e/, vo]. 1 (New York, Ny: oxford University preSS, 1%6);

Herman Gray, “Television and the New Black Man: Black Male Images in Prime-Time Situation Comedy,” Media, (ldture and Society, vol. 8, 1986,

pp. 233-242; Susan H. Wilson, “The Missing Comic Strip,” Editor and Publisher, Apr. 23, 1988, p. 164; and “Women Are Disappearing From TV,”

Broadcasting, Nov. 23, 1987, pp. 52-53,

ss’’comui~ Cable for and by Children: An ACT Handbook,” Action for Children’s Television, Newtonville, MA, 1983.
194 . Critical Connections: Communicationfor the Future

Box 7-A—Forms of Community Cable

. Public access-programming initiated and created by members of the community; the cable company

should not interfere in the content of the shows. Public access programming is noncommercial.

. Educational access—schools, colleges, and libraries can produce their own cable programs; students are

usually involved in the production.

. Government access—local officials can use access to increase citizen awareness by cablecasting town

meetings and important public messages.

● Religious access—synagogues and churches can publicize activities and spread their views by producing

access programs.

. Leased access-a kind of rent-a-channel, leased access gives companies or individuals a voice on cable TV.

Program content is controlled by those who pay for channel time to get their message out.

. Local origination (LO)—LO programs are produced by the cable company, which controls the content;

young people may or may not be involved in production. LO programming can carry advertising.

SOURCE: Reprinted with permission from “Community Cable for and by Children: An .4CT Handbook,” by Action for children’s Television

(ACT), Cambridge, MA.

number of factors account for this situation, includ- to the messages prepared by opposing groups. In

ing the lack of funds, skills, technical expertise, and

adequate equipment. While most community-access

systems receive some funding from local governments or commercial operators, providing additional

support for production equipment and distribution

may be one way of promoting wider access.

Cable community-access networks may also be

underutilized because people are either unaware of

their existence or unfamiliar with their use as a

public media. Opportunities to participate do not

translate into actual participation until community

members are motivated to become more active in

promoting their cultures. People will have to see

themselves as producers as well as audiences, and as

publishers as well as readers. For many people,

accustomed to the passivity of traditional media, this

shift can be very difficult. To bring about the

requisite change in attitude, young and old alike will

need to be taught critical viewing skills, and to learn

their way around the technical, social, economic,

and political processes of public and commercial

communication systems.89 Action for Children’s

Television provides some tips on how to get started,

as outlined in box 7-B.

Administrative and political battles can further

impede access, especially in cases where there are

disputes about content.90 In some instances, there

have been efforts to censor unpopular messages, and

in other cases groups have requested time to respond

Kansas City, for example, efforts by local Ku Klux

Klan members to air controversial programming

brought attempts to change the cable franchise

agreement to give the cable operator more discretion

in selecting programming.91

Also discouraging the use of public-access channels is the intense competition with commercial

media. On average, amateurs are unlikely to produce

exceptional television programming. And even

when they do, they generally have insufficient

resources to adequately promote their work. The

problem that newcomers face is one of differentiating their work, and of gaining the attention of the

appropriate audience at a time when the traditional

media are spending more and working harder to

attract a viewing audience that is becoming increasingly selective and sophisticated.

What role the Federal Government might play in

promoting the use of community-access services in

the future is open to question. Despite its long

commitment on behalf of the development of local

programming, the Federal Government has, of late,

been much less inclined to impose carriage requirements on local cable companies. However, were the

telephone companies to enter the field in competition with cable companies—and perhaps on a

common-carrier basis-the hope for local-access

channels will certainly be rekindled.

89fiid.

Wetha Hill, “P.G. Cable Performers Await Cue in Off-Camera Dispute,” The Washington Post, June 25, 1988, p. B1.

gi’’pubiic Aeeess in Kansas City Heads for Showdown,” Broadcmting, June 13, 1988, p. 58.
Chapter 7-Communication and the Production of Culture . 195

Box 7-B--Steps for Making Cable TV

The first step for anyone interested in any aspect of making community cable TV is to find out what is offered

by the local cable system. Is there a separate access facility, or is the cable studio open to the public? Are formal

training sessions held, or do newcomers learn by apprenticeship? Does the cable system provide the videotape, or

is that up to the access user? After getting an overview of how access works in your community, you might want

to:

. Speak with others who have been involved in access productions.

● Volunteer to work on an already existing program for a better idea of what goes into cable production.

. Check the local library for any media-related materials, especially ‘how-to’ guides.

. Enroll in a media workshop, run either by the cable system, the local access foundation, or other community

groups (check schools, youth groups, religious organizations, video clubs, and so on).

c Think about what’s missing from the community cable lineup that you might provide. What interests could

you explore and share by making your own cable show?

. Write a detailed proposal and present it to the access coordinator or the head of local programming. Outline

specific ideas and how you would present them. Describe the potential audience for your show.

● Round up a cast and crew. Friends, neighbors, and relatives can all play a part.

SOURCE: R@nted with permission from “Community Cable for and by Children: An ACT Handbook,” by Action for Children’s Television

(ACT), Cambridge, MA.

Education and Culture like their own, where there is no property qualification for voting or for standing for election. That

All societies educate, and education is necessary seemed to be an idea taking root in every head.93

to maintain and to structure the social order.

Education mediates between individuals and society. It is the means by which societies transmit

acquired knowledge, attitudes, values, skills, sensibilities, and symbols from one generation to the

next—and thus the means by which individuals

learn the skills and roles necessary to function in and

to influence their society .92

In the United States, there has always been

support for the idea that education plays an essential

societal role. Contrasting the attitude of Americans

toward education with that of Europeans, Alexis de

Tocqueville, the well-known commentator on

American society, noted in 1831:

The public benefits that Americans have associated with education have changed over time and in

different historical circumstances. In the earliest

years of American history, education was considered essential for the survival of the new democratic

Nation. Later, with the need to acculturate immigrants and to unite a divided Nation in the aftermath

of the Civil War, it was considered the means for

building a Nation of citizens. At the turn of the

century, education was expected to train and socialize American youths for participation in a modern,

industrialized society. More recently, Americans

have seen in education the solutions to some of the

Nation’s thorniest social problems.94

Everyone I have met up to now, to whatever rank Throughout its history, the American educational

of society they belong, has seemed incapable of system has been quite successful in adapting to meet

imagining that one could doubt the value of educa- the changing needs of society. It has been transtion. They never fail to smile when told that this view formed from a system designed to meet the needs of

is not universally accepted in Europe. They agree in an agrarian society to one tailored to the needs of an

thinking that the diffusion of knowledge, useful for urban, industrialized society. It has been changed,

all peoples, is absolutely necessary for a free people moreover, from a system structured to meet the

~%Her~rt A. Thelen and Jacob W. Gretzels, “The Social Sciences: Conceptual Framework for Education,” The School Review, VO1. XV No. s,

Autumn 1957, p. 346. See also Charles E, Bidwell, “The School as Formal Organization,” James G. March (cd,), Handbook of Orgaw”zations (Chicago,

IL: Rand McNally & Co., 1%5), pp. 969-972.

gqAlexis de ~cqWville, Journey ro America, translated by George Lawrence (New York, NY: Anchor Books, IW 1).

~FOr a discttssia of the social goals attributed to public education, see Rush Welter, Popular Educatwn and Democratic Thought in Amricu (New

York, NY: Columbia University Press, 1963). See also David Tyack and Elizabeth Hanson. “Conflict and Consensus in American Public Education,”

America’s Schoois: Public and Private, Daedalus, Summer 1981.
196 . Critical Connections: Communication for the Future

educational needs of a privileged few, to one more

structured to meet the diverse and sometimes

conflicting needs of a growing and heterogeneous

population.

Today, however, the American educational system is undergoing a number of stresses. Some

originate within the educational system itself; others

stem from the profound changes taking place in the

larger social environment. Among these developments are:95

an increase in the level of education that

individuals need to participate effectively in

society;

an extension of the period of time during which

individuals can and need to be educated;

an increase in the diversity of clientele for

education, and thus an increase in the diversity

of the demand for education;

a decline in the public resources available for

education, resulting in part from:

—an increase in the cost of producing education,

—a questioning of the public benefits associated with public education, and

—a loss of confidence in the institutions

providing education; and

a general decline in educational achievement,

especially when measured against education

achievement levels attained in other countries.

Because communication technologies can serve

as specialized educational tools, they have always

been valued as educational resources. With the

development of the penny press, for example, a

number of early communication scholars, among

them Charles Horton Cooley, John Dewey, and

Robert E. Park, conceived of it, above all, as a source

of public education and enlightenment.96

The radio was also appreciated for its educational

potential, although in allocating spectrum the Federal Radio Commission (FRC) gave a clear preference to commercial stations.97 As Czitrom describes:

The FRC consistently chose not to view advertisers as special interests. It gave preference to commercial stations while discouraging what it termed

“propaganda stations,” particularly those run by

labor and educational organizations. The FRC thus

reduced the ‘public interest, convenience, and necessity’ phrase to mean the needs of commercial

broadcasters. 98

Given this experience, educators quickly learned

that if educational broadcasting was to be successful,

educators would need to have a number of channels

specifically reserved for such a purpose.99 Moreover, by the time television came along, educators

and others interested in educational broadcasting

were much more organized and aggressive in

making their demands known.l00 As a result, educators were more successful than they had been with

radio in gaining the FCC’s support for educational

broadcasting. In March 1951, the FCC announced its

intent to reserve 209 channels for noncommercial

television stations.

g5F~r di~cuwio~ of ~ese s~~ses, see U.S. Congess, ~fice of Technolo~ Assessment, l~o~tio~l Technology and lts Impact on American

Education, OTA-CIT-187 (Springfield, VA: National Technical Information Service, November 1982); National Commission on Excellence in

Education (Washington, DC, 1983); I. Kirsch and A. Jungeblut, Literacy :Profi/es ofAmerica’s Younger Adu/fi, Finaf Report, No. 16-PL-01 (Princeton,

NJ: National Assessment of Education Progress, 1986).

%2zitrom, op. cit., footnote 30, especially ch. 4, “Toward a New Community? Modern Communication in the Social Thought of Charles Horton

Cooley, John Dewey, and Robert E. Park,” pp. 90-121.

mFor a discussion ~d history, ~ Ro&-fl J. Bl&ely, To Se~e rhe p~lic /nterest (Syracuse, w: Syracwe University press, 1979). According tO

Blakely, “By 1925 the commercial radio stations had begun to find in the sale of time for advertising an enduring answer to the problem of financial

support, while the educational stations had not. When the Seeretary of Commerce adopted policies that created trafficking in licenses in 1925, the number

of noncommercial stations began to deeline. In 1926, when the impetus for networks to get local affiliates and for local stations to acquire network

affiliation was added, the decline quickened.” As Blakely notes, under these circumstances, one of the few educational groups that managed to survive,

and which thus came to play a major role in educational broadcasting in the United States, was the State universities and land grant colleges (pp. 53-54).

98Czi~m, op. cit., fm~ote 30, pp. go-g I. And m Bl&ely adds: “Educational stations also suffered frOm frequent shifts in tieir frequencies ~cause

of shifis made by the FRC. Commercial stations made money, convertible -iito political power; educational stations cost money. If their programming

was not popular enough to attract sizable audiences, they were hard to justify politically, if it was popular, it provoked politicaI opposition. ” Blakely,

op. cit., footnote 97, p. 55.

99~ ~en~ent t. ~is eff=t, s~Wr~ by Senators Robe~ Fe Wagner and Henry D, Hatfield, had been propo~ to tie communications At Of

1934, but failed to pass for lack of support. How~ver, in 1945, the FCC decided on its own accord to reserve 20 of the 100 charnels available in frequencies

higher than 25 megacycles for educational radio.

100A cenm~ force beh~d ~ls effo~ Wm tie F~d for Adult Education, which ~de~~k ~ee b~ic ~ks: 1) ~~g be reservation of channels; 2)

activating the stations; and 3) establishing the Educational and Radio Center. Blakely, op. cit., foomote 97, ch. 4.
Chapter 7--Communication and the Production of Culture ● 197

Also important in assuring the survival of educational television (ETV) was the early funding by the

Ford Foundation, and two key pieces of Federal

legislation-the Educational Television Facilities

Act, which provided money to activate and expand

ETV stations, and the All-Channel Television Receiver Act, which served to increase the number of

receiving sets on which viewers could receive ultra

high frequency (UHF) signals.lO1 But the ultimate

support for educational TV came only in January

1967 with the passage of the Public Broadcasting

Act, which incorporated many of the recommendations made in a national study by the Carnegie

Commission on Educational Television.

While past efforts to employ technology for

educational purposes have had their detractors, the

results have been successful enough to inspire those

who are concerned about education today and who

look to new technologies for potential solutions.

And, indeed, a number of recent analyses suggest

that communication technologies could play a very

effective role in education.102 Two of the many

educational applications of new information and

communication technologies will be considered

here: remote learning and desktop publishing of

educational materials.

Remote Learning

Remote learning refers to the provision of mediated instruction at a distance. It can take place in a

variety of ways, ranging from the simple exchange

of printed material via the postal service to two-way

interactive, cross-continental television. It can also

occur in a variety of settings. Remote learning can

include situations in which a student, or students,

participate in a class that is meeting elsewhere, or it

can be used to create a virtual classroom where

students, although dispersed, interact via telecommunication. Moreover, remote educational materials

can be comprised of any number of media formats,

including audio/video presentations, graphics, film

clips, real-time video conferencing, computer-aided

instruction, etc.

In its recent study, Linking for Learning, OTA

found that advances in information and communication technologies expand the array of remotelearning options and provide potential solutions to a

number of educational needs.103 According to the

study:

In distance learning, technology transports information, not people . . . [It] has has changed dramatically in response to new technologies and new needs.

Technologies for learning at a distance are also

enlarging our definitions of how students learn,

where they learn, and who teaches them.l04

Given technological advances in transmission,

and in information storage and reprocessing, remote

learning may help to reduce educational disparities

among regions. It has been estimated, for example,

that one-third of the country’s schoolchildren are

poorly educated due to the limited staff and resources in small; geographically isolated schools.105

However, as the OTA study points out, modern,

interactive-based distance education can help small,

remote communities to meet State-mandated curricular reform, especially requirements for courses in

mathematics, science, and foreign languages. For

where there is a shortage of qualified teachers and/or

too few students at any one site to warrant the hiring

of a teacher, remote learning provides an effective

alternative. 106 

Remote learning also makes it possible to link all

levels of education-from kindergarten through

college-allowing for a more optimal use of educational resources and the rethinking of educational

curricula. Maine’s educational telecommunication

network, linking universities, high schools, and

lol~id., p. 143. ~majorincentive for Feder~ support was the general concern about the state of Arnericaneducation inthefaceof the SOvlet’S success

with Sputnik.

lmFor an e~ly, ~t ex~emely ~werf~, vision of educational technologies, ww Seymour Papert, Mindsrorms (New York, Ny: B=ic Books! 1980).

See also OTA, op. cit, foomote 95; U.S. Congress, Office of Technology Assessment, Power On/New Tools for Teaching unlearning, OTA-SET-379

(Washington, DC: U.S. Government Printing Office, September 1988); “Educational Technology 1987,” Electronic tiarning, October 1987; and

Michael Rice, “Toward Improved Computer Software for Education and Entertainment in the Home,” Report of an Aspen Institute Planning Meeting,

Wye Woods Conference Center, Queenstown, MD, June 3-4, 1987.

lmsW J~n Ohler, “Distace Mucat.ion and the Transformation of Schooling,” OTA contractor report, May 1989.

l~u.S. C’onmss, offiw of ‘1’cchnoIogy Assessment, Linking for Lxzrning: A New Course for Education, OTA-SET430 (Washington, DC U.S.

Government Printing Office, November 1989), pp. 3-4.

lm~~ Br~haW andp~cla Brown, “me Px-c)rnlse of Distance bmrning,’’folicy Briefs, No. 8 (San Francisco, CA: FU West Laboratory, 1989).

l~TA, op. cit., footnote 104.
198 ● Critical Connections: Communication for the Future

newly created outreach centers, is an example of

how such connections can lead to expanded services

and new relationships.107

As more and more educators have become aware

of the increased potential of remote learning, the

number of States and school districts initiating

projects and plans for distance education has increased. For example, in 1987, less than 10 States

were promoting distance learning; in 1988, twothirds reported some involvement.l08 Involvement

can entail modest efforts at the local level, or more

elaborate undertakings requiring collaboration with

regional education service centers and nearby universities and community colleges.

Notwithstanding this growing interest in remote

learning, the access of students and teachers to these

kinds of facilities is still quite limited. One factor

inhibiting access is the lack of a telecommunication

infrastructure. Even though cable systems now reach

many communities and the telephone network is

ubiquitous, few classrooms have the wiring required

to take advantage of this telecommunication base.

And only 7 percent of all school districts have the

capacity to receive satellite signals.

Attention to the quality of instruction is also

critical to the successful implementation of remotelearning programs. While remote learning helps

students overcome a number of barriers, it can at the

same time reinforce students’ feelings of isolation,

if used as a substitute for traditional teacher/student

and student/student interactions. And OTA’s analysis shows that not all remote-learning systems afford

the same levels of student/teacher interaction. Moreover, students report that distance learning is

“harder.” When the remote-learning group is large,

students complain about how difficult it is to raise

questions and obtain help during class time. Most of

the students interviewed by OTA preferred instruction at their own schools.

Teacher support and active involvement in the

development and deployment of remote-learning

systems is also essential to their success, as the

history of earlier educational technologies clearly

illustrates. l09 Remote-learning systems can provide

teachers with a number of advantages. Many teachers report, for example, that remote teaching has

improved their skills, forcing them to become more

organized and more innovative. *10 Moreover, distance learning can provide teachers with a wider

reach, allowing them to “meet” and consult with

national experts, visit other classrooms, or collaborate and share notes with colleagues 50, or even

5,000, miles away. In such fashion, expert teachers

in Iowa welcome prospective teachers into their

classrooms via satellite, while two teachers in

Connecticut join classrooms via a fiber-optic network to team-teach.l11 On the other hand, teachers

have also voiced a number of concerns about the

prospects of remote learning. Some are concerned

about being replaced by technology. Others are

unfamiliar with, and thus uncomfortable using,

technology. 112 And others fear a loss of control Over

their curriculum and course-work. Involving teachers early in the process of developing remotelearning systems will serve not only to improve the

design of these programs, but also to assure their

long-term viability.

To facilitate the implementation of remote learning, a number of jurisdictional problems may also

need to be resolved. Distance education not only has

the potential to decrease the amount of local control

over schools; at the same time, many of the new

institutional arrangements being established to develop and offer student courses, enrichment activities for classroom instruction, and programs for staff

development are now being structured in a more

centralized fashion, while the curriculum and inservice training are becoming more and more

uniform. Under these circumstances, nationwide

accreditation procedures might need to be developed

to supplement, or replace, current State-administered

standards. However, local and State educational

institutions may not be eager to renounce their

lmB~ce 0. B~ker, “Dis@nce Learning Case Studies,” OTA contractor report, June 1989.

los~id.; ~~W “Education~ Technology 1987: A Report on EL’s Seventh Annual Survey Of the StateS,” Electronic tiarning, vol. 1, No. 2, October

1987, p. 41.

109For a discussion, StX OTA, Op. Cit., foolnote 95.

llOB~er, op. cit., fOOwOte 1~.

1 ll~ld.

llZFor a discu~~on, wx Ger~d W, Bracey, “Still Anxiety Among Educators over Computers,” Electronic tiarning, March 1988, p. 20.
Chapter 7-Communication and the Production of Culture ● 199

control in these matters. * 13 Thus, educational leadership will be a critical factor for planning efforts that

draw together public- and private-sector interests,

use resources efficiently, and meet a broad base of

educational needs.

Although the Federal Government’s role in education is limited, its decisions can have a significant

impact on the future of remote learning. Because

education is a public good, and thus subject to

underfunding, government funding programs can be

of particular importance. The Federal funding of Star

Schools, for example, has already accelerated the

growth of distance learning in the United States.114

Federal telecommunication policies are also important, as the history of public broadcasting in the

United States clearly illustrates. For example, it was

only when the government began to reserve spectrum for educational broadcasting that educational

groups were able to develop a viable system for

educational television.

Desktop Publishing of Educational Materials

Desktop publishing refers to a simplified publication process that uses a personal computer, wordprocessing and page-layout software, and a printer to

produce documents such as newsletters, newspapers, fliers, and books.115 Desktop publishing is

cheaper and easier than traditional publishing because it eliminates the need for typesetting and

mechanical page layout. What-you-see-is-whatyou-get software allows users to experiment easily

with various type styles and sizes, graphics, and

page setups. Educational applications include:

●

●

●

●

●

printing of student newspapers and school

publications;

preparation of more sophisticated audiovisual

aids by teachers;

publication of class notes by teachers to supplement or supplant traditional textbooks;

student class projects, such as writing and

printing of storybooks; and

publication of university press books.l16

Desktop publishing systems, when used by teachers to “publish” essays, have helped motivate some

students to read and write. Some students have

improved their writing ability because they can edit

and print their work. One elementary school teacher

who uses a desktop publishing system with children

who are in need of extra help describes the process:

We work with kids we call “compensatory students,” . . . which means they’re a little slower than

average. To improve reading comprehension, 3rd,

4th, and 5th graders are required to write and publish

their own storybooks . . . The kids are really motivated to make their stories interesting and nicely

illustrated, especially since they know that after the

books are published, the authors will be using them

in public readings to the kindergarten and 1st grade.

Making their books has really turned these kids

around. Last year’s evaluation showed that reading

comprehension test scores for our 4th and 5th grades

were 50 percent higher than the control group’s

scores.

Not only has “getting published” built reading,

writing and problem-solving skills, it had an

enormously positive impact upon the “compensatory student’s” self-confidence and self-esteem.117

For older students, desktop publishing can cut

costs and increase flexibility for student newspapers,

giving them more experience in editorial and layout

decisionmaking. Desktop systems allow teachers to

tailor classroom materials to the needs of students,

giving them more control over class content. Teachers, administrators, and community leaders could

even use desktop publishing to circulate school

information within the community to garner more

participation in local educational decisions.

The more successful desktop publishing is, however, the more consideration will need to be given to

the issue of equity. The costs of such systems are not

negligible. As in the case of deploying computers in

the schools, without a Federal policy of support, new

technologies are likely to be distributed first in

well-to-do areas which, in fact, may not be the

school districts most in need of the special benefits

113~ ~actice, ~1OCW ofcon~ol over distance ~ucation varies horn State to State, and the responsibility for educational telecommunication maY

reside outside of the cducationat community.

114~ additim, the ~blic Telecommunications Facllltles ~o~am established in l$)fjz at the Nation~ Tel~omm~cations” and hrformation

Administration has funded the purchase of some equipment used in distance-learning efforts. The Rural Electrification Administration (REA) is

providing loans for efforts that have educational components to rural telephone cooperatives in rurat Mimesota, the Oklahoma Panhandle, and the

Papagos Indian reservation, among others. And Title 111 of the Higher Education Act has supported part of the University of Maine’s telecommunication

network.

l15Milt Stiley, c’~~top ~blishing,” The Cowuter Teacher, November 1987, pp. 46-49; Harold A. Sims, “Desktop Publishing in a pC-Ba

Environment,” Educan”onaf Techofogy, August 1987, pp. 6-11; and Deborah Little and Charles Suhor, “Schooi Uses of Desktop Publishing: Asking

the Right Questions,” Educational Technology, August 1987, pp. 35-37.

116Ro~ti McC~y, *’Stw the ~ews! i% U@ate on Desktop Publishing,” Electrorul L.earm”ng, March 1988, pp. 24-29.

1 ITAs cit~ in ibid., p. 25.
200 ● Critical Connections: Communication for the Future

these technologies afford. Moreover, within schools,

priorities will need to be set with respect to how such

systems will be used. Should in-house production of

tickets, fliers, and programs, which save a school

money, take precedence over instructional uses?

Should the system be used to reward those who are

performing well in school, or to boost the skills of

poor performers?

To the extent that desktop publishing is used by

teachers to develop their own teaching materials,

issues may arise with respect to quality control. If

desktop publishing is to offer new opportunities to

get involved in the production of educational materials, some new quality-control mechanisms might be

needed to encourage the production of wellexecuted educational materials. Moreover, teachers

may require additional training to take full advantage of these technologies. * 18

Religion and Culture

Religious ideas have often been characterized as

the answer to the problem of meaning. As Emile

Durkheim wrote about religion: “C’est de la vie

serieuse.’’ l19 [It’s really serious.] And, according to

sociologist Talcott Parsons, religious beliefs:

. . . are those which are concerned with moral

problems of human action, and the features of the

human situation, and the place of man and society in

the cosmos, which are most relevant to his moral

attitudes, and value-orientation process.l20

In fact, American culture was first conceived of in

religious terms.121 As noted by Bellah et al., the early

colonists:

. . . saw their task of settlement as God-given: an

“errand into the wilderness,” an experiment in

Christian living, the founding of a “city upon a

hill." 122

However, although originally conceived of as a

quasi-governmental affair, over time, and in response to changing social forces, religion came to be

viewed in America as much more of a private matter.

As Bellah et al. describe it:

Religion did not cease to be concerned with moral

order, but it operated with a new emphasis on the

individual and the voluntary association. Moral

teaching came to emphasize self-control rather than

deference. It prepared the individual to maintain

self-respect and establish ethical commitments in a

dangerous and competitive world, not to fit into the

stable harmony of an organic community.123

Among the many factors contributing to this

change were, for example, the political separation of

church and state, the breakdown of traditional,

communal ties in the wake of industrialization, the

growth in the diversity of the population, and the

widespread adherence to the philosophy of laissezfaire and individualism.124

The privatization of religion in the United States

has not significantly affected the level of individual

participation in religious activities. Religion continues to be one of the primary ways in which

Americans involve themselves in communal life.125

About 60 percent of the U.S. population claim

membership in a church or synagogue, a percentage

that has decreased only slightly since 1950.126 In one

annual survey, about 40 percent of the adult population said that they had attended a church or

synagogue within the previous 7 days, compared to

42 percent in 1970 and 47 percent in 1960.127 And,

a 1983 Gallup poll reported “a rising tide of interest

and involvement in religion among all levels of

society,” with 57 percent of the respondents reportlW3COti Jasch&, “use of Tel~ommunications for Instruction Across State Lines Attracting Official Notice,” Chronicle of Higher Education, NOV.

6, 1985, P. 15.

llg~fle ~~eim, The E/ememary Form of the Religio~ Life, translated by Joseph Ward Swain (Ixmdon: George Allen & Unwin Ltd., 19’76).

120pasms, op. cit., footnote 3. P. 368.

121 Sacvan Bexovi~h, The Purltun Origlm of t~ A~rican Self (New Haven, CT: Yde [University ~ess, 197s). SCC dso Boorstin, Op. cit., fOOtIIOte

51, especially ch. 1.

m~ll~ et al., op. cit., fOOtnOte 55$ P. **O.

l~lbid., p. 222.

1z41bid., ch. 9.

125As not~ by ~llah et ~<: “~eficam give more mo~y and donate more time to religious bodies and reli@ously assoc:at~ OrgiUllztitiOIIS bl tO

all other voluntary associations put together.” Ibid., p. 219.

1-1984 YeWbook of Ame~can and ca~~n c~rc~s pu

(s the yrcentage at 59.6 for lg&? and 59.’7 for 1984.

127fiMetm Religion Re~~ch Center, Emerging Trends (Princeton, NJ: PFU?C, 1983)
Chapter 7--Communication and the Production of Culture ● 201

ing that they were more interested in religious and

spiritual matters than they had been 5 years previously. 128

As society comes face to face with an increasing

number of major ethical issues—such as abortion,

dealing with AIDS, and genetic engineering-the

links between religion and public policy are, again,

likely to become pronounced. Already there are a

number of indications that people are moving in this

direction. 129 Religious values that have shaped

personal perspectives are now being voiced in the

political and economic arenas, and organized faith

groups are trying to influence public policies on a

variety of issues. Public officials and candidates,

moreover, are now coming out of the ranks of

religious institutions and/or are justifying their

behavior on religious as well as social policy

grounds.130

The problem for society, in this context, is to

maintain the requisite balance between diversity and

integration. For pluralism in American religion was

essentially made possible by a basic underlying

agreement about religious values. As Bellah et al.

have emphasized:

The fact that most American religions have been

biblical and that most, though of course not all,

Americans can agree on the term “God” has certainly

been helpful in diminishing religious antagonism.

But diversity of practice has been seen as legitimate

because religion is perceived as a matter of individual choice, with the implicit qualification that the

practices themselves accord with public decorum

and the adherents abide by the moral standards of

community.131

Because they exhibit both centrifugal and centripetal tendencies, new communication technologies

and how they evolve are likely to significantly affect

the balance among religious subcultures and between religious subcultures and the national culture.

Although religious activities have traditionally been

centered around face-to-face interactions and sacred

texts, religious groups have been among the first to

take advantage of new communication media to

achieve their ends, and they have done so to

considerable effect. The evangelical religious

groups of the 1820s, for example, were among the

first to exploit improvements in printing technologies-faster presses, stereotyping, and machinemade power—to advance their causes.132 And remote broadcasts of religious services have been

taking place since the introduction of radio in the

1920s. In fact, because religious broadcasting was

perceived to be “in the public interest,” most stations

and networks offered religious groups some air time

on a sustaining (free) basis. *33

To understand how new communication innovations might change how people participate in religious activities, and thus in the larger production of

culture, this section will focus on two applications:

electronic networks used by faith groups to coordinate administrative and ministerial activities, and

religious programming networks that distribute

faith-oriented messages.

Electronic Networks

Religious organizations are beginning to use

electronic connections to broaden and strengthen

communication among their administrators and

members. The Presbyterian Church (USA), for

example, 134 operates Presbynet, an online computer

communication network that links religious leaders,

staff, and lay people and transmits a variety of

church-related discussions. Presbynet was created to

promote participation in church dialog and to help

mend an ecumenical rift within the church, and it

was designed with this goal in mind.135 It provides

toll-free telephone numbers, free connect-time, userlZ5G~Iup ~ganization poll for the Christian Broadcasting Network, reported in ibid.

lz~or discmsiom, ~ KeMe~ D Wald, Religion ad Po/ltlcs in the United Stutes (New York, NY: St. Martin’s ~ess, 1987); and William F. Fore,

Television and Religwn (Minneapolis, MN: Augsbert Publishing House, 1987).

Iswald, op. cit., footnote 129.

lslBellah et al., op. cit., footnote 55, p. 225.

]n~g~fly loc~, tie evmgelic~ ~oups cen~~iz~ their production and distribution activities in New York City beCause of efficiencies in

communicating to the Nation from the leading commercial center. Some even claimed that God had ordained the move to New York. See David P. Nerd,

“TheEvangelical Origins of Mass Media in America, 1815 -1835,’ ’Journu/isrn Monogruph, No. 88, 1984, for an account of how early religious groups

adopted the newest printing technologies to reach everyone with the same message.

lss~d ~li~ous ~oups were quite successful in heir use of the radio. By 1932, there were more than 400 programs. cl~sified by T~ SWU@ sc~ol

Times as “sound and scriptural,” airing on 80 radio stations. Ibid.

13QMany o~er denominations have similar networks.

lsssan~a Grew, D~Wtor of Communlcatlon of the ~esbyte~an ch~ch (USA), Personal communication, ~t. 18, 1986.
202 ● Critical Connections: Communication for the Future

friendly software, promotion and support by local

church members with computer experience, and

even nonelectronic means of learning about what

was being said on the system. Most systems consist

primarily of a central computer with conferencing

and communication software. Using their computers

and modems, members can dial the central computer

through the public telephone network to share

private messages, public announcements and articles, religious ideas, graphic information, and requests for information. The combination of electronic mail, computer conferencing, and bulletin

boards is supported by pooled funds.136

Electronic networks could provide new opportunities for involvement in church activities. For

church leaders and administrators, the networks are

anew way to share ideas, discuss common problems,

and coordinate activities. Successful programs developed in one area of the country can be shared with

peers throughout the Nation and even internationally, cutting costs for all and encouraging efficient

use of effort. For lay members, the networks can

provide a new set of contacts and make discussions

of faith-related issues more accessible. People who

are more aware of and active in their church

activities have more impact on church actions, and

can extend the effects within their own social circles.

Networks can also be used to link church communities of different sects, providing a means for

cooperation and ongoing dialog. The networks of a

number of religious groups are linked, for example,

via Ecunet, an umbrella network that is sponsored by

the National Council of the Churches of Christ.137

Conferences range from those having to do with

traditional religious functions to those addressing

broad social issues. Conference topics are set up by

individual participants, and conversations are for the

most part among the lay members of the church,

although there is a predominance of those interested

in computers and communication technology.138

One problem with these networks is that they tend

to exclude those who lack the necessary computer

resources or are unfamiliar with technology. Thus,

some people may become cut off from religious

dialog and lose some of their input into church

affairs. Moreover, if networks are given precedence

over face-to-face and local contact, interactions over

the network could weaken ties to local church

groups and community, depriving some members of

social interaction and the spiritual guidance offered

by more traditional forms of interaction.

Religious-Programming Networks

Until the 1970s, most video religious programming consisted of individual shows produced by

faith groups to carry their message to the broadcast

audience. With the rising costs of video-program

production and the growing penetration of cable, a

number of cable channels emerged for religious

programming. Many of these relied on charismatic

evangelists and on-air fundraising until scandals and

falling ratings led several of the leading networks to

reposition themselves. 139 Now a number of evangelical networks, such as the Reverend Jerry Falwell’s

Family Net and The Christian Broadcasting Network, broadcast a wide array of talk, music, and

variety shows in addition to evangelical programs. 

140 Mainline churches also support program

networks like the Catholic Eternal Word Television

Network and the Jewish Television Network, and

several have recently joined together to establish an

interfaith cable network, the Vision Interfaith Satellite Network (VISN).141

Faith groups, then, have taken advantage of the

increased channel capacity offered by cable (and

other technologies) to reach larger audiences with

lsbIbid.

lsTDavid Pomeroy, Nati~~ Council of the Churches of Christ, personal Communication, June 13) 1989.

138~id,

139~.r@to the memor~d~, T~ /mpir~iom/Ne~ork, clrculat~ by p“fL, an evange]ic~ is “an individu~ who, in ~dition to having a ‘bOm

again, ’ or ‘life changing spiritual experience, ’ believes in the literal truth of the Bible, has repented of sin and received the Holy Spirit of Jesus Christ,

which then literally indwells the individual.” Jeffrey K. Hadden and Anson Shupe, Televangelist: Power and Politics on God’s Fronrier (New York,

NY: Henry Holt & Co., 1988). According to John Motavelli: “Virtually all the major TV evangelists have faced sharp declines in their popularity since

1980. CBN’S Robertson has seen his approval rating drop from 65 percent to 50 percent; Oral Roberts has dropped even more dramatically, fkom 66

pereent to 28 percent; and Jimmy Swaggart has plummeted from 76 percent to 44 percent.” John Motaveili, “Born Again: Religious Channels

Emphasizing Entertainment to Broaden Appeal,” Cableviswn, Sept. 28, 1987, pp. 20-22.

l~or exmple, abut 25 ~rcent of the Christian Broadcasting Network’s progr~s ~religious. “CBN at Age 11 Drops the Classics for Original

programs,” Television/Radio Age, Apr. 18, 1988, p. 34; and “Falwell Backs New Religious Cable Channel,” Electronic Media, May 2, 1988, p. 3.

lqlLa~a ~n~, “~ Evangelists Fade on cable TV, M~~& churches c]~rn tie Air, T~ wall Street Jouna/, MN. 9, 1988, p. 32.
Chapter 7--Communication and the Production of Culture ● 203

their messages. Their founders see the networks as

a means of reasserting the role of the church in

shaping cultural values.

142 Increased contact with

audiences could also challenge churches to be more

accountable to viewers’ current concerns and conditions. 143

While this opens new opportunities for faith

groups to participate in cultural production, it also

raises several issues. It is possible that new networks

will simply escalate a ratings war among religious

broadcasting groups.

144 Interfaith networks, especially if they are backed by powerful cable companies, could replace other religious programming and

therefore narrow the opportunities for independent

participation. 145 Some church leaders worry that

“electronic evangelism” is not true evangelism, but

instead “makes religion some thing you can soak up,

like a sponge, rather than work at.’’146 Some local

church officials worry that national or international

“electronic churches” will steal members away from

local churches, turning members into passive donators rather than activists in local religious affairs.147

The degree of coordination between local churches

and national program producers will help determine

the extent to which this phenomenon occurs. *48

Others see churches’ increased cultural role as

signifying a larger political role as well. Some either

feel that religious organizations should not be so

involved in politics or fear the specific political

stands that such organizations might take.149 This,

and the profitability of some religious broadcast

networks, has raised questions about the appropriateness of tax exemptions for religious broadcasters

and politically active churches.

Entertainment and Popular Culture

Although often thought of as a personal activity or

a business enterprise, entertainment performs a

significant cultural function as well.150 Like any

form of play, entertainment inculcates the predominant cultural values and socializes individuals to

execute certain roles.151 In fact, participating in

entertainment is a form of ritual. It entails:

. the collective reenactment of symbolic archetypes that express the shared emotions and ideas of

a given culture. *52

Participants witness and reaffirm the basic myths

and stories that structure their experience, playing

them out in circumstances that are familiar or

believable to an audience.

Given the critical impact that entertainment can

have on the lives of individuals, and on society in

general, the creators of content can exert a great deal

of influence. For this reason, policy makers, elites,

social critics, and social observers throughout history have, in general, paid particular attention to the

rules that govern the creation and distribution of

entertainment content.153 Concerns have been parIQzwil] Bane, acting manager of VISN, personal communication, June 22, 1%8.

143 Dan Matthews, Trinity church and Board Chair of VISN, personal communication, June 19, 1%8.

l~peter G. Horsfje]d, Religious Television: The American Experience (New York, NY: bngman, 1984), P. 149.

1450ffici~5 of the P’TL cable network, for ~xmple, mount~ a c~pai~ against the new VISN network to convince cable operators that the new

mainstream network was urmecessary. VISN founders see their network as a supplement to, not a replacement for, evangelical networks. “New Muhifaith

Cable Service Angers PTL,” TV Guide, Apr. 23-29, 1988, p. Al; “Cable’s Vision,” Broadcmting, Mar. 21, 1988, p. 56; and K. Harold Ellens, Mode/s

ofReligwus Broadcasting (Grand Rapids, MI: William Eerdmans Publishing Co., 1974), p 144. For programming networks, access to the means of

producing programs is as irnpor?ant as access to the finished programs. Because the number of cable channels on a system is limited, and competition

for carriage on those channels is becoming severe, it is likely that competition among faith groups will increase.

l~Fore, op. cit., foomote 129.

1471b1d. However, Fore ~50 notes that the audience for rellglo~ broadc~~ is made up lmgely of people who Me alSO active church-goers, indicating

that electronic churches are more likely to reinforce religious activities than to undermine them.

14E~e s~dy fo~d that religlous progm~ ~entlon locat ch~ches in one out of fo~ progams, and encourage Iocat attendance in one out of eight

programs. George Gerbner et al., “Religion on Television and in the Lives of Viewers,” report for the Ad Hoc Committee on Religious Television

Research, National Council of Churches of Christ, New York, 1984.

l@W~d, op. cit., fmmote 129. See ~W David S, Broder, “will Evangelistic polltics Fade?” The Wmh”ngton Post, May 4, 1988.

150por one ~scu~ion of tie development of ente~~ment ~ a cultm~ fo~, see H~old Mendelssohn and H.T. Spemagel, “Entertainment as a

Sociological Enterprise,’ ’Percy Tannenbaum (cd.), The Entertainment Functions of Television (Hillsdaic, NJ: Lawrence Erlbaum Associates, 1980), pp.

13-20.

151see Clifford Geert,z, The ]nteqw-etation of Cultures (New York, NY: Basic Books, 1973).

152MichaeI Real, MISS Mediated Culture (New York, NY: Prentice- Hall, 1977), p. b.

153The gmting of ~pyn@t ~ England, for example, was originally designed as a mwhanism for censorship.
204 ● Critical Connections: Communication for the Future

ticularly great with respect to mass media, which

allow small groups of individuals to speak to large

and distant audiences.154

Many people were concerned, for example, by the

advent and popularity of motion pictures. The 1914

warning of writer, Frederick C. Howe, was typical:

Commercialized leisure is moulding our civilization-not as it should be moulded but as commerce

dictates . . . And leisure must be controlled by the

community, if it is to become an agency of civilization rather than the reverse.155

To address such concerns, many municipalities and

States set up local censorship boards “to stem the

glorification of crime and sex on the nation’s

screen.’’ 156

Not surprisingly, similar concerns about the

negative impact of the mass media on American

culture continue to be voiced today. The media have

been criticized, for example, for fostering consumerism, supporting the “powers-that-be,” reinforcing

negative stereotypes, downplaying social issues and

mollifying social concerns, and contributing to the

decline in popular taste. *57

However, entertainment media are not necessarily

or inherently conservative; they can also serve to

engender and manage cultural change. By virtue of

their power to select and interpret content, media can

subtly introduce new, and even controversial,

ideas.158 But, whether or not the media will lead or

follow depends to a large degree on the structure of

the media industry, how it is financed, and the

relationship of key media industry players with other

elite groups in society. Thus Ball-Rokeach and

Cantor argue that it is impossible to know what

messages will reach an audience without looking at

the sociology of the organizations involved in mass

Communication. 159 Looking at the United States,

they note for example:

. . . in a free enterprise system as it exists in the

United States, those who control the means of

communication (for example, newspapers, radio

stations, television stations) and the means of

distribution (such as networks and distributors) must

depend on advertisers and other sources of financial

support (such as financiers and international trade

agents) as well as creators. To make matters even

more complex, they must also depend upon the

judicial, regulatory, and legislative agencies to

continue to provide a situation that is conducive to

their production process. Power over what is shown

rests finally with those who own or finance the

media, rather than with the individual creators.l60

We find, therefore, that in the United States today

there are a number of people who are concerned not

only because the media industry is, itself, becoming

increasingly concentrated and vertically integrated;

but also because the leaders in these industries are

becoming increasingly linked and interconnected

with other industrial groups. As Ben Bagdikian

describes:

A handful of mammoth private organizations have

begun to dominate the world’s mass media. Most of

them confidently announce that by the 1990s they—

five to ten corporate giants—will control most of the

lS4Fa~ec~~icdi~cm~10n of tie differenti~ impact of m~ia, ~the work of H~old ~nis, op. cit., footnote 11. For a.nexplication and interpretation

of Innis’s work, see James W. Carey, “Space, Time, and Communication: A Tribute to Harold his,” Carey (cd.), op. cit., footnote 50, ch. 6. For some

of the earlier works on media effects in the United States, see Paul Lazersfeld, Radw and the Printed Page (New York, NY: Columbia University Office

of Radio Research, 1940); and Paul B. Lazersfeld, B. Berelson, and H. Gaudet, The People’s Choice ~ How the Voter Makes Up His Mind in aPresidenzial

Campaign (New York, NY: Guell, Sloan and Pearce, 1944).

lssAs ci~ in Cziuom, op. cit., footnote 30, p. 44.

lsGJames J. p~er, “me ~g~izationat Environment of the Motion Picture Sector,” in BaI1-Rokeach and Cantor (eds.), op. cit., foomote 48* P. 146.

Although called onto act, the Federal Government did not become involved in censorship until U.S. entry into the World War 11, And, in fact, the movie

industry took steps to avoid government censorship by promoting a private civic organization, the National Board of Censorship of Motion Pictures,

to perform this role. Czitrom, op. cit., footnote 30, pp. 52-55.

lsTFor somediscussi~s, w-W A. Berger, Television in Society (New Brunswick, NJ: Transaction Books, 1986); Mark Crispin Miller, Boxedln:

The culture of TV (Evanston, IL: Northwestern University Press, 1988); and Ben H. Bagdikian, The Media Monopo/y (Boston, MA: Beacon Press, 2d

cd., 1987).

158As ~~a Mc~rmack notes, the Iiteratwe on how the m~ia are used by dominant groups to reinforce socioeconomic divisions ~d legitimate

cultural values is quite extensive. However, there has been much less thorough and empirical investigation devoted to the subject of how, and under what

circumstances, media can serve to bring about social change. For a discussion, see Thelma McCormack, “Reflections on the Lost Vision of

Communications Theory,” in Ball-Rokcach and Cantor (eds.), op. cit., foomote 48, pp. 3442. For one study that makes this case, see Elisabeth

Noelle-Neumamt, “Mass Media and Social Change in Developed Societies,” Elihu Katz and Tamas Szecsko, Mass Media and Social Change (Jmndon:

Sage Publications International, 1981). On the basis of her anaiysis of the effeets of the media in the Federal Republic, the author claims that under

circumstances where there is a significant degree of ‘media consonance, ’ the media act as agents of change.

lsgs~a J. Ball-Rokeach and Muriel Cantor, “The Media and the Social Fabric,” Ball-Rokeach and Cantor (*.), Op. Cit., fOOttlOte 4s, P. 15.

I@Ibid.
Chapter 7--Communication and the Production of Culture .205

world’s important newspapers, magazines, books,

broadcast stations, movies, recordings and videocassettes . . .

Many of the media magnates also indulge in

another form of synergism; interlocks with financial

and commercial operations that are affected by news,

opinion and popular culture, and which can be either

promoted or protected by the parent firm’s media.

While Capital Cities/ABC, for example, controls the

ESPN cable channel, RJR Nabisco, the global food

and tobacco company (and an important advertiser

with ABC), has a 20 percent interest in ESPN.

General Electric, a second-level giant in the media

through its ownership of NBC, is a first-rank giant in

world military and nuclear reactor production.161

The impact of the media on culture will also

depend on the nature of the audience.162 Audiences

are not passive receivers of content, as was once

believed. As J.T. Klapper has pointed out,163 people

tend to interpret content differently depending on

their background, expectations, peer relations, and

the context in which they are operating. On this

point, Karl Erik Rosengren notes, for example:

Mass media use is not independent of other

socializing agents. It may, for example, be affected

by the shortcomings of other socializing agents—

school, for instance, or the family. There is an

interaction not only between the individual and

socializing agents, then, but also among the socializing agents themselves.164

People can also exert some leverage in determining the kind of content made available to them.

Through their purchases, for example, audiences

will show a preference for some forms of media, and

some kinds of content, over others. 165 Moreover,

individual members of audiences can also join

together to lobby media organizations about content,

an approach that has been successful in a number of

instances in the past.166 Audiences also have control

over the content they absorb; whether reading a book

or watching a film or movie, an audience will be

selective in its perception of actions and events.167

In democratic societies, efforts to promote a

diversity of cultural content, and to guard against

any one group playing an inordinate role in its

development, have focused on structuring organizational arrangements and the relationships among

players in the communication system. One way that

the government in the United States sought to

structure these relationships was by establishing and

setting limits on many forms of ownership rights.

New technologies can also restructure these

relationships, altering the balance of who can

participate, and how, in the production of culture.

Two such technological applications will be considered here. One of these, pay-per-view television,

could enhance the audience’s role in determining

content. The other, digital sampling and editing,

could reduce the barriers for creators wishing to

enter the cultural-production process.

Pay-Per-View Television

Pay-per-view (PPV) refers to the sale of programs

to viewers in their homes, on an unbundled, showby-show basis. Theatrical exhibition and videocassette rentals are primitive forms of PPV, but new

technologies are making PPV more convenient.

Cable is the most common means of providing it,

and about one-half dozen PPV networks are now

offering programming to cable systems serving

approximately 10 million cable households.168 In

lbl~ H. B@kian, “The tids of the Global Village,” The Nation, June 12, 1989, pp. 805.815.

l~r ~ discussion, ~ Muriel G. Cater ~d Joel M. Cmtor, “Audience Composition and Television Content: The M*s Audience Revisi@i”

BaI1-Rokeach and Cantor (eds.), op. cil., foomote 48.

lmJ.T KI~per, The Efleccs of Mu,ss Communication (New York, NY: Free Press, 1960).

164Kml E* Rosengren, “Linking Culture and other %cietat SyStems,” Ball-Rokeach and Cantor (eds.), op. cit., foomote 48, p. 91.

165~ f~ack~ ~t have t. ~ ~ls dirwt. Tracing tie ch@ng contem of American map operas in relationship to a changing audience, Cantor

and Cantor note, for example: “In free enterprise under the capitalist system, the important influence on how content is created is who the creators intend

to be the rurget audience (or audiences) of consumers, not necessarily the actual audience(s) attracted to particular programs . . . We do not postulate

that there is a direct, immediate, linear causal relationship between the target audience and the content they receive but rather a dynamic interaction based

on several different kinds of feedback ffom the audience over time to the creators.” Cantor and Cantor, op. cit., footnote 162, p. 219.

l~r adi~ussionof~ ~le ofm~ia interest ~ups, we Ka@n Montgome~, “The polltic~ Smggle for prime Time,” Ball-Rokeach and Cantor

(eds.), op. cit., foomote 48. As the author notes, minority groups seeking fair representation have had more success than groups such as the PTA that

have criticized the media for its overemphasis on sex and violence. She explains this discrepancy in terms of the media’s desire to maximize audience

size. Jnco rpomting minority points of view may attract new audiences, whereas deleting sex and violence might have the opposite effect.

167’& noti~ Ofsd=uve ~~ption w= fint inu~u~ ~ l% by Paul B. ~rsfeld et ~., op. cit., footnote 154. More recently, many have stid

that it is less applicable to television because as a medium it is more forcefut and direct. For a discussion, see Noelle-Neurnann, op. cit., foomote 158.

m~a Bm~ck, •~pay.pm-view Networks,” Channefs Field GuMe 1988, November/December 1987.
206 ● Critical Connections: Communication for the Future

most of these systems, movies are shown at specified

times, and subscribers can elect to pay to receive

them at those times.

Ordering and billing capabilities are key to the

development of PPV. Many systems employ service

representatives who answer subscribers’ telephone

orders and arrange for delivery of programs; other

systems have automated ordering systems. A more

recent development is the use of automatic number

identification (ANI), a service offered by telephone

companies to cable operators that automatically

identifies the caller and thereby streamlines ordering

and billing. “Impulse” systems provide even more

convenience-with addressable converters in their

homes, viewers can simply tune into programs and

be billed automatically. 169 Impulse systems are more

expensive to install, but generate more than twice as

many subscriber purchases than nonimpulse systems. 170 As fiber-optic cable is laid to residential

households, it will be possible to provide “video on

demand”—PPV in which viewers can order content

from catalogs, receive programs at their convenience, and be billed automatically.171

PPV is a new means for distributing entertainment

content. It could serve, however, as much more than

a convenient way to receive programming. It could

also give viewers more control, allowing them to be

more selective when receiving content. In fact, by all

accounts viewers are using new technologies to do

just that.172 Moreover, because these technologies

link the user more closely to the media provider,

audience feedback with respect to content can be

more direct.

In the short run, it is unlikely that PPV will have

a direct effect on the range of media content. To date,

the greatest demand for PPV programs has been for

hit titles readily available in other media, although

a few shows aired only for PPV—wrestling matches,

fights, and concerts-have attracted small audiences. PPV companies have also experienced some

difficulty raising capital, with slow growth putting

pressure on their cash outlays and increasing their

debt service.173 Mergers have been suggested as a

solution to these financial problems, but greater

vertical integration in the media industry would be

counterproductive, serving to impede the development of a wider range of content.174

PPV might become more popular over time,

however. If this were to occur on a large scale, it

could undermine the economic basis of network

television—advertising. 175 Without advertising, the

cost of entertainment would be considerably higher

for some, giving rise to issues concerning equity of

access. Moreover, a PPV entertainment environment

would make the market the final arbitrator of the

Nation’s cultural needs. While such an outcome

would be welcomed by some, others contend that

there exists a public interest above and beyond

consumer choice.176

Digital Sampling and Editing

Machine tools enhanced people’s ability to perform physical tasks. Similarly, new information and

communication technologies will enhance their

ability to carry out intellectual pursuits. Among

other things, these technologies will allow more

l@’IYW Kanem~su-Gosho’ s’’Spmcer” 300 system employed by the New York Times’ New Jersey cable systems is an example of m imPul* 5Ystem.

See John Motavalli, “PPV at the Next Plateau: How Big a Business is It?” Cubfeviswn, July 6, 1987, pp. 36-38.

ITONSncy Brumback, 4’PPV Proves Hot Topic at New England Meeting,’” Multichannel News, Aug. q, 1981’, p. 17.

171k J~e 19g8, GTE fiIed an application for permission to build an optical fiber tewbed to test several video services, including video on demmd,

in Ckritos, CA. “GTE Files Fiber Test Bid,” Television Digest, vol. 29, No. 27, July 4, 1988, p. 6.

172sW, for example, Glen Collins, “From a Vast Wasteland to a Brave New World,” The New York Times, Mar. 20, 1988. See also Peter Ainslie,

“Confmntinga Nation ofGrazers,’’Channels, September 1988, p. 54. So far, the greatest demand for PPV programs has been for hit titles readily available

in other medi~ suggesting that PPV, at least in the short run, will not dramatically increase the range of program fare. A few shows aired only on

PPV—wrestling matches, fights, and concerts-have gathered small audiences, however.

ITgwape Fritim, “EX~ted PPV Merger Provokes Hope, Skepticism,” Cablevision, Feb. 1S, 1988.

174Mo~ recently, for example, Walt Disney Pictures and Television invested equally (14.3%) with multiple system cable operators American

Television and Communication, ContinentalCablevision, Cox Communications, Newhouse Broadcasting, Telecable, and Viacom Cable in the New

York- based pay-per-view system, Viewer’s Choice. “Disney Buys Into Viewer’s Choice,” Broudcusting, June 26, 1989, p. 53.

175 AsJay B]um]~pointsout: “~spite~e incre~edn~~rof Vtewfig options, the amount of tlmethat people spend with television is not very el~ic.

[This being the case] the audience that one programmer attracts will typically be gained at the expense of some other provider. The chase for audiences

is now almost a zero-sum game,” Jay Blumler, “The Role of Public Policy in the New Television Marketplace,” Benton Foundation Project on

Communications and Information Policy Options, paper no. 1, Washington, DC, 1989, p. 9.

ITbFor a discussion, see ibid.; and Victor E. Ferrall, Jr., “The Impact of Television Deregulation on Private and Public Interests,” ~ournal of

CommW”catwA vol. 39, No. 1, Winter 1989, pp. 8-38.
Chapter 7--Communication and the Production of Culture ● 207

/

people to participate in the creative processes and to

share the products of their work. As Ithiel de Sola

Pool noted:

The technologies used for self-expression, human

intercourse, and recording of knowledge are in

unprecedented flux. A panoply of electronic devices

puts at everyone’s hand capacities far beyond

anything that the printing press could offer. Machines that think, that bring great libraries into

anybody’s study, that allow discourse among persons a half-world apart, are expanders of human

culture. They allow people to do anything that could

be done with communications tools of the past, and

many more things too.177

One particular technological application that may

enhance access to the process of cultural production

is digital sampling. Digital sampling and editing can

be thought of as akin to genetic engineering—

manipulating and recombining sound and video

images instead of genetic material. In digital sampling, sounds are converted to digital signals that are

stored as information in computer files. These

signals can then be processed in a number of

ways—the pitch, volume, and sequences altered to

create new sounds on the basis of the original

recording. Digital video images can be similarly

processed-items can be moved or removed, faces

can be altered, and colors can be changed. With these

techniques, existing images, sounds, and performances become more than single performances-they

are also the basis for new artistic works.

Computer and video technologies are having such

an effect on film editing. With tools such as

EditDroid, developed by Lucasfilms, the arduous

task of editing thousands of feet of film is simplified

by this kind of electronic snipping and pasting.178 By

computerizing the editing process, a film artist can

rearrange footage in the same way a writer rearranges words on the word-processor: inserting and

deleting images frame by frame; taking those

sequences from one place and shifting them to

another; and scrolling through sequences again and

again. All this is done in a matter of seconds.179 As

in creating texts or developing online databases and

information services, films can also be edited,

merged, and re-formed. In the same fashion, old

films, stored tape footage, and other archival material can all serve as the basis for new derivative

products and creative works.

Electronic snipping and pasting has also altered

the world of the still-image photographer. Using

laser and computer technologies to scan original

photographs and convert them into digital data, one

can manipulate the “no-longer-photographic” image

in very sophisticated ways.180 The same technologies can also transmit photographs electronically to

printers in remote locations.

The production of music and sound is equally

amenable to electronic snipping and pasting. Using

the ability to store recording sound digitally and gain

increased digital control of that sound, the musician

can mix and match not only sounds, but also rhythms

and pitch. According to composer Michael Kowalski, these new tools allow for:

. . . unprecedented access to reproducing, copying

and editing sound—an ability to take tiny snippets of

sound, anywhere from a twenty thousandth of a

second of a sound to the whole piece of music, and

manipulate it to your heart’s content.181

However, these technological advances also have

the potential to damage creators’ interests. The same

images and sounds that the artist, photographer, or

musician has stored to use, manipulate, revise, and

reproduce can also be manipulated, revised, copied,

and used in a multitude of ways by others, with or

without their permission.182 Some creators worry

that a:

. . . cavalier attitude will develop toward taking

whatever you want and doing whatever you want

with it.183

1771~el de Sola Poo1, Technologies of Freedom (Cambridge, MA: The Belknap Press of Harvard University Press, 1983), P. 226.

178ExW~ pint out~fdm edit~g is a major component in he making of a film. It CafI take ~ long = the shooting it~lf. A tYPic~ fifish~ feature

film consists of 10,000 feet of film on 6 reels, the result of as many as 2,000 splices from the original footage. Stuart Games, “Lights,

Cameras . . . Computers,” Discover, Augwst 1984, pp. 76-79.

ITgIbid.

l~stew~d Brad, Kevin Kelly, and Jay Kinney. “DigitaJ Retouching,” Whole Earth Review, No. 47, jdY 1985, PP. 42-47.

IEIMc~I KowW,OTA Workshop on Technologies for Information creation, ~. 6, 1984.

182u.s. ConWss, ~lw of T~~olo~ Assessment, I~eile~~l PrOPe~ Rig&s in an Age of Electro~’cs ati I@ormation, OTA-CtT-302

(Springfield, VA: Nationat Technical Information Service, April 1986).

lgsL~t~ JOH md ~mie Sdlivan, graphic artists in New York City, personal communication, M~h 1985.
208 ● Critical Connections: Communication for the Future

This attitude has already surfaced within the artistic such techniques, artists, photographers, and musicommunity itself, as well as in advertising and cians may find it increasingly difficult to track or

publishing. 184 Although many of these innovative trace the uses of their work. Hence, by virtue of their

tools for cutting and pasting are still relatively ability to increase access, these technologies may

expensive and unavailable, they may be more pose problems for the intellectual property system

accessible in the future. With wider deployment of and for the integrity of the creator’s work.

l~CMOI Rishm and Jon Baumgarten, “The American Experience: Two Views of Electrocopying,” Publishers Weekfy, July 14, 1989, pp. 52-53.
Chapter 8

Communication and the Individual
CONTENTS

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ~ . . . . . . . . . . . . . . . . . . . . . 211

THE COMMUNICATION NEEDS OF INDIVIDUALS . . . . . . . . . . . . . . . . . . . . . . . . . . 211

Approach l: Measuring Today’s Behavioral a Blueprint for the Future . . . . . . . . . . . . 212

Approach 2: Asking People What They Want and Why . . . . . . . . . . . . . . . . . . . . . . . . 213

Approach 3: Considering Social and Demographic Trends in Forecasting

Future Needs.... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-.”.”- 213

Approach 4: Trying To Identify Why People Use Existing Communication Systems. 215

OPPORTUNITIES PROVIDED BY THE NEW COMMUNICATION

TECHNOLOGIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............”..+ 216

Education and Self-Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216

Counseling and Psychological Support . . . . . . . . . . . . . . . . . . .. .. .. ... ... ...+... 218

Recreation and Leisure, Entertainment and Self-Expression. . . . . . . . . . . . . . . . . . . . . . . 219

Social Interaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....”. 221

Economic Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., .. .. .. <. ... ... ...”900 223

Personal Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . 225

Controlling and Manipulating Technology-Mediated Interactions . . . . . . . . . . . . . . . . . . 227

Potential for Overcoming Barriers to Physical Mobility. . . . . . . . . . . . . . . . . . . . . . . . . 228

KEY FACTORS SHAPING IMPLICATIONS FOR THE INDIVIDUAL . . . . . . . . . . . . 229

Technological Literacy Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229

Socioeconomic Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232

System Design and Support Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235

B o x

Box Page

8-A. Data on Technology Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214
Chapter 8

Communication and the Individual

INTRODUCTION

Virtually every aspect of an individual’s existence

involves communication. Whether trying to make a

decision, keep in touch, hunt for a job, or relax at

home, individuals are highly dependent on the web

of communication systems and the mechanisms that

surround them. Individuals’ lives are shaped in part

by the communication tools available to them, and

by the information networks in which they participate.

Traditionally, technological innovations have

been a mixed blessing for the individual. New

technologies have improved the lives of some; posed

problems for others; and changed the nature of daily

life for almost everyone. The advent of television,

for example, may have brought greater awareness

and companionship to many people, but it also

brought the questionable impacts of advertising,

graphic violence, and TV-delivered morality.

Communication systems used by individuals have

evolved in response to and in tandem with social and

demographic change. Today’s trends foreshadow

future communication needs and suggest directions

for the adoption of technology. For example, the

U.S. population is aging and becoming more ethnically and linguistically heterogeneous. Thus, communication systems may be called on more and more

to compensate for lack of mobility, or to translate or

customize certain information.

New communication capabilities may offer dazzling opportunities to amplify the powers of human

talent, substitute convenience for drudgery, foster

social interaction, make education more universally

and continuously available, provide new flexibility

in working and living arrangements, and so on. At

the same time, however, they may threaten to erode

personal privacy, sharpen social inequalities, and

create frustration and isolation. Moreover, the technologies that create opportunities for some may

create problems for others.

As new capabilities emerge, conflicts will arise

among stakeholders over priorities in implementing

the technology. New control and screening capabilities in the telephone system, for example, may pit

guardians of personal privacy against directmarketers. New tools for creative expression may

cause friction between individuals who want access

to raw informational material and those who hold the

intellectual property rights to that material.

This chapter will examine the opportunities and

problems that the new technologies pose from the

point of view of the individual. It will:

. describe different ways of looking at individual

communication needs;

. examine a number of opportunities and limitations posed for individuals by new technologies; and

. examine some of the factors, such as literacy

and ability to pay, that may determine whether

and how individuals will be able to use the new

systems.

THE COMMUNICATION

NEEDS OF INDIVIDUALS

Gauging the communication needs and desires of

individuals has always been difficult. The history of

modern communication media is strewn with embarrassing predictions and assumptions, such as Harry

M. Warner’s 1927 statement: “Who the hell wants to

hear actors talk?”

Nonetheless, analysts with a variety of perspectives-public policy, marketing, academic, and

consumer advocacy--continue to try to identify and

define “communication needs.” There are several

approaches to this task, each with its own strengths

and weaknesses.1 This section discusses four distinct approaches:

1.

2.

3.

4.

measuring today’s behavior as a blueprint for

the future;

asking people what they want and why;

considering demographic and social trends in

forecasting future needs; and

trying to identify the fundamental, underlying

reasons why people communicate.

IFor a discussion of batdes between behaviorists and cognitive psychologists over how 10 measure n=ds, see “what m pmple Want, ~YwaY?”

The New York Times, Nov. 8, 1987, p. 11.

–21 1-
212 ● Critical Connections: Communication for the Future

Approach 1:

Measuring Today’s Behavior as a Blueprint

for the Future

Looking at how people presently communicate is

perhaps the most obvious way to determine how

they might want or need to communicate in the

future. It is also, on the surface, the most straightforward and objective approach. Furthermore, technology is quickly improving our ability to measure

some types of communication behavior. Libraries

with new online circulation systems, for example,

can better find out which books are circulating, and

among which user populations.2

However, controversy over television’s rating

systems indicate that this approach is not without its

problems. 3 Measuring behavior and determining

what the measurements really mean are both difficult. While it is often possible to figure out who is

using a communication system, it is not always easy

to tell what people are using it for. In other words,

you can find out how many people are buying the

newspaper, but not necessarily what sections they

are reading.4 Or you can tell definitively how many

people are using the telephone, at what time of day,

but not what they are talking about. Nor are data on

current behavior always available in a comprehensive form, both because of their value as a proprietary strategic weapon in the marketplace and because this kind of information is not always collected systematically. When data are available, they

are often contradictory. For example, a recent Harris

poll showed a drop in concert and performing-arts’

attendance, but the figures were vigorously disputed

by concert and performing-arts’ associations.5

Another problem with the “present behavior”

approach is that people’s communication behavior is

sometimes more indicative of their options than of

their preferences. In the case of television programming, one scholar claims: “Scheduling factors

. . . appear to confound any observed relationship

between preferences and viewership.”6 Widespread

participation may not mean people are completely

satisfied with a system or service. Conversely, low

use of a system or service may reflect its shortcomings rather than a lack of need for it. If only a small

percentage of the population uses libraries, is there

little need for libraries or is there a great need for

better libraries?7

The pitfalls of forecasting needs by projecting

from present behavior are perhaps clearest in hindsight. As Russell Neuman points out:

If we had tried to estimate the market demand for

photocopiers 25 years ago based on the total market

for carbon paper, we would have been off by several

orders of magnitude.8

Small differences in quality, e.g., in ease of use, can

translate into large differences in degree of use.9

Finally, the behavior-measurement method falls

short in light of the widely accepted assumption that

people will increasingly do things via communica2A~ El~ne Albright, a libr~an at the University Of Maine, exPl~ns.

- “It [forces] us to have a dialogue that we never had before, to see why certain

things really aren’t being used.” Personal communication, Oct. 1, 1987.

s“Neilsen Ratings May Be Axed by Networks,” The Wusk”ngton Post, Jan. 18, 1987, p. H1.

~stine D, Urban, “The Competitive Advantage of New Publishing Formats,” Electrom”c Publishing Plus (White Plains, NY: The WaWington

Program of the Annenberg School of Communications and Knowledge Industry Publications, 1985).

“’Poll Finds Arts Attendance Has Declined,” The New York Times, Mar. 16, 1988, p C19.

Yarrie Heeter, “Cable and Program Choice,” Dolf Zillrnann and Jemings Bryant (eds.), Selective Exposure to Communication (Hillsdale, NJ:

Lawrence Erlbaum Associates, 1985), p. 204.

TFor low us of librfie~ by tie gener~ public, ~ Ching.chih Chen and peter Hernon, lnfo~tion Seeking: Assessing and Anticipating User Needs

(New York, NY: Neal-Schuman Publishing Co., 1982); and Brenda Dervin, “Communication Gaps and Inequities: Moving Toward a

Reconceptualization,” Brenda Dervin and Mel Voigt, Progress in Communication Sciences (Norwood, NJ: Ablex Publishers, Inc., 1980, vol. 2), pp.

73-112. Another potential telecommunication benefit that raises this question is that of “online” provision of health information. The Consumer

Federation of America, in comments to Federal Judge Harold Greene, noted that elderly and low-income individuals are much less likely than the rest

of the population to consult with health care service providers over the phone, and the elderly are less likely to use health information lines. (Response

of the Consumer Federation of America, United Church of Christ Office of Communication, and the United States Public Interest Research Group to

Comments on the Report and Recommendations of the United States Concerning the Line of Business Restrictions Imposed on the Bell @rating

Companies by the Modification of Final Judgment, Mar. 13, 1987, p. 12). But does thal mean that they would not use an ‘online’ health information

‘ rcsottrce?

8w, Ruswll Nemm, TIW Media H~it (white Plains, NY: Electronic Publishing Plus, The Was@gtOn pfogr~ of tie Annenkrg SChOO1 o

f

Communications and Knowledge Industry publications, 1985), p. 9. This is true even when the projection is near-term. Neurnan points out, for example,

that media executives often fail miserably at predicting demand for programming for today’s technology-the majority of movies and TV shows simply

flop. Ibid., p. 6.

9SW, for exmple, G~ Stix, ‘(~at Zapwd me El~tronic Newspaper?” Co[wn6ia .Iournulism Review, vol. XXVI, No. 1, May/J~e 1987.
Chapter 8-Communication and the Individual ● 213

tion systems that they currently do in person, or that

they currently don’t do at all. If new capabilities

encourage applications that have previously been

impractical, it is difficult to imagine what those new

applications might be simply by focusing on traditional applications.

For a summary of individuals’ use of communication systems, including traditional, well-entrenched,

and emerging systems, see box 8-A.

Approach 2:

Asking People What They Want and Why

Another approach to needs’ analysis is to ask

people, through surveys, polls, and focus groups,

what communication capabilities they want, or what

they think of a hypothetical communication capability. This approach assumes that people can evaluate

a communication capability before actually using it

in a concrete, daily setting. With rapidly changing

communication and information technologies, this

may not always be possible.10 For one thing, the

immature prototype systems on which people often

base their opinions are not always very representative of how the technology will evolve. And it can be

very difficult to ask enough questions and present

enough scenarios to illustrate the range of possibilities. Yet, accurate judgments about pricing, ease of

use, convenience, and a host of other characteristics

can be crucial in predicting usage.l1

Notwithstanding these difficulties, it is tempting

to try to infer from the data that are available. In the

Harris poll on the arts, for example, 32 percent of

those surveyed said there were not enough arts

events and institutions in their areas.12 Can it be

inferred that they need more access to arts events via

communication systems? Or would only in-person

access alleviate this perceived deficiency?

In our marketplace-oriented society, needs are

often defined by people’s willingness to pay. However, it may be a mistake to equate “wants” with

“needs.” People may not know, particularly in

advance, “what’s good for them.” This argument is

often made, for example, with respect to television.13

Approach 3:

Considering Social and Demographic

in Forecasting Future Needs

Trends

A third approach to assessing needs is to identify

social and demographic trends that influence how

people communicate or how they might communicate in the future. It is universally agreed, for

example, that the U.S. population is getting older. It

is also widely believed that elderly persons frequently suffer from decreased mobility, loneliness,

and the frustration of not being able to contribute to

society as productively after retirement. Finally,

some say that economic realities will force our

society to find ways to keep the elderly participating

in the work force longer. Taken together, these

trends have led many to predict the need for

communication systems that support increased involvement for the elderly.

There are many other social and demographic

trends that one could identify, for the purpose of

inferring communication needs. Some examples are:

●

●

●

●

There are more women working outside the

home. By 1986, nearly 52 million women were

working, about 200 percent more than at the

end of World War 2.14 One inference that might

be drawn from this trend, for example, is that

there may be a greater demand for time-saving

technologies, such as shop-at-home.

There are more single-parent families. This

trend might suggest the need for telework

opportunities, as might the following trend.

Traffic congestion and commuting times are

increasing in many large metropolitan areas.15

The number of non-English-speaking residents

is rising, especially persons of Hispanic and

10~ ~ ~ecent Nation~ Re@atory Resemch Institute s~dy of 1,Ooo business and 2,()()() residential telephone subscribers in Ohio, Iess than 40 percent

could name any new telephone service they would need in the next 5 years. BOC Week, Nov. 16, 1987.

none 1985 smey, for exmple, found that ~thou~ 44 percent of person~. computer users thought they would use their machines for “education,”

only 12 percent actually did; of the 19 percent who thought they would use them for “home budgeting/management,” only 7 percent actu~ly did. Evan

Roth, “Power Surge in Personal Computers,” Editorial Research Reports, vol. 1, No. 1, Jan. 9, 1987, p. 6.

12 $~poil Finds ~s Attend~ce Has Declined,” Op. Cit., fOOtnOte 5.

lqse, for ex~p]e, Robert MacNeil, “Is Television Shortening Our Attention Span‘)” National Forum, vol. LXVIII, No. 4, fall 1987, p. 21.

lqDavid E. Bloom, “Women and Work,” American Demographks, vol. 8, No. 9, September 1986, pp. 24-30.

15Ro&II ~~phy, “urban Traffic Congestion: A National Crisis?” Urban Lund, vol 44 No. 10, 1985, PP. 2-7.
214 ● Critical Connections: Communication for the Future

Box 8-A—Data on Technology Use

The average person watched about 30 hours of TV per week in 1986. Women and elderly persons watched

more, and there was little variation by household income.l The 1986 top 10 network programs were primarily

entertainment-oriented shows: The Bill Cosby Show; Family Ties; Cheers; Murder, She Wrote; Golden Girls; Night

Court; 60 Minutes; Growing Pains; and Moonlighting. The top 10 syndicated programs were: Wheel of Fortune,

Jeopardy, PM Magazine, the New Newlywed Game, MASH, People’s Court, Three’s Company, the Oprah Winfrey

Show, Southwest Conference Football, and the Phil Donohue Show.

A 1983 study found that the average American spent about 11 hours per week on all forms of reading material.

About one-half mid books and spent an average of about 9 hours per week on them. Of these people, 40 percent

read for “pleasure or recreation,” and 27 percent for “general knowledge.”2

Of the magazines we read, 21 percent are sports magazines (by number of titles, not circulation). Fourteen

percent are general editorial, 6 percent travel, 5 percent crafts/hobbies, 4 percent each for music, literary,

home/garden, art/antiques/amusements, 3 percent women’s, 31 percent all others.3

Our household-originated mail consists primarily of bill payments (36 percent), greeting cards (21 percent),

responses to ads (15 percent), letters to friends or relatives (11 percent), and invitations or announcements (4

percent). 4

Most telephone calls are made for social reasons to the same handful of friends and family. One recent study

found that the average household’s five most frequently called numbers accounted for over two-thirds of all their

calls, However, it is difficult to establish very precisely how people use the telephones

The number of videocassettes households rent or buy rose from a median of 5.8 in 1984 to 22.6 in 1987 (during

the same period, VCR penetration increased from 17 to 55 percent).6

Fifty-eight percent of Americans visit a library at least once a year, women more than men, and people with

household incomes between $20,000 and $50,000 more than others.7

What are people using their computers for? A survey of members of the largest U.S. computer users group

showed that 66 percent use their [home, not office] computers for word processing, 42.8 percent for entertainment,

33 percent for spreadsheet work, about 30 percent each for communications, programming, and database

management, 28 percent for education, and 23 percent for budgeting.8

What are online computer conferencing networks being used for? One content analysis of an experimental

system in California showed that 15 percent of all messages were “interpersonal” (mostly advice giving and

seeking), 14 percent were “graffiti” (idle or obscene comments), 13 percent were “insults or alliance building,” 10

percent were buy/sell advertisements, 5 percent social comment (mostly political), 4 percent “public service,” 4

percent about the system itself, 3 percent about housing, 3 percent about music, 2 percent jokes, 2 percent event

announcements, and the rest miscellaneous.9 Other online systems cover a wide variety of subjects. The Whole

Earth Electronic Link, for example, harbors conversations on movies, local and national politics, science fiction,

the stock market, gardening, spirituality, business, and even the WELL itself.10

l“Te]evision: 1987 Nielsen Report,” The A.C. Nielsen CO.

2Jo~ph F. Bri~ey, Jr., “me 19g3 Consumer Resewch Study on Reading and Book Purchasing,” John Y. Cole (~.), BOO~ In Our FuC~e:

Perspectives and Proposals (Washington, DC: Library of Congress, 1987).

SIMS dirw~w of publications, 1986.

4’*u.s. Posti Service Household Diary Study,” November 1987, USPS Office of R~es.

5**~w.~cme HoWhoIds in the post-~vesti~ Era: A Study of Telephone SubscriberShip and Use in Michigan,” study p~p~d by

the Michigan Citizens Imbby for the Michigan Divestiture Research Fund, October 1986. See also B.D. Singer, Social Function.s of the Telephone

(Palo Alto, CA: R&E Associates, 1981); Martin Mayer, “The Telephone and the Uses of Time,” Ithiel de Sola Pool (cd.), Social hnpacr of the

Telephone (Cambridge, MA: The MIT Press, 1977).

@poU Finds AN Attendance Has Declined,” The New York Times, Mar. 16, 1988, p. C19.

7Americm Libr~ Association, “Libraries in an Information Society: A Statistical Summary,” June 1987.

8Bos~n Computer society.

9SWan ~ug]as, ~~~e segmen~d Society: cm New Technologies Narrow the Gap,” San Francisco State University) 1987.

I@or mom ~omation ~ Mjck Wfinter, The Compfete Guide to the WELL (Yountville, CA: Self-publishd, 1986).
Chapter 8-Communication and the Individual . 215

Asian origins. This trend suggests the need,

perhaps, for translating devices.l6

Other trends are more derivative, and thus less

reliable in assessing needs. They might include, for

example:

●

●

●

The complexity of life may be increasing, if

gauged by the number and nature of the

decisions that individuals face and the types of

information they must assimilate to make

decisions on matters such as health, for example. Such a trend might suggest a greater need

for information access.

A developing emphasis on self-improvement,

which might foretell an increased demand for

training and educational applications of communication and information technologies.

A decline in overall free or leisure time, which

would suggest the need for time-saving technological applications.17

Approach 4:

Trying To Identify Why People Use Existing

Communication Systems

Using more systematic and theoretical approaches, many researchers have sought to interpret

the role of communication systems in people’s lives.

A sampling of these approaches follows.

Pioneered by Harold Lasswell in the 1940s, mass

media theory identified four major functions of the

media:

1.

2.

3.

alerting individuals to shifts in their social,

cultural, or political surroundings (“surveillance”);

providing facts and analysis useful in decisionmaking or opinion formulation (“correlation”);

facilitating escape (“entertainment”); and

4. providing a focus for social interaction and a

means of obtaining information that can be

used socially or to enhance status (“socialization”).

Uses and gratifications theory, which emerged in

the 1970s, claimed that media use is motivated both

by “gratifications” (defined as “transitory mental or

emotional responses that provide momentary satisfaction”), and by “uses” (“the anticipation of attaining pragmatic goals such as learning new behaviors,

solving problems, making decisions, coping with

environmental forces, reducing uncertainty, and

strengthening predispositions’ ’).18 This theory also

acknowledges that media use is often “deficitmotivated’ ’—that is, that people use media to relax,

to relieve tension or fatigue, to kill time, to avoid

boredom and loneliness, and to evade social conflict

or psychological problems .19

The theory of parasocial interaction, introduced

by Horton and Wohl in 1956, claims that massmedia users, particularly television-viewers, find

friendship and intimacy in mass communication

systems by developing “relationships” with persons

in the media.20

Interpersonal communication theory holds that

communication is crucial to the establishment,

maintenance, and termination of human relationships, and to establishing and sustaining individuals’

self-concepts.

21 Also cited as important functions

are: informing and being informed, forming attitudes and beliefs, making decisions, attaining pleasure, assessing values, maintaining values, generating social change, and expressing ideas and innermost feelings.22

Each of the four approaches to identifying communication needs has its own strengths and weaknesses. These approaches, however, are not mutually exclusive, and each can contribute to the

lb~e number of Hispanics in tie United States has grown by 30 percent since 1980, four times faster than the population ~ a whole. Joe Schwmz,

“Hispanics in the Eighties,” American Demographks, vol. 10, No. 1, January 1988, pp. 42-45.

17 “Poll Finds Arts Attendance Has Declined,” op. cit., footnote 5. See alSO John P, Robinson, ‘“Trends in Americans’ Use of Time: Some Preliminary

1975-1985 Comparisons,” Survey Research Center, University of Maryland, College Park, MD, December 1986.

lgch~les K. Atkin, “~formation~ Utility and Selective Exposure to Entertainment Media,” Zillmam and Bryant, op. cit., footnote 6.

19For more on ~5 approach, see E. Katz, J. Blurnler, and M. Gurevitch, ‘cUses and Gratifications Research,” Public Opim”on Quarterly, vol. ST,

1973-74, pp. 509-523.

zOA1an M, Rubin et ~, “~neliness, pNasoci~ Interaction, and ~c~ Television News Viewing,” H-n comm~ication Research, winter 1985.

21sm, for exmple, Donald p. cushrnan and DUdley Il. c~n, Jr., Communication Ln Interpersonal Relationships (Alb~y, NY: State University of

New York Press, 1985).

22Rebecca Rubin et al., “Interpersonal Uses of Communications,” paper prepared for the annual meeting of the International Communications

Association (ICA), Montreal, Canada, May 1987. See also C.C. Arnold and K.D. Fransen, “Conceptions of Rhetoric and Communication,” C.C. Arnold

and J.W. Bowers (eds.), Handbook of Rhetorical and Communication Theory (Boston, MA Allyn and Bacon, 1984).
216 ● Critical Connections: Communication for the Future

analysis in this chapter. To incorporate them all,

however, it is necessary to stand back and focus not

so much on communication needs per se, but on

what people’s needs are as individuals, and to ask

how communication and the new communication

technologies might best fill those needs.

OPPORTUNITIES PROVIDED BY

THE NEW COMMUNICATION

TECHNOLOGIES

An approach that focuses on the needs of individuals assumes that human beings have a fundamental

nature, a nature that can be observed and defined.

This assumption is not new; it has formed the basis

of both Eastern and Western religious thought, as

well as political and social ideologies ranging from

humanist philosophy to existentialist psychology .23

There is some historical consensus, moreover, not

only about the existence of human nature, but also on

the subject of the human being’s most basic needs.

From Aristotle to Spinoza, Goethe, and Ibsen, poets

and philosophers through the centuries have conceived of individuals as being compelled to search

for the meaning of life through their individual

endeavors to fulfill their potentials. This same

perspective is repeated in art and literature.24

Psychologist Abraham Maslow also addressed

the subject of human needs, which he viewed as

being ordered in a particular hierarchy.25 The basic

survival needs, such as food and shelter, come first,

followed in order of importance by needs for safety;

belonging and relatedness; ego, relating to one’s

position within a group; and self-actualization,

autonomy, and creativity. Individuals seek fulfillment of their higher-level needs only after they have

satisfied their lower, more basic needs. The full

development of the individual, however, requires

attention to those at the top of the hierarchy.

Communication and communication technologies are basic to all that an individual does. The

following discussion of opportunities and constraints examines the uses of technology in a whole

range of activities that, together, might contribute to

the individual’s meeting all of the basic needs as

defined by Maslow. The activities examined include:

●

●

●

●

●

●

●

●

education and self-improvement;

counseling and psychological support;

recreation and leisure, entertainment and selfexpression;

social interaction;

economic participation;

personal business;

controlling and manipulating technologymediated interactions; and

overcoming barriers to physical mobility.

Education and Self-Improvement

In a 1984 Gallup poll, 41 percent of the general

public who responded ranked “encouraging lifelong

learning” as the most important goal of the education

system.26 This response is not surprising, given that

continuing education is prevalent in the United

States today and is becoming more popular all the

time. Overall, approximately 23 million people over

the age of 17, or 13.5 percent of all adults,

participated in some kind of part-time education in

1983. nearly double the number reported in 1957.27

New communication technologies could enable

more individuals to take advantage of opportunities

for convenient and effective education and selfimprovement, both formal and informal. In the past,

avenues for informal self-improvement—from

23)2.i~h Fromm, Beyo~ t~ c~lm of ]llW1on: My Encounter with Man and Fred (New York, NY: Simon and Schuster, hIC., 1%2). writing On

behalf of this notion, Erich Fromrn notes, for example: “The question is by no means of a purely academic nature. If men differed in their basic psychic

and mental structure, how could we speak of humanity in more than a psychological and anatomical sense? How cotdd we understand the ‘stranger’ if

he were fundamentally different from us? How could we understand the art of entirely different cultures, their myths, their drama, their sculpture, were

it not for the fact that we all share the same human nature?”

zd~mactenz~g human grOWIJI, the 20th century humanist psychologist, Karen Homey, writes: “The human individual, given a chance, tends to

develop his particular human potentialities. He will develop then the unique alive force of his real self; the chwity and depth of his own feelings, thoughts,

wishes, interests; the ability to tap his own resources; the strength of his will power; the special capacities or gifts he may have; the faculty to express

himself; and to relate himself to others with his spontaneous feelings. All this will in time enable him to find his set of values and his aims in life. In

short, he will grow, substantially undiverted towards self realization.” Karen Homey, Neurosis and Human Growth: The Struggle Tmards Se(f

Realization (New York, NY: W.W. Norton, 1950), p. 17.

XA~aham MasIow, ‘6A l%eory of Motivation,” Psychological Bulletin, vol. 50, July 1943, pp. 370-396.

~phi De/@ Kqpa, The Gallup PoII of Teachers’ Attitudes Toward the Public Schools, part z, January 1985.

ZIU.S. CongZCss, ~fice of Twh.noIogy As~ssment, Technology and the American Economic Transition: choices for the Future, OTA-TET-283

(Washington, DC: U.S. Government Printing Office, May 1988), p. 128.
Chapter 8--Communication and the Individual ● 217

“how-to” books to private lessons-have had very

little to do with formal instruction through educational institutions. New technologies could potentially break down this barrier by making more of the

institutional curricula available in a more appealing

and attractive format for the home.28 Recently, for

example, “how-to” videotapes are proliferating on

subjects ranging from golf and cooking to “How To

Build a Gazebo” and “Teaching Your Parrot To

Talk.” 29 Books-on-tape, convenient for filling

niches of time (for example, while driving to work),

are also very popular. The sale of nonmusical audio

cassettes generated $175 million in revenues in

1985.30

Meanwhile, schools and corporate training centers are experimenting with new audiovisual tools

and formats-including live two-way audio and

video remote-teaching systems—that, in many

ways, resemble traditional home-entertainment

media. The University of Maine, for example, is

using fiber optics, satellites, and cable TV systems

to provide interactive multimedia courses to underpopulated areas of the State, in some cases piping

courses directly into individual homes. The Annenberg/Commission for Public Broadcasting project

has funded several experiments on a new system that

allows students at a remote classroom site to receive

freeze-frame video or graphic images, superimposed

with notations from an instructor’s pen, over normal

telephone lines.31 And several universities—

including New York’s New School for Social

Research, Purdue University, the New York Institute

of Technology, and Nova University-offer online

access to text-only courses for credit toward degrees

or other credentials .32

Other efforts leave out the telecommunication

component; one law school is using optical diskbased interactive video programs to simulate courtroom situations.33 Students, acting as lawyers, can

participate (raising objections, for example) by

typing instructions on a keyboard. The video then

jumps to a point where the judge or opposing

counsel responds to the particular objection. Such

systems are also being used to let students perform

simulated chemistry experiments, practice cardiopulmonary resuscitation, or learn how to weld metal

seams.

Such experiments are precursors of the type of

system that might provide home access to America’s

educational infrastructure.34 Much attention has

already been focused on the potential of educational

video. Video is being used to train and teach in a

variety of settings. The Public Broadcasting Service’s National Narrowcast Service, for example,

broadcasts educational programming via satellite

and microwave systems to audiences at work sites

and college campuses across the country .35 Other

groups are importing foreign programming via

satellite for language and culture courses.

But critics note that unfulfilled promises of

educational benefits have accompanied every wave

of new technology, from the radio to the videodisk

of the 1970s. And indeed, today’s systems face many

obstacles. One commentator notes, for example, that

although:

. the telecommunication technologies appear to

have the potential to provide access to a wealth of

intellectual resources . . . they are being developed

in isolation from each other . . . We must find

efficient ways to pass along to others both the

learning materials that are being pioneered around

the country and the teaching ideas that give them

Power .

3 6

zgThis cfic~~ has often ken available through mail-order or extension courses, but in a less convenient or attractive form.

29caroI R. Riggs, “How-To Videos Are Growing Fast,” D&B Reports, September/October 1986.

SoJohn c~y, “Tel~omm~ications Technologies ~d ~blic Broadcmting 1986,” repofl prepmed for the Corporation for ~blic Broadcasting, June

1986, p. 65.

31“Lewning Math in the Space Age,” The Boston Globe, Mar. 1, 1987, p. 45. For a report on the use of new communication technologies for distance

learning, see U.S. Congress, Office of Technology Assessment, Linking for Learning A New Course for Education, OTA-SET-430 (Washington, DC:

U.S. Government Printing Office, November 1989).

320&n such COUW5 ~ offe~d fiough intemediv instltutlom, such ~ the Electronic university Network, a division of San Francisco-based

TeleLearning, Inc., “lbrming Computers Into College Classrooms,” Business Week, Oct 14, 1985. See also Patricia Kirby, “Going to College Via the

Computer,” Capital Computer Digest, June 1988.

33 “Smden@ Hone Skills in Video Courtroom, ’’’The New York Times. Mx. 24, 1987.

34Some m~fi~ level of access is ~ready av~lable. There me 30 thriving di~-a-gr~m~ ~rvices nationwide, for example, mostty run by university

writing centers.

3SM~a Mayor and peter J. DiIT, “Telelearning in Higher Education,” National Forurn, vol. LSVI, No. 3, summer 1986, pp. 7-10.

36~id.
218 ● Critical Connections: Communication for the Future

Others have expressed concern that telecommunication-mediated educational services might be used to

justify the reduction of support for conventional

education. They note that if this were to happen and

educational materials were distributed via the marketplace, it could lead to great inequities in educational opportunities and attainment.37

Counseling and Psychological Support

Closely related to the need for education and

self-improvement is the need for counseling and

psychological support in coping with life’s problems. In today’s environment of high divorce and

crime rates, widespread substance abuse, and financial insecurity there is a need for both formal and

informal support mechanisms.38 One indicator of

this need is the fact that, although participation in

both traditional therapy and less-structured self-help

groups is on the rise,

39 experts estimate that most

mental health problems are going untreated, mainly

because most people with such problems still do not

seek professional help.40

Today, with the exception of telephone hotlines

and book-based systems (“How to Lose Weight,” for

example), counseling is a face-to-face activity.

However, new communication technologies could

potentially make psychological support and counseling of many kinds more accessible to individuals,

and help overcome the obstacles that typically

prevent them from seeking help. In the nascent

world of computer-conferencing, dozens of organized fora for sharing advice on general and specific

problems have emerged, and experiments with more

personalized services, incorporating traditional elements of therapy, are under way.

The online “support groups” were originally

pioneered by handicapped and disabled people.

Online groups are similar to face-to-face support

groups, except that the discussions can be accessed

from anywhere in the country, bringing together

people with obscure problems who would otherwise

never meet. And because they are ongoing, participate-at-your-own-convenience affairs, help is almost constantly available. As one person familiar

with such groups noted:

A guy gets on [a computer conferencing system]

and talks about his mother being sick and suddenly

there are twelve other people there typing in their

thoughts. It can be very supportive.41

There has been considerable discussion about

using interactive electronic media to supplement or

substitute for some types of traditional face-to-face

therapies. 42 Such an approach, Some claim, might

cut down on the distractions of interpersonal proximity that have traditionally plagued therapy .43

Computer bulletin boards aimed at behavior

modification have also been used experimentally,

and in conjunction with traditional therapy, to help

individuals set goals for themselves and monitor

their progress toward achieving them. “The Health

Connection,” an online system headquartered in

Houston, TX, enables participants to record

information about their exercise, diet, and medication. The system then generates graphs showing

indicators such as the number of calories consumed

and expended. Participants can also send questions

to experts online, and search a database of health

information. Computers are also being widely used

by professionals to administer and evaluate standardized diagnostic tests, such as the Minnesota

Multiphasic Personality Inventory.

37”m ‘~ fo~ation Age’ for Everyone? Telecormn~ications and Information Services in California’s Future,” introductory pawr for an

inforrnationat hearing before the Assembly Committee on Utilities and Commerce, California Legislature, Sacramento, CA, Feb. 1, 1988.

38A rwent s~dy by tie Nation~ ~Stltute of Mental He~~ fo~d that between 29 ~d 38 percent of ad~ts have ex@enced a psychiatric “disorder,”

According to a 1983 Harris Poll, three out of five adults say they feel under great stress at least once a week. Problems with marriage or intimate

relationships are the most frequent reason people seek help, followed by depression, relationships with co-workers, parents, or children; lack of

self-esteem or feelings of insecurity; substance abuse; personality or character disorders, and sexual problems. See Martha F. Riche, “Behind the Boom

in Mental Health Care,” American Demogr@h”cs, vol. 9, No. 11, pp. 34-37, 60-61, N(wember 1987.

39From ] 6 t. 25 ~rcent of ~1 Vlslts to doctors’ offices in tie early 1980s were for psychologlc~ problems. hestimated ]2 IIlilhOI’1 &leriCiNtS

participate in roughly 500,000 self-help goups. Dan Hurley, “Getting Help From Helping,” Psychology Today, January 1988.

~iche, op. cit., footnote 38.

qlvic Sussman, “personal Tech: Let Your Fingers Do the Talking,” The Wask”ngton Post Magazine, Oct. 19, 19%

‘$2For an overview, sw RUSS V. Reynolds, “Computer-Automated Service Delivery. A primer,” The Behavior Therapist, vol. 10, No. 5, 1987. The

mwtia under discussion are primarily computer-based, although at least one psychiatrist is already offering therapy via cellular telephone to Los Angeles’

motorists enraged at traffic tie-ups. “Car Phones Transforming U.S. Highways Into Moving Telephone Booths,” The New York Times, Aug. 21, 1987.

q3For exmple, some patients become physic~ly at~acted t. tie ~erapist; others attribute successes to he pre~nce of the therapist, and then feel

unable to achieve them without him/her.
Chapter 8-Communication and the Individual ● 219

Praising the benefits of online counseling, one

researcher notes that changing behavior patterns is

more easily accomplished if programs can be

tailored to and scheduled into an individual’s life.

And computer programs are being designed to do

just that.44 Online systems also encourage participants to be more open in discussing their problems,

and may allow the therapist to more easily obtain

“confirming reports” and assistance from family and

friends.

Other experts are less optimistic about the new

technology. A number of them warn that technology

may dehumanize the helping process. Others are

concerned about the problems of quality control. At

present, there are no official bodies that set standards

or systematically evaluate the quality of therapeutic

or self-help software.45 In addition, issues involving

medical confidentiality, malpractice, and liability

for actions taken on the advice of online medical

programs are still unresolved.

Recreation and Leisure, Entertainment and

Self-Expression

From movies to novels to rock-and-roll, “entertainment” has traditionally been one of- the main

driving forces in the development of American

communication systems.

46 And so it continues

today, judging from the time and money spent on

it. 47

Several trends relate to the future of leisure and

communication media. First, as already noted,

Americans have less and less leisure time,48 putting

a premium on home entertainment to eliminate

travel. 49 Second, more entertainment options are

becoming available via new technologies in the

home, notably cable TV and videocassette recorders.

50 To the degree that most Americans enjoy

spectator sports, theater, concerts, and other forms of

art and entertainment, they are increasingly able to

do so by means of the mass media.51

Mass-media entertainment, however, has traditionally been and continues to be primarily a passive

activity. in contrast to participatory, communication-related, recreational activities, which have also

been on the rise in recent years.52 One of the

promises of new communication systems is that they

may offer a new meeting ground for traditionally

separate active and passive activities-a way to

combine entertainment and self-expression, and

foster more active participation and creativity.

Self-expression and participation have always

played a role in some mass media formats, from

letters to the editor, to radio and TV talk shows, to

game shows and shows like “People’s Court,” where

the audience is encouraged to take sides and form an

opinion. 53 And there is little doubt that people are

interested in expressing themselves, judging from

the deluge of artifacts like T-shirts, bumper stickers,

44Ro&fi p. Hawkins et id., “Reaching Hard-To-Reach Populations: Interactive Computer Programs as Public Information Campaigns for

Adolescents, ’’Journuf of Comrnum”catwrz, vol. 37, No. 2, spring 1987, p. 11,

qs~s~pher Joyce, “This Machine Wants to Help You,” Psychology TodW, February 1988.

46D~jel J. Czjuom, Media ~~ the AmeriCan Mind: From Morse to McLu~n (Ch~l Hill, NC: University of NOdI CtUolina %SS, 1982).

4TNot eveV~y h= a telephone, but a~ost eve~ single ho~ehold h~ a TV ~d a radio. Watching television, experts agree, is the mOSt pOpUIU

leisure pursuit, followed in descending order by visiting or socializing, playing cards or other games, attending movies, making home or car repairs,

gardening, exercising, attending sports events, visiting amusement parks, and attending arts events. John Robinson, “The Arts in tierica,’’Americun

Demograp/dcs, vol. 9, No. 9, September 1987, p. 44.

dsRobinson, op. cit., footnote 17.

@Offi~eofTW~oloW As~ssment, op. Cit., fmmote 27, p. 139+ And ami=ation to more home-based entefi~nment isevi&nced by industry StallStiCS.

By 1986, movie indusuy revenues from videocassette sales equaled revenues from box-office movie sales. See also “Studios Woo Cassette Mass

Market,” The New York Times, Feb. 27, 1986, p. C26; and “Poll Finds Arts Attendance Has Declined,” op. cit., footnote 5.

s~er fo~a~ have emerged (such as compact disc audio) or may be emerging (such as direct broadcast satellite).

51MO+3 ~o~c~ even~ have higher media audiences than in-~r~n audiences. tie ~udy show~, for ex~ple, hat while only 13 ptXCent Of dle

population attended a classical music concertina given year, 20 percent listened to classical music on the radio, and 24 percent watched a classical music

performance on television. Robinson, op. cit., footnote 47. See also Jeremy Schlosberg, “Who Watches Television Sports?” American Demographics,

vol. 9, No. 2, February 1987, pp. 45-49, 59. For an example of the recent diversity available in entertainment programming, see “Fish Are Jumping on

Many TV Screens and the Corn 1s High,” The Wall Street Journal, June 25, 1987.

52The nu~ ofp~ntem, au~ors, and dmcers row at lemt 80 ~rcent in tie pmt dec~e; ~d ~tw~n 19’75 and 1980, (he proportion of Americans

involved in amateur photography rose from 19 to 44 percent, and of those who play a musical instrument from 18 to 30 percent. Robinson, op. cit.,

footnote 47; and James Ogilvy, “The Experience Industry,” American Demographics, vol. 8, No, 12, December 1986, pp. 26-29,59.

5sFor ~me audieme mcm~~, tie ~rceived llne ~tw~n re~ity ~d m~e.~lieve in his ~~ is ~k: red small-claims cOUtlS wc packed with

people citing precedents from the television show, “People’s Court.” Michael Pollan, “Reality Shows: The Syndicated Bench,” Chunnels, vol. 7, No.

7, July/August 1987, pp. 52-54.
220 ● Critical Connections: Communication for the Future

coffee mugs, and posters that help people communicate their personalities to the world.54

Lately, other forms of pseudo-participation have

emerged. There are hotlines that allow people to vote

on the fate of their favorite TV characters,55 and

novelty-shop services where individuals can add

their personality to a mass-media product by recording their own voice over the instrumental track of a

top-40 hit.56 Another recent phenomenon is the

emergence of millions of home-based audio “broadcast” stations, in the form of telephone-answering

machines. Several types of technology are emerging,

or are being developed, that may strengthen the trend

toward participation in entertainment.

Information production tools, for example, are

making many forms of self-expression cheaper,

easier, and more impressive, shifting the emphasis—as some put it—from perspiration to inspiration. Desktop publishing and design software, for

example, enable individuals to produce professional-quality documents, layouts, and all manner of

designs. Computers linked to synthesizers are giving

amateurs studio-quality capabilities for creating and

performing music, and, incidentally, for working

collaboratively by trading musical “patches” (digitized musical excerpts) over telephone lines and via

computer bulletin boards.57

Optical disks, together with authoring software,

might further empower the would-be recreator/

creator. According to one researcher:

Future videodisk novels will provide scenes of

historic crisis, fantasy castles, or exotic modern

locales that the “readers” will people, both visually

and imaginatively, with characters of their own

choosing. 58

Such a description may call to mind the video game

of the late 1970s, viewed by many as a fad but now

making a comeback.59

Whether people will take advantage of such new

opportunities is uncertain. Although video cameras

and tape recorders have been widely available for

some time, they have not sparked a new grassroots

media genre. This lack of interest may reflect, in

part, the dearth of distribution mechanisms available

to the individual, as well as a lack of interest in

programming not packaged with Hollywood’s gloss

and slickness. It may also be a sign of limited talent

or expertise. As one commentator says of desktop

publishing:

If you don’t know what you’re doing, you’re just

going to produce ugly documents faster.60

There are, however, notable exceptions. High

school and college students across the country are

producing video yearbooks. People with access to

public cable TV studios are producing a hodgepodge of programs. In New York City, for example,

one lady does a weekly singing tribute to Frank

Sinatra, and a dentist answers callers’ questions

about dental work. Talented individuals on shoestring budgets occasionally produce low-gloss,

homespun films that succeed because their concept

is good, 6l

The evolution of systems for self-expression and

participation will also depend on the willingness of

traditional information providers to provide raw

material on an unbundled basis for repackaging by

individuals. It has been said that the second best

sports magazine in the United States would be a

compilation of the cuttings in the editor’s wastebas54$x John w. H~~n, “Phrmes on Your T-Shirt: Personal Graffiti in Modern Society, “ Cahfornia Sociologist, winter 1980.

55When Victoria principal amounced she was quitting the TV show, “Dallas,” for example, USA Today set up telephone lines so people could vote

on how the show should cleat with the loss of her character, Pam.

56~er ~p~m items ~e Custom.made ~w~s cassettes, b~~eb~l cads, and ma~~,]n(, covers, where the customer is the stti who hits the home run

in the ninth inning or whose face appears on the card or cover,

57 Betw=n 1983 and ]986, sa]es of syn~eslzers som~ more ~~ fivefold to 350,000,” while s~es of br~s-band inswcntsfell about 15 p3Cent tO

139,500. “Music Amateurs Find New Inspiration Composing at the Keyboard of Computers,” The Wall Street Journal, Oct. 29, 1987, p. 29. For more

information about Musical Instrument Digital Interface (MIDI), see Michael Boom, “Music Through MIDI” (Redmond, WA: Microsoft Press, 1987),

and Craig Anderton, “MIDI for Musicians” (New York, NY: Amsco Publications, 1986)

Sf!chw]es A. Gmfi and Helen Dalwmplc, “me Computer and tie Book,” Jo~ Y Cole (cd.), BOOkS in Our Future” perspectives a/Zd prOpOSalS

(Washington, DC: Library of Congress, 1987), p. 176.

5g~ 1981, “ldeo ~me ~cade.u~rs sPnt $5 hllllon+qu~ to tie combined revenues of tie Las Vegm gambling industry and the U.S. fiht’t industry,

or the total television revenues and gate receipts of major league baseball, football, and basketball. Ronald Rice, “New Media Technology: Growth and

Integration,” Rice and Associates, The New Media Communication, Research, and Technology (Beverly Hills, CA: Sage Publications, 1984)

m “Computers b a Thousand Publishers Bloom,” The New York Times, Sept. 8, 1987, p. Al.

blFor exmple, tie movies “She’s Gotta Have it,” financed with the producer’s credit cards, and “Sherman’s March,” shot by one man with his

videocarnera. Also note the popularity of rock songs redubbed with spoof lyrics— a fom]at pioneered by “Weird Al” Yankovic.
Chapter 8-Communication and the Individual ● 221

ket at Sports Illustrated. But what company will sell

its material for such purposes? Will individuals have

access to the vast archives of sounds, images, and

text as raw material for repackaging? Certainly not

without raising a host of intellectual property

issues. 62 Moreover, without intermediaries to Provide a modicum of quality control, some issues may

also arise with respect to content, as in the case of

Dial-a-Porn.

Social Interaction

People use communication systems to build and

maintain their “networks” of relationships.63 These

relationships are crucial both in satisfying specific

needs, such as information-seeking,64 and in sustaining a general sense of well-being.65

Innovations in communication have influenced

patterns and characteristics of social interaction,

whether among friends and relatives, or strangers.

Pool notes, for example, that the telephone reduced

loneliness, strengthened family ties, produced discontinuous communities, and generally stimulated

social interaction.66

The past few years have seen the widespread

adoption of telephone-answering machines, making

interpersonal communication more convenient, and

a drop in long-distance telephone rates, making such

communication more practical for more individuals.

A whole wave of electronic technologies is poised to

revolutionize interpersonal interaction, potentially

making such contacts more varied in format, more

convenient, more random, more purposeful, or—

depending on one’s perspective—more impersonal

and unsatisfying. The new technologies can be

divided into two categories: messaging systems such

as facsimile, electronic (text-only) mail, and voice

mail; and conferencing systems, which, like conference calls, enable two or more people to communicate interactively at the same time.67

The promise of electronic-conferencing systems

is that they will encourage new types of social

interactions among people who share common

interests and among people at random. These

systems create new types of situations in which

people can meet, broaden the geographic scope of

their potential interactions, and take some of the

element of coincidence out of meeting people with

specific interests. One example of such a technology

already in widespread use is audioconferencing, also

known as group bridging.68 These systems allow

people to participate in a conference call with a

handful of complete strangers. Already active in

several cities, these services are developing special

lines for specific interest groups such as trivia buffs,

soap-opera addicts, rock fans, and born-again Christians. One party-line in Boston even caters to men

and women in the midst of divorce proceedings.69

One attraction of this type of system is the random

contact with strangers it provides—an electronic

sort of hitchhiking from the safety of one’s telephone. As Robert Kraut, a social psychologist at Bell

Communications Research, says:

It not that different from the anonymity you find

on bus rides or plane rides. There’s someone you

know you can spill your guts to without repercussions.70

In contrast, another new electronic meeting-place,

the computer conference, better facilitates purposeful contacts. Much has been written about the

stereotypical “hackers” who live, breathe, and hold

their wedding ceremonies on these systems.71 Behind this stereotype is a vast and growing universe

of conferencing networks—corporate and nonprofit, —.

6zFor a discmsion, S= U.S. Congess, office of Technology Assessment, Inte!lectuul ?’roperty Rights in an Age of Eiec~onics and I@or~tionv

OTA-CIT-302 (Springtleld, VA: Nationat Technical Information Service, April 1986).

Gs@~an and Calm, op.cit., foomote 21, p. 1.

@RuW~ Ne~~note~ mat more ~ople rely on ~rso~ friends man organized or in~itution~ sources for impo~ant information. Neuman, Op. Cit.,

foomote 8, p. 8.

65~~an and calm, op. cit., footnote 21, p. @.

661~el de Sola pml, “Forecmting the Te[ep~ne A Retrospective Tech~~gy Assess~nt (NoIwood, NJ: Ablex, 1983), pp. 129-131.

67’’The line between these two categories is blurry, however, because some systems combine elements of the two by enabling people to pmicipate

in a conference by leaving messages that everyone else can see, regardless of when they “check in.”

68Ken Fr~c~~g, (,lp/ (Lifestyle), dispatch on group bridging services, SePt. 22? 1987

@Jack Semonds, “The Newest Dating Game: Party Lines Are Humming and Also Controversial,” U.S. News and World Report, June 8, 1987.

T~r~k]ing, op. cit., footnote 68.

71- researcher characterizes “the hacker” as “an addict who sleeps by day and works at a computer keyboard at night, feeding on junk food and

the euphoria of computing.” Everett Rogers, ComrnunicatiorI Technology: The New Media in Society (New York, NY: The Free Press, 1986), p. 235.
222 ● Critical Connections: Communication for the Future

academic and commercial. It is estimated that there

are between 7,000 to 10,000 private home-based

bulletin boards in the United States today .72 These

online forums cater to every imaginable interest,

from botany to arms control to dirty jokes. People

with unusual interests can find their niche quickly,

sometimes by searching the profiles of other participants to get specific details about them and their

interests.

Some claim that electronic conferencing encourages freer communication because without visual

and audio cues, such as appearance, tone of voice,

and body language, people may be less embarrassed

and therefore less inhibited. Says sociologist Sara

Kiesler:

People focus their attention on the message rather

than on each other.73

Theodore Roszak notes that electronic conferencing

systems have “a liberating and leveling effect,”

encouraging a certain amount of role-playing, because they “blank out race, age, gender, looks,

timidity, and handicaps.”74 He adds, however, that

more anonymity can mean less accountability,

leading to what he calls “nasty material: racist and

sexist slurs, dirty jokes, profanity.”

While conferencing systems may change the

nature of communication between strangers or

acquaintances, new capabilities for keeping in touch

could also affect closer relationships, in particular

those among friends and relatives. The freeze-frame

videophone, for example, one of the notorious

unfulfilled promises of the 20th century (along with

3-D television and personal robots), shows signs of

finally emerging as a popular and economical

supplement to the telephone. Matshutsita, which

recently began marketing a $300 set that connects to

a telephone line, had sold 64,000 of them by May

1988. 75 Although household demand for video

communication remains uncertain,

76 many organizations are already using videoconferencing; and as

the technology gets cheaper, more are likely to do so.

New technology may also enable geographically

dispersed individuals to share more experiences.

Communication tools such as the television or the

snapshot have often served as a setting or topic for

social interaction. Future systems—those that allow

people to share work or play games or learn together

from a distance--could serve a similar purpose.77

Questions arise, however, regarding the hard-tomeasure indirect and psychological effects of the

new technologies. How effective, for example, is

technology-mediated communication as a substitute

for face-to-face interaction? Will improved communication capabilities accelerate geographic dispersal

of families and friends? Or will they siphon off time

spent in face-to-face interactions with nearby friends

and neighbors? One indicative dilemma is the new

phenomenon of “video visits” to nursing homes.

Some have reported that showing videotapes of

family members to elderly patients calms them and

may make them feel “more involved.”78 One Washington, DC, nursing home has initiated a “Visiting

Through Video” program, funded by the Markle

Foundation. The videos:

. . . have been particularly useful in helping staff

cheer up residents who may be experiencing depression or having a difficult day . . . The staff benefits

as well . . . By learning more about each resident’s

history and personality, they are able to provide

individualized attention and deal more directly with

specific problems and concerns.79

But some say video visits may also encourage

relatives to postpone or avoid visits in person.

With respect to electronic conferences—whether

audio, video, or textual-society may need to

decide:

TzW~/e Earth Revi~, Winter 1987; also Steve Johnson, personal cOmmUnicatlOn, May 12. 1988.

73sma ~e~ler, ~~~~ng~ead: me Hidden Me~sage~ in Compukr Networks, ’’/Harvard B~i~ss Revi~, vol. 64, No. 1, January-February 1986,

p. 48.

7Q~~m Rwz~, ‘~p~er~ for Democracy: ~bli~ Libraries and ~formation Te~hnolo~,” Wilson Libra~ Bu//etin, February 1986, p. 15.

7STim Magazine, Apr. 21* ~988.

7~y ~ecdo~ evidence is available. he successful experiment, called the “Hole m Space,” set Up cameras ~d TV scrmns at public locations in

h Angeles and New York so passers-by could see and talk to each other across the continent.

77~ther~~ till@F~ may depd on ~hetherpople ~rceive these systems w sh~ed soci~, ra~er than individual, toO]s. htfOtTttkNIOXt- WWkVd

tools, for example, if equipped with large display scr&ns that several people could view at one time, might be treated as a fun “game.” Most contemporary

computer-related technologies (not to mention radio walkmen) have the reverse image that of a personal shell to withdraw into.

Tg’” CVib Visits’ Help Elderly and Kin,” The New York Times, Feb. 25, 1987

TgB~bie White, “Vid~ Visits Help Families Say ‘I LOve You, ’ “ Aledia&Vulues, No. 45, winter 1989, p. 20.
Chapter 8--Communication and the Individual ● 223

●

●

●

●

who will be admitted to them, and at what level

of participation;

what types of conferences can be kept private;

whether content will be regulated—that is, will

some types of electronic interactions require a

monitor—and whether there will be welldefined rights, roles, and limitations for partici -

pants; 80 and

whether people will be able to conceal their true

identity or pretend they are someone else.

Economic Participation

Technological change has historically brought

about changes in the ways individuals participate in

economic life. In preindustrial times, for example,

the family served as the basic economic unit with

most people working on a number of tasks, cooperatively, in their homes.81 Industrialization gave rise to

the factory system in which workers were organized

to perform ever more routinized and specialized

forms of labor.82 Today, as discussed in chapter 5,

new technologies once again create opportunities for

changing economic relationships.83 And, as in the

preindustrial era, technology will now allow individuals to more easily work on their own schedules, at

their own paces, in their homes. This technical

capability, moreover, has come about at a time

when, for a variety of reasons, self-employment,

moonlighting (multiple job-holding), and part-time

work are on the rise and at their highest levels in

many years.

84

One way in which new technologies have created

economic opportunities is by lowering the barriers

for individual endeavors. One such barrier, for

example, is access to markets for professional

services. New capabilities such as facsimile transmission, overnight mail, and electronic messaging

are enabling knowledge-workers such as writers,

programmers, designers, and accountants to do

much more freelancing, consulting, and part-time

work. Consider freelance photographers, for example. In the past several years, taking advantage of

these technologies, services have emerged that, for

a fee, inform photographers across the country of

editors’ photographic needs. One person who runs

such a service describes the implications for freelancers this way:

Before, if you were right next to the flagpole, you

got the job. Today, if you’re in Colorado and you see

a request for a picture of a wildflower with a little bit

of snow around it, you can get the job.85

Future communication systems could go even

further in helping individuals advertise, sell, and

deliver their intellectual products. One researcher

has noted that France’s Minitel:

. . . seems to make it possible for anyone, with next

to no capital, not only to publish . . . but also to

capture revenues, all in a single, integrated system.86

Technologies for coordinating work activities and

enabling more flexible schedules may have a similar

impact on the nature of economic participation.

Telephone-answering machines, for example, have

made it easier for freelancers to hold a daytime job

and also keep in touch with customers. More

recently, the advent of call-forwarding has made it

substantially easier to hire an answering service.

Finally, the increasing capabilities and falling

prices of information tools, particularly computers,

have stimulated entrepreneurial participation in

many industries. This trend is likely to continue. For

example, a hot-air ballooning enthusiast in Sacramento, CA, who began publishing his monthly

magazine, “Balloon Life” (circulation 2,500), when

SOAudioconfe~ncing ~mices typically provide a monitor who is responsible for keeping the conversation going and warning about “inappropriate”

language. In some areas, audioconferencing systems got off to a rocky start due to criticisms that they were being used for drug deals and for arranging

trysts, in addition to the fact that children were running up huge bills without their parents’ knowledge. Franckling, op. cit., footnote 68.

slNeil J. Sme[ser, social Change in the Indutrial Revolution: An Application l>f Thco~ to the Lancashire Cotton IndusttY, 1770-1840 (hndon:

Routiedge & Kegan Paul, 1959).

Szshoshana ZUbOff, /n the Age of the Smart Macti”ne (New York, NY: Basic Bwks, 1988).

83~chael Piore and Chmles Sa&-.l, ~~ Secoti /~wtria/ Divide (New York, NY: Basic Books, ~c-, 1984 )0 S* ~so ibid+

840f~e apWoximately 7~,0~ new ~ompanles fo~ed in 1985 (compared to 90,~ in 1950), stx),~ consist~ of ~lf-employed individuals. Roger

Thompson, “Small Business,” Editorial Research Reports, vol. 1, No. 23, June 19, 1987, p. 305. There are approximately 6 million “moonlighters,”

working an average of 14 extra hours per week. Richard Worsnop, “Part-Time Work,” Editorial Research Reports, vol. 1, No. 22, June 12, 1987, p. 294.

And there were about 19.5 million part-time workers in 1987, up from 12 million in 1970, according to the Department of Labor’s Bureau of Labor

Statistics, as cited in The Washington Post, Feb. 11, 1988, p, A18. About 3 million of these were ‘*professionals,” with the biggest gains in the ranks

of part-time editors, library workers, and accountants. Worsnop, op. cit., footnote 84.

MRo~ Engh, ~rsom-d communication, Apr. 14, 1988.

sb~ch~l Rice (~.), “Towmd Enhancing the Social Benefits of Electronic Publishing,” report of an Aspen Institute Planning Meeting. 1987.
224 ● Critical Connections: Communication for the Future

desktop publishing equipment became available,

explains:

The market is so small, the overhead had to be

small to make it a viable product.87

Further reductions in the cost of distribution, perhaps via telecommunication, could make such efforts even more viable.

New technologies have also been regarded as the

means by which businesses could provide flexible

work arrangements, allowing people to perform their

jobs at home. Such arrangements, it is argued, will

not only increase worker productivity, but will also

provide opportunities for people who, because of

family responsibilities or physical disabilities, might

be unable to work in an office situation.88 In fact,

recent experience with telework has proved that it is

relatively successful in both regards.89 However, it

also shows that the technology, in and of itself, will

not alter the nature of the work experience. On the

contrary, the most successful cases of telework were

those in which the traditional organizational principles of the office could be most easily transferred to

the home.90 As Margrethe Olson has noted, for

telework to have a major, structural impact on work

at home, the office itself will need to be integrated,

and the technology will have to go further in

assuring that:

. computing power is inexpensive and portable;

. there is access to all information resources

required to perform the work in a form that is

accessible by computer, requiring that it be

both “machine-readable” and “online;” and

. there is access to other people in the organization through communication networks that link

all locations, office and home.91

New communication technologies will affect

individuals’ economic lives not only as entrepreneurs and workers, but also as consumers. The

increasing number of video transmission channels,

for example, allows consumers to browse through a

variety of live or taped home-shopping television

programming services, and it will not be long before

many people can routinely use their VCRs to

examine products exhibited on full-motion catalogs,

or videologs.92

More important to the consumer than browsing is

the capability for comparative shopping that videotex services afford.93 The systems now being used

employ a tree-branch menu architecture-requiring

a user to perform the motions of entering a store,

selecting a department, and choosing a product. New

information technologies, however, can engineer

quick searches for all listings of a particular product

in an entire catalog/mall, allowing consumers to

compare and sort the relevant lists according to their

own particular criteria. This opportunity could be

extended even further, so that single catalogs are

created to include listings of all products available

from anywhere in the Nation, or even the world, in

a particular product area. One might even envision

many of the current specialized magazine publishers

creating affiliated catalogs. This network market

SIThe NeUJ York Times, Oct. 8, 1987.

88Atme time it ~m ~w~~at ~ many ss 50 ~rcentof ~1 office jobs could be performed in the home. StX, for example, R.C. H~~ess~ “Technology

Assessment of Telecommunications-Transportation interactions,” Stanford Research Institute, Menlo Park, CA, 1977.

89For adis~~sionof rwent Cxwnence ~~ telework options, ~Ro~fl E. fiaut, “predicting~e USC of T~hnology: The c= of Telework,” Robt

E. Kraut (cd.), Technology and the Transformation of Wldte-Coliar Work (Hillsdale, NJ: Lawrence Erlbaum Associates, Inc., 1987), pp. 113-133; and

Margrethe H. Olson, “Telework: Practical Experience and Future Prospects, “ ibid., pp. 135-152. See ah Jack M. Nines, “Traffic Reduction by

Telecommuting: A Status Review and Selected Bibliography,” Transportation Research, vol. 22A, No. 4, 1988, pp. 301-317.

~enerally speaking, the successful cases were those involving people who either occupied upper-level positions and who traditionally managed their

own time, or who were in low-level positions and their work performance could be easily monitored on the basis of output. Kraut, op. cit., footnote 89;

Olson, op. cit., footnote 89.

glIbid.

92“Re~ilers Pa& ~ou@ Vidwlog possibllitles,” Advertising Age, Jan. 1 g, 1988, s@al repo~on dir~t rn~keting, p. Slq. h early 1988, two fhtllS

began pursuing shared use of a videolog, creating CD-ROM disks with up to 50,000 frames/pages of detailed catalog information. The catalogs, which

include up to seven detailed photos of items from sellers equivalent in number to one mall, were made accessible to subscribers to the cable systems

serving two small communities outside of Boston and Chicago. Both .senices permit users to instruct the central CD-ROM player to search and retrieve

pages/frames by using the telephone. The still photos are distributed to homes via a cable television channel reserved for the service.

gsvidmtex is a gener~ nme for a “mass medim which delivers text and visu~ information dir~~y to consumers. The u~r interacts With the SJW311

via a hand-held keypad, push-button console, or fidl alphanumeric keyboard. Desired information is retrieved interactively from a videotex center,

through telephone lines, via cable, or over a regular television network, with text and graphics displayed on a television screen or other video monitor.

While early systems involved terminals, increasing emphasis is being put upon accessing videotex systems with personal computers.” As defined by

W. Wayne Talarzyk and Murray A. Young, “The New Electronic Media ‘Videotex, ’ “ College of Business, The Ohio State University, RS 88-4, March

1988, p. 252.
Chapter 8-Communication and the Individual .225

concept can also be expanded beyond the realm of

easily specified commodities to handle customized

requests. For example, networks might be created

that allow buyers to specify their needs—verbally

or, more likely, in a written form on an electronic

bulletin board-so that interested sellers could

respond with bids in a kind of reverse auction.

Such systems could also improve buyers’ access

to evaluation services. The videotex service provided by Prodigy Services Co., for example, facilitates comparative shopping by providing easy access to Consumer Reports. As the use of such online

catalogs increases, other evaluation services will

probably be developed, ranging from those that rate

items as acceptable or not to those that go into

greater depth, evaluating different aspects of a

product.

Notwithstanding these potential benefits, many

experiments with videotex have failed, and most

Americans remain unfamiliar with its concept.94

However, this situation may be changing. In a recent

survey on consumer awareness of videotex, one-half

of the respondents expressed interest in videotextype services. The results of this survey suggest that:

, . . videotex may be in a position similar to where

television was following World War 11. Some people

have heard about it, a few had experienced it, but

almost no one envisioned the impact it would have

upon society over the next forty years.95

It should be noted that not all aspects of videotex

are beneficial from the consumer’s point of view. In

participating in such systems, consumers make

themselves available, in effect, to considerable

intrusion on their private lives and increasingly

sophisticated marketing devices. As pointed out in a

U.S. Federal Trade Commission (FTC) report on

videotex technology:

But the monitoring and control capability also

raises substantial and difficult issues of individual

privacy. And it places potentially enormous marketing power in the hands of vendors with access to

personal or disaggregated information on viewing

and purchasing patterns. As a result, will marketers

and advertisers be able to manipulate consumers

more effectively knowing what their previous purchases have been?

Thus many of the new media, especially those that

allow direct sales, raise troubling privacy issues.

While some consumers may be willing to sacrifice

privacy for the convenience of direct “electronic”

ordering, the idea of a central data bank compiling

viewing habits, purchasing behavior, and answers to

opinion polls for every participating household

raises the specter of Big Brother.96

By using videotex services consumers may benefit

from reduced prices. However, they will also be

assuming some of the work that was previously

performed by marketers and retailers.

Personal Business

New technology has typically, if not always

accurately, been heralded as improving the quality

of daily life by eliminating drudgery and enhancing

the effectiveness of the individual’s efforts. In an age

of declining leisure time and increasing demands on

that time due to the growing complexity of modern

life, some claim that communication technology can

make good on this promise by simplifying routine

“personal business” activities such as shopping,

scheduling, getting information, and personal finance management. Moreover, these technologies

may enable people to feel more secure, confident,

and in control, and to make better-informed decisions.

One potential the new communication technologies have is to allow individuals to make better use

of their time. The videocassette recorder and the

automated-teller machine have already introduced

individuals to the benefits of “time-shifting’ ’—doing

something at one’s convenience that would otherwise be impractical. Now a number of new technologies, such as call-waiting and electronic-messaging,

are emerging to enable individuals to better juggle

their activities.

941bid., p. 254.

95 fiid.

96u.s. F~er~ Tr~e Commission, Report on the FTC Policy Review Session on New Media (Washington, DC: U.S. Govermnent ~lnting office)

1979), p. 69, as cited in Vincent Mosco, Pushbutton Fantasies: Critical Perspectives on ~’ideotex and l~ormation Technology (Norwood, NJ: Ablex

Publishing Corp., 1982), p. 104.
226 ● Critical Connections: Communication for the Future

Portable systems such as pagers are also helping

individuals to coordinate their activities .97 Hospitals

now dispense pagers so that prospective fathers and

organ-donor recipients can be “on-call,” for example. And Sears, Roebuck’s dental care centers

provide beepers to walk-in patients so they can

browse until a dentist is available. There is a down

side to these technologies, however, as anyone who

has ever been paged by their boss late at night, or

while on vacation, can attest.

We have already discussed how technology can

match buyers with sellers. These same technologies

may provide a host of other matching services that

are useful to the individual. For example, online

systems have been designed to facilitate ride-sharing

by matching up riders with drivers. Some department stores have computerized their bridal registries

so users can view a list of requested marriage gifts

and determine which ones have already been purchased by others.98

Another time-consuming task that many individuals face is managing personal or family finances. A

range of new technologies, from electronic homebanking to electronic-payment systems such as debit

cards, promise to speed the completion of these tasks

and give the individual more and timelier information about their financial situation. The Internal

Revenue Service, for example, is field-testing online

tax-filing systems to accompany computerized taxpreparation aids already available from taxpreparation firms or as stand-alone software packages.

99 Benefits to taxpayers could include quicker

refunds and earlier warning of arithmetic or other

errors. 

100

Another potential for enhancing personal efficiency may be realized by new systems that could

improve access to a variety of information, from

transportation directions and schedules to answers to

questions concerning food preservation.lO1 Already,

toll-free and so-called “dial-it” [recorded information] telephone lines have revolutionized individual

access to such “information on demand. ’’102 A list of

dial-it numbers available through New York Telephone, for example, includes horoscopes, horserace

results, “technical sex tips,” Wall Street Reports,

grammar tips, and many more topics. *03

Another potential, if controversial, benefit of new

communication technology is the security provided

by devices that allow people to keep closer watch

over one another. Some parents are reportedly

giving their children pagers so they can check on

them at any time. Elderly citizens already have

access to a wide range of monitors and warning

devicesl04 that sound an alarm at a remote location

should help be needed. Some claim these enable

them to maintain a less risky independence in their

own home. And although, as of 1987, only 3 percent

of U.S. residences had monitored alarm systems to

warn of fire, vandalism and burglary, and medical

emergencies, l05 more effective technologies are

emerging all the time.

Concerned that interpersonal relationships will

come to be overly dependent on technological

mediation, Jacques Ellul calls for a new ethic to deal

with the use of technology:

This new ethic would also be an ethic of freedom.

Powerful means do not necessarily insure freedom;

gTBy 1986, ~e~ Wem about 6 million pagers in operation. The most sophisticated were able to display up to 40 letters or numbers, scroll forw~d

and backward, and store up to five messages. Doctors, the first to wear beepers, now represent only one-half of the users. intercity paging networks have

come online, and one can even buy rhinestone-studded beepers as Mother’s Day gifts. Peter W. Huber, Antitrust Division, U.S. Department of Justice,

“The Geodesic Network: 1987 Report on Competition in the Telephone Industry,” January 1987.

98JOM Cwey, “Termin~s in Public Locations,” Electronic Publishing PIus, P. 18.

99JMy Rosenfeld, “The Electronic Taxman,” PC World, April 1987.

l~st tmpayem get tw en~usi&Stic, however, tie RS i5 ~W te5ting automatic dialer/record~ message players for calling to chastise delinquent

taxpayers early on Saturday mornings.

Iolwhich is not t. say hat ~adition~ infomatlon ~Wces like tie newspap,r will dlsapp~, quickly or ever. AS Hukr notes: “A newspaper C~eS

30 million bits of information, weighs less than three pounds, handles both text and graphics, is completely portable, randomly accessible, 24 hours a

day, costs less than 25 cents a connect-hour, and is mostly paid for by somebody else . “ Huber, op. cit., foomote 97, p. 22.

IozSuch Iineshave ~ow ~emendomly in rwent yeas, but we not new. As e~]y M he 1930’s, lines like did-it existed for weather and time ad Were

getting 20,000 and 60,000 calls a day, respectively. Pool, op. cit., footnote 66, p. 121. See also “The Revolution Wrought By Toll-Free Calls,” The New

York Times, Feb. 12, 1987.

103 Hu&r, op. cit., footnote 97, table ps. 10

104Not t. mention emergency .caedevices. pofiable defibril]a~~ can now ~nd s~t~ info~ation, s~h M a el~~c~dio~~s, over telephone h%

to a doctor in a hospital. The doctor can then decide if a shock is necessary, and instruct the onsite device to deliver it. “Reach Out and Defibrillate

Someone,” The Wu.ddngton Post, Health Section, Dec. 8, 1987, p. 5.

lmHu&r, op. cit., footnote 97, p. 13.1.
Chapter 8--Communication and the Individual ● 227

on the contrary, technique has come to represent both

necessity and fate for modern man, and thus, the

effort to recover our ethical identity is the equivalent

of resuming the fight for freedom. . . In other words,

we must decide that it is not technique that frees us

but rather it is from technique that we must free

ourselves.l06

Controlling and Manipulating

Technology-Mediated Interactions

New technologies give some individuals more

control over who they communicate with, when, and

under what circumstances; at the same time, they

deprive others of the ability to escape gracefully

from unwanted communication or to benefit from

anonymity in their communication. People have

always taken advantage of their communication

systems to exert control over their communication

interactions. Some executives use secretaries to

screen their calls, for example, and many people use

telephone-answering machines for the same purpose. Tomorrow’s communication systems will

offer more opportunities for such screening and

manipulation. By providing advance information

about callers, new technologies, for example, allow

people to program their telephone to screen out

certain callers or to dispense different recorded

messages to different callers.107 Such capabilities

will supposedly make communicating more convenient and efficient-for example, by helping to

eliminate unwanted communication such as wrong

numbers or crank calls. But they will also alter the

psychological landscape of interpersonal communication, as have previous innovations.108

First, increased control and flexibility may invalidate traditional excuses for avoiding communication. With call-waiting, for example, keeping the

line busy is no longer a viable avoidance strategy. In

the near future, call-forwarding and portable devices

like cellular telephones and laptop computers may

make it physically possible for a person to be

reached anywhere, anytime.l09 Such developments

would make it increasingly difficult for individuals

to distance themselves from the demands of others. 110

Secondly, these capabilities may remove an

element of anonymity, and thereby equality of

opportunity, from communication. The ability to

find out who is calling in advance, as Joshua

Meyrowitz, author of No Sense of Place, explains,

would “re-establish what the phone used to bypass,’’111 perhaps leading to a more formal communication environment where one would have to

“present credentials” before being electronically

admitted.

Part of the beauty [of electronically mediated

communication] is the anonymity. The phone is an

equal opportunity instrument.112

For some people, from resourceful reporters to

job-hunters,

113 the loss of such anonymity might be

a serious problem. One State American Civil Liberties Union (ACLU) director fears that people would

stop reporting instances of crime and child abuse if

they thought they might be identified.

Whether anonymity or “escapability” will actually be lost, or convenience gained, will depend on

what future communication networks are allowed to

do. For example, it is unclear whether service

l~jacques Elhd, “The Power of Technique and the Ethics of Non-Power,” ,Kathleen Woodward (cd.), The Myths of Information: Technology and

Postindustrial Culture (Madison, WI: Coda Press, Inc., 1980), p. 246.

l~sever~mgim~ @]e@onecompanies have &eady ~Wn field-testing such sewices, which ~ekno~ generic~ly u “CLA!3S” (Custom Local Area

Signaling Services).

IOS~c ~le@one.msWfing machine, fm exwple, allows ~ple to “s~ategically cdl o~ers when hey knOW ~ey me not home, so they can get credit

for calling, but do not have to talk.” The New York Times, May 13, 1987, p. B1.

l~exm~m ~ developing Ways for pple to “tie their phone numbers with them,” perhaps by inserting a “smart” pbstic cmd into the nemest

telephone wherever they wish to be able to receive calls (in addition to the voice or text messages they maybe able to receive wherever they are). Our

culture has been anticipating this development for awhile— remember Maxwell Smart’s “shoe phone” on “Get Smart” and Dick Tracy’s watch-radio?

ll~esc~abili~ is not n~ess~ly impo~d by technology alone, however. Pool notes that the telephone’s ring is “an imperious command” that vefY

few people tcday can ignore. Pool, op. cit., footnote 66, p. 142.

11 lp~n~ communication, NOV. 16, 1987.

112~id.

~ ~3Some job-h~te~ ~~mtiy lmder pressure to provide more advance information in the form of “video resumes.” The ta~s, which can cost up

to $300 to produce, are especially important for visually oriented (e.g., artistic) jobs, but are increasingly catching on in other fields. AS one employer

notes, (WSJ) the tapes are “a quick way of deciding whether [a candidate] met the basic requirements: appearance, command of the language and

presentation abilities.” Colleges are also begiming to receive the tapes-on average, from 5 percent of their applicant pools. The New York Times, Jam

3, 1988.
228 ● Critical Connections: Communication for the Future

providers would be allowed, or even able, to provide

the name as well as the number of a caller.114 Or

whether there would be restrictions on subscribers’

abilities to trace calls. Is the invasion of privacy an

unwanted call, or is it the tracing of that call? And

what about unlisted telephone numbers? Many

people will not want their communication “address”

revealed to others, or to selected types of others. A

recent New Jersey field test of a prenotification

service prompted complaints from the ACLU and

individuals that it compromised the individual

privacy of individuals with unlisted numbers.l15 The

desire for invisibility may also be selective—a

company might want its directory available to

clients, for example, but not to headhunters.

Finally, etiquette will play a role in structuring the

new communication environment. As technological

capabilities change, so may society’s perceptions of

what is appropriate and acceptable in interactions.116

We are entering a period of rapid change, with many

new capabilities emerging simultaneously, Their

design and presentation will likely have a significant

impact on how they are used.

Potential for Overcoming Barriers to

Physical Mobility

Many people are prevented from participating in

society as fully as they would like because of serious

barriers to physical mobility. These barriers can be

biological—such as physical handicaps and advancing age-or situational, such as difficulty in finding

adequate child care, traffic congestion, and lack of

time. In an age characterized by impending labor

shortages,

117 a growing population of elderly people

who may face increasing pressure to continue

contributing economically, and more women in the

work force, communication technologies that facilitate fuller individual participation will be very

important.

Technologies such as the VCR that allow an

activity to be rescheduled to a more convenient time

have come to be known as “time-shifting” technologies. Systems are emerging that could be called

“space-shifting” technologies because they allow

individuals to do things in a more convenient place.

A videoconferencing system in Brooklyn, New

York, for example, designed to streamline the arrest

process, allows crime victims and witnesses at the

73rd Precinct station to converse “face-to-face” with

prosecutors 5 miles away, in many cases making

depositions possible where they otherwise wouldn’t

be.

118 In Whitman County, WA, a bookmobile

equipped with a packet radio119 offers mobile access

to the central library’s online card catalog. A cellular

telephone hookup in Livonia, MI, allows mobile

units to take onsite X-rays for instant analysis at a

hospital miles away.l20

Workers such as writers, data-entry clerks, and

engineers are less and less tied to one work location

because the technology allows them to transmit

textual and graphical information over telephone

lines. Even prisoners are using communication

systems to participate in the outside world. Inmates

of the Stillwater, MN, correctional facility are

making telemarketing calls as part of a rehabilitation

plan. And inmates of an Arizona women’s prison

have been taking 800-number telephone reservations for Best Western Hotels for nearly 9 years.121

Technologies under development may further

sever ties to physical locations. Joint authoring,

design, and editing technologies, for example, will

make it easier to collaborate with someone who is far

away.

122 New call-distribution systems will enable

businesses to route overflow call traffic to homebased clerks at their home telephone numbers

I lqIf the c~ler were a ffiend calling from an unfamiliar number, or a stranger calling from a familiar number, this would obviously not be possible.

lls~cording t. SWey Samphng, hc., Fafileld, CT., one in four Americans has an unlisted telephone number, and unlisting has increased by 25

percent nationwide in the last 4 years. As cited in “Sorry, No Number,” The New York Times, The Editorial Notebook, Dec. 14, 1988, p. A30.

llGsm Judith -n, “The Telephone at Home,” Miss Manners’ Guide to Excruciatingly Correct Behuvior (New York, NY: Warner Books, 1983),

pp. 1%-206.

117sw Teq s. supple, “The coming Labor sho~age,” American Demogr@hics, vOi. 8, No. 9, September 1986, PP. 32-35.

118*’pic~e~l Vidwconferenclng sy~tems Help Link police, ~o~cutors and Crime Victims in Brooklyn, New York,” Telecom Highlights

International, vol. 8, No. 29, July 22, 1987, p. 13.

llgpacket radio is a t~hno]ogy for t.fansmittlng data Over the titWaveS,

lzOBmbma Swaab, “Cel]ulat- Speeds X-Ray Diagnosis,” Cefhdur Business, July 1986.

lzl*’fiWn hatesin Telemarketing Sales,” D&B Reports, Novemoer/December 1986.

]22sW ~~Roc~ngs of tie First Conference on Compu ter. supwfled Cooperative work,” spons~ by tie Association for Computing Machinery,

1987.
Chapter 8--Communication and the Individual ● 229

whenever the in-house clerks are busy.123 And

capabilities such as those provided by CD-ROM

(compact disk-read only memory) optical disks that

may substitute for the shared support resources of a

central office (like libraries or reference materials)

could further increase the geographical flexibility of

some workers.

Space-shifting systems may enable certain

groups-like the elderly—to participate in society

longer and more fully than would otherwise be

possible. After 2 years, the results of an online

program at the University of San Francisco, called

SeniorNet, indicate that:

SeniorNet members began to play more active

roles in their communities. Learning computer skills

opened up job possibilities for some and helped

others relate with computer-using family members. . . [also] by giving them access to technological tools we have the opportunity to share their ideas,

learn from their experiences and understand their

wisdom. 124

Space-shifting also benefits individuals suffering

from serious health problems. For example, a recent

report on corporate strategies for coping with AIDS

promoted working at home—technology-assisted if

possible-as a way of keeping AIDS victims on the

job as long as they are able to work.125

But some argue that such systems may only

increase feelings of isolation and frustration. Says

Erik Sandberg-Diment:

Most people would probably miss the real world

too much, Have you ever asked your computer,

“What are you doing after work?’’126

John Naisbitt, author of Megatrends, agrees:

The utilization of electronic cottages will be very

limited: people want to go to the office; people want

to be with people.127

Martin Elton wonders whether such arrangements

might not in fact become “electronic ghettos,” and

notes that the results might be mixed, particularly for

the elderly.in These systems enable them to socialize and participate more without going out, he says,

but perhaps the excuse to go out and be with people

is what keeps them going.

KEY FACTORS SHAPING

IMPLICATIONS FOR THE

INDIVIDUAL

How individuals use the new communication

technologies and the impacts they have on their lives

will depend on a number of factors. This chapter

examines three of these:

1. technological literacy factors;

2. socioeconomic factors; and

3. factors relating to system design and support.

Technological Literacy Factors

The issue of literacy has received much attention

in recent years, with estimates of rampant illiteracy

sparking controversy over the definition of the

problem and the nature of possible solutions.129

Increasingly, the literacy debate is being broadened

to include discussions of new communication tools

and the skills required to use them. This section will

address this issue by focusing on the following

questions:

●

●

●

Do skill requirements constitute a barrier to

individuals’ use of emerging communication

systems?

What characteristics of the new technologies

influence the level of skills required to use

them? and

Should these skills be incorporated into a more

general definition of literacy?

l~pemon~ cornm~cfion, Michael Gibbons, Vice President, BeIl Communications Research, June 13, 1988.

lzdSeniorNet, ~ ~~~e ~rogm for ~nior~, ~a~ ~~tablished ~ 1986 at the Unlverslty of San Fr~cisco, suppo~ by the John and M~ Markle

Foundation. For a discussion, see Mary Furlong, “On-Line Connection Makes Friends for Seniors,” Media&Values, No. 45, Winter 1989, p. 11. See

also Greg Kearsley and Mary Furlong, Computers for Kids Over Sixty (San Diego, CA: Park Row Press, 1988).

125The wall Street lourruzl, Jan. 20, 1988.

lzbEIik Sandberg-Diment, “Waving to the Future from the Electronic Cottage,” The New York Times, Jan. 21, 1986* P. 19.

12i’Jo~ N~8bitt, Megatre~: Ten NW Directlo~Tra@orming Our Lives (New York, NY: Wwner Books, ~c.v 1982)* P. 46.

128M~~ Eltm, ‘*~enWil] the ~fomation Explosion Reach older Amefic~s7’’American Be~Wra/Scientfit, vol. 31, No. 5, May/June 1988, pp.

564-575.

lzgEstimates of the nm~r of illiterates have rang~ from single.digit ~rcen~ges to one-third of the pop~ation. For ~ overview of the debate, S=

Charles A. Goodrum and Helen Dalrymple, “Illiteracy in the U.S.,” Cole (cd.), op. cit., footnote 58, pp. 40-50.
230 ● Critical Connections: Communication for the Future

Many experts, especially in the wake of the

proliferation of personal computers, take the position that communication technologies are broadening the range of skills that should be considered

necessary to be “literate. ’’130 Others claim that, as

was the case with the automobile, the need for

special expertise in using the new technologies will

pass as the devices become more sophisticated.131

Few dispute, however, that the current generation of

communication technology is posing substantial

challenges to individuals’ learning abilities. From

computers to programmable VCRs and answeringmachines, to advanced-calling features, the frustrations of figuring out the often complex procedures

are widely in evidence.

Corporations have been forced to spend millions

of dollars, for example, to teach their employees how

to use new private branch exchange (PBX) telephone systems.132 User groups have sprung up

across the country so people can help each other

master the nitty-gritty details of computing.133 As

one scholar puts it:

The home computer is a rather complex product

requiring special skills and possibly some training.134

Such complexities may discourage potential

users. Many people, according to Casimir S.

Skrzypczak, Vice-President at Nynex, find the new

communication services “too difficult to either learn

in the first place or [to] remember. ’’135 Jakob Neilsen

concurs:

Just the perception of the necessity of acquiring a

huge amount of knowledge to get started keeps many

people from trying new systems.136

Contributing to this phenomenon is the fact that

people may be uncertain about the benefits of the

technology in the first place. One Bell Communications Research study of residential users’ adoption

of new telephone services found that:

. . . in cases where it was clear to users how they

could do it and what it would do for them, [the new

services] were used. *37

But otherwise they were not.

Even the people who do try out new communication technologies, however, frequently experience

frustration. According to recent research, people

tend to shy away from investing in the additional

learning necessary to take full advantage of the new

tools--exhibiting what some researchers call “satisficing” behavior.138 The pull of familiarity is so

strong, in fact, that many people:

. . . prefer to continue to use an older, less powerful

software package that they have learned rather than

face a new learning curve.139

Several hypotheses have been advanced to explain the difficulties individuals are having with

emerging communication technologies. Although

the research has focused primarily on the computer

Isos=, forexmple,Qro@n van Dyke, “Taking ‘ComputerLiteracy’ Literally, ’’Cmnmunications ofthe ACM, May 1987, VO1. 30, No. 5, Pp. 366-374.

131 The automobiles of the 1920s, for exmple, r~uired aprson t. cr~k the st~er h~dle ad muddle ~CN@ other tihnic~ details. The automobile

analogy is often made in the computer industry. Imtus Development Corp. founder Mitchell Kapor, for example, says that most people “don’t want to

know how it [the computer] works. They want to get it in drive.” The Wail Street Journal, “Computer Firms Step Up Efforts to Make Machines Easier

to Use,” Dec. 14, 1987, sec. 2, p. 1.

lsz’’Modern Telephone md-u~r Illi@racy Problem Being Confronted,” Network World, NOV. 17. 19W p. 23.

133A r=nt Nw York TIWS ~cle on Pmr productivity in the se~ice ~dus~es quot~ one an~yst as say~g: “M~y managers and employees Still

lack the knowledge to use computers and electronic hardware effectively . . . there is a lot of experimentation . . . and a lot of horror stories. ” The New

York Times, June 29, 1987.

ls4Nicho1mp. vit~~ et ~., “computing in the Home: Sfifts in the Time Allocation patterns of Households,’ ’Co~~”cations of rheACM, May 1985,

VO~. 28, No. 5, p. 520.

lssc~fir S. SkIZypCZak, “The Intelligent Home of 2010,” IEEE Communications Magazine, December 1X7.

136J&ob Niel=n et ~., “Integrated Software Usage in the Professional Work Environment,” Proceedings of the 1986 Conference of the

Computer-Human Interaction Special Interest Group of the ACM. Often this perception ]s reinforced by the size and grammatical obfuscation of the

manuals that accompany many new communication tools.

lsT~~hael A, Gib~ns, Assistant Vice President, Bell Communications Re~~ch, person~ cornrnufication, June 13, 1988. Cail-waiting, according

to one report, has grown twice as fast as any other custom-calling feature because access is completely automatic-customers do not press any buttons

to use it. “The Telecom Strategy Letter,” Northern Business Information, Inc., 1987.

138’’ Satisficing,” a~m coined in 1969 by HR. Simon, is the “satlsfylng of cfitic~ requirements just sufficiency to h~dle the problem at hand tithout

necessarily optimizing the sohnion.” Nielsen, op. cit., footnote 136. In other words, this IS getting by any way you can even when you know there must

be a better way.

lsgAssoci~ion of Dam ficessing ~gazlizations, “Report on Computer Comectiwty,” March 1987, p. 15.
Chapter 8--Communication and the Individual ● 231

because it is programmable, multipurpose, and

heterogeneous, the results are relevant to other

technologies that may share these characteristics.

Some researchers point to the fact that the new

systems require more abstract and deductive reasoning than traditional tools such as copying machines

or typewriters, which are amenable to simple rulefollowing. l40 One commentator has compared learning how to use a computer to taking up a musical

instrument. 141 Others note that often individuals

must modify computer-related tools to fit their

particular needs and circumstances-for example,

by customizing a word processor’s printer driver file

to a specific printer, or by designing a database to

store specific information. This “reinvention” process, as Everett Rogers calls it, often entails “several

weeks of frustrated problem-solving and information seeking after the initial purchase. ’’142 Still others

point to the diversity of systems as an impediment to

communication “literacy,” claiming that the multiplicity and inconsistency of command schemes and

other procedures confuse individuals and deprive

them of synergies in acquiring expertise. Nicholas

Vitalari, a professor at the University of California,

Irvine, comments:

Industry cannot expect the average consumer to be

fluent in person-machine interfaces of multiple

systems. 143

It is uncertain whether technological advancements will alleviate the difficulties of operating

communication systems, thereby decreasing the

need for any special literacy. 144 Technology is

emerging to make systems easier to use and understand,145 but these user-friendly helper programs

may sacrifice functionality for simplicity. According to Tom Stewart, they can be “slow, lacking in

power and rather rigid in the way they [can] be

used.”*%

In the meantime, it is clear that skill requirements

remain a barrier to individual use of communication

tools. What is not clear is the relative importance of,

and the distinctions between, different types of new

communication skills. As one observer notes:

Few educators understand which [new technology] subjects fall into which category. . . [and] the

general public is even in worse shape in guessing

what skills they should learn. *47

Recent definitions of literacy, in the traditional

sense, perhaps offer a model for a definition of

communication literacy in the emerging technological environment. These definitions have tended to

identify a range of skills that comprise literacy, and

different levels of those skills that contribute to

different levels of literacy. One might be able to read

a bus schedule, for example, but not be able to figure

out when the next bus is coming. 148 Defining literacy

requires determining which skills are necessary, and

at what levels of proficiency. To this end, it is

necessary to ask questions about specific technologies, while paying attention to their role in society.

For example, if a library stops updating its paper

card-catalog (as the Library of Congress did in

1986), should literacy include the ability to perform

l~At lle Women’s Computer Literacy Project in San Francisco, computer skills are taught by explaining the whole system in everyday terns, using

analogies that reduce technicat terms to familiar concepts.

ldlEverett Rogem, co~~ication Tec~ology: The New Media in Society (New York, NY: The Free press, 1986), p. 116.

142 fiid.

ldsNichol~ p. vi~~ and Alladi Venkatesh, “In-Home Computing and Infomatlon SeWices,” Telecommunications Policy, March 1987, p. 70.

l~~ong those who mwe hat it will are Roger Schank and Peter Childers, The Cognitive Computer (Reading, MA: Addison-Wesley, 1984).

145~ ex~ple of ~ch a tw~ology is “Grateful Meal,” a system ~at helps u~rs fo~~ate ~mches for tie datab~ of tie Nation~ Library of

Medicine. Progress is also being made on software to compensate for human inconsistencies in searching and navigating-the tendency to use different

synonyms to refer to the same topic on different days, for example. G. W. Furnas, T.K. Landauer, L.M. Gomez, and S.T, Dumais, “The Vocabukuy

Problem in Human-System Communications,” Communications of the Associatwnfor Computing Machinery, vol. 30, No. 11, November 1987, pp.

964-971.

l~om Skwm, ~it~~ opi~on, Be~vlo~ ati Information Technology, VOI 6. No- 2, A@/June 1987, P. 95.

ldTRob Horn, (wanginst!i~lnet! rhorn on tie USENE~ a computer mad network). The general confusion over the importance Of COmpUter skills hm

been evidenced by the ephemeral boom of “computer camps.” There were over 500 overnight camps offering computer training as an activity at the

phenomenon’ speak in the summer of 1984, and about 20 devoted exclusively to teaching computer skills. By 1987, there were fewer than 200 offering

any training and only several full-time computer camps. Jim Lemonn, American Camping Association, personal communication, Dec. 10, 1987.

148A fairly in~~sting definition, relevant also because it is nontechnology-specific, is the one recently advanced by the National Assessment of

Educational Progress: “using printed and written information to fimction in society, to achieve one’s goals, and to develop one’s knowledge and

potential.” Irwin S. Kirsch and Ann Jungeblat, “Literacy: Profiles of America’s Young Adults,” National Assessment of Educational Progress, Princeton,

NJ, 1986, p. 3.
232 ● Critical Connections: Communication for the Future

an online keyword search? 149 Will literacy in the

year 2005 mean the ability to use a spreadsheet? To

manage a hard disk? To hook up an old-style 1980s

1200-baud modem and get it running? 150

Finally, some argue that regardless of the technological environment, literacy will still rest on basic

abilities which, by many current accounts, are still

severely lacking. According to two writers:

The information gap is not likely to be solved by

easier-to-use interfaces, better ergonomic designs, or

artificially intelligent programs. [These systems]

require basic reading literacy, knowledge and certain

cultural backgrounds, to be used effectively and

employed beyond the level of simple entertainment. 151

The question of promoting literacy in new communication technologies is inextricably intertwined

with the question of socioeconomic factors and

access to these technologies. But in a society where

many will not be able to afford to buy technology for

their homes, public-access facilities may be crucial

to maintaining certain minimum levels of communication competence. When the telephone emerged in

the early 1900s, one of the primary functions of

public telephones was to allow people to learn to use

them by watching others.152 Other public-access

facilities-from schools to libraries-have traditionally provided a repository for the expertise, in

both print and human form, to help people communicate or get information.

A new vision of the public-access facility, to help

individuals cope with the complexities of information-age tools, is perhaps in order. In recent years,

there have been several noteworthy initiatives.

“Hands-on” learning centers-part museum, part

classroom, part recreation center—seem to be taking

hold across the country. One example is “Playing to

Win,” a New York City-based nonprofit center,

located in the basement of a housing project

building, where neighborhood residents can work

with and learn about computers. On a larger scale,

the Boston Computer Society is planning a $3

million “Computer Discovery Center” to address

people’s basic questions such as: “What can I do

with a computer?“ “What do I need to know about

computers?” and to “help them feel in control of,

rather than controlled by, technology .’’153

Socioeconomic Factors

The relationship between socioeconomic status

and access to communication systems has traditionally been a matter of lively debate and a focus of

policy efforts. The concept of universal service, for

example, was developed when access to a telephone

was deemed vital for an individual to function in

society, 154 Since the 1970s, the debate over the link

between socioeconomic status and “access” has

intensified, with some claiming that there is an

increasing stratification of society based on differential access to communication tools and information

sources.

155 Others have questioned the validity of

these claims, countering that many innovations such

as computers and satellites are indirectly benefiting

.—. —

ldg~the ability to krtowwhennotto use an online system? Accordirtgto Edmund Pellegrino, it is important for individuals to know “what information

[they] want processed, what has been left out, when to ditch the program or the algorithm, and whereto go to read it for [themselves].” Edmund D.

Pellegrino, “’Ilte Computer and the Book: The Perils of Coexistence,” Cole (cd.), op. cit , footnote 58, p. 86.

l~~olynn Van Dyke lists the general categories into which most academic researchers currently divide “computer literacy:” f~lliwity with

computers and data processing (“awareness”); ability to use applications programs; ability to program; and knowledge of the ways in which computerized

systems are integrated into the social order. These categories may soon begin to divide up mto more categories, as authoring systems become available

that will allow ptmple to design and actually construct programs of vaying sophistication without understanding the nitty-gritty of computer language

semantics and structures. Van Dyke, op. cit., footnote 130, p. 367.

lslvit~~ and Venkaksh, op. cit., footnote 143, p. 73.

152..cwy, op. cit., f~rnote Q& p. 13. It sounds silly now, but at the turn of the century, “telephone literacy ’’courses were offered commercially. ‘loYd

Morrisett, in Michael Rice (cd.), “Toward Harnessing New Electronic Technologies to Meet the Needs of Elderly People,” report of an Aspen Institute

Planning Meeting, 1987.

153From the ~d.r~sing li~ratue of the Boston computer Society. ~ Swden, some villages have “tele-cot~ges” quip~d with a variety Of high

technology equipment. These provide an information bank and training center; provide services to small businesses; create a network of competence;

and create employment in rural areas. Funding comes from county government and mumcipal boards, and Swedish Telecom. “The Tele-Cottages in

the Nordic Countries,” Telecommunication Journal, vol. 55, No. V, May 1988, pp. 307-310.

154fiOw.mbsi&es ad “lifel~e” pro~ms have ~n the chief weapons in fie battle to get a telephone in evq home, a battle that hm not yet been

completely won,

lS5~e= re=whers sw~ of ~omm~ication gaps ~tw=n he “info~atlon rich” and he “information poor.” See, for ex~ple, OSC~ Gandy, “The

Politicat Economy of Communications Competence,” Vincent Mosco (cd.), The Polincal Economy of I#ormztion (Madison, WI: University of

Wisconsin Press, 1987). See also Cecilie Gaziano, “The Knowledge Gap: An Analytical Review of Media Effects,” Communication Research, vol. 10.

No. 4, October 1983.
Chapter 8-Communication and the Individual ● 233

the entire population,156 and that other innovations

will follow historical patterns and achieve widespread dissemination after initial adoption by an

affluent minority.157

From either point of view, questions emerge. How

strongly does income correlate with access to

communication systems? How is this relationship

changing with the emergence of new technologies?

Are there classes of technology-empowered individuals, and might new technologies sharpen or blur the

divisions between these classes? And, as Ben

Compaine asks of the new tools and capabilities:

What are necessities, what are frills, and what falls

in a debatable middle ground?158

There has traditionally been some link between

communication behavior and socioeconomic status.

People without telephone service, for example, have

generally been poorer, younger, and less settled than

the rest of the population.159 And people from

higher-income households read more books,160 and

could better afford magazines, long-distance calls,

and transportation for face-to-face interaction.

Nonetheless, the major systems of communication

(television, radio, basic telephone service, newspapers, and the postal service) have achieved widespread penetration and use in most strata of society.

Recent technologies, however, have broken this

pattern, running into what one observer calls “penetration Walls. "161 Although these products and services are expected to achieve greater penetration over

time, income appears to be a strong factor limiting

this penetration. Penetration of videocassette recorders, for example, seems to be reaching a plateau at

between 60 and 65 percent. With respect to computers, while 21 percent of all respondents in a survey

conducted by AT&T, Consumer Federation of

America, and the American Association of Retired

Persons said they owned one, the figure was 15

percent for Black respondents, 6 percent for those

with incomes below $10,000 a year, and 3 percent

for those aged 65 and over. The average member of

the Boston Computer Society—at 23,000 members

the country’s largest computer-users group-earns

$50,000 a year, about double the Nation’s median

annual income.162

Part of the reason for this trend may be the

increasing range of available services and capabilities, with a corresponding range of prices and fees.

In the past, a household either had a telephone or it

didn’t. Individuals could either get a book or

periodical, or they couldn’t. They could either send

a letter or they couldn’t. Today, a telephone subscriber can have touch-tone service, custom-calling

services, measured service, wide-area calling,

speed-dialing, cellular service, and any number of

other features. A bibliographic search can be done in

the card catalog-the old-fashioned way-or via

one of several different computer databases, containing either citations only or full copy. A text message

can be sent via paper mail, electronic mail, facsimile,

or overnight courier. In short, the range of communication options is much wider.

ls~ers cite ex~ples such as incre~ing availability of diverse video programming and new calling services as evidence of benefits acCming to a

large number of Americans. Call-waiting, for example, offers the same flexibility previously provided by a second telephone line—at a fraction of the

cost.

lsTBen Comptine, ‘c~f~ation Gaps: Myti or Reality,” Telecommunications poli~, Mach 1986, P. 11.

158~id.

ls~oj=tsmv,JointTelecomrn~ications proJwt, Conswer Federation of America, American Association of Retired persons, and AT&T> Feb.

12, 1987, p. 21. lle majority of households without telephones had incomes below $10,000 per year. Other studies show that although 92 percent of

all households have a telephone, only 81 percent of Black and Hispanic households have one. Entire States fall well below the national average, as do

many inner city areas. See also “bw-Income Households in the Post-Divestiture Era: A Study of Telephone Subscribership and Use in Michigan,” study

prepared by the Michigan Citizens Imbby for the Michigan Divestiture Research Fund, October 1986. These figures are especially significant because

studies have shown that people are likely to reduce their spending on medical care and food before they will take a cut in telephone service. “Let’s Talk

Telephones,” Telecommunications Consumer Coalition, 1987, as cited in William Evans, “Towards an Equitable Information Age: Comments and

Suggestions Regarding Recent OTA Proposals,” Temple University, unpublished paper, Mar. 16, 1987.

I@Book re~ership rises progressively with income, from 35 percent of those earning less than $15,000 per year tO TO perCent of those m~ing more

than $k$0,000. Cole (cd.), op. cit., footnote 58.

161C~y, op. CIL, fOOmOte 30. p. 7.

162BOSKXI conlpu~r Society, and U.S. Bureau of the Census, “Current Poptdation Reports.” Such data go on and on. tieStudy found, for ex~Ple>

that penetration of custom-calling services [call-waiting, call-forwarding, and three-way calling] was 34 percent among households with yearly incomes

over $50,0(XI, 32 percent in the $35,000 to $50,000 group, and 23 percent in the $25,000 to $35,000 group. “Custom Calling and the Promise of Enhanced

Consumer Communications,” Yankeevision, The Yankee Group, January 1987. For videotex, of the households subscribing to current home systems,

the average amual income is estimated to be in excess of $36,000, with one-half of those earning more than $50,000. “Videotex User Sumey: 1986,”

Link Resources, July 1986, p, 1.

89-148 0 - 90 - 6 QL 3
234 ● Critical Connections: Communication for the Future

Another relevant development is the recent proliferation of different types of communication hardware available for use in the home. Until the 1970s,

communication hardware for the home consisted of

telephones, radios, and TVs. Today, there is a

bewildering variety of hardware-from answering

machines to fax machines to digital TVs to modems-that can add hundreds or thousands of

dollars to the traditional household communication

budget. 163

It is difficult to determine whether this variety of

options and affordability levels will translate into a

more communication-stratified society, or what the

implications of such a society might be. For knowhow and motivation play a large role.l64 People in all

income brackets write letters to the editor and call in

to talk shows. Moreover, people in all income

brackets suffer the frustrations of the new technological environments. For example, an estimated onethird of investment-software buyers eventually scrap

their purchases “because the software baffles

them. ’’165 And, according to the Joint Telecommunications Project study, people at all income levels had

similar perceptions of the difficulty of getting

information about equipment repair and local service problems.l66 On the other hand, it is also clear

that there is a strong relationship between access to

the new technologies and empowerment. A recent

study by the National Assessment of Educational

Progress, for example, found that “computer competence” among students was linked to having access

to a computer in their home, just as traditional

literacy has been linked to home-support variables in

the past.167

In some cases, the difference between access to

traditional technologies and access to a new technology is one of convenience. Convenience has always

been a basis for price discrimination in communication-if you could afford a book, for example, you

could buy it and keep it. Otherwise, you could

borrow it from the library and would eventually have

to return it. But convenience may take on a different

import in the emerging technological environment

where ease of use seems to make the difference

between use and nonuse.

One concern for policymakers may be to assure

that pricing structures and conditions do not exacerbate the problem of stratification of access. In the

Joint Project study, three-quarters of those without

telephone service said they couldn’t afford deposits

and other one-time costs of establishing telephone

service, while only one-quarter said they could not

afford the monthly service charge.168 The lack of a

credit card may be another such barrier, as they are

a common prerequisite for subscribing to many

online services.

Another concern is that the increased use of

emerging communication systems may erode the

revenue bases-and therefore raise the costs-of

traditional, shared systems such as the U.S. Postal

Service, the telephone system, and libraries. Traditionally, these systems exploited economies of scale

to make basic communication capabilities and tools

widely affordable.

The role of such shared facilities will need to be

further examined, and possibly expanded, to consider the provision of affordable access to emerging

technologies. Today, individuals who cannot afford

a facsimile machine, a computer, or some other type

of tool must be able to pay high one-time usage fees

for access at commercial outlets ($10 per hour for

use of a computer, for example, and $5 per page for

facsimile machines). Much debate has centered

around the allocation of the costs and benefits of

such shared systems, particularly libraries and the

telephone networks. Telephone companies, for example, are offering new services (such as customcalling) for substantial additional fees. Some claim

that all ratepayers have subsidized the development

of these networks, developing hypothetical

“ratepayer equity,” and should have equal access to

such services without having to pay more.

lbsu~ess ex~rn~ ex~ndit~es drop, such as for movies, but this may not be the c=.

164Conver~ly, t=~olo@c~ kno~.hO~ dws not ~ways ~anslate ~to Sociwonomic success. Jane ue~~~r of ACORN points out that “a lot of

the new dead-end, lower-paying jobs require computer literacy.” Personal communication, Dec. 22, 1987. New technology can both reduce and raise

the level of skills rquired to function effectively in various situations.

lbs6’Gtig up: MOE Small Investors ‘lhrn to Computers for Assistance,” The Wall Street Journal, June 25, 1987.

t66Joint Tel~omm~ications pfOJW, op. Cit., fOOtIIOte 159.

167~c~] E. M@inez and pJ~cy A. Mead, “computer Comptence: The Fi~ Nation~ A~ssment,” Nation~ Awsment of EducatiOnd prOglWS,

Princeton, NJ, April 1988. Even Everett Rogers, who denies that there is any functional need for a computer in the home, says that: “One of the main

functions of home computers is to learn how to use a computer.” Rogers, op. cit., footnote 141.

168Joint Tel excommunications Project, op. cit., footnote 159.
Chapter 8--Communication and the Individual ● 235

System Design and Support Factors

From the catalogs of the very frost libraries to the

switchboard operators of the earliest telephone

system, communication systems have always provided guidance and assistance, whether in human or

technological form, to their users. Today, the extent

and nature of such guidance and assistance is at the

crux of many debates over the design of future

communication systems, and many feel that the

results of these debates will strongly influence the

way in which individuals use the technology.

The features in question are the means by which

individuals interact with and discover options within

their communication and information environment.

In technology circles, they are known as “navigational tools” and “interfaces.” But most laymen

think of them as an unrelated collection of tools and

aids—from physical systems like telephone

books, 169 TV guides, newspaper headlines, and

computer menus, to human helpers like librarians,

teachers, and friends. These tools and resources are

vital to our ability to communicate. *70

There is much evidence that individuals are not as

aware as they might be of their communication

options, and that this lack of awareness is a barrier

to use of communication systems. In studies of cable

TV viewers, for example, researchers have found

that viewers are not very aware of the different

channels available to them over cable, let alone the

different programs.

171 And a big problem in libraries, according to Carol Henderson of the American

Library Association, is that people go away thinking

“there’s nothing there” because they don’t know

what databases, or sources in general, are available. 172 Indeed, research shows that individuals’

communication behavior is very often dictated

simply by chance circumstances-viewing “whatever is on” or reading whatever happens to cross

their paths.173

Not only do people not know what communication options are available, but they often lack crucial

information about pricing and conditions of use—a

deficiency that can also be a major barrier to use.174

Since the divestiture of AT&T, consumer advocates

have consistently complained about complicated

pricing structures, inconsistent pricing, and lack of

a standardized source of information about such

pricing.

175 Due to competition, there are more

services available and more complex pricing

schemes to go with them.176 And information on

long-distance rates and calling procedures is no

longer included in the one place people typically

think to look—the telephone book.

Compounding this lack of awareness of communication options and conditions has been their recent

proliferation, dubbed by some as “information

overload.” The effects of such proliferation, which

were first noted in marketing studies of how much

product information consumers could digest, are

highly disputed. Most agree, however, that by

almost any measure the flow of information is

quickening. For example, the number of books

published annually in the United States increased

from 28,600 in 1965 to 51,000 in 1986.177 As Pool

noted:

169’fhc telephone~k iSthemoSt frquent]y ~~ed reference so~ce_21 Wrcentof the population cons~t it on an average day. The runner-upis material

on food preparation, at 18 percent. Neuman, op. cit., footnote 8, p, 8.

170M~ ~nan, “The ~menslons of perceiv~ Accessibility to Information: ~plications for the Delivery of hfornxition Systems and Services,”

Journal of the American Society for Information Science, September 1985.

ITICarrie H~ter and Bradley Greenberg, “Cable and Program Choice,” Zillmann and Bryant, op. cit., footnote 6.

172& ano~er exmple of tie fip~ance of awareness: when a cable TV experiment went a~ in southern Maine last year, a university extension

course on firefighting intended for local f~ehouses was piped instead into ail local residences. The next day, the university was flooded with requests

to take the course, and enrollment tripled.

ITsNeuman, op. cit., foomote 8, p. v.

174A gwd illusuation of~is is the con~oversy over price-b~d]ing for ~rno~aphic “dial-it” services. Peter Huber notes that when the costs of the

pornographic service are billed separately from the costs of the telephone time for these calls-that is, when people can figure out how much is going

to the pornography provider and how much to the phone company—use falls off sharply. Huber, op. cit., foomote 97, sec. 8.7,

175&em&g few of tie ~omplexlty of telecommunication rate s~ctues is he main obstacle to ge[t~g nonprofi[ organizations onto computer

networks with each other, according to Denise Vesuvio, Executive Director, Public Interest Computer Association, Washington, DC,

176@e rWent Study conducted in ~chigan showed hat 54 percent of telephone users did not know which type of service they were receiving. Almost

20 percent said they did not know why they chose the type of service they did. Another 20 percent said they chose their service because it was the least

expensive. “Low-Income Households in the Post-Divestiture Era: A Study of Telephone Subscribership and Use in Michigan,” study prepared by the

Michigan Citizens bbby for the Michigan Divestiture Research Fund, October 1986.

ITTBowker Annual, 1987.
236 ● Critical Connections: Communication for the Future

More and more material exists, but limitations on

time and energy are a controlling barrier. .. 178

Daniel Dennett agrees:

Technology has created innumerable opportunities for us to know, and to act. We want to deal

responsibly with this bounty, but we do not know

how. When we turn to the question of which priority

should engage our best efforts, we drown in the

available information, unable to make truly principled decisions.179

Computer researcher Thomas Malone recognizes a

similar frustration among participants in electronic

mail networks who:

. . . often adopt crude methods, such as removing

themselves entirely from [electronic mailing] lists

that are of occasional interest, in order to avoid being

inundated. 180

In this context of information overload and

serendipitous communication behavior, minor details in the design of the tools and systems that guide

and assist individuals are often the deciding factors

in determining communication behavior. The impact of channel selectors, for example, has been

shown to be subtle and complex. Researchers have

found that subscribers to older cable systems that

have two dials (one for the cable and one for the

broadcast charnels) generally tend to concentrate

their viewing on the channels on either one or the

other.181

A good example of how design changes can

change an individual’s communication behavior is

the experience of public television. When cable

television came along, with its tuner mechanism that

encouraged sequential scanning of channels, public

television’s ratings improved markedly. No longer

easily identified with a knob position, the Public

Broadcasting Service became just another video

channel. 182 In light of the individual’s need for more

and better assistance in using communication systems, therefore, it is appropriate to consider what the

role of policy might be in encouraging systems that

provide such assistance. First, however, it is important to realize that, increasingly, the technological

tools that provide guidance and assistance are

viewed by programming and service providers as a

new strategic opportunity to influence individuals.

Indeed, there is a very fine line between many access

tools—like telephone directories-and advertising.

This is especially true in the emerging “online”

electronic environment, where the structure and

emphasis of access mechanisms like menus and

indexes may play a greater role in determining

behavior than in traditional media.183 The implication of this is that any attempt by policy makers to

structure such access mechanisms will be inherently

controversial.

The promise of the new technology is to provide

cheaper, more understandable, and more customized

guidance and support to all users of communication

systems. New computer-based directories, for example, should be able to present information in

different forms to different individuals. Many scholars, who claim that information gaps are largely a

result of the way information is presented, see in new

technology the potential to help close such gaps.l84

A simple example is that of language barriers. The

Hispanic population is growing four times faster

than the U.S. population as a whole.185 But most

telephone-based information services (directory assistance, operators, etc.) provide English-only service. 186 The use of dual-language online databases

ITsIthiel de Sola pool, “Tracking the Flow of Information,” Science, vol. 221, No. 4611, Aug. 12, 1983, p. 609.

ITgDaie] c. ~mett, ~~~omation, T~hnology and the Vimes of Ignorance, ’’Daedufus, VO1. 115, No. 3, summer 1986 P. 148. He continues: “@r

responses exhibit a sort of Rorschach magnification of whatever minor personal proclivities emerge from the noise of competing and imponderable

alternatives.’;

l%mx w. M~One et ~., “~telligent ~omation.sh~ng Systems,” co~m”catio~ o~the ACM, VO1. 30, No. 5, May 1987, p. 390.

lslHeeter and Greenberg, op. cit., footnote 171.

182Ro&~Lipp~cot~ f-er dlEtor of interactive media at WGBH-TV, Boston, MA, pe~n~ comm~cation, Apr. 21, 1987. “It [cable] put us on

the menu in a way that we were never on the menu before.”

183~deWndent fi~ pr~ucer, La~nce D~es~, ~s new technology m ~ opport~ity to incr~ public aw~eness about available pmgr~ming,

particularly educational and informational videos. Daressa, who notes that how program listings “play” is almost as important as the quality of the

programs themselves, declares that “government should take a position against couch-potatodom” by subsidizing the marketing of such programming.

Personal communication, June 22, 1988.

l~For exaple, Brenda Dcrvin, “Categorization of Communication Users,” OTA contractor t@POI% September 1987.

1S5JU Schwartz, “Hispanics in the Eighties,” American Demogru@ics, vol. 10, No. 1, hUNXUY 1988, P. 43.

1-Cmpany is m~ng pay telephones that, in ~dition to having an LCD display for operating instructions or tivertising messages, have voiceinatruction in a choice of languages. The Star-Ledger, Trenton, NJ, Feb. 9, 1987.
Chapter 8-Communication and the Individual ● 237

and other systems such as voice synthesizers and

computerized language translators could eliminate

this problem.

Another potential of the new technology for

easing the individual’s communication burdens is

the creation and adoption of software tools to help

people filter, sort, and prioritize their communication. Such tools are currently under development.187

They may allow individuals to better control their

information diet, to be more consistent, and to track

specific topics rather than whatever happens to

present itself randomly.188

Critics note that such tools will only be effective,

however, to the extent that an individual’s communication environment is integrated—that is, to the

extent that one “navigational tool” provides access

to a variety of resources and services. *89 Some have

likened the current level of integration in cornputerbased media to having four different telephone sets

on your desk, three to call different areas of town and

one to call long-distance.l90

lgTM~onedes~fi& me of tie subtle criterion which these filters can be programmed to base their decisions: the characteristics (status, rWutatiOn.

etc.) of a message’s sender; the “cost” of reading a message (e.g., how long it is); and the “cost” to the sender of sending it, among others. He also

acknowledges that the challenge is great: “People may have difficulty knowing what they want and do not want. . . until they have seen it.” Malone et

al., op. cit., foomote 180.

lss’~e effo~ ~~ to monitor al] tie avti]ab]e m~ia for a snippet of information or entertainment that resonates closely with one’s tfites md

interests is usually more than most are willing to invest,” says Neuman. “The result is that the average audience member satisfies, following primarily

the most widely-publicized bestsellers in each medium.” Neuman, op. cit., foomote 8, p. 210.

la%uch ss early ~lephone operators, who could tell you what was playing at the movies, where the town doctor was, what time it was, or connwt You

to somebody else.

l~er5 note wexi~kg Pawr catalogs like the Yellow Pages are hard to use because they lack integration. “What’s needed 1s a thesaurus-like

prompting system,” says Lloyd Mornsett, “to help the person find the information. ” Morrisett, in Rice (cd.), op. cit., footnote 86.
Part III

Crosscutting Communication

Issues and Alternative Policy

Strategies for Their Resolution

The United States has entered a new communication era. Recent advances in information storage,

processing, and transmission technologies, occurring in a partially deregulated and more competitive

economic climate, are rapidly reconfiguring the

Nation’s communication infrastructure. The revolution in computers and communication technology

has already transformed the regulatory and market

structure of communication-related industries, dramatically changing the way in which information is

created, processed, transmitted, and made available

to individual citizens and institutions.

Changes are also taking place at the international

level. Because the new technologies encourage the

flow of, and the demand for, information-based

products and services across national borders, they

are wearing away the lines that historically have

divided domestic and international communication

systems and markets. Communication is now one of

the fastest growing sectors in the international

marketplace, and international conglomerates are

increasingly being formed to provide products and

services both at home and abroad.

New communication and information technologies hold promise for a greatly enhanced communication system that can meet the changing communication needs of an information-based society, At the

same time, however, these technologies are generating a number of significant social problems. How

these technologies evolve, and who reaps their

benefits and bears their costs, will depend on

decisions currently being made in both the public

and private sectors. This study provides a context for

evaluating these decisions.

To assist Congress in determining an appropriate

role for the Federal Government in the development

and use of these new technologies, and based on the

analysis presented in previous chapters, Part III will

outline:

●

●

●

the current problems or issues that might

provoke the need for a Federal policy response,

some alternative ways for the Federal Government to address these issues, and

the potential effects of policy alternatives on

different players and societal realms.

Other chapters identify and discuss policy issues

as they relate to specific sets of players in particular

realms of social life. Chapters 9 through 13 will

address these issues as they overarch and cut across

one another. While all five dimensions of the

communication infrastructure discussed in Part III

are critical, they cannot all be maximized. Trade-offs

are required. For example, providing for security is

often at the expense of access and interoperability;

and interoperability sometimes delays innovation

and modernization.
Chapter 9

Equitable Access to

Communication Opportunities
CONTENTS

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243

THE PROBLEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243

Defining Universal Service . . . . . . . . . . . . . . . . . . +. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253

Implementing Universal Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254

STRATEGIES AND OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254

Boxes

Box Page

9-A. Comparative Shopping for Intrastate InterLATA Directory Assistance . . . . . . . . . . . 247

9-B. Problems Encountered in Setting up an Interactive Data Network . . . . .. +.,...... 248

Figures

Figure Page

9-1. Changes in Allocation of Advertising Revenues in Television . . . . . . . . . . . . . . . . . . . 244

9-2. Comparison of Growth in Telecommunication and MIS Spending, 1988 and 1993. 249

9-3. 1988 Product, Revenue Breakdowns for Time and Warner. . . . . . . . . . . . . . . . . . . . . . 251

9-4. Congressional Strategies and Options To Address Access to

Communications Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256

Tables

Table Page

9-1. A Decade’s Decline in Network Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... ..+.,.... 245

9-2. Consumer Spending: Pay-Per-View v. Competitors , ..,............++, . . . . . . . . . 245

9-3. Strategic Advantages of Recent Developments in the LAN Industry . . . . . . . . . . . . . 252

9-4. Sources of Public Broadcasting Income, 1987 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
Chapter 9

Equitable Access to Communication Opportunities

INTRODUCTION

In the United States, the government has traditionally fostered public access to information on the

grounds that its widespread use was critical to a

healthy polity and economy. For example, the

government long permitted the postal service to

charge below-cost rates for newspapers and magazines. State and Federal telephone regulators have

endorsed tariffs that maintained low rates for local

telephone service at the expense of higher rates for

long-distance service. Similarly, commercial broadcasters were allowed to charge market-based prices

for carrying advertising messages, but were required

to spend a portion of these revenues on the coverage

of public affairs to meet public interest standards

such as the Fairness Doctrine. Until 1987, cable

operators were required to carry local broadcast

stations, and many of them still must provide public

access to producers free of charge.

The provision of access requires a number of

things. In addition to communication pathways,

information content, and audiences, individuals also

need to have the skills-as well as access to the

navigational tools-required to locate these resources in a timely fashion and in a form appropriate

for their needs. In all realms of life, unequal access

to these resources leads to disparate advantage, and

ultimately to inequalities in social and economic

opportunities.

THE PROBLEM

OTA found that changes in the U.S. communication infrastructure are likely to broaden the gap

between those who can access communication

services and use information strategically and those

who cannot. Moreover, the people most likely to be

adversely affected will be those for whom the new

communication technologies are held out as a means

to improve their circumstances-the poor, the educationally disadvantaged, the geographically and

technologically isolated, and the struggling small

business.

One barrier to access that maybe much greater in

the future is cost, given shifting subsidies due to

deregulation and changes in the financing and

operation of communication services. Another barrier is the discretionary power of media owners to

determine what information will be disseminated.

OTA found, for example, that the first amendment is

being used more and more as a device to protect the

economic interests of media owners. In a number of

instances, this can actually compromise the goal of

freedom of expression.

OTA identified five major factors that are likely

to contribute to these kinds of access problems:

Factor 1: Shifting subsidies due to cost-based

regulation and changes in the financing and

operation of communication services.

The prices that individuals pay for communication and information services are determined to a

large degree by how these services are financed and

how their costs are allocated. Where there are

cross-subsidies, as in the historical cases of the

telephone and postal service, or where costs are

borne by advertisers willing to pay for information

distribution, consumers may be charged less than the

actual service cost. Financial arrangements such as

these can facilitate widespread access to communication and information services.

Technological change, together with changes in

the regulatory structure, has led many communication providers to try to price access closer to real

costs and to structure their prices based on measured

usage, thereby eliminating many traditional sources

of subsidies. ] In telecommunication, for example, a

regulated monopoly has been replaced by what are

more or less competitive markets in which regulaI It is impo~t to note hat the problems involved in identifying real costs have proven to be intractable, and they are likely to b2cOme even more

difficult to solve in the future, given the deployment of the intelligent network. For a discussion of past and future problems entailed in identifying costs,

see Anthony G. Oettinger, “The Formula is Everything: Costing and Pricing in the Telecommunications Industry,” Program on Information Resources

Policy, Center for Information Policy Research, Harvard University, Cambridge, NW, 1988, See also Roger G. Nell, “Telecommunications Regulation

in the 1990s,” Stanford University, Center for Economic Policy Research, No. 140, August 1988, p. 14; Alfred Kahn and William B. Shew, “Current

Issues in Telecommunication: Ricing,” The Yale Journal of Regulation, vol. 4, No. 2, 1987, pp. 191-256; Richard J. Solomon and Loretta Anania,

“Paradoxes and Puzzlwof Digital Networks, Part 2,” TefecoMunications, February 1987, pp. 28,30, 32; and Bruce L. Egan, “Costing and Pricing for

an Integrated Digital Telecommunication Network,” Telecommunications, November 1987, pp. 47, 49, 50, 52, and 54.

-243–
244 ● Critical Connections: Communication for the Future

tion plays a greatly reduced role. In this deregulatory

climate, where competition is not only allowed but

also fostered, discrepancies between costs and prices

are increasingly less tenable. For wherever prices are

kept artificially high, users will seek alternative,

private solutions to meet their communication needs.

To avoid this kind of bypass of the public telecommunication network, the Federal Communications

Commission (FCC) has begun to shift costs from

interstate interexchange service to local exchange

service by imposing subscriber line charges and by

capping the interstate share of local plant costs

assigned to interstate calls.2

Changes are also taking place in how mass media

are being financed and provided. Whereas in the past

much of the Nation’s entertainment and news

programming was sponsored and subsidized by

advertisers, and thus was available to a broad

segment of the population at a reduced price, today

this is less and less the case.3 Given the growing

number of distribution channels, there is now much

greater competition for audience share and advertiser revenues, as can be seen in figure 9-1.4 These

developments have had a significant impact on the

three major broadcast networks, whose audience

share has been declining over the past decade, as

illustrated in table 9-1. This year, for the first time,

the networks’ prime-time viewing audience fell

below 70 percent to 67.4 percent,5 while their share

of total television advertising revenues is expected

to decline from 36 to 30 percent.6 Industry pundits

expect this erosion of network audiences and loss of

advertising share to continue into the 1990s.

Figure 9-l-Changes in Allocation of Advertising

Revenues in TeIevlslon

1988* ($ millions)

~ Big Three nets

h $9,435 (35.5%)

)

Other cable

/$363 (1.4%)

Cable networks l— $1,042 (3.9%)

Local spot

$7,525 (28.3%)

1983 ($ millions)

Three nets

955 (41.1%)

$4,827 (28.7%)

SOURCE: Channe/aFie/d Guide, 1989; McCann-Erickson; cable data

from Paul Kagan Associates Inc. Reprinted with permission.

Meanwhile, advertiser-based cable service has

registered significant gains, both in terms of its

audience share (UP by 30 percent) and advertising

2A ~brof ~Ple have ~W~ that the move to bfing @ces closer to cows hm, in fact, not pceed~ quickly enou~ due to tie resistance Of

State policymakers. For one such discussion, see Robert W. Crandall, “Fragmentation of the Telephone Network,” Paula R. Newberg (cd.), New

DirectionSin Telecommunicatwnr Policy, vol. 1, Regulatory Policy: Telephony andMass Media (Durham, NC: Duke University Press, June 1989), pp.

222-246.

sIt should be nod that exactly how much of a reduced price is an important public policy issue. As Ben Bagdikian has Pointed out, $dveti-b~ed

media may not be a bargain for consumers because the costs of advertising may be passed on in terms of higher prices. These prices reflect not only

direct costs of the product advertisement; they also reflect the role that advertising plays in fostering oligopoly by raising the cost of entry into established

markets. See Ben H. Bagdikisn, The Media Monopoly (Boston, MA: Beacon Press, 2d cd., 1987), especially ch. 8, “The High Cost of Free Lunches,”

pp. 134-151.

On the other hand, as VictorE. Ferrall, Jr., has noted, “It is often said that ‘fnx’ television is not in fact free because consumers pay for the programming

they receive by paying for the cost of advertising, which is included in the price of the products advertised on television. True enough, but this ‘price’

for television programming is totally separate from and unrelated to use of the television service. Programs are available at no charge to viewers who

do not choose to purchase advertised products and, conversely, product purchasers pay for television advertising whether or not they view the programs

in which the product was advertised, or even own a television receiver.” Victor E. Ferrall, Jr,, “The Impact of Television Deregulation on Private and

Public Interests,” Journal of Corrun~”cation, vol. 39, No. 1, Winter 1989, p. 10. For discussions of the role of advertising, see John E. Cslfee,

“Advertising and Market Performance: An Interpretative Survey of the Literatllre,” University of Maryland, prepared for the National Association of

Broadcasters, Jan. 12, 1988.

d~e mlation~ip between audimce share and advertising revenues is becoming more and more pronounced, given the development and u$e of

audience-measurirt g devices such as people meters.

5“~~-Network Viewing Falls Below 7096,” Broadcasting, Apr. 17, 1989, p. 29.

~cstudy RdCM cable Ad Revenues to Triple by 1995,” h4uMchannelNews, NOV. 21, 1988, P 69.

71bid.
Chapter 9--Equitable Access to Communication Opportunities ● 245

Table 9-l-A Decade’s Decline in Network Share

Combined

Year ABC CBS NBC total

1978-79 . . . . . . . . . . . .

1979-00 . . . . . . . . . . . .

1980-81 . . . . . . . . . . . .

1981-82 . . . . . . . . . . . .

1982-83 . . . . . . . . . . . .

1983-84 . . . . . . . . . . . .

1984-85 . . . . . . . . . . . .

1985-86 . . . . . . . . . . . .

1986-87 . . . . . . . . . . . .

34%.

31

29

29

28

27

24

23

22

30%

31

30

30

29

28

27

26

25

2 7 %

28

2 6

2 4

::

26

2 7

2 8

91%

90

85

83

81

78

77

76

75

1987-88 . . . . . . . . . . . . 22 22 26 70

60URCE: Nielsen MediaResearoh. Reprinted withpermission.

Table 9-2--Consumer Spending:

Pay-Per-View v. Competitors

1987 1996

spending Percent spending* Percent

Medium ($billions) of total ($billions) of total

Pay-per-view . . . . . . . . 0.06 0.3 2.60 6

CableTV . . . . . . . . . . . . 6.59 32.0 17.32 40

Home video . . . . . . . . . 6.18 30.0 12.99 30

Movies . . . . . . . . . . . . . 3.91 19.0 5.63 13

Pay able. . . . . . . . . . . 3.71 18.0 4.76 11

● Projected

80URCE: ChanneWFieldGuide 19B9, p. 102. Reprinted with permission.

revenues, which are predicted to triple by 1995.7

Also cutting into the network audience share is the

growth of pay cable and pay-per-view services. Pay

cable can now be found in 28.8 percent of all TV

homes,8 while the number of homes being offered at

least one pay-per-view channel now totals 6.8

million, an increase of 70 percent from 1978 to

1988. 9 That this trend toward media fragmentation

is likely to persist can be seen from table 9-2, which

compares 1987 and 1996 consumer spending per

medium and each medium’s percentage of total

media spending.

In the absence, or with the decline, of traditional

subsidies, the Federal Government will need to

determine if and how it should act to ensure

equitable access to communication and information

services. If, for example, entertainment programming is increasingly provided on a pay basis rather

than through advertiser-based distribution, the cost

of access may be too high for some. This issue of

increasing costs has been raised most recently with

respect to cable television. At recent hearings of the

Senate Antitrust Subcommittee, Senator Howard

Metzenbaum, for example, claimed that, since the

deregulation of the cable industry in 1984, rates for

cable service have risen on an average of 32 percent,

making it the highest rate increase for all service

commodities.10

As described in chapter 12, the amount of subsidy

available for communication services is also likely

to be decreased in the future to the extent that

business-users, who have traditionally subsidized

residential and small-business users, migrate from

the public network and set up their own telecommunication systems. Under such circumstances, fewer

resources will be available for publicly shared

communication services. Similarly, if communication services that were once provided through the

public network, and thus served to cross-subsidize

one another, are now unbundled and provided in the

marketplace, many small users may have to pay

considerably more for services.

Factor 2: Increased transaction costs and increases in the complexity of the tools required to

access and effectively use information.

To be effective communicators, people need to

know how to use the technology through which their

messages are mediated. Moreover, to find information relevant to their particular needs, they must be

able to locate the appropriate source. To use this

information strategically-whether in politics, business, or other realms-they must be able to find it in

a timely fashion. Finally, to communicate effectively with others, individuals not only need to

identify their audiences and the most cost-effective

means of exchange, but they must also be able to

package their messages in the most appropriate

technological format. These prerequisites represent

the transaction costs of effective communication—

costs that are often overlooked.

spaUl NOg~OW~, ‘*Hwd work pays,” Channels/Field Guide, 1989. P. 89.

gFrank ~v=e, “At the Crossroads,” Channels/Field Guide, 1989, p. 102.

lw~e W~hington post, Apr. 13, 1989, p. D-24. At the request of Senator Metzenbaum, the General Accounting Office undertook a study of cable

rates from 1986 to 1988. ‘Rte study concluded that basic cable rates in OhiO had increased during that period by 27 percent. See U.S. Congress, General

Accounting Office, Ohio Cable Television Rate lncreuses, 1986 to Present (Gaithersburg, MD: U.S. General Accounting Office, September 1988).

Citing figures from the Bureau of Labor Statistics, representatives of the cable industry claim that the average subscriber’s bill has increased by only

14.5 percent. They note, moreover, that this increase is not particularly high, given that rates prior to deregulation were artificially low. See “The Big

Chill on Capitol Hill, ’’l?roudcusting, Apr. 17,1989, pp. 27-29; and “Inflation’s the Limit on Basic Cable Rates,” Broadcasting, May 22,1989, pp. 27-28.
246 ● Critical Connections: Communication for the Future

In the past, many transaction costs, especially in

the area of telecommunication, were hidden. For

example, as an integral part of the product they sold,

providers of telephone services included their own

technical expertise and assured interconnection and

connectivity. In addition, they provided services

such as directories, maintenance, protocols, and

routing. Today, while residential and business users

benefit from a greater choice of communication

services, they must assume the corresponding transaction costs on their own.ll

The typical household user, for example, needs to

develop the expertise to select the best provider of

equipment and service, recognize problems, and

negotiate or perform necessary repairs.12 According

to Carl Oppedahl, a telephone buff who advises

consumers on such matters, 13 in order to be an

educated consumer of communication services one

needs-among other things-to:

●

●

●

●

Box

understand the difference between a local

operating company and an interexchange carrier and the responsibility of each for providing

service;

know the difference between central offices

equipped with step-by-step, crossbar, and electronic switching systems and be aware of the

kind of services available from each;

understand the rationale and implications of

choosing between measured or flat-rate services or among other classes of services; and

know that an interface is simply another name

for a jack.

9-A, which outlines the steps entailed in

comparative shopping for intrastate interLATA

(local access and transport area) directory assistance, provides another picture of the numerous

factors the consumer now needs to consider when

choosing a service.

Businesses, too, will have to take greater responsibility for configuring their own communication

services, and for meeting their own particular

communication needs. In fact, as described in

chapter 5, many businesses regard this postdivestiture development as an economic opportunity

that allows them to employ their communication and

information systems strategically as a competitive

weapon to enhance their position in the marketplace.

However, putting together and maintaining a communication network not only entails considerable

expense; it also requires a high degree of expertise

and technical skill, as many businesses trying to

develop their own private networks have rapidly

discovered. 14 Whereas in the past, vendors typically

performed a number of key functions—such as

providing network management, developing industry standards, designing an optimum system architecture, planning the introduction of new technologies, and evaluating and assessing alternative products and services-today these tasks are either

performed or commissioned by business-users themselves.15 For one picture of the problems faced by

business-users, see box 9-B.

To meet the needs of business-users, new companies are emerging and old ones are reorganizing to

better position themselves to take part in what is now

a very lucrative systems integration market. According to the market research firm, International Data

Corp., for example, the system integration market is

growing at an estimated annual rate of 20 percent,

with revenues increasing from $8 billion in 1987 to

$22 billion in 1993.16 However, the costs of obtaining such services, whether by creating expertise

internally or by purchasing services externally, can

be considerable, especially given the lack of standards, the dearth of network management tools, and

a multivendor environment. It is not surprising,

therefore. that corporations are spending a steadily

I Isome of~e trm~ctim costs en~Ied in employing new technologies may be offset if the technologies reduce the cost of conducting business or

carrying out other activities. For example, by using new technologies, a consumer might reduce the costs entailed in searching for the best buy.

lzfJomeho~~ld usem haveconquered~is challenge, but many ot$crs have not. See Consumer Federation of America (CFA), American AsWiatiOn

of Retired Persons (AARP), and AT&T, Joint Te/ecommum”cat~ons firoject, paper presented at the annual assembly of the Consumer Federation of

America, Feb. 12, 1987.

13*, for exmpIe, his advice to consturte~ in Cad Oppedahl, The Telephone Book Gem’ng Whut You Want and Paying fiss For it (che~erland,

OH: Weber Systems, Inc., 1987).

14For discwSiomof=5 wh~ problems led &em t. @ve up~eir effo~to deve]~ private networks, see JOhII Foley, “Merrill shifts Gears: SOiiCitS

Network Bids,” Commun icationsWeek, Oct. 31, 1988, pp. 1, 58; see also John Foley, “Problems Force Users to Retrench,” ComrnunicatwnsWeek, Nov.

7, 1988, pp. 1, 57; and Kelly Jackson, “Red Ink Downs Net,” CornrnunicationsWeek, Nov. 21, 1988, pp. 1,43.

tSSan&aG. ‘Atck and A.M. Webster, “Vendors and Users: They Need to Start Building ‘1’ogether,” CO?rUWM icationsWeek, CLOSEUP, Feb. 29, 1988,

pp. 12-14. See also David Gabel, “Control of Large Networks No Dog-and-Pony Show,” Conywtenvorld, Nov. 7, 1988, pp. 83-89.

IGForadiscUsim, ~wBreib~, “Sys~ms Inte&ation Surge,” ConqmterworfdFocus onlnregration, Special Issue, Feb. 6.1989, Pp. 29-33.s=

also Neil Watson, “Modems and Mtdtiplexers: A Market Makeover,” CommunicationsWeek, CLOSEUP, Nov. 14, 1988, pp. C7-C9.
Chapter 9--Equitable Access to Communication Opportunities ● 247

Box 9-A-Comparative Shopping for Intrastate InterLATA Directory Assistance

“These calls, because they are to points outside of your LATA, are forbidden fruit to your LOC. Your LOC

is required to give the call over to your primary long-distance carrier. Yet the rate is set by your PSC [public service

commission], and the number of listings you get is set by your PSC, just as they are for LOC-handled calls. You

may find that you can save money by using 10XXX codes to get a free call or two from a secondary carrier. Then

again, the pricing policy set by your PSC may allow one or more free DA calls through your primary carrier.

The DA operator who answers works for an LOC (probably your LOC), yet if something goes wrong you will

only be able to get credit by calling your long distance carrier.

Puzzle 1: Area Codes Straddling LATA Boundaries

Colorado is all area code 303, and is split into two LATA--the Denver LATA and the Colorado Springs LATA.

Caroline lives in the Denver LATA and her exchange has converted to Equal Access. Her calls to points in the Denver

LATA are routed through the circuits of her LOC, while her calls to points in the Colorado Springs LATA are routed

through the lines of her primary carrier, MCI. The central office computer is programmed with a list of all the phone

exchanges in each LATA, which it uses to decide, on a call-by-call basis, whether to route the calls to the LOC’s own

lines or to the lines of MCI. If she dials 1-303-555-1212, and she has not yet quite decided whether to ask for a listing

in Denver or for a listing in Colorado Springs, is this an intraLATA or interLATA call? How does her central office

know whose lines to route the call to? Are the answers different if she asks for two listings, one in Denver and one

in Colorado Springs?

These questions come up only if she allows the central office to decide the routing of the call. She could use

10222 to force the central office to route the call via MCI, or could use her LOC’s 10XXX code (if they have one)

to force the routing to her LOC’s lines. In either case the price charged for the call is determined by the PSC, but

the prices may not be the same.”

SOURCE: Carl Oppedahl, The Telephone Book (Chesterland, OH: Weber Systems, Inc. 1987), pp. 135, 136. Reprinted with permission.

increasing proportion of their budgets on communication services, as can be seen in figure 9-2. Nor is

it difficult to understand why, given these circumstances, the majority of business-users (with the

exceptions being among the largest corporate users)

have yet to develop and deploy their communication

networks in an optimal fashion.17

Shifting the direct burden of transaction costs to

the communication-user has significant consequences

for equity. In fact, it may further increase the gap

between those who can access and use information

strategically and those who cannot, since not every

person or every business will be equally able to

assume these costs. As chapter 8 points out, many

Americans do not have the technical skills required

to take advantage of the opportunities afforded by

new technologies. Moreover, as chapter 5 describes,

many businesses do not operate on a scale that

permits them to become communication experts in

their own rights. In the past, these transaction costs

were essentially the same for everyone; increasingly, they are the basis for gaining competitive and

strategic advantage.

Factor 3: Growth in the economic power and

concentration of many media.

As described in chapter 4, integration activities in

the communication industries have generally been

curtailed by antitrust law and the establishment of

consent decrees, as well as by regulatory limitations

of ownership rights. Recently, however, the FCC has

sought to relax many of these rules, thereby encouraging rather than discouraging integration and

multiple ownership. In the area of broadcasting, for

example, the FCC has abolished the regional concentration rule, which prohibits the common ownership of

three commercial AM, FM, or television stations

where any two stations are located within 100 miles

of the third, and where the primary service areas of

any of the stations overlap. It has also eliminated the

“top 50” rule, which generally prohibited those who

owned or had interests in two or more very high

frequency (VHF) stations in any of the top 50

television markets from acquiring VHF television

stations in any of those markets. In addition, the FCC

has raised the ceiling for multiple ownership from 7

to 12 in each broadcast service, provided that the

audience reach of any entity in a particular service

17s=, foronediscussion, Steven Titch, Margie Semilof, and John Berrigan, ’’Missing Links,” CmavumzcationsWeek, CLOSEUP, Sept. 12,1988, PP.

C6-C9.
248 ● Critical Connections: Communication for the Future

Box 9-B—Problems Encountered in Setting Up an Interactive Data Network

“Recently, a major retail chain formed a technology task force to study alternatives for a new interactive data

network. Competitive pressures had rendered its dial-up system obsolete. Senior management wanted anew, on-line

network to connect 1,000 stores for credit verification, catalog look-up and point-of-sale data collection.

Salesmen from public packet switching network providers, private packet switching equipment providers,

VSAT (very small aperture terminal) satellite suppliers, modem manufacturers and leased-line providers all

submitted proposals-each promoting a different solution.

After months of analysis and review, the task force selected a modem-based network, using leased long

distance data lines. Six months later, anew VSAT supplier came in and demonstrated how another architecture, one

combining VSAT with intraLATA (local access and transport area) local-loop lines, could save the chain $25

million over the next 5 years, or more than 30 percent of its expected costs under the recently signed contract.

Unfortunately, it was too late to switch.

In another situation, a senior sales representative for a major network provider had champagne bottles ready

to pop for the expected award of a retail network connecting 7,000 locations. More than 18 months of

work—including many late nights—had gone into the detailed system plan, layout and pilot tests. Senior

management, involved in the later stages of the sales process, was counting on the contract to meet upcoming

booking and shipment targets.

One week before the contract was to be awarded, the salesman learned that yes, he would win a contract-but

for only 300 warehouses. The retailer finally had realized that its applications and data needs did not justify

interactive capability for the remaining 6,700 stores. The shrunken contract nearly cost the salesman his job and set

the manufacturer’s growth plan back two years.

In these examples, the ‘losers’—in the first case, the user; in the second case, the vendor—had failed to

rigorously analyze all the alternatives to determine which would be fundamentally advantaged for the required

applications. In both cases, critical expectations went unmet, and significant resources were wasted.”

SOURCE: Douglas A, Cogswell, “Clearing the Obstacles Takes a Plan of Attack,” CornmunicutionsWeek, CLOSEUP, Sept. 12, 1988, p. C14.

Copyright 1989 by CMP Publications, Inc., @O Community Drive, Manhasset, NY 11030. Reprinted from CommunicationsWeek

with permission.

does not exceed 25 percent of the national audi- tion Administration (NTIA) and the FCC.19 

. More

ence.18

Government efforts have also been under way to

alleviate a number of the antitrust constraints

imposed on the regional Bell operating companies

(RBOCs) as part of the Modified Final Judgment

(MFJ). In its triennial review of the telecommunication industry, the Department of Justice recommended, for example, that RBOCs no longer be

restricted from manufacturing and from providing

information and long-distance services, a position

that was supported to a greater or lesser extent by

both the National Telecommunications and Informarecently, Congressmen Al ‘Smith and Tom Tauke

introduced legislation in the House of Representatives, The Consumer Telecommunications Act (H.R.

2140), that would allow RBOCs to provide information services, including electronic publishing, and to

engage in manufacturing, given certain safeguards .20

In the Senate, Senators John Breaux, Trent Lott, and

Ted Stevens cosponsored a resolution (SR Con. Res.

34) that calls on the Senate to “determine whether,

or the extent to which the Bell regional holding

companies should be allowed to engage in forbidden

businesses of manufacturing, information services,

ls~~ ~~nt of tie nat,ion~ audience if a minority station. Moreover, UHF stations count as only one-half a station. See Amendment Of Swtion

?3.3555 of the Commission’s Rules, The Broadcast Multiple Ownership Rules, 4 FCC Rcd 1741 (1988), For a discussion of broadcast ownership rules,

see Stanley M. Besen and Leland Johnson, “Regulation of Broadcast Station Ownership: Evidence and Theory,” Eli Noam (cd.), Video Media

Competition: Regukuion, Economics, am’ Technology (New York, NY: Columbia University Press, 1985).

lgpeter W. HU~r, The Geodesic Network: 1987 Report on Competition in the Telephone [ndustry, U.S. Department of Justice, January 1987; MIA

Telecom2(W0: Churting the Coursejbr u New Century, U.S. Department of Commerce, National Telecommunications and Information Administration,

October 1988; and the FCC Comments, Mar. 13, 1987, United Mates v. AT&T, pp. 194-195.

z@I’~ bill spifjc~ly excludes changes in the ban against cable/telephone company cross-ownership as well as long-distance telephone Wrvice. It

incorporates four provisions designed to prevem cross-subsidies, and calls on the FCC to draw up a number of rules and regulations to administer and

enforce the law. Charles Mason, “MFJ Legislation Finally Debuts,” Telephony, May 1, 1989, p. 12, and Kathleen Killette, “Bill Hits Bells’ Case,”

c ommunicationsWeek, May 1, 1989, pp. 8, 79.
Chapter 9--Equitable Access to Communication Opportunities ● 249

Figure 9-2-Comparison of Growth in Telecommunication and MIS Spending, 1988 and 1993

(Percent of Total Operating Budget By Industry Sector) -

9.5 %

rl3.8%

10.2%

9.3 % 4.1%

6.1%

9.7 %

3.6%

5.7%

3.8% 8.7 %

5 .9%

8.3 %

3.3%

5.4%

——

3.1%

5.2 %

I 7.8 %

5.7%

7.4 %

1

2.8% !

2.6%

4.8%

-1

5.0% I I

— —..—

1988 1993 * 1988 1993 *

Composite survey group

1988 1993*

Industrial

1988 1993”

Nonfinancial services

~ DP/MIS

Financial services

~ Telecom

“Projected

SOURCE: Copyright 1989 by CW Publishing Inc., Framingham, MA 01701 Reprinted from Cornputerwodd, Jan. 16, 1989, p. 114.

and long distance.”21 The FCC has also begun an

inquiry on altering the Cable Communications

Policy Act of 1984 to allow telephone-company

entry into the cable industry,22 a subject that

Congress is likely to consider during 1990.

This changed regulatory climate is only one factor

affecting the market structure and the degree of

integration and concentration in communicationrelated industries. As described in chapter 3, technological developments have also had a significant

impact. The convergence of technologies has

blurred the boundaries that divide one industry from

the other, reconfiguring economies of scale and

scope and raising new opportunities for mergers,

acquisitions, and joint ventures. As one financial

analyst, commenting on these developments in the

entertainment field, has noted:

Dividing lines in the entertainment businesses are

blurring , . . One side co-opts the other by buying it

. . . The enemy becomes your friend.23

Seeking to take advantage of these opportunities

and developments, large corporations have become

owners of multiple broadcast properties in major

cities, as well as cross-media owners; a number now

own newspaper and radio or television stations in

the same geographical area. As Ben Bagdikian has

noted:

Compounding the trend [towards concentration]

has been the practice of companies already dominant

in one medium like newspapers, investing in a

formerly competitive medium, like television. OwnZlchm]es M-, “MFJ Resolution Introduced in Senate,” Teiephony, May 15, 1989, p. 16.

ZZCC ~Cket No, 87.266. kJuIy 1988, the FCC annouc~that~e restrictions contained in the 1984 Cable Act may no longer serve the public ktemst,

and requested public comments on a number of proposals that include cost allocations, accounting procedures, and other financial safeguards telephone

companies should have to adhere to in order to be allowed into the cable business, See, for a discussion, Jeannine Aversa, “No Surprises in FCC’s

Cross-Ownership Reposal,” Multichannel News, Sept. 26, 1988, p. 3.

~HsI Vogel of Nlernll Lynch, as cited in “Gulf +Western Sets Its Sights on Media Empire,” Broudcusting, Apr. 17, 1989, P. 31.
250 ● Critical Connections: Communication for the Future

ership in every major medium now includes investors from other media—owners of newspapers,

magazines, broadcasting, cable systems, books and

movies mixed together. In the past, each medium

used to act like a watchdog over the behavior of its

competing media . . . But now the watchdogs have

been cross-bred into an amiable hybrid, with seldom

an embarrassing bark.24

Also seeking to benefit from these emerging economies are the regulated telephone companies that

have been dogged in their efforts to extricate

themselves from the line-of-business restrictions

established by MFJ. Similarly, companies that have

previously been involved primarily in data communication are now increasingly forming alliances,

establishing joint ventures, and acquiring companies

that will enable them to enter into new and complementary markets in the area of telecommunication .25

A number of economic factors have also fostered

greater concentration and integration within communication industries, as described in chapter 3. In

the area of mass media, for example, many companies--

faced with rising production costs and a fragmented

and more sophisticated viewing audience-are trying to spread their costs and share their economic

risks by entering into mergers, alliances, and other

such combinations.26 Commenting on the problems

faced in this environment by the small, independent

company, Rich Colbert, vice-president and director

of programming for Television Program Enterprises,

explains:

If you are not studio-based, well-capitalized

and/or associated with a broadcast group, then the

odds are overwhelmingly stacked against you.27

Given this context, it is not surprising that some

members of the industry estimate that over the next

4 or 5 years, the number of industry program

suppliers could be reduced to four or five.28 At the

same time, leaders in the cable industry suggest that,

over the next 25 years, the number of cable

companies may decline to between six and eight.29

Most representative of the move towards greater

consolidation in the media is the recently proposed

merger between Time Inc. and Warner Communication, which would give rise to the world’s largest

media and entertainment company, as can be seen

from figure 9-3.30 Also indicative is the recent

decision by Gulf+Western to sell its financial

services subsidiary, Associates First Capital Corp.

(the Nation’s third largest independent finance

company), in order to raise the capital necessary to

continue the expansion of its communication operations on a worldwide basis.31 Ironically, now renamed and reorganized as Paramount Communications, Gulf+ Western has sought to use the money

garnered from the sale to compete with Warner

Communications for the purchase of Time Inc.32

In the areas of telecommunication and dataprocessing, much of the incentive for integration

comes from the post-divestiture shakeout and from

users who, building enterprise-wide networks, are

looking for a single source to link their disparate

computing systems.33 As one industry observer has

described the situation:

[Users] are driving a new wave of merger mania.

Strident demands for simple solutions to complex

networking needs—beyond the scope of most individual companies—have spawned a wave of merg24&g&~an, op. cit., footnote 31 P. s.

2.5For ~me exwples, ~ Steven Titch, “AT&T in Fiber pact,” CmmunicazimsWeek, Jan. 2, 1989, p. 8; Timothy Hai@tt “~M BuYs Into Fiber

Company, ’’CommunicarkmsWeek, Jan. 16, 1989, p. 20; “As the Big Get Bigger the Small May Disappear,” Business Week, Jan. 12, 1987, p. 90; Peter

Purton, “Olivetti Expands Into Telephones,” Telephony, Mar. 6, 1989; Paul Korzeniowski, “NET, Tellabs Pair Up,” CommunicarionsWeek, Apr. 17,

1989, p. 1; Timothy Haight and Glenn Abel, “HP Plans Apol10 Buy,” CommunicariunsWeek, Apr. 17, 1989, p. 1; John Burgess, “IBM Ready to Enter

Field of ‘Caller ID’ Phone System,” The Washington Post, May 2, 1989, p. E-1; and Timothy Haight, “Novell Alliances to Extend LAN Reach,”

CommunicatwnsWeek, Mar. 6, 1989, p. 1.

26SW ~.. ‘3 for a di~cwsion. See ~~o Jay G, B] Umer, “The Role of ~blic policy in the New Television M~ketplace,” Benton Foundation prOJect On

Communications& Information Policy Options (1989 ),paperno. 1, pp. 15-26; and Neal Koch, ’’Shifting Sands,’ ’Channels/Field Guide, 1989, pp. 84-85.

ZTJo~ FI~, “Re~ity sew In,” Channels/Field Guide, 1989, p. 87.

zgKoch, op. cit., footnote 26, pp. 84-85.

zg’’Hostetter on con~ent~: Reflections on the Past, Glimpsing the Future,” Cablevision, Apr. *LL 1989, P. 80.

3~or one discwSion, ~ “Tlme Inc. and Wwner Commurtication5: Media Giants Strike Merger Deal,” Broadcasting, Mu. 13! 1989> P. 28.

31 Vogel, op. cit., fOOtnOte *3.

%?FOr a discussion, we ~ura Landro and Dennis Kne~e, “Emcn~nmcnl Giants Are Now Al] the Rage: But IS Big Any Better?” The wail Street

Journal, June 9, 1989, p. 1. See also “Paramount Muddies Waters With Time Offer,” Broadcasting, June 12, 1989, pp. 27-28.

q3sm Kelly Jack~n, “Ali~ccs: Goal Is One-Stop Shops,” Compuferworfd, Feb. 20, 1989, P. z*-
Chapter 9--Equitable Access to Communication Opportunities ● 2.51

Figure 9-3-1988 Product, Revenue Breakdowns for Time and Warner

Time revenue

$4,507,000,000

Programming

23%

Magazines

42%

18%

Time operating income

$653,000,000

~ Books

15%

~ab,e~‘ro’;;:ming

26%

Filmed

entertainment

37%

en

Warner revenue

$4,206,1OO,OOO

/

Cable and

broadcasting

11%

~ Publishing and

related distribution

3%

Warner operating income

$607,500,000

33% Publishing and

related distribution

2%

SOURCE: &~asting, Mar. 13, 19S9, p. 29. Reprinted with permission.

ers, acquisitions, and business alliances over the past networking, there was a large number of independ2 years during which networking has really taken ent LAN companies in the early 1980s, competing

off.34

with one another. More recently, however, as the

product has become less distinct and as users have

This move towards partnerships and consolidations begun to look for simpler networking solutions,

can be seen most clearly by looking at the local area growth in the LAN market has begun to slow and

network (LAN) industry, which illustrates the pat- companies have begun to coalesce, so that each of

tern of many new players in the communication the original LAN providers has made at least one

industry. Triggered by the growth of computer acquisition. Some of the largest and most strategic of

q~ndice Wi@ 6$ A~ySt.S Hot on Networking,” Commum”cationsWeek, May 22, 1989, pp. 75, 88. Mergers attract money from tie fm~ci~

community, which in turn spurs on mergers. As the author notes: “This [development] broadens the scope of possible financial deals that could fuel stock

price gains-and of course, whenever an industry starts down the acquisition trail savvy investors should follow track,” Ibid., p. 88.
252 ● Critical Connections: Communication for the Future

Table 9-3--Strategic Advantages of Recent Developments in the LAN Industry

Companies Type of agreement Strategic advantage

Tandem/UngermannBass . . . . . . . . . . ,

3Com/Bridge . . . . . . .

3Com/Microsoft . . . . .

Microsoft/Ashton-Tate

Digital Equipment/

Apple Computer . .

.

Acquired

Merged

Joint software and R&D

agreement

Joint marketing and

R&D agreement

Joint marketing and

R&D

Broadens Tandem’s transactional processing line to include LAN connectivity for

distributed customer environments. As a result of owning Ungermann-Bass, Tandem

will also get access to direct sales accounts based on IBM and DEC environments.

Makes 3Com the largest independent manufacturer of LANs, offering both low-end

cluster LANs and high-performance facility-wide LANs.

Poses a potential threat to Novell, the leader in LAN software. Will develop network

management software for the OS/2 LM, offering a variety of advanced features.

Will develop a relational data base server software product. Directly attacks the

established position of strong stand-alone desktop computer data base vendors

such as Oracle.

Will enhance the development of third-party connectivity products between

Macintosh workstations and the VAX environment. Bolsters a weakness in both

companies i

SOURCE: Teieoommunications, October 19S8, p. 24. Reproduced by special permission of Telecommunications.

these partnerships and arrangements are listed in

table 9-3.35

These trends toward greater concentration may

lead to greater discrepancies in the ability of people

to access key audiences and the most strategic

communication pathways. Although the total number of media pathways is generally increasing, those

that offer the most effective and efficient services

seem to be coming under the control of fewer

communication and information gatekeepers. As

ownership of the most cost-effective media becomes

more and more concentrated, the ability of such

owners to structure the Nation’s political agenda is

likely to increase. Similarly, corporate owners will

assert more control over cultural and economic

agendas as well.36

Factor 4: Luck of clarity about coverage of

first-amendment rights.

The purposes of the first-amendment rights of free

speech and free press are to prohibit the government

from interfering in communication and to ensure that

free and robust discussion, especially of public

affairs, takes place.37 First-amendment rights are not

absolute, but are balanced against other competing

public values, such as national security, fair trial, and

public morality. Confusion (some would say inconsistencies) in the development of first-amendment

protections has been magnified with the introduction

of new forms of communication. For example, print,

common carrier, and broadcast media have each

been accorded a different first-amendment status.38

One technology that has recently provoked a

certain amount of discrepancy and disagreement

about first-amendment rights is cable television. In

a court in Oakland, CA, for example, the case was

successfully made that cable television is entitled to

essentially the same rights as the print media, and

that, therefore, cable applicants could not be denied

a franchise even if a city was already receiving cable

service. Based on this argument, U.S. district court

judges in Palo Alto and Santa Barbara, CA, went

even further to argue that, given cable’s firstamendment rights, most franchise requirements

were unconstitutional. However, in the case Preferred Communication v. City of Los Angeles, the

Supreme Court remanded the case back to the

district, pointing out that while cable television

activities implicate first-amendment interests, where

a cable system’s “speech and action are joined in a

single course of action,” first-amendment values

“must be balanced against societal interests.”39 And

the underlying question of the proper standards for

35Timothy Haight, “Vendors: Mergers Mark the Industry Midlife,” CommunicationsWeek, Apr. 3,1989, pp. 1, 46; see also Martin Pyykkonnen, “~al

Area Network Industry Trends,” Computerworid, October 1988, pp. 21-29.

sbFor for one analysis of this phenomenon, see Bagdikian, op. cit., footnote 3.

gTFor adisc~ion of the positive and negative pU~SeS of the first amendment, see Stephen Hohnes, “Liberat Constraints on Private power?” Judith

Lichtenbcrg, Democracy ati the Mass hte~ia (forthcoming),

sgIthiel de Sola Pool, Technologies of Freedom (Cambridge, MA: The Belknap Press of Harvard university fie~t 1983).

s~’of cable and CourtS, Franchising and the First,” Broadcasting, May 22, 1989, pp. 69-’71.
Chapter 9--Equitable Access to Communication opportunities ● 253

judging first-amendment challenges was left unresolved. 40

In situations such as these, where much is left to

interpretation, all actors in the communication

process can assert first-amendment protection, and

their claims will quite often be in conflict. For

example, some claim that the first amendment

enables them to access any communication path for

which speakers can pay.

41 The Supreme Court,

meanwhile, has held that the first amendment

protects the right of providers of some communication paths to refuse to accept paid editorials on

controversial issues.42 At the same time, it has held

that the first-amendment right of listeners to have

access to balanced presentations on issues of public

importance needs to be taken into account.43 Where

conflicts arise, the courts have attempted to balance

the first-amendment claims. Such resolution, however, depends on the particular circumstances presented in the case. As circumstances and litigants

change, so may a court’s interpretation of firstamendment rights. Additionally, interpretations may

vary from court to court and from judge to judge.

Confusion about what is covered under the first

amendment allows parties to assert first-amendment

protection for a variety of interests. One member of

Congress noted that as technology increases the

number of people who can legitimately claim

first-amendment protection, there are attempts “to

try and wrap any economic desire these entities have

in a First Amendment cloak in order to give a false

superiority to an argument.”44 For example, newspaper publishers argued that the first amendment

requires that telephone companies be prohibited

from delivering their own electronic information

services, and the court accepted this argument, at

least for the short term.45 In the political arena,

contributors to political campaigns have argued that

government ceilings on campaign contributions

restrict their freedom of “political speech.”46

Factor 5: Lack of consensus on the part of

decisionmakers about what constitutes the minimum level of communication services that

should be made universally available.

Recognizing the importance of communication

services to everyday living, Congress incorporated

the goal of universal telephone and radio service at

an “affordable” cost into the Communications Act of

1934. This goal was reinforced in 1949 with the

enactment of legislation to subsidize the extension

of service to rural areas. Moreover, the goal of

universal service has always received widespread, if

not universal, support.

Notwithstanding this historical consensus, two

major questions have emerged with respect to the

goal of universal service-which services should be

made universally available in an era when information has become a key, strategic resource; and how

should the goal of universal service best be implemented.

Defining Universal Service

Now that achieving the historical goal of universal telephone and broadcasting service has been

closely approximated, many suggest that universal

service needs to be redefined to take into account

new communication opportunities and a changing

information environment. In the socioeconomic

context of 1934, when the Communications Act was

passed, access to telephone and radio services was

considered to be extremely important. Similarly, it

is necessary to determine which communication

services might be considered critical in today’s

environment .47

In its analysis, OTA sought to provide a basis for

answering this question by identifying the factors (in

‘Wbid.

qlJ~e BaITon, “~cess to the Press-A First Amendment Right,” Harvard L.QW Review, VOI. 80, 1967, p. 1641.

q~ol~laBrO~C~ting System v. Democratic National Committee, 412 U.S. 94 (1973).

43Red Lion &-&cating CO. V. FCC, 395 U.S. 367 (1969).

44Rep. AI Swifi (D-w*), as quoted in “First Amendment Spotlighted,” Broudcasring, NOV. 16, 1987.

45s= Um”tedsates v. ~erlcan Telep~ne & Telegraph co,, 552 F. Supp$ 131, 186 (D.D.C. 1982), aff’d sum nom; and Maryland V. United States,

460 U.S. 1001 (1983). See also Richard E. Wiley, “Report on Legal Developments in Electronic Publishing,” Jurimetrics Journal, Summer 1987, pp.

403-422.

~BWUey v. Vdeo, 424 U.S. 1 (1976).

b7For ~w exmp]e, ~“me Intelligent Network Task Force Report,” Pacific Bell, October 1987; and NTiA Teiecom 2000, oP. cit., foomote lg.
254 ● Critical Connections: Communication for the Future

addition to cost) that prevent people from taking

advantage of opportunities that new communication

technologies afford. The two most important factors

OTA identified are technological skills and access to

navigational tools.48

Technological Skills

To both communicate and use information effectively, one needs to have certain technical skills. In

any particular instance, the kinds of skills required

are relative to the social and technological environment in which people live and work. Given that

many of the transaction costs entailed in communicating are greater and will increasingly be borne by

the user, it is likely that people will need to be much

more technically sophisticated in order to communicate and use information to their best advantage.

Moreover, achieving this kind of sophistication is

complicated by the fact that a considerable number

of Americans cannot even read and write well

enough to be able to act effectively in their daily

lives. Although policies addressing literacy have not

generally been considered in communication decisionmaking, this study highlights their relevance. At

the very least, this requirement for literacy needs to

be taken into account in defining what will constitute

universal service in the future.

Navigational Tools

Navigational tools guide users through the maze

of information, enabling them to identify and locate

relevant information and communication paths.

Including such things as computer menus, TV

guides, and telephone directories, navigational tools

are the means by which individuals and groups

interact with their communication and information

environment and discover the options available. In

some cases, navigational tools can help to compensate for a user’s lack of technological sophistication.

For some people, the fact that navigational tools are

not widely available represents a significant barrier

to their ability to access information. Like technological skills, this factor needs to be taken into

account when defining universal service for the

future. 49

Implementing Universal Service

A second major question that has emerged with

respect to universal service--given some agreement

on what should constitute it—is how it should best

be provided, priced, and paid for. Some contend, for

example, that there are major economies of scale and

scope in providing communication services. Hence,

they believe that universal service can be provided

most efficiently on a monopoly basis, with rate

regulation and some form of subsidization. In

contrast, others assert that economies in the communication infrastructure are insufficient to justify

monopoly services. They argue that universal service can be achieved most efficiently if all communication providers, being allowed and encouraged to

compete in the marketplace, are induced to lower

their prices. To assure equitable access, these

advocates would provide subsidies targeted to those

who could not afford service under such an arrangement.

This issue is compounded by the uncertainties and

lack of agreement about the nature of economic

relationships within the communication infrastructure.50 Some stakeholders see these relationships as

sufficiently competitive; others do not. Reaching a

consensus is likely to be even more difficult in the

future, given a rapidly changing technological environment with increasing amounts of horizontal and

vertical integration.51 Even in determining how best

to implement universal service, decisions will be

subjectively based to some extent.

STRATEGIES AND OPTIONS

If Congress wishes to affect access to communication services, it could pursue a number of different

strategies. Congress could:

4%1 tie fmrd analysis, however, the answer to the question of what should constitute universal service is inherently, ad profoundly, a politic~ *

well as a philosophical one. Given the enhanced role of information and communication in the economy and society, access to communication services

is now an important determinant of all socioeconomic opportunities. Thus, making choices about universal service is essentially making choices about

equality of opportunity. Defining universal service is, in effect, making choices about the nature of society itself.

@Some have noted, moreover, that the need for universal access to navigational tools should apply not only to users of information, but to providers

of information as well, Just as users need tools to help them locate information appropriate to their needs, so information providers require tools to help

them klenti~ the most appropriate audiences. Some fear that, in the future, the providers of navigational tools may serve as a new bottleneck to

competition. Access to users has already become a policy issue in the case of telephone companies’ control of customer proprietary network information

(CPNI). It is important to note that policies that enhance access to users can have significant privacy implications.

s~or a discussion, .SW ch. 3.

511bid.
Chapter 9-Equitable Access to Communication Opportunities . 255

●

●

●

●

●

●

influence the means by which communication

services are funded and financed,

structure the prices at which such services are

offered,

provide direct government support for users to

access information and communication paths,

regulate and/or redefine the rights of mediaowners,

influence the level and availability of the tools

and resources required to access communication and information services, and

assume a more proactive role to assure robust

debate on issues of public importance.

A discussion of these strategies, and options for

achieving them, follows. A summary appears in

figure 9-4.

Strategy 1: Influence the means by which communication services are funded and financed.

Option A: Reconsider policies for funding and

providing financial support for noncommercial

media.

In the United States, there has been a long history

of funding media services. As described in chapter

4, in addition to subsidizing the postal service and

the press and supporting public education, the

Federal Government has also fostered and provided

financial support for scientific research and the arts.

For example, Congress supported the development

of a national library system, passing legislation in

1895 to make the vast store of government publications available to the public through a network of

national depository libraries.52 In addition, the

Federal Government has provided financial support

for the National Endowment for the Arts and the

National Endowment for the Humanities, as well as

for the production and distribution of educational

and cultural television programming through the

Corporation for Public Broadcasting (CPB) and

direct funding of public broadcast stations.53

A number of different rationales have, over time,

served to encourage government funding of this

kind. Subsidies have been provided, for example, to

foster an informed and educated citizenry, to develop national manpower, to provide equity, and to

broaden and enhance cultural experiences. Support

has also been provided to encourage the production

of public goods (such as research and education)

which, given their particular economic nature, are

generally produced in short supply. However, considering the special role that communication plays in

political affairs, the question of how government

should involve itself in this area has always been

highly sensitive and potentially controversial, as the

following example and discussion of public broadcasting serves to illustrate.

In the United States, public broadcasting has

traditionally received funding from a number of

different sources-Federal, State, and local governments; individual subscribers; businesses; foundations; and universities, as can be seen from table 9-4.

As detailed by John Carey:

In 1987, the estimated total income for public

broadcasting from all sources was 1.29 billion

dollars. Federal sources provided 18.8 percent of all

income, while non-federal sources provided 81.2

percent of income. Total income from federal

sources has increased moderately during the last

decade. However, income from federal sources has

declined, as a percentage of all income, while income

from members and businesses has increased.54

Given the ad hoc nature of these sources, there has

always been some concern about the long-term

viability of funding for public broadcasting. However, since 1983, Federal funding for public radio

and television has increasingly become a subject of

52Joe Forehead, ~n~odUction to unitedstaresp~fic Documents58-59 (Littleton, CO: Libraries Unlimited, 2d edition, 1978). See id.so U.S. COngEsS,

Office of Technology Assessment, Informing the Nation: Federal l~ormation Dissemination in an Electonic Age, OTA-CIT-396 (Washington, DC:

U.S. Government Printing Office, October 1988), In 1987, the Federal Government spent $6 billion distributing about 58,000 publications to more than

1,300 depository libraries.

WAX William Baurnol, Pe@orrning Arts (New York, NY: Twentieth Century Fund, 1%6); and William Baurnol, in..atiort and t~ pe~o~ing Arts

(New York, NY: New York University Press, 1982). In 1987, the Federal Government contributed 18.8 percent of the $1.29 billion in funding collected

for public broadcasting. See John Carey, “Public Broadcasting and Federal Policy,” Markle Foundation, New Directions in Telecommunications Policy,

vol. 1, Regulatory Policy: Telephony and Mass Media (Durham, NC: Duke University Press, June 1989); and Michael Rice, Public Television.. Issues

of Purpose and Governance (New York, NY: Aspen Institute, 1981).

54c=Y, op. cit., fOOt.nOte 53.
256 Critical Connection: Communication for the Future

Figure 9-4--Congressional Strategies and Options To Address Access to CommunicationS Opportunities

mm

Option C

provide common

carrier status for

Critical navigational

tools recognizing

their essentialfacility nature

Re-examine and reevaluate the

traditional regulatory categories of

common carrier print

and broadcasting in

the light of techno1

logical change and

market developments

to determine whether

they continue to be

Option A I

Provide monetary

subsidies to

Individuals and

sPecial groups using

information and

communication paths

I

Strengthen require- 11 Rescind the cable/ I

ments to provide telephone company I l——

I

Public access to

H

crossownership rules

Production facilities to Increase the com- 1 I

0

Option E

Increase SuppOrt for

advertiser-subsidized

Media that prwlde

the !Jubllc Wh

noncommercial

mformahon at prtces

already heawly

Subsldtzed

Option C

Provide public

institutions with

communication

equipment, or

increase current

funding or Subsidies

for its purchase

I

I

I

I

J

mOption B

F’rovlde equipment,

(or Subsldles for m

!JUrchase) to Indlvldual

users

Option C

Require media providers

to uphold more Stringent

public-interest standards ‘7Option A

Codify the FalrneSS

Doctr[ne for brOa@

casters andlor extend

1

1

I

I

Option D Option B I

Adopt Campaign-reform Mandate time and

Iegislation On communication path

Ways for discussion

Of public policy issues

h b

ITOption B

provide Federal

support for

tecfmologlcal literacy

programs

1

Option D

provide funding for

creation of

bibliographical devices

for publicly funded

SOURCE: Office of Twhnology Assessment, 1990.
Chapter 9--Equitable Access to Communication Opportunities ● 257

Table 9-4--Sources of Public Broadcasting Income,

1987 (Total estimated income= $1.29 billion)

Percentage

Source of all income

Federal Government . . . . . . . . . . . . . . . . . . . . . . 18.8

State and local government, colleges

and universities. . . . . . . . . . . . . . . . . . . . . . . . 32.8

Member donations and auctions . . . . . . . . . . . . 23.0

Business and industry . . . . . . . . . . . . . . . . . . . . 15.1

Foundations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6

SOURCE: Corp. for Public Broadcasting

congressional controversy and public debate.55 Questioning whether it is appropriate for tax dollars to be

used to support the tastes of one segment of the

American audience, some have urged that congressional appropriations be replaced by private and

voluntary revenue sources.56 On the other hand,

some critics have suggested that public broadcasting

is beginning to stray from its original goal of

providing alternative, and controversial, programming because of its increased dependence on industry and foundations for financial support.57

Differences have also arisen with respect to how,

and to which groups, Federal monies should be

channeled and allocated. For example, concerned

that CPB was allowing its programming decisions to

be guided too much by political considerations, the

Senate Committee on Commerce, Science, and

Transportation included language in one version of

the funding bill for public broadcasting that called

for the direction of funds to local broadcast stations

rather than to CPB. opponents of this idea, among

them CPB, argued that such a plan would threaten

the quality of public television’s programming,

undermining minority programming and speeding

up the creeping commercialization of the product.58

As passed, Public Law 100-626 ordered CPB to

undertake, and provide to Congress by January

1990, a study of the funding process.59

This problem of finding public media may

become more acute in the future. Not only have the

costs of production increased significantly, but

competition for subscriber and production funds has

also increased from pay channels offering cultural

and other programming targeted to the traditional

public television audience.

Over the years, a number of alternative methods

of financing public broadcasting have been proposed. These include:

. a manufacturer’s excise tax on television sets;60

. a cultural subscription television service;6l

. advertisement-based public television services;62

ssFor a discussion, see Bernevia McCalip, “public Broadcasting Funding: The Process and Current Issues,” Library Of eOn~eSS, conmssion~

Researeh Service, #HE 6645 D, Apr. 22, 1986. See also Harry M. Shocxshan III and~uise Arnheim, “Public Broadeasting,” Benton Foundation Rojeet

on Communications & Information Policy Options, paper no. 2, 1989.

sbMcCalip, op. cit. footnote 55, p. 1.

s’7For agen=~ discussion of the f~~We of public television tom~t its ofigin~ gods, ~ Stephen white, “~pub]ic Television Experiment, ’’Current,

Oct. 20,1987, pp. 7,10-11. For a discussion of why labor issues are rareIy aired on public television, see Pat Aufterheide, “The Corporatization of Public

TV,” Unwn, October/November 1988, pp. 11-13.

58s&, fm a discussi~, “~blic Broadcasting Dispute Eased,” Congressional Quarterly, @t. 15, 1988, p. 2986. See al~ “Dissent in public

Broadcasting: Who Controls the Purse Strings?” Broadcasting, May 30, 1988, p. 25.

59’’fIhiS i~W is Pm.tly ~der Study by two ~oups, the so.mem~r Nation~ Association of public Television Sttions (NAPTS) Task Force (which

includes representatives from PBS, NAPTS, CPB, individual stations, regional, and minority groups), and by CPB. CPB is responsible for delivering

the congressional report. How, and to what extent, it will integrate the comments of the Task Force into its report is still unclear. For a discussion, see

“Public TV Reviews Budget Plans,” Broadcasting, Feb. 13, 1989, pp. 89-91. Public Law 100-626 also created a fund to be distributed to independent

producers and production entities, producers of national children’s educational programming, and producers of programming addressing the needs and

interests of minorities for the production of programs. CPB was also called on to create an independent production service, which would be exclusively

dedicated to supporting a number of demonstration projects towards greater broadcast diversity.

@In its 1%7 report on public television, the Carnegie Commission recommended that Congress employ amanufacturer’s excise tax on television sets

(beginning at 2 percent and rising to a ceiling of 5 percent) to fund public television. This approach was followed by most European countries. However,

Congress was strongly opposed to it. Stephen White, “Our Public Television,” The Public Interest, Summer 1987, pp. 85-86. More recently, as an

alternative to S.1935, the National Association of Broadcasters proposed that a public broadcasting support fee be collected by imposing a 1.5- to

2-pereent tax on TV-VCR-radio sets, but the Electronic Industries Association strongly opposed that plan. Television Digest, Nov. 9, 1987, p. 1.

bl~ 1981,@Grossman, Resident of PBS, circulated a plan for the Public Subscriber Network, a cultural subscription-TV SeIVice that public

broadcasters would usc to air first-run public TV programs, but “PBS Cable” never got under way. Richard Barbieri, “Do Home Shopping and

‘NewsHour’ Belong on the Same Channel?” Current, May 19, 1987, p. 1.

62The Tempw Co-iwion on Alt~native Financing for public Tel~ommunications, cmat~ by Conwess in 1981, recommended that congress

permit “enhanced underwriting,” but not traditional systemwide advertising. For a discussion, see Subcommittee on Telecommunications, Consumer

Protection, and Finanee,of the House Committee on Energy and Commerce, 97th Cong. 2d sess.,Alternative Financing Options for Public Broadcczwing:

Report of the Temporary Commission on Alternative Financing for Public Telecommunications, committee print, 1982.
258 ● Critical Connections: Communication for the Future

the establishment of a trust fund in support of

public television, using fees from the sale or

lease of spectrum;63 and

a trust fired using taxes on license transfers for

radio and broadcast stations.64

Although none of these proposals has generated

widespread support, they may have greater appeal in

the future, given government budget deficits and

continued financial constraints in public broadcasting.

The history of public broadcasting serves to

illustrate some of the difficulties and the kind of

opposition that might arise if Congress were to adopt

a similar direct-funding approach to foster the

development and use of other electronic media and

communication services.

Option B: Increase support for advertisersubsidized media that provide the public with

noncommercial information at prices already

heavily subsidized.

With the growth of fee-based communication

services, Congress might take steps to promote

and/or protect media that are supported or subsidized by advertising. Congress has provided this

kind of support for advertisement-based media in the

past, for example, by limiting the markets in which

cable services could compete with broadcasting

services, and by establishing “must-carry rules” that

required cable companies to carry local broadcast

signals. 65 Such support was later rescinded, however, with deregulation of the cable industry in 1984,

and as a result of the Supreme Court’s decision to

invalidate the must-carry rules.

Today, however, the cable industry is no longer an

infant industry struggling for survival. In fact, as

already noted and discussed below, the concern now

is with the pace of integration and concentration in

the cable industry.66 Moreover, broadcasters, faced

with the fragmentation of their market and a loss in

advertising share, are no longer as dominant in the

media industry.

In this changed context, there is once again a call

to provide greater support to advertiser-based media

services. While many media providers would welcome such support, some would want to minimize

any public-interest obligations they might incur in

exchange for government promotion.67 On the other

hand, such policies are not likely to be supported by

fee-based media providers who are benefiting from

the shift to their services. Consumers might also take

issue with such policies if they were to deprive them

of the choice of paying for advertisement-free

entertainment, or if they led to price increases. Any

congressional action in this regard would depend on

the importance Congress places on the public having

some common means for accessing communication

content, an issue discussed in more detail in chapter 7.

One way in which Congress might act to support

advertiser-based media is to reinstate “must-carry”

requirements. A case for such action has been

strongly put forward by the FCC Commissioner,

James Quello. As he has stated:

Congress should do this not to please broadcasters, but to serve the public with assured free

TV .. .68

One problem with adopting must-carry rules is

that their constitutional status has yet to be determined. The Supreme Court invalidated previous

“must-carry” rules in July 1985 on the grounds that

they infringed on the first-amendment rights of cable

63~~ ~etb~, ~hic. h= &n ~pp~e-J by ~ ~w~r of frm.mmket ~onomlst~, ~m inclu~ ~ pm of a 1987 adminis~a[ion bud~t proposal.

64S0 1935P-~ ~d a Publlc ~oadcmting ~g ~d ~th a z.Wrcent f= on the transfer of any ]icen~ administered by the FCC, with an

tiditiond z-percent fee due on radio and TV stations tr~sfem~ less than 3 yeas titer previous s~e, and an additional l-percent fee for transfers of

licenses by those feud to ~ve “wiilfilly” violated the F~rness Doctrine. The f~ wo~d have ~n b~ti on the price paid or fair market value of the

license involved, including the value of all assets used in comection with that license.

65~ 1968, fm exmple, the FCC ~t Upm]es hat govern~~e oPration ~d&llve~ of subscription television se~ices ~dover-the-~r~~issions

of pay TV programmi ng that prohibited these services from competing with bro~asters for recent sporting events or feature films that were between

3 ~d 7 years oId. Challenged in tie COmS by Home BOX Office (HBO), the~ roles were eventu~ly overtllrn~. For a discussion of the history of cable

regulation, see Don R. Le Due, Cable Televishn and t~ FCC (phil&lphia, PA: Temple University Press, 1973); see alSO Don R. Le Due, Beyond

Bro&casting: Parrerns in Policy arldh (New York and ~ndon: ~ngman, ]987); and Tom Wititeside, “tiw~d and Upward with the Arts,” The

New Yor&er, part 1 May 20, 1985; part 2 May 27, 1985; and part 3 June 3,1985.

%~, for one recent discussion, H~ M. shoosh~ III, “cable Television: promoting a Competitive Industry %.ructure~’ Paula R, Newberg (cd.),

New Directwnsin Teleco~~catiompo@, vol. ~,Reg&~~poli~: Telep~nyandM~s Med~ (DWh~, NC: Me University Press, June 1989),

pp. 222-246.

67SCZ “INTV’S Pa&en Says Bro~c~ters Must Embrace Public Interest Standard,” Broadmting, June 27, 1988, Pp. 52-53.

~James @ello, “Mut Carry From A Commissioner’s Point of View,” Broadcasting, May 28.1988, P. 28.
Chapter 9--Equitable Access to Communication opportunities ● 259

owners.

69 The courts reiterated this position in 1987

when the FCC sought to introduce a new set of

must-carry rules.70 However, the court made it clear

that they did not “mean to intimate that the FCC may

not regulate the cable industry so as to advance

substantial governmental interests.”71 Thus, the

Court left the door open for Congress to make a

stronger case of demonstrating that such rules would

serve a “substantial government interest.”72

Industry stakeholders disagree about what effect

the elimination of must-carry rules has had on the

availability of local broadcast programming, and

thus about the need for new laws. Cable companies

claim that only the marginal, unprofitable stations

are being dropped from cable distribution.73 While

staunch in advocating their rights under the first

amendment, representatives of the cable industry

have, however, demonstrated a willingness to compromise in this area.74 Broadcasters strongly urge the

reimposition of must-carry rules. They claim that

cable companies have dropped a significant amount

of broadcasters’ programming, not because these

programs were failing, but because they were too

successful and too competitive with cable.75 Data on

this issue were collected in surveys by the FCC and

submitted to Congress in 1988.76

Decisions about must-carry are further complicated because they are linked to other media policy

decisions. Some influential members of Congress,

for example, have pointed out that they will not give

positive consideration to new must-carry legislation

until the issue of the Fairness Doctrine, as discussed

below, has been resolved. Others have tied the issue

of must-carry to that of the cable compulsory

license.77

Another way in which Congress might affect the

future of advertiser-based broadcasting is through its

decisions about high definition TV (HDTV). Recognizing that, if broadcasters are to remain competitive

with other media, they will need to be timely in

delivering a high-quality HDTV product, the FCC

favored the domestic broadcasting industry with its

September 1988 decision requiring that HDTV

standards be compatible with existing television

sets. 78 At the same time, the FCC declined to provide

the additional spectrum that broadcasters would

need to develop some HDTV options, such as the

MUSE system proposed by the Japanese.79

Option C: Require all media owners to provide some

services on a common-carrier, or shared, basis.

The law of common carriage as it pertains to

telecommunication was modeled after railroad legis-

@Qu”ncy Cdle w, inc. V. F(X, 768 (D.C. Cir. 1985), cert. denied 106 S. CT 2889 (1986).

70~ ~wOrd~ce Mm a compromise struck ~tween major cable and broadcast interests, the FCC issued interim must-cm ~es in 1986 and 1987.

These rules required large cable systems to make a limited portion of their capacity (up to 25 percent) available to local TV signals, and all cable systems

tooffersubscribers A/B switches, which allow viewers to switch from cable to antenna reception. See Henry Geller, “Broadcasting,” Markle Foundation,

NewDirections in Telecornmunicatwm Policy, vol. l, Regulatory Policy: Telephony and Mass Media (Durham, NC: Duke University Press, June 1989).

TICen~V com~catiom COW. v. FCC, 835 F. 2d 292 (C/C/ Cior.), cert denied 56 U.S. L.W. 3816 (May 31, 1988).

72BY b=~g its ~l~g on the f~lue of the must-cm rttles to meet the U.S. Supreme Court’s O’Brien test, the court avoided the more gener~ ~d

problematic question of what kind of first-amendment protection should apply to cable. John Wolfe, “Appeals Court Again Invalidates Must-Carry on

Free Speech Grounds,” Cablevision, Dec. 21, 1987, p. 12.

TaFor exmple, a ~ce Waterhou= smey, commissioned by NCTA, found that cable systems continue to Carry 98 Percent of the bro~cast stalions

qualified to be carried under the second set of must-carry rules, that 94 percent of cable systems carry all the local broadcast sigrds that were required

under those rules, and that 91 percent of operators have not repositioned the broadcast stations. “NCTA Study Shows Cable Carrying Most Stations,”

Broadcasting, Sept. 19, 1988, p. 59,

TqFor ex~ple, the Nation~ Association of Broadcmters and the National Cable Television Association are preSCnt.ly trying to negOtiate a must-cq

agreement between them. See “Must Carry Law Germinating in Congress May Not Survive, Predicts Attorney,” Broadcasting, Jan. 30, 1989, p. 60.

TSForan a~ountby the Association of kdependent Television Stations, Inc., see Free Television Under Seige: Typical andillustrative Case Histories

ofAnti-Competitive Conduct by Cable Television Systems, submitted to the Congress of the United States and the Federal Communications Commission,

my 1988.

76LW j~f=, C*MWt-CW Report E~ns Split Decision,” Muhichunnel News, Sept. 5, 1988, PP. 1, 88.

77U~er the ~pyri~t At of 1976, cable companies have a compulsory license to carry all signals that are authorized by the FCC. k Wtober 1988,

the FCC recommended that Congress abolish this license, at least for distant signals. Ln January 1989, Representative John Bryant reintroduced legislation

that could make the compulsory license conditional on whether or not cable operators cany local broadcast signals.

TgS~NormAls@r,’C~’s High Stales, Hi@-T~h Battle, ’’Fortune, Oct. 24, 1988, pp. 161-170; David B. Hack, ’’High Definition Television (?IDTV)

in the United States-What Does An ‘Even Playing-Field’ Imok Like?” Libmy of Congress, Congressional Research Service, Report 88-365 SPR, May

31, 1988.

TgAdva~ Television Systems, 3 FCC Rcd 6520 (1988). Broadcasters have urged the FCC not to reallocate to hmd mobile t.hOSe pms of the UHF

broadcast spectrum that might be required to cieveIop an HDTV system. So far, the FCC has gone along with this request, although the spectrum allocation

issue is still unresolved. See Geller, op. cit., footnote 70, pp. 20-21.
260 ● Critical Connections: Communication for the Future

lation, which had been employed as a means of

eliminating discriminatory or exclusionary practices. While granting the telegraph companies (and

later the telephone companies) special privileges—

such as the right to use public roads, to exercise the

power of eminent domain, and to use the corporate

form of doing business-it also imposed the obligation to provide reasonable and nondiscriminatory

service to the public.80 Moreover, as Ithiel de Sola

Pool pointed out:

. . . though common carrier doctrine often lacks

explicit reference to civil liberties, many of the same

concerns are dealt with in different words. In its own

way the law of common carriage protects ordinary

citizens in their right to communicate. The traditional law of a free press rests on the assumption that

paper, ink, and presses are in sufficient abundance

that, if government simply keeps hands off, people

will be able to express themselves freely. The law of

common carriage rests on the opposite assumption

that, in the absence of regulation, the carrier will

have enough monopoly power to deny citizens the

right to communicate .81

Unlike those who provide telephony-based services, owners of the mass media have almost complete discretion in determining the programming and

content they distribute. For, as the court ruled in

Miami Herald Publishing Co., v. Tornillo, even

when a daily newspaper is the only daily in a city, the

government cannot require it to provide a right-ofreply to someone criticized in its pages.82 Thus, to be

guaranteed access to a wide-reaching communication platform, an individual would, in extreme cases,

need to purchase a cable network, newspaper, or a

broadcast station. The costs of such access preclude

this option for the vast majority of Americans. In

1988, for example, the average cost of buying a

stand-alone television station was $25.8 million, up

$2 million from 1987’s average,83 while in some

markets the cost of buying a cable system was up to

$2,500 per subscriber.84

To facilitate broader access to communication

paths for those who presently cannot afford it,

Congress could require media owners to lease

portions of their pathways in the fashion of a

common carrier, in much the same way as some

cable companies were once required to do with their

public access facilities.85 Or, as some economists

have suggested, rather than granting a single broadcaster an exclusive license to use a frequency in a

market for a number of years, different content

producers could be given licenses to different

portions of a broadcast day. In this way, the costs of

access could be shared and spread over a range of

pathway users.86

Policies requiring common carriage or the sharing

of pathways are likely to be strongly opposed by

media owners who do not want to give up discretion

over the content they provide. Such discretion not

only provides them a vehicle to express their own

points of view; it also allows them to select the

programming that will yield the greatest financial

returns. 87 In recent years, media owners have, with

the support of the courts, become increasingly

successful in resisting any government efforts to

influence content.

This situation might change, however. Issues

involving the rules that govern information distribution are likely to persist and be reactivated as

telephone companies, which have traditionally

80wiI]i~ K. J~eS, ‘me @mmon C@er Concept AS Appli~ to Teltxomrnunications: An Historical Perspective,’ ’Paper Submitted to tie F~er~

Communications Commission as Appendix to the Reply Comments of International Business Machines Corp. in Competitive Carriers Rufemaking, CC

Docket No. 79-252, filed Apr. 4, 1980, p. A-6.

81pwl, op. cit., footnote 38, P. 106.

82M~ Herald P&l&hing CO. v. Tornillo, 418Q5 241 (1974).

83’’~m@g Hti,s 1988,” Broadcasting, Feb. 13, 1989, p. 46.

~“Is Cable Cornering the Market?” The New York Times, Business, Apr. 17, 1988, pp. 1,12.

85~ ~ant~g of me cable franchi~s, for ~x~ple, ~~ m~e contingent On a cable cornp~y”s a~rnent ~ provide some access tO members Of

the public who wish to produce information content. Manhattin Cable TV, for ex~p]e, cties 150 hours of public-access programming per week, In

exchange for access, producers agree to create a certtin number of progr~s to fill a given time-slot. AS might k imagined, the quality and variety of

these programs vary considerably. For a discussion, w Lisa Belkin, ‘*Public-Access TV: Behind tie Scenes,” T& New York Times, Apr. 13, 1987, p.

C-18,

MS=, for exmp]e, B,M. Owen, J.H. Bm~, and W.G. Manning, Television Economics (Lexington, MA: ~Xin@On Books) 197A);R“‘“ll~ ‘O ‘wk~

@J. McGowan, Economic Aspects ofTelevisionRegufation (Washington, DC: Brookings Institution, 1973); and Mark Nadel, “Comcar: A Marketplace

Cable Television Franchise Structure,” Harvard Journal ontigiskztwn, vol. 20, 1983, pp. 541-578.

87As ~ Dw ~ n~~, he wlll~wess of cable compaNes t. Provide chamels for tie pro~~ming of o~ers d~l~ed as tie value to b gdnd by

doing their own programming increased. See h Due, op. cit., footnote 65.
Chapter 9--Equitable Access to Communication Opportunities ● 261

served as common carriers, become more and more

involved in the delivery of dial-up information and

video services. Rethinking the role of telephone

companies could usefully provide an opportunity to

readdress and reassess all of the rules that govern

media owners and information providers. One issue

that might particularly benefit from further exploration is the relationship between content and carriage. 88

Strategy 2: Structure the prices at which communication services are offered.

Option A: Establish or maintain rate-of-return

regulation.

Government has traditionally sought to assure

universal access to telephone services at affordable

prices by limiting market entry and by regulating the

rate-of-return that telephone companies could earn

on their investments. Regulation was considered

necessary, given the telephone company’s ability to

charge monopoly prices. However, in the more

competitive environment that followed divestiture,

policymakers began to seek alternatives to rate-ofreturn regulation.

In spite of this growing interest in developing new

regulatory mechanisms, there are a number of

stakeholders who want to maintain rate-of-return

regulation-or at least postpone any changes—until

there is more evidence demonstrating their positive

effects. 89 They claim that, at present, there is

insufficient competition in the communication industry-and especially in the local exchange—to

merit changes in regulatory policy.90 They contend

that these alternative regulatory approaches will lead

to inequities and less affordable prices for communication services. Contrary to the FCC’s estimates of

consumer gains, for example, the International

Communication Association predicts that, if the

FCC proposal to establish price caps (described

below) were adopted, consumers will lose $6.7

billion over the next 4 years. 91 Similarly, th e

Consumer Federation of America has argued tha t

residential customers will suffer higher rather than

lower rates under the FCC plan.

Many also challenge the notion that incentive -

based regulations will provide incentives for greater

efficiency and innovation. They suggest that these

new forms of regulation will, in fact, induce carriers

to reduce the quality of their services.

92 Moreover ,

some argue that, under a new system, the administrative burdens placed on the FCC will be greater than

before. They question whether the FCC has sufficient staff to handle price-cap implementation .

Criticizing specific aspects of the plan, some maintain that: 1) the price-cap index should not be based

on present tariffs, which they claim are too high ,

9 3

and 2) there is no way of figuring out what a good

index would be. Others challenge the index that has

been proposed to adjust for productivity increases. 9 4

Among those who favor maintaining rate-of -

return regulation are the National Association o f

Regulatory Utility Commissioners, the Consume r

Federation of America, CompTel, MCI, the American Association of Retired Persons, and the National

Association of State Utility Consumer Advocates.

9 5

Telephony is not the only area where the regulation of rates is being called for. Concerned abou t

concentration and integration within the cable industry, and recent hikes in rates being charged for cable

service, a number of groups—among them th e

Consumer Federation of American and the Motion

Picture Association of America (MPAA)—are now

urging that the cable industry be made subject to

S8At ~sent, m~ia Omers tie responsible for the content they distribute. Thus, if they were obliged to provide information services ‘n a

common-carrier basis, determinations would need to be made about who should be held responsible for obscenity, false statements, libelous statements,

etc. If accorded the same immunity from liability as telephone companies and the postal service, this could increase the dissemination of such disfavored

messages as dial-a-porn.

There is also the issue of whether the underlying carrier should be permitted to carry its own messages, when such carriage might enable it to

disseminate its own materials on a more favorable basis than those of its competitors. This is discussed by Judge Greene in his MFJ decision.

89Kafi1Wn Kil]ette, “users Urge FCC t. ~lay fice Caps,” Co-um”catiomWeek, Sept. 19, ]988. See also ch~les Mason, “Some Lawmakers Wilnt

Price Caps Put on Ice:’ Telephony, July 18, 1988, p. 13.

~oroneview, see Ronald J. Binz, “TheProblem with Price Caps, ’’Telephony, Sept. 26, 1988. See also Consumer Federation of America, “Divestiture

Plus Four: Take the Money and Run,” December 1987.

gljo%ph W, wiiz, Jr., “The Rise—and Fall?-of Price Caps,” Telematics, vol. 5, No, 9, September 1988, pp. 8-13,

gz~j~, op. cit., foomote 90.

g3~id.

gqchales M~n, “USTA Blasts AT&T Productivity Claim,” Teiephony, Sept. 19, 1988. pp. 11-12.

9SSW F~er Notice in the FCC Docket 87-313 (price Caps), May 1988.
262 ● Critical Connections: Communication for the Future

increased regulation.96 Moreover, following Senate

Antitrust Subcommittee hearings in April 1989,

Senator Howard Metzenbaum, the chairman, introduced two bills. One restored the authority of cities

to regulate cable rates, and the other required cable

operators to make their programming available to

cable competitors such as wireless cable.97

Option B: Adopt alternatives to rate-of-return regulation.

As noted, many argue that rate-of-return regulation is unproductive and no longer necessary .98

Advocates of this position propose that telephone

companies be allowed greater leeway in setting

prices and earning profits. According to this view,

with the ability to gain rewards for superior performance, telephone companies will have more incentives to innovate and reduce costs. Advocates

contend, moreover, that the administrative costs of

such an approach would be lower than for rate-ofreturn regulation.

One FCC alternative to rate regulation is a system

of price caps.99 Under this scheme, carriers would

not be restricted in the rate-of-return they earn so

long as the prices they charge for service remained

within a prescribed range or band. Although the FCC

price-cap proposal was originally intended to apply

to AT&T alone, some have argued that it should be

extended to include the local exchange carriers and

independent telephone companies on a voluntary

4-year basis. In accordance with the latest version,

prices would be capped on the basis of existing

tariffs, adjusted over time for productivity gains so

that the benefits of productivity would be shared

between consumers and the telephone companies

alike. The FCC estimates that, if such an approach

were adopted, consumers would reap $1.6 billion in

savings within the first 4 years.

Other incentive-based regulatory approaches have

been adopted or proposed in a number of States.l00

Vermont, for example, has adopted a social contract

mechanism that allows the Vermont Public Advocate (a member of the Department of Public Service)

to negotiate a 5-year contract with New England

Telephone that provides for both the stabilization of

local rates and the relaxation of rate-of-return

regulations. In 1986, New York State began a

moratorium on rate changes, to last approximately 2

years, and announced that it would allow New York

Telephone to retain one-half of all revenues earned

in excess of its permitted 14 percent rate-of-return.

Similarly, the South Carolina Public Service Commission has applied price caps to AT&T’s intrastate

interLATA services since 1984.

Incentive-based regulation has the support of

NTIA, as well as the basic support of AT&T and

most local exchange carriers. AT&T, however, has

argued that the local exchange carriers should be

subject to more regulation, given the lack of

competition in their industry. Supporters have called

for additional fine-tuning in a few areas, such as

determining how base rates are set and the productivity assumptions that are built into rates.

These regulatory proposals have been challenged

by a number of stakeholders who want to maintain

rate-of-return regulation. In the face of this opposition, and in response to congressional pressure, the

FCC postponed making a final decision on its

price-cap plan to allow more time for consideration

and deliberation.101 The FCC approved a revised

plan for AT&T in March 1989. No decision was

made with respect to RBOCs. Not entirely satisfied

MAs noted by Shooshan, “the absence of effective competition in most cable markets means that cable subscribers are forced to pay more for

programming than they would in a competitive market. In those few markets where competing cable systems are being built and operated, cable rates

have been reduced substantially. Op. cit., footnote 66, p. 10.

Ws= s,833 and S.834.

98For a disc~sion of tie issue, see Further Notice in the FCC Docket 87-313 (Price Caps), May 1988, pp. 17-34; See also waz, Jr., OP. CiL foomote

91.

-e the FCC price-cap proposal was first aired in August 1987, but further revised in May 1988. The May 1988 version extended the plan to the

regional Bell operating companies and independent telephone companies, and made participation voluntary for a 4-year test period beginning in April

1990. The FCC issued a500+ paragraph notice in May 1988, requesting comments by July 26 and reply comments by August 26, 1988. The FCC was

expected to approve a price-cap plan in January 1989, but delayed a decision until March 1989 to permit it to review the matter with Congress. FCC

Docket 87-313, May 1988, paras. 24-56,

loos= Fufier N@ce in FCC ~cket 87-313, May 1988, pp. 39-40. See also, Paul Teske, “State Regulation of Telecommunications,” OTA COnmactor

report, July 6, 1987.

IOIFOr a discussion, sw Ka~~n Killette, “U.S. Bill Would Bottle price Caps,” Co nununicatwnsWeek, Feb. 8, 1988, pp. 1, 63; John Burgess, “the

FCCA Delays Decision on AT&T Rate Plan,” The Washington Post, Jan. 21, 1989, p. C-1; and Mitch Betts, “Price Caps: A Road to Deregulation,”

Computenvorfd, Feb. 13, 1989, p. 59.
Chapter 9--Equitable Access to Communication (opportunities ● 263

with the FCC’s revised price-cap plan, the Chairman

of the House Telecommunications Subcommittee,

Edward J. Markey, together with 13 cosponsors,

introduced the Telephone Rate Verification Act.

According to Markey, the act is designed to be “an

early warning system” that will alert the public to

any “unintended consequences” of the price-cap

plan. As provided by the act, the General Accounting

Office would review the FCC’s reports and evaluate

the effect of price caps on rates.

Strategy 3: Provide direct government support

for users to access information and communication paths.

Option A: Provide monetary subsidies to individuals

and special groups using information and communication paths.

Congress might take direct steps to assure access

by subsidizing users. This might be done, for

example, by providing funding to certain classes of

people for the purchase of information or communication services (as in the form of “information

stamps”) or by subsidizing their rates.

The major argument for government subsidies of

this kind is that, without such support, some critical

groups in society-such as small-business users, the

poor, and public education institutions—will be

unable to afford access to communication paths.

Subsidies could be targeted specifically to those

groups that are most at risk, without distorting the

allocation of resources within the marketplace.

If Congress were to pursue such an option,

determining which services to subsidize would be a

major issue. The FCC, together with a number of

States and local telephone companies, has already

established “lifeline” programs designed to help

low-income and disadvantaged individuals afford

telephone service.102 However, these lifeline services are limited to supporting “plain old telephone

service.” Less consideration has been given to the

idea that, in an information age, people need to do

more than speak on the telephone to actively

participate in society.103

A second issue, related to the first, is how to fund

the subsidies. This will be more problematic in a

post-divestiture era, since efforts will need to be

made to assure that subsidies do not provide

incentives for uneconomic bypass of the public

shared communication infrastructure. At the present

time, Federal monies for lifeline programs come

from the Universal Service Fund, which is funded by

a portion of interstate carrier receipts. The FCC uses

this fund to match State lifeline contributions on a

one-to-one basis. These funds are targeted to lowincome residents.

The States have adopted a number of different

methods to fund their lifeline subsidies. California,

for example, has imposed a tax on interLATA

common carriers. In Hawaii, the local telephone

companies support lifeline with monies saved from

reduced State taxes. The general State budget

provides the source of funds for Maryland’s lifeline

program.

l04

The final issue is who should be subsidized.

Traditionally, local telephone rates for all residential

users were subsidized by long-distance service.

Today, lifeline subsidies are limited to those below

a certain income level. This level is usually derived

from some percentage of the poverty level or from

income levels established for receiving other social

benefits, such as food stamps or Medicaid.105

Option B: Provide equipment, or subsidies for its

purchase, to individual users.

Instead of providing monetary subsidies for communication and information services, the government could provide, or subsidize, equipment as a

means of fostering access. Such a policy would

encourage access in two ways. First, by acquiring

equipment, individuals would have more direct

l~~rding~~/A Te/ecom2@0, “Twenty-f ivest~es and tie Di@.rict of Columbia have qualified for full assistance under the FCC’S ‘lifeline’ Plan,

which provides for a waiver of the federal subscriber line charge (currently at $2.60 per month), as long as states lower local rates by a concurrent amount.

Recently, the FCC expanded its lifeline assistance to encourage households without telephone service to join the network by providing a $30 credit

towards the cost of installation.” Op. cit., footnote 19, p. 207.

~mFor an ~~ent again~ including discretionary services together with “plain old telephone service” (POTS) for regulatory pWpOW$ .S= Gail

Gart3eld Schwartz, “ASeenario for Regulated and Unregulated Telecommunications,” Telematics, vol. 3, No. 10, 1986, pp. 6-10. According to Schwartz,

“Ifregulators do include discretionary serviees in POTS and continue to regulate them, the LOC’S [local operating companies’] ability to serve the larger

business markets at prices low enough to prevent bypiiss could be impaired. Also, their ability to subsidize riskier operations with earnings from less

risky ones, or to subsidize price-e! astic services with revenues from services that are competitive but less price-elastic, would be reduced.”

l@Wlichael V. Russo, “Technology, Dereg~ation, and the Public Interest in Preserving Universal Telephone Semice,” IEEE Technology and ~ocie~

Magazine, March 1988, pp. 4-11.

1wfbid,
264 Critical Connections: Communication for the Future

access to communication pathways and the information services they provide. Second, to the extent that

greater access led individuals to increase their use of

services, costs could be spread and prices lowered so

that more and more people could afford service.

The Government of France has successfully

pursued such a policy in its effort to foster the

development of a mass market for information

services. Since 1982, it has distributed over 3.7

million Minitel terminals throughout France.106 In

the United States, there is much less precedent for,

or public acceptance of, government intervention in

the private sector communication marketplace on

such a scale. Less ambitious efforts to provide or

subsidize equipment have been undertaken, although the recipients have typically been institutions rather than individuals.107 Legislation has been

introduced in the past that would have provided

taxpayers an income-tax credit for computers in the

home purchased for educational, professional, or

other essentially nonrecreational use.108 It was not

passed, however, and such legislation is even less

likely to find support today in the present political

climate of increased budgetary concerns and competition for government funds.

Another obstacle to such a policy is that, to

implement it, the government might have to favor

one equipment provider over others, an unlikely

prospect in a highly competitive economy.

Option C: Provide public institutions with communication equipment, or increase current funding or

subsidies for its purchase.

The precedent for providing funding or subsidies

to institutions (particularly schools, libraries, and

research labs) for the purchase of equipment is well

established in the United States. For example,

funding for educational technology is available to

States, districts, and schools through various programs administered by the Department of Education. Funds may be appropriated specifically for

educational technology, obligated for technology

projects through existing program areas, or applied

from other grants and awards. Federal block grants

and other grants to States and school districts

support the use of technology at their discretion.l09

This option would increase the numbers of people

who have access to communication pathways and

services and might contribute to an increase in

overall computer literacy. However, it faces the

same obstacles as option B, including budgetary

concerns, competition for government funds, and—

in the case of providing actual equipment—the

problem of designating equipment providers.

Strategy 4: Regulate and/or redefine the rights of

media-owners.

Option A: Reexamine and reevaluate the traditional

regulatory categories of common carrier, print,

and broadcasting in the light of technological

change and market developments to determine

whether they continue to be the most suitable for

fostering communication access.

The evolution of communication regulatory policy in the United States responded to each new

technology as it came along. Three bodies of

regulatory law emerged—print, common carrier,

and broadcasting. Although different in approach, a

common element of each was the goal of promoting

diversity of and access to information and communication. 110

Today, historical boundaries that once existed

among both technologies and markets are increasingly becoming blurred, raising questions about

whether or not these three distinct sets of rules still

represent the best means of fostering their intended

policy goals. Given these changed circumstances,

Congress may want to consider a new regulatory

approach that would more accurately reflect technological and market conditions, and thus better meet

the goal of providing diversity and access.

One approach would be to base regulatory rules

strictly on market structure. This approach assumes

lmE~is Booker, “Vive Is Minitel,” Telephony, Aug. 8, 1988, Pp. 24-32.

l~H.R. 5573,97th Cong., 1982.

I08H,R. 2531, tie F~ily Opportunity Act, was introduced by Rep, Newt Gingrich in April 1983. It would have allowed an income tax credit for 50

percent of the expenses paid for computers in the home, limiting the amount for a taxable year to $1(K), multiplied by the number of qualified members

of the taxpayer’s family.

l@For a &Cw~ion of tie Dep~ment of E&cation’s pfincip~ prog~s providing funds for tec~o[ogy in ducation, see U.S. Congress, Office of

Technology Assessment, Power On! New Tools for Teaching and Learning, OTA-SET-379 (Washington, DC: U.S. Government Printing Office,

September 1988), app. C.

I IOPmI, op. cit., footnote 38.
Chapter 9--Equitable Access to Communication Opportunities ● 265

that market structure is the principal factor determining access. It is based on the notion that, in a

competitive situation, there will always be a number

of pathways open to individuals seeking information

or an audience, and that, under such circumstances,

the cost of access will not be prohibitive. Media

pathways that are subject to effective competition

would be free to set their own prices and exercise

discretion over the information they carry; those that

exhibit monopoly characteristics would be required

to operate as common carriers.

One benefit of this approach is its relative clarity

and consistency. With three distinct and historically

based categories of law to draw on and guide them,

legislators and regulators have had to spend considerable time and effort trying to categorize new

technologies, segregate economic activities, and

keep media organizations confined to their appropriate turfs.111 And stakeholders have often been able

to use this confused situation to stifle competition,

and thus to actually limit or reduce diversity and

access. Finding satisfactory solutions to regulatory

problems like these is likely to become even more

difficult in the future, given the rapid convergence of

communication technologies and markets and the

development of new products and services that defy

the traditional categories. In contrast, agreement

about the definition of monopoly conditions is not

likely to change with every new technological

development.

However, altering the conceptual basis for regulating content-based communication would be extremely difficult, given the weight of the first

amendment and the entrenched interests and property rights of present-day media owners. As demonstrated in Miami Herald Publishing Co. v. Tornillo,

the Court has denied the government the right to

regulate a newspaper on first-amendment grounds,

even when it had monopoly power. And, as recent

history has clearly shown, media-owners have been

quick to draw on the protection of the first amendment to defend their interests.

Another difficulty is reaching agreement on what

constitutes monopoly conditions and when effective

competition exists. It is clear that there can be

considerable disagreement on these standards, based

on the diversity of opinions exhibited in recent

stakeholder testimony and comments on the structure of the cable industry112 and telephone company

line-of-business restrictions.113 Also, definitions of

“monopoly” can differ, depending on whether economic or political criteria are used. Whereas an

economic analysis will look at power over suppliers

who compete in the market, a political analysis will

concentrate on “who,” under the circumstances, can

gain access to information or use the media. ’14

Given the development of electronic markets,

bulletin boards, online data services, videotex, and

electronic publishing, the issue of regulatory categories, although deeply troublesome, is likely to

persist. If, in the future, everyone is to enjoy access

to the benefits of these technologies, Congress may

need to act now to reevaluate the most appropriate

rules for their use.

Option B: Rescind the cable/telephone company

cross-ownership rules to increase the competition faced by the cable industry.

As already noted, the cable industry has become

considerably more concentrated and integrated since

its deregulation under the Cable Act of 1984.115

Concerned that these market changes will limit

access to cable services, a number of policymakers

and others have recommended that the telephone

companies be allowed to become more involved in

11 l~ld.

1143= JSIIUSZ A. ~dover and Yde Bra~tein, “DCRS cable RJe.vision Really Face Effective Competition?” In “Competitive ISSUeS in tie Cable

Television Issue,” hearings of the Sulxommittee on Antitrust, Monopolies, and Business Rights of the Senate Judiciary Committee, IOOth Cong., 2d,

sess., Mu. 17, 1988, pp. 192, 235, and passim.

113 Hu~r, Op. Cit., footnOte 19,

lloFor ~is distinction, see Poo1, op. cit., footnote 38. See also Charles E. LindbIom, Politics arui Markets (New York, NY: Basic BOOkS, 1W7).

1 lsFor disc~sio~ of the market structure in the cable industry, see ch. 3; see also Shooshan, op. cit., footnote 66. According to the autior, he major

public policy issues surrounding cable television in the 1990s will relate to industry structure and mmpetition.
266 ● Critical Connections: Communication for the Future

offering cable services.116 In its June 1988 report,

Video Program Distribution and Cable Television:

Current Policy Issues and Recommendations, NTIA

recommended that telephone companies be freed to

provide video dial tone and act as video common

carriers, leasing charnels to all video programmers.

The report urged the removal of current requirements that telephone companies lease channels only

to franchised cable operators or franchising authorities. It did not recommend, however, that telephone

companies be allowed to provide video services

directly to subscribers in their own service areas,

their activities being limited in these areas to

providing transport, maintenance, and billing services.117

The FCC, however, went even further in its

proposals, calling for the elimination of the cable/

telephone company cross-ownership and videoservice restrictions.118 Support for this position

within the FCC has subsequently waned, however.

Having dissented from the original the FCC decision, Commissioner Dennis has continually questioned the value of changing the cross-ownership

rules. She has suggested, for example, that, if

telephone companies are free to own cable systems

in their own service areas, they may simply buy out

existing plants rather than build competing ones.119

More recently, Commissioner Quello, reevaluating

his position in the light of public comments, now

calls for a full en bane FCC hearing on the issue.120

Those who advocate the elimination of the

cross-ownership rules argue that, having become

monopolies in their own rights, cable companies no

longer require the kind of market protection intended

by the 1984 cross-ownership ban. In addition, they

anticipate that increased competition will have a

positive effect on service rates. Moreover, as described in chapter 12, many people argue that by

allowing telephone companies to provide video

services, they will have a greater incentive to move

quickly to deploy fiber optics to the home. *21 Some

also note that, to the extent that telephone companies

are required to provide video services on a commoncarrier basis, access will be extended for all.

The outgoing FCC chairman, Dennis Patrick, was

outspoken in his support of this position. Viewing

deregulation as inevitable if more competition is not

interjected into the industry, he came down squarely

in favor of allowing telephone-company entry into

the cable area, subject to safeguards. 122 According to

Patrick, everyone has something to gain. Not only

will there be a greater incentive to develop information services and deploy fiber optics, but program

developers and syndicators also will have more

116For diScWSiomof~S development, ~ Larry Jaff~, “cable Comes Under Fire at Senate Antimst Hearing,” Mu/tichanneJ N~s, Ma. 21, 1988,

p. 1; JohrI Wolfe, “Malone Bears Brunt of Hill Hearing,” Cablevision, May 23, 1988, pp. 12-13; “Cable Has Its Work Cut Out for It,” Broadcasting,

Mar. 28, 1988, p. 31; and Margaret E. Kriz, “Cable’s Comeuppance,’’Nationa/ Jourrud, Mar. 26, 1988, pp. 807-811, As Shooshan has noted, in the past

“problems related to cable’s market power have been handled on an ad hoc basis, if at all, by the FCC and other Federal agencies.” Op. cit., footnote

66, p. 226.

The telephone companies are prohibited from owning cable systems within their own service areas under the Cable Telecommunications Policy Act

of 1984. Moreover, MFJ prohibits the telephone companies from providing information serwces.

llTV1deo Progrw Dist~bu~Wn ~~ c~ie Television: current PO1lCY Issues ad Reco~e@tio~, NTIA Report 88-233 (Washington DC: U.S.

Department of Commerce, June 1988). For discussions, see also “NTIA Opms Pandora’s Box for Change in Cable—Beginning With Telco Entry,”

Broadcasting, June 20, 1988, pp. 37-40; and Kathleen Killette, “Commerce: Ease Curbs, Telcos Eye Options Under NTIA Proposal,”

CommunicationsWeek, June 20, 1988, pp. 1,46.

As NTIA argues, with telephone companies limited to providing common-carrier video dial tone, there would be no danger that they would stifle the

development of new programming material. In fact, they would benefit from maximum traffic due to the large number of competitive information product

suppliers.

I lgoIl Sept. 22, 1988, the FCC released a “Further Notice of Inquiry and Notice of Proposed Rulemaking” in CC Docket No. 87-266, which =ks

additional comment on a commission proposal to recommend to Congress the abolition of the statutory ban on telephone companies providing cable

service within their local telephone service areas. Because the cross-ownership rules are codified in the Cable Communications Policy Act, the FCC

cannot repeal them on its own authority. For a discussion, see “FCC Advances Repeal of Networks-Cable Ban,’ ’Broadcasting, Aug. 8, 1988, pp. 23-24;

Fred Dawson, “In Subtle but Sure Ways, Telco Entry Into Cable Goes Beyond ‘If’ to ‘How, ’ “ Cablevision, Feb. 15, 1988, pp. 20-22; Melinda Gipson,

“FCC Proposes Allowing Telcos to Provide Cable,” Cablevision, Aug. 1, 1988; and Sam Dixon, “FCC Prepares to Tangle With Cable-Telco

Cross-Ownership,” Telematics, vol. 5, No. 7, July 1988, pp. 12-16.

I lgS~Je~ineAver~, “FCC’S Dermis Rejects Telcos’ Cable Entry, ’’MulrichannefNews, Nov. 21, 1988, p. 11; and Charles Mason, “Wnnis Knocks

FCC Cableflelco Assumptions,” Telephony, Nov. 21, 1988, p. 15,

lzosee’’~ello Having Second Thoughts About Telco Entry, ’’Broadcasting, Jan. 16, 1988; see also “Quello Calls fmFCC Hearing on Entry of Telcos

Into Cable,” Broadcasting, June 12, 1989, p, 67.

lzlFOr the Pre=ntation of these ar~ments see, for example, Nicholas P. Miller, “Yes-Telcos Can Provide Better and IAXS Expensive Service,”

Teiematics, vol. 5, No. 12, December 1988, pp. 7, 11.

IZZS= “FCC’,S Patrick Urges Telco Enuy Into Cable,” Broadcasting, June 12, 1989. p. 57.
Chapter 9--Equitable Access to Communication Opportunities ● 267

outlets for their products, while broadcasters will

have less need for must-carry legislation.123

Some stakeholders, while not opposed to telephonecompany entry, are much more cautious and tenuous

in their support. Broadcasters have been open to the

idea of allowing telephone companies to become

more involved in delivering cable services, but only

on the grounds that transmission services be provided to them on a common-carrier basis and at no

cost. On the other hand, they are divided with respect

to whether the elimination of cross-ownership rules

should be applied to the television networks as well.

While the networks would welcome such a change,

affiliates fear that it might lead to anticompetitive

behavior on the part of the networks.124 Moreover, as

the Association of Independent Television Stations

has told the FCC, there are:

. . . serious problems of horizontal concentration and

vertical integration in the cable industry, and,

critically, their injurious effects on cable carriage of

local television stations are hardly served by the

promise of still greater ownership concentration and

vertical integration inherent in network ownership of

cable systems.l25

This perspective, as it pertains to network-cable

cross-ownership, has been echoed by MPAA. 126

Like broadcasters, representatives of the cities,

while generally interested in considering such a

policy, have their own reservations. Members of the

National Association of Telecommunications Officers and Advisers, for example, have expressed the

concern that if telephone companies are allowed to

operate cable systems in their own service areas, the

cities would very likely lose their local regulatory

authority over cable service.127

Having been highly vocal in their criticisms of

integration and concentration within the cable industry, representatives of program suppliers such as

MPAA have called for government measures to

either deregulate cable, or to bring the telephone

companies into the market as competitors. Testifying before the FCC, the representative of a group of

producers argued that cable television is a classic

bottleneck, and said:

Incumbent cable monopolies control the delivery

of broadband video services to the American consumer. There is a crying need for full and fair

competition in the delivery of such services. Producers are hopeful that telephone company entry into

cable, under specified conditions, may hold the

answer. 

128

With some exceptions, members of the cable

industry are strongly opposed to changes in telco/

cable cross-ownership rules. In response to the FCC

decision, for example, the National Cable Television

Association voted to temporarily increase its membership dues by 15 percent to enable it to wage a

more effective campaign against telephonecompany entry.129

Pointing to the competition from other video

program distributors, cable companies deny that

they constitute a monopoly.130 In fact, they argue

that the real dangers of monopoly still reside with the

telephone companies who, if allowed into the cable

business, would use their favored access to poles and

conduits to behave in an anticompetitive fashion. To

the extent that vertical integration in the cable

industry has occurred, cable representatives argue

that it has been generally beneficial, leading not to

anticompetitive behavior but rather to greater diver123~1d.

lz@Choosing Sides on Network-cable Crossownership,” Broudcusting, (let. 31, 1988. pp. 5’7-58.

1+. J~f=, “Big ~=, Affiliate5 Differ on Cable Ownership,” Mu/tichunne/ N~s, ~t. 31, 1988> P. lg.

1~’ch~5ing Sides on Network-cable Crossownership,” op. cit., footnote 124.

lzTFor a discu~ion, see Larry Jaffee, “Telcos’ presence Conspicuous at Telecom convention,” Multichannel News, Oct. 3, 1988, p. 14.

128Joxph W. Wz, Jr., Cements of Buena Vista pictwes Distribution, Inc., MG~A Communications CC)., orion pictures COrp., pSratnOUnt

Pictures Corp., Twentieth Century Fox Film Corp., and Universal City Studios, Inc. Before the Federal Communications Commission, Washington, DC.,

CC Docket No. 87-266, Dec. 16, 1988.

129sW c*N~A Blm~ BWeau’s Telco-Cable ~islon,” ComnicatWmWeek, May 22, 1988, p. 40; and “N~A Votes 15~0 Dues Surcharge to Fund

Telco Fight,” Broudcusting, Get. 3, 1988, p. 29.

130s@, for this ~Went, John M. DraWr, “me Telco Cross-ownership Refictions: A Cable per~tive,” paper presented at the Media hlStitUte

luncheon series, Washington, DC, Apr. 19, 1989. See also, Charles Mason, “Who Are the Real Monopolists? Telcos, NCTA Trade Chtuges,’’Telephony,

Dec. 26,1988, pp. 10-11. As noted by Shooshan, the problem in determining the extent of competition on the basis of the existence of other video program

disrnbutors is “that there is no fixed standard to define how close the competitive substitutes must be in order to provide workable competition. Thus,

conclusions tend to be extremely subjective.” Op. cit., foomote 66, p. 230.
268 ● Critical Connections: Communication for the Future

 Countering the argument sity in programming.131

that telephone-company entry will lead to reduced

rates, cable companies contend that, on the contrary,

with the elimination of the cross-ownership rules,

telephone ratepayers will be overcharged to help

defray the costs of telephone company entry into the

television business. They also take issue with the

argument that the cross-ownership rules discourage

modernization, arguing that fiber will be introduced

within a reasonable timeframe without the revenue

support from cable television. *32 There are, however, some multiple service operators who support

telephone-company entry, viewing the telephone

companies as potential bidders who, having plenty

of money to spend, are likely to raise the price of

purchasing their systems.

Option C: Provide common-carrier status for critical navigational tools, recognizing their essentialfacility nature.

As already noted, navigational tools are becoming

increasingly important for effective communication.

Information users need such tools to help them

locate information in a form and format that is most

useful to them. Information providers need navigational tools not only to help them identify the most

efficient modes of transmission, but also to assist

them in identifying and making themselves known

to potential audiences. Moreover, because the value

of such tools is likely to increase in the future—

together with the amount of available information,

its growing strategic importance, and the development of new transmission modes—new rules governing access to them maybe required. In particular,

Congress may want to provide common-carrier

status for critical navigational tools, recognizing

their essential-facility nature. Such a policy assumes

not only that such tools are becoming increasingly

critical, but also that the structure of the market is

such that effective competition is lacking and access

is limited.

Providers of navigational tools are unlikely to

favor the status of common carrier. Like other

providers of information media, they would most

likely view such restrictions as infringing on their

first-amendment rights and depriving them of significant market opportunities. To date, this status has

been granted only when it has been established that

facilities are essential. Individuals who might otherwise be excluded from gaining access to information

will argue that they are being deprived of an

essential service. Thus, the issue might hinge on

what constitutes first-amendment rights, as well as

an essential service, in the economic realm, given

the enhanced role of information in society.

Option D: Strengthen requirements to provide

public access to production facilities.

The Cable Communications Policy Act of 1984

included provisions that grant franchise bodies the

authority:

. . . to enforce any provisions of the franchise for

services, facilities, or equipment proposed by the

cable operator which relate to public, educational, or

governmental use of channel capacity.133

Public-access channels have had mixed success,

as program producers often suffer from lack of

funding, inadequate equipment, and viewer apathy.

While some have been pleased with the quality of

programming, 134 others have viewed it as marginal.135 Conditions are changing, however, and

such a policy might now be more successful. Not

only is there more user-friendly equipment available

for producing content, but the cable audience is now

large and perhaps diverse enough to encourage more

varied programming.

Reinforcing such a policy would be strongly

opposed by the cable industry if it were expected to

bear the costs of additional facilities. It also raises

the question of whether such a policy might also be

extended to other forms of media. This issue might

become much more complex if telephone companies

were allowed into the information-services business.

Congress would need to decide whether telephone

companies, too, would have special obligations to

131~~Pr, ~. cit., fmmote 129. SW ~so Benjamin Klein, “The Competitive Consequences of Vertical Integration in the Cable ~dust~,” J~e 1989s

University of California, Los Angeles.

lszFor me accmt of these arguments, see “Should the FCC Modify Its Policies Concerning Cableflelco Cross-Ownership?” Frank W. Lloyd, “No:

We Should Fear a Single Information Pipeline to the’Home,” Te/emutics, vol. 5, No. 12, December 1988, pp. 8-10.

13361 l(c), cOtjifid at 47 U,S.C, 531(c).

134s% diScUS@I of cable community access channels in ch. 7.

135~w s~~r, *~ Cable Fable Revisit~: Disco~~, policy, and tie M~ng of cable Television,” Critica/ Studies in MOSS CO~?lhltWn,

VO1. 4, 1987, p. 195.
Chapter 9--Equitable Access to Communication Opportunities ● 269

provide the public with access to production facilities and assist them in producing content.

Strategy 5: Influence the level and availability of

the tools and resources required to access

communication and information services.

Option A: Foster the relationship between the

producers and distributors of communication

content.

Congress could act as a facilitator by brokering

the relationship between the independent and minority producers and distributors of information. Such

a function might be assigned to, for example, the

National Endowment for the Arts or the National

Endowment for the Humanities. The major constraint of this option is the cost. In addition,

traditional producers may oppose assistance to

independent producers if they see them as potential

competitors. On the other hand, they might view this

option as beneficial if it serves to enrich the overall

creative environment.

Option B: Provide Federal support for technological literacy programs.

The Federal Government might provide support

for the development of programs to train individuals

in the use and ethics of using new communication

technologies and in evaluating content. One way of

doing this would be to tap into the expertise that the

Department of Defense has developed in technology training. 136 Since a comprehensive policy might be

extremely costly-involving equipment support,

teacher training, and the establishment of new

centers for learning-one argument against this

policy would be cost constraints. However, these

could be ameliorated by supporting training efforts

that are already under way. Assuming a role in

coordination might be the most effective way to

leverage Federal dollars. Another argument against

this option would be that it is impossible to deal with

technological literacy without addressing the underlying problem of the lack of basic literacy.

It is unlikely that the educational community

would oppose this option; however, some would

argue that government support for literacy should be

funneled through State and local authorities in order

to minimize bureaucracy and to best target local

needs.

Option C: Increase funding and support for direct

research on navigational tools.

Present government support is limited primarily

to designing navigational tools to assist scientific,

military, and technical research. Given the enhanced

role of communication in the political, cultural, and

economic realms, government may want to develop

a more aggressive policy to assure the transfer of this

expertise to other sectors.

Support for or opposition to such a policy would

depend on how it was implemented. Opposition will

develop if some groups are favored at the expense of

others; for example, government support for one

kind of equipment standard will put other vendors at

a disadvantage. On the other hand, users will benefit.

To the extent that this option served to equalize

opportunities for gaining access to communication

paths, it might be opposed by those who currently

can use navigational tools to gain strategic advantage.

Option D: Provide funding for creation of bibliographical devices for publicly funded programs

and information.

The Federal Government already provides a

variety of bibliographic services, such as the Department of Education’s ERIC (Educational Resources

Information Center) and AGRICOLA, compiled by

the National Agricultural Library. Those who wish

to provide alternative services in the marketplace

would be opposed to this option. The information

industry argues that these services can be better

provided in the marketplace. These issues are

discussed in considerable depth in the OTA study,

“Informing the Nation,"137 and will not be discussed

here.

136An exaple of such an ~angement is provided in the Training Technology Transfer Act of 1988 (20 U.S.C 509). TO take advantage of tie

investment of public funds already made in the development of education and training software, particularly in the Department of Defense, this act

facilitates the transfer of education and training software from Federal agencies to the public and private sectors and to State and local governments and

agencies, including educational systems and educational institutions, in order to support the education, training, and retraining of industrial workers,

especially workers in small business concerns.

IWOTA, op. cit., footnote 52.
270 ● Critical Connections: Communication for the Future

Strategy 6: Assume a more proactive role to

assure robust debate on issues of public importance.

A major purpose of the first amendment is to

protect the free discussion of governmental affairs.l38 At this time, the government’s role in

assuring a diverse “marketplace of ideas” is ambiguous. In the print media, the government plays almost

no role in promoting debate on public issues. In

broadcasting, although the FCC has ruled that the

Fairness Doctrine is an unconstitutional infringement on the first-amendment rights of broadcasters,

139 the Equal Time Requirement and the Public

Trustee Standard still appear to be in force. A more

proactive government role might include congressional options such as the following.

Option A: Codifi the Fairness Doctrine for broadcasters andlor extend it to other media.

Most broadcasters and other media providers, as

well as the present FCC, are opposed to this option.

They claim that there is now an abundance of media

channels, and thus the Fairness Doctrine is no longer

justified on the grounds of spectrum scarcity. They

also maintain that the Fairness Doctrine does not

promote the diversity of messages, but in fact has a

chilling effect because broadcasters are reluctant to

broadcast controversial materials and risk being

accused of providing unbalanced coverage. This

argument, however, ignores the fact that the Fairness

Doctrine itself requires coverage of controversial

issues.

A number of public interest groups-such as the

Media Access Project, the American Civil Liberties

Union (ACLU), and the United Church of Christ—

favor the Fairness Doctrine because they believe it

gives them leverage in getting public issues aired.

Two broadcasters, Fisher Broadcasting Inc. and

Westinghouse Broadcasting and Cable Co., assert

that the Fairness Doctrine does not inhibit their

coverage of controversial issues of public importance.l40 If the Fairness Doctrine were reinstated,

however, the public-trustee status of broadcasters

might be less open to challenge, enabling them to

argue against spectrum licensing or any proposal to

give them common-carrier status.

One criticism of the Fairness Doctrine has been

that it singles out the broadcasting media and

requires them to give a certain type of coverage to

issues of public importance. Such a standard has not

been imposed on the print media.141 Although cable

is legally required to comply with the Fairness

Doctrine, the FCC has not enforced the doctrine

since 1974.142 Given the difficulties certain groups

have in accessing communication paths and the lack

of diversity in messages carried (see chs. 6 and 7),

Congress could extend the Fairness Doctrine to all

media. However, many would oppose this approach,

fearing that such government regulation would lead

to government control over content. The Supreme

Court’s Miami Herald ruling,143 which invalidated

Florida’s right-of-reply statute as a violation of the

first amendment’s freedom of the press, would be a

precedent for invalidating an extension of the

Fairness Doctrine to the print media.l44

lqg~e Supeme Cow has ~ogniz~ the s~ci~ status for first-amendment protection of communication related to political affdrs in a numkr of

instances. In Roth v. Um”ted Stares, 354 U.S. 476, 484 (1957), the Court stated that the first amendment affords the broadest protection to political

expression in order ”to assure [the] unfettered interchange of ideas for the bringing about of political and social changes desired by the people.” Similarly

in The New York Times v. Sullivan, 376 U.S. 254, 270 (1964), the Court spoke of the “profound nationat commitment to the principle that debate on

public issues should be uninhibited, robust, and wide open.”

lsgoIi Aug. 4, 1988, the FCC declwd the q&yew-old Fairness Doctrine unconstitutional. Rep. John Dingell (D-Mich) and Senator ~nest Hollings

(D-S. C.) have led effoxts to reinstate the Fairness Doctrine and give it statutory status; however, they did not have enough votes to override a threatened

veto by President Reagan. Prior to the FCC’s action, Congress had passed a bill to codify the Fairness Doctrine (S.742 was passed by the Senate on Apr.

21, 1987, and H.R. 1934 was passed by the House on June 3, 1987), which was vetoed by President Reagan on June 19, 1987.

lme FCC’S Meredith dwision as quoted in Broadcasting, Aug. 10, 1987, p. 39-F.

IdI~ ~Went for ~is discrepmcy hm ~n b~ed on broadcmting’s scarcity of spectrum. SW RedLLm Broadcasting v. FCC. 395 U.S. 367, 1969.

142FCC fixtie F~e= ~crnne on c~le systas ~ I%$J (=. ‘76-Z09 C-F.R.)q ~G~rge H. Shapiro, filip B. Kwl~d, and Jmes P. Mmtio,

‘cableSpeech’ (New York, NY: Law & Business, Inc., 1983), pp. 49-75; and Daniel L. Brenner and MONCX E. Price, Cable Television and Other

Nonbroadwrt Video (New York, NY: Clark Boardman Co., Ltd.$ 1986), pp. 6-72-6-74.

lqs~ Mia’ ~er~d Ptilishing CO. V. Torn”//o, 418 U.S. 241 (1974), the Supreme Court held unconstitutional a Florida law that gave pditicd

candidates a right of reply to newspaper criticism on the grounds that the first amendment freedom of the press prohibits any governmenttd regulation

of the press that would require it to print something it would not otherwise print. One of the Court’s concerns was that editors might not print political

editorials in order to avoid controversy.

l~~omm M. ~bin, “Extending the Ftirness Doctie to the Print Media,” Library of Congress, Congressional Research Service, CRS Repofi

87-584 A, June 17, 1987.
Chapter 9--Equitable Access to Communication Opportunities ● 271

Option B: Mandate time and space on communication pathways for discussion of public policy

issues.

Rather than regulating the content of media, as the

Fairness Doctrine does, Congress could instead

regulate the structure of media access in order to

provide more diversity. 145 For example, Congress

could subsidize those wishing to use existing media

for public affairs discussions, designate certain cable

charnels for such discussions, prohibit multiple

ownership or require diversity of ownership, or

establish new public forums, such as computer

bulletin boards and publicly supported broadcasting

stations. Henry Geller has proposed that broadcast

station-owners be charged a “spectrum fee” that

would be used to subsidize public-affairs programming on public radio and television. The National

Association of Broadcasters (NAB) has suggested

that revenue to improve access to media for public

affairs programming--specifically access to public

broadcasting-should come not from the broadcasters, but from consumers in the form of taxes on TVs,

radios, and VCRs.l46

Owners of private media would probably oppose

this option to the extent that they would lose

advertising revenues. One argument against this

option is that most people do not watch public affairs

. programming and that increasing the amount of

coverage or improving the quality of coverage will

not change public behavior.

Option C: Require media providers to uphold more

stringent public-interest standards.

At present, there are no explicit public-interest

standards. One option, therefore, would be for

Congress to establish explicit standards and measures for what constitutes public-interest programming. For example, Congress could establish quantitative measures for particular programming categories, such as children’s programming and local

public affairs.147 However, there have been problems with such policies in the past, particularly in

formulating, overseeing, and actually enforcing

guidelines. Broadcasters and civil libertarians have

been strongly opposed to any government intervention in program content. For example, the 100th”

Congress passed a bill (H.R. 3966) to reimpose

limits on the amount of advertising on children’s

television shows. The bill was opposed by the FCC

and the Department of Justice, but NAB said that

broadcasters could live with this measure. The bill

was supported by Action for Children’s Television

and many public interest groups concerned about

family values.148 President Reagan pocket-vetoed

the bill, saying that “this bill simply cannot be

reconciled with the freedom of expression secured

by our Constitution. ’’149

Alternatively, Congress could relax antitrust regulations to allow the media to cooperate in developing voluntary standards for certain program areas.

Such legislation has been proposed with respect to

violence in programming.

150 The ACLU opposed

the bill on the grounds that it represented congressional control over portions of TV content. Although

the networks opposed the bill, NAB did not;

however, they expressed concerns about how the

guidelines would be implemented. Children’s advocates, including many in the medical profession,

support controls on violence on TV.151

Option D: Adopt campaign-reform legislation.

As chapter 6 points out, the costs of political

campaigns restrict access to communication paths

for both potential candidates and citizens who want

to influence the electoral process through campaign

contributions. Accompanying the increase in campaign expenditures has been a decrease in voter

turnout, an increase in political cynicism, a decrease

in the importance of political parties, and an increase

in the influence of political action committees

(PACs) and political consultants. Part of the increasing cost of campaigns can be attributed to the high

costs of waging a media campaign.

ld@F~om and Fairness: Reflating the Mass Media,” Philosophy and Public Policy, VO1. 6, No. 4, Fdl 1986, PP. 1-5.

l%john Burgess, “Broadc~ters Offer plan to Tax Sales of TVs, Radios and VCRs,” The Washington Post, NOV. 10, 1987, P. ~.

147For a discusim of ~~ effo~ t. establlsh quantitative standmds for broadcasters, s= DOUgl~ Ginsburg, Regulation o~Broadcasting (St. pal.d,

MN: West Publishing Co., 1979), pp. 142-149.

ldgpaul Smobin, “Bi]] t. Boost Quality of Kids’ TV Clears Despite Veto Possibility,” CQ Weekly Reports, at. 221988, P. 3065.

14~’Reagan pocket-vet~s Bill on Children’s TV,” The Washington Post, NOV. 6, 1988, p. A6.

1s0s.844 WM pa.ss~ by the Senate, but H.R. 3848 did not pass the House. “ACLU Attacks TV Violence Bill,” TV Digest, Oct. 10, 1988, p. 6.

151J~y W. Zylke, C*More Voices Join Medl~ine in Expressing Concern Over Amout, content of mat Children S(X on TV,” JAMA, at. 7, 1988,

VO1. 260, No. 13, pp. 1831, 1835.
272 ● Critical Connections: Communication for the Future

To reform political campaigns, Congress could ●

consider the following options:

●

●

●

●

●

●

extend public funding, such as that provided to

presidential candidates, to congressional candi- ●

dates, State or local candidates, and nonprofit

groups; 152

reconsider and extend the limits on individual

campaign contributions; 153

●

decrease the amounts that PACs can contribute

to a candidate or establish an overall limit on

the PAC contributions that Federal candidates

can accept; 154 ●

restrict the length of the campaign season; 155

clarify what is meant by “lowest unit rate” that

can be charged for political broadcasting; 156

●

provide free media time to candidates for

Federal offices; 157

initiate legislation placing limits on the amount

of money that can be spent on political advertisements; 158

impose standards on the form of political

advertisements, thereby making them more

uniform, cheaper, and less subject to price

differences; 159

hold hearings to assess the impact of negative

advertising on recent Federal elections and

consider ways to regulate negative advertising;

investigate the impact of media practices, such

as news-program coverage of political candidates 160 and polling;l6l 

and

investigate the influence of political consultants and the impact of technology-supported

campaign practices.

lszh tie ImCon=ss, tie focal point of such efforts was the Senatorial Election Campaign Act of 1987 (S.2), introduced by Senators Boren and

Byrd, which provided public financing and spending limits in Senate elections. Republicans opposed to spending limits and public funding were able

to filibuster the bill. For a review of campaign financing reform, see Joseph E. Cantor and Thomas M. Durbin, “Campaign Financing,” Library of

Congress, Congressional Research Service, C!RS Issue Brief, May 12, 1988,

ls3@e loophole ti~ Conqss cre~~ in 1w9 is that national parties can solicit urdimited contributions from corporations, labor unions, and

individuals for State and local parties, routine expen~s, and party-building activities. See Charles R. Babcock, “$100 Million in Campaign Donations

Belie Notion of Federrd Limits,” The Washington Post, Nov. 8, 1988, p. A12, and Carol Matlack, “Backdoor Spending,’ ’Natwnul Journul, Oct. 8,1988,

pp. 2516-2519.

ISdAmW~rof ~chbflls have &xmpropos@ inc]udingtie Campaign Reform Act of 1987 (H.R. 166), the Comprehensive Camp@I Finance Reform

Act of 1987 (H.R. 573), the Senate Campaign Cost Limitation and Public Financing Act (S.645, S.725), and the Bipartisan Commission and

Congressional Campaign Financing Act (S.1672). See Cantor and Durbin, op. cit., footnote 151, p. 6. Such changes, however, could be sidestepped by

PACS increasing their independent expenditures, which under Buckley cannot be limited.

155Aresrnct~ Campaign ~~n could be a requirement for receiving public funding, as is presently the case. Affecting the length of campaigns might

also be accomplished by reforming the nominating process. Either a national primary or a regionat primary might restrict the length of pre-cxmvention

campaigning. Kevin J. Coleman, “The Presidential Nominating Process: The Regional Primary Movement and Proposed Reforms,” Library of Congress,

Congressional Research Service, CRS Issue Brief IB861 17, Mar. 7, 1988.

ls~e cmp~g C@t R~uction Act (S. 2627) would establi~ that a station’s charge for preemptible pOlitiCal time would have to WA i~ lowest

preemptible rate for that spot, and that a fixed spot rate could be no more than one-half again the preemptibie rate. “Congress Looks for Better Deals

on Campaigns,” TelevisionJRadio Age, Oct. 3, 1988, p. 17.

lsTForex~ple, in tie loOth Congew, Representative Stratton introduced the Free Politicat Broadcasting Act of 1987 (H.R. 521) to provide free radio

and TV time to Federal candidates. He also co-sponsored, with Senator Pen, the Informed Electorate Act of 1987 to require TV stations to provide free

time to political parties for communications by House and Senate candidates.

lf@Ttw 19’71 F~eral El~tion Campaign Act imposed spending limits on media advertising by Federal candi&tes, but these were repdd in 1W4.

To be consistent with Buckley, limits on advertisements would have to be part of a public funding scheme.

15gIn tie 98rh (lmgress, Senalors Rudman and kouye, adopting this approach, introduced the Fairness in Political Advertising ACt. ArOOng otier

things, this act would require that the purchaser of the ad or a designee: 1) speak to the camera for the duration of the ad; 2) permit some variation in

backgrounds, provided they are taken with the same lens as the speaker; and 3) mandate written material identifying the speaker and purchaser of the

ad. Curds B. Gans, testimony before the Senate Committee on Commerce, Science, and Transportation, Sept. 10, 1985, pp. 12-13.

1- FCC h= exemp~ broadc~ters from the equal time requirements when candidates appear on a bona fide news interview or docwmtary

program, which includes television shows such as “Donahue” and “Entertainment Tonight.” Some candidates supply tapes to broadcast stations, raising

another question about the definition of a bona fide news program. Jack Loftus, “FCC Goes Easy on Political TV,” Television/Radio Age, Apr. 4, 1988,

pp. 43, 132.

161A n~~r of bills have kn introduced to either restrict the use of or lessen the impact of exit polls. @e proposal that has ~n supportti by tie

media is to adopt attniform poll-closing time; the networks have given their verbal commitment that, if such a law were enacted, they would not announce

exit-poll results until the polls closed. Statements of representatives from ABC, CBS, and NBC on S. 182 before the Senate Committee on Rules, May

12.1988.
Chapter 10

Security and Survivability

! of the Communication

Infrastructure
C O NTENT S

INTRODUCTION .. .. .. .. .. .. .+ +. +.. ..+. ....,. .. .............+.........+++.. . . . . . 275 Page

THE PROBLEM ......., .. .. .. .. ... ,., .+6..., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275

STRATE GIES AND OPTIONS ,. .. .. .. ... ..,6+ ....,. .. .. .. .. .. .. ... .++, . . . . . . . 282

Figures Figure

10-1. Vulnerability of Industries to Computer Outages .,. ,.. ..o., .. .. ., ... ,.. +.+06+. 276 Page

l0-2. Severity of Loss Due to Computer Outages .......,, . . . . . . . . . . . . . . . . . . . . . . . . . . 277

10-3. 1988 Increase in Computer Devices Infected by Viruses, . . . . . . . . . . . . . . . . . . . . . . 278

10-4. Four Stages of Viral Infection of Computer Systems . . . . . . . . . . . . . . . . 10-5, Congressional Strategies and Options To Address Security/Survivability..,. . . . . . . 279

of the Communication Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283
Chapter 10

Security and Survivability

of the Communication Infrastructure

INTRODUCTION

Security and survivability are essential characteristics of the communication infrastructure.l However, establishing a secure and survivable infrastructure requires tradeoffs between security and survivability on the one hand, and access, cost, and ease of

use on the other.2 Experts estimate, for example, that

security features constitute approximately 10 to 20

percent of a network’s overhead costs. Moreover,

adding features to provide additional security not

only increases network traffic; it also slows down

the speed of transmission. Thus, although most

people would probably support the general goals of

security and survivability, they might disagree

significantly on the levels of security and survivability required, and the extent to which other communication goals should be sacrificed in order to achieve

them.

THE PROBLEM

In the past, the security and survivability problems of the communication infrastructure were not

particularly germane to most members of the American public. Where such issues did arise, they were

generally resolved outside the public policy arena,

either in the private sector or behind the scenes in

government. In the future, these issues will become

less containable. OTA found that security and

survivability are becoming more important and more

visible as communication policy goals; in addition,

it is becoming more difficult to make the tradeoffs

required to achieve them. Equally important, OTA

found that the views of stakeholders may diverge to

a greater extent over how these tradeoffs should be

made. Moreover, the institutional mechanisms by

which security and survivability issues are to be

resolved and security goals achieved are not optimally designed. OTA identified a number of factors

that might contribute to security and survivability

problems in the communication infrastructure. They

include:

1.

2.

3.

4.

5.

the increased reliance of business and government on communication and informationbased systems, and hence a greater vulnerability to their failure;

an increase in the number and variety of

problems that may threaten the security or

reliability of communication systems;

an increase in the complexity, decentralization, and interdependence of communication

systems and, hence, in the difficulty of coordinating them to achieve security and survivability goals;

a growing divergence in stakeholder needs for

security and reliability; and

an increase in the number of people who have

access to communication systems and who are

knowledgeable about their use, occurring at a

time when there is no consensus about the

legitimate use of the technology.

These factors are discussed below.

Factor 1: The increased reliance of business

and government on communication and

information-based systems, and hence a

greater vulnerability to their failure.

Chapters 5 and 6 depict the growth and dependence of business and government on communication

and information-based systems. More and more, in

all business activities, companies are employing

their communication systems and the information

stored in them to achieve a competitive advantage.

In addition to using these systems to extend their

markets, many businesses are using them to actually

IThe word “survivability” is used here to denote reliability, recoverability, contingency planning, and/or Operating under extreme conditions.

z~e in~ance where this tradeoff is evident is the UNIX operating system. UNIX’s open structure made it highly popular among academics and

researchers, who spent years enhancing its flexibility. But, by virtue of its openness and its capacity for networking, UNIX has suffered from being

inherently more vulnerable and insecure. For a discussion, see Sanford Sherizen and Fred Engle, “Striving for UNIX Security,” Cmnputenvorld,

Mar. 20,1989, pp. 85-93. For a discussion of the tradeoff between security and access, and the special problems that this tradeoff presents to the research

community, see Kelly Jackson, “Virus Alters Networking,” ConvnunicatwnsWeek, Nov. 14, 1988, pp. 1,75.

–275-
276 ● Critical Connections: Communication for the Future

restructure their organizations on a regional or

global basis. Thus, the failure of a communication

system can lead not only to market losses, but also

to the failure of the business itself. For an indication

of industry vulnerability to computer outages, see

figure 10-1.

In a recent survey conducted by the Center for

Research on Information Systems, University of

Texas at Arlington, researchers identified four major

consequences for businesses when information/

communication systems fail:3

1.

2.

3.

4.

the reduction in, or perhaps complete termination of, the business function; -

a loss in revenues;

increased costs of doing business; and

intangible costs entailed in the loss of

and customers, or legal or regulatory

tions.

image

violaAs depicted in figure 10-2, the damage to business

increases with the time it takes to achieve recovery.

Government, too, is becoming more dependent on

communication and information systems, and hence

more vulnerable to their failure.4 Faced with increased costs and budgetary constraints, many government agencies are looking to communication

systems as a way of improving the efficiency and

effectiveness of their operations. For example,

online telecommunication systems are now being

used for the delivery of Medicare and food stamp

benefits, as well as for processing Federal income

tax forms.5 Failures in these systems will not only

create administrative havoc and serious problems for

the individuals involved, but they may also serve to

Figure 10-1-Vulnerability of Industries to

Financial

Manufacturing

Service

Government

Education

Utility

Transportation

Insurance

Distribution

Medical

Computer Outages

o 10 20 30

= Percent of incidents

‘Based on 1,000 disasters tracked over

a 2-year period

SOURCE: Copyright 1989 by CW Publishing Inc.,Framingham,MA01701.

Reprinted with Dermlseion from Corntxfterwodd, VOI 23, No. 16,

@;. 17, 1989, p. 21.

undermine the support for, and legitimacy of,

government operations themselves.

The need for a secure and survivable communication infrastructure has become especially acute in

the realm of national security and emergency

preparedness. It has long been a matter of national

policy that telecommunication services required by

the Federal Government, including for defense

purposes, should be procured from the commercial

sector, unless special circumstances dictate otherwise.6 However, the operational requirements to

meet the government’s security and defense needs

are becoming greater and greater all the time. For

example, in October 1981, President Reagan announced a strategic modernization plan that was

designed to prevent the realization of strategic

3Steven R. c~~emen and LaWence L. Schkade, “Financi~ and Functional ~pacts of Computer @tages on Businesses,” CRIS-87-01, Center

for Research on Information Systems, College of Business Administration, The University of Texas at Arlington, TX, January 1987.

4s= US. Cm=ess, Office of Technology Assessment, Defending Secrets, Shartng Data. New Locks and Keys for Electronic IZfor~tionY

OTA-C1T-31O (Washington, DC: U.S. Government Printing Office, October 1987); and U.S. Congress, Office of Technology Assessment, Federal

Government lr@orrnation Technology: Management, Security, and Congressional Overslght, OTA-CIT-297 (Sprin~leld, VA: National Technical

Information Service, February 1986).

5S= Ka&riw MC_jr~l, I$~e Goverment’s Ex~nditwes cm Data Wi]l Soon ~u~ Money spent on Voice,” GoVer~ent Networ&ing, SepL 2],

1987, pp. 7-14.

6Such a ~licy, however, h~ not ~n without i~ opponents. The “Continuing Resolution for Appropriations for Fiscal Yem 1988” rWuires ~1

government agencies to be connected to the Federal Telecommunications System 2000 (FTS 2000), although some exemptions will be made on the basis

of existing systems and special needs. The Defense Nuclear Agency and the U.S. Army, Navy, and Air Force, among others, have generally resisted

transferring their services to ITS 2000 for both logistical and security reasons. In December 1988, contracts (estimated to be worth $3 billion to $15

billion, depending on the number of Federat agencies includti) were awarded to American Telephone & Telegraph Co. (AT&T) and U.S. Sprint

Communications Co. to build the all-digitat private network for the government. In accordance with the conwact, AT&T will be responsible for

developing a network for agencies representing 60 percent of all traffic, while U.S. Sprint will handle the rest. See Mitch Betts, “Feds Sign FIX 2000

Net Pact,” Computerworfd, Dec. 12, 1988, pp. 1, 4. See also Kelly Jackson, “Gov’t May Be Forced To Deal Only With FTS-2000 Winner,”

CommunicationsWeek, Aug. 1, 1988, p. 16.
Chapter 10--Security and Survivability of the Communication Infrastructure ● 277

Figure 10-2--Severity of Loss Due to

Computer Outages

100

7 5

5 0

2 5

0

1 5 10 15 20 25 30

Number of days of outage

SOURCE: Center for Reeearoh on Information Systems, The University of

Texas at Artington. Reprinted with permission from Cornputerworld, vol. 23, No. 11, Mar. 13, 1989, p. 1. Copyright 1989 by CW

Publishing Inc., Framingham,MA01701.

dominance by the Soviet Union. In essence, U.S.

deterrence strategy, encapsulated in National Security Decision Directive-13 (NSDD-13), was moved

one stage further from one based on mutual assured

destruction, or even flexible response and counterforce nuclear targeting, to one of flexible response in

which the United States would be equipped, and

demonstrably able, to prevail in any conflict from

low-intensity operations to prolonged strategic nuclear war. For the policy to succeed, and to be

credible, U.S. military Command, Control and

Communications and Intelligence (C3

I) systems had

to be “fool-proof.”7

Extensive reliance on technology may also make

it more difficult for organizations to recover from

system failures.8 When technical problems occur,

the people trained to operate systems manually may

no longer be available. The Department of the Navy

was confronted with such a situation, for example, in

the late 1970s. When faced with a computer outage

in their computer-based Combat Information Centers, the Navy’s radar operators found it very

difficult to effectively perform their task of targettracking because many of their basic skills had

become rusty.9

Factor 2: An increase in the number and

variety of problems that may threaten the

security or reliability of communication

systems.

With the advance of information and communication technologies, communication systems are becoming vulnerable to a much wider range of possible

disasters-from earthquakes, fires, and floods, to

power outages, disk crashes, and intruding hackers.

l0 Two major incidents occurred in 1988 that

illustrate the variety of system security/reliability

problems that can occur, as well as the extent of the

damage that can result. These events were a fire at

Illinois Bell Telephone Co. ’s Hinsdale central office; and the most serious case of computer hacking

to date, involving the implanting of a computer virus

into the Internet, a major packet-switching network

that connects research and government computers.

The Hinsdale fire occurred on May 8, 1988, at a

major transmission hub that links local telephone

switching centers with one another and with longdistance networks. The center provides voice and

data communication services to several communities, as well as to a number of corporate data

networks operated by companies such as United Air

Lines, Montgomery Ward & Co., American Express

Co., and Sears. Approximately 42,000 local lines

and 118,000 trunks for local and long-distance

call-routing are connected to the Hinsdale central

office. In the wake of the fire, services were

suspended for 7 days. An investigation found that,

similar to many such incidents, the disaster resulted

from both human error and mechanical failure—in

this case, faulty wiring. Many who were affected by

the outage sought unspecified damages for their

losses. However, the court ruled to dismiss their

class-action suit, on the grounds that an existing

Illinois tariff limits telephone company liability in

the event of a service outage to a 200-percent credit,

which in this case amounted to approximately $3.5

million. However, to reassure its customers about

7M~iII ~onds, “Defense Interests and United states Policy fOr Telecommunications,” OTA contractor report, June 1988, p. 30.

gsteven R. ~sten~n and Lawrence L. Schkade, “Surveying the Aftermath,” Compureworld, Mtu. 13, 1989, P 82.

%id.

l~eter Sclsco, “NO Such Thing as a Smal] Disaster,” Computenvorki, July 11, 1988, pp. S I-S11.
278 ● Critical Connections: Communication for the Future

the integrity of the network, Ameritech announced

that it will invest $80 million during the next 5 years

to preclude a similar mishap in the future.11

The impact of the fire in Hinsdale was not only

felt by those in the immediate vicinity. Throughout

the country, many users began to examine and

investigate the security and reliability of their

communication networks. For example, a number of

large users and user organizations in New York

began to press the public telephone company to

develop an emergency backup system that would

allow them to connect their businesses to two central

offices instead of one. *2 The fire not only heightened

users’ awareness of their growing vulnerability; it

also raised some fundamental questions about liability in the event of major system failures.13

Reinforcing and underscoring this growing concern about system vulnerability has been the significant growth in the phenomenon of computer viruses.

14 As can be seen in figure 10-3, while only

3,000 machines were damaged by viruses in the first

2 months of 1988, over 30,000 systems were

affected in the last 2 months of the same year.l5

Moreover, because viruses occur surreptitiously and

act subtly to cause all sorts of damage, they serve to

epitomize and symbolize the unpredictability of

communication system failure, and the problems of

anticipating and preparing for it. In fact, as depicted

in figure 10-4, the damage resulting from computer

viruses occurs in a series of four stages, becoming

increasingly more severe the longer the virus remains unobserved.

One of the most publicized and disruptive computer-virus incidents to date occurred in November

1988, when it was reported that a 23-year-old,

first-year computer science graduate student at

Cornell University had tapped into the Internet

Figure 10-3--1988 Increase in Computer Devices

Infected by Viruses “

Thousands of new machines Infected each month

7Clr--

“ Jan Feb. Mar. Apr. May June July Aug Sept. Oct. NOV Dec.

“Includes the Internet infection

SOURCE Copyright 1989 byCW Publishing Inc., Framingham, MAo1701.

Reprinted with permission from Cornputerwotid, vol. 23, No. 6,

Feb. 13, 1989, p. 90.

network. By taking advantage of a well-known

weakness in the UNIX operating system and its

accompanying electronic mail application, Sendmail, a virus was implanted that, within a few hours,

infected more than 6,200 computers. Among the

networks affected were those belonging to a number

of government laboratories, including the Lawrence

Livermore National Laboratory in California where

research is conducted on nuclear weapons and

civilian energy.16 

Given the growing number of ways in which

communication systems are becoming vulnerable,

users now have to adopt multiple approaches to

provide for secure and survivable networks. This

requirement complicates the processes entailed in

protecting communication networks, and can greatly

add to the, expense of providing that protection.

IISteven Ti@ “~]llnois De]ays Fhe Re~rt,” ComvnUm’carlomWeek, NO V. 14, 1988, p. 12; and Beth Schdtz, “111. Bell Crafts Disaster pl~,”’

CommunicationsWeek, Mar. 20, 1989,

lzJohn Foley, “Telco Swjtch vulnerdiljty Worries FinanciaI Users,” communicationsWeek, June 27, 1988, PP. 1, 1’7.

13rbid. AS Foley notes, alt.ttou@ most users already have their own contingency plans—including those that use fiber optics, microwave, or s

systems-to bypass the local loop, most of their plans to restore their private networks in the event of disaster require a healthy public network.

14A v~s is a computer program that is surreptitiously passed on to other computers online or through the exchange Of memow dkh. ~trOd

by piggybacking onto legitimate programs or messages, they are generally intended to cause damage by destroying data or overloading computer syst

They can be designed to act immediately, or set to operate at a given time.

ISSW JOhII D. McAfee, “Managing the Virus Threat,” Cornputenvorfd, Feb. 13, 1988, p. 89.

IGFor accouts of ~s incident, see Tony F~nberg, “The Night the Network Failed, ’’New Sclenftit, VO1. 121, No. 1654. MM. 4, 1989, pp. 48-42;

Philip J. Hilts,“ ‘Virus’ Hits Vast Computer Network,” The Washington Post, Nov. 4, 1988, pp. A-1, A-4. For a discussion of the impact on networ

see Jackson, op. cit., footnote 2, pp. 1, 74-75.
Chapter 10--Security and Survivability of the Communication Infrastructure . 279

Addressing security problems is also complicated

by rapidly changing technologies. New technologies

bring with them novel, and often unforeseen, security problems. For example, when voice mail began

to be widely deployed, hackers quickly discovered

ways of using this technology to tap long-distance

telephone lines.17 Questions are now being raised

about how the introduction of integrated services

digital networks (ISDN) will affect the security

requirements of present and future networks.18 In

addition, with the increased use of cellular radio for

data transmission and facsimile calls, there is

increasing concern about the security risks entailed

in the use of these technologies.19

The convergence of computer and telecommunication technologies also gives rise to problems of

contingency planning because the requirements for

the two systems are quite different. Moreover,

security personnel for computers and telecommunication differ greatly on what they see as the major

security problems and safeguards. Because there is

no consensus in government or in the private sector

as to whether computer managers or network managers should be responsible for information security,

effective security arrangements are often hindered

by political turf battles, uncoordinated activity, and

lapses in security coverage.20

Factor 3: An increase in the complexity,

decentralization, and interdependence of

communication systems and, hence, in the

difficulty of coordinating them to achieve

security or survivability goals.

Increases in computing power and decentralization of computing functions have increased the

vulnerability of computer and communication systems to unauthorized use. Early systems were

designed to be used by trained operators in reasonably controlled work environments; therefore, only

local access to systems was of concern. Today’s

Figure 10-4-Four Stages of Viral Infection of

Computer Systems

There are four stages of viral infection

00- Local main memory

Virus ● Affects currently executing application

● .Simple to remove

● Llmlted damage if contained

L I

1

Fixed local storage

1

. May infect all stored applications

● Potential local data damage

● Requires 1 to 5 man-hours to remove

● Moderate damage if caught in time

I Shared file system I

-- Utilities --Shared --Communications

--Compilers applications --System files

-- Editors

--Tools I I

● Widespread system infection

I ● May cause substantial damage I

I ● Complex recovery I

Systemwide removable media

Floppy Write-once, Removable Tape

disks read-many disks hard disks backups

--Widely dispersed --Archived for considerable

--Difficult to locate periods

--Easy to overlook --May reintroduce old infection

● Extremely difficult to recover

c Media may not be traceable

● ProbabllltV of reinfection IS extremely high

SOURCE: Copyright 1989 by CW Publishing inc.,Frammgham,MA01701.

Reprinted with permission from Cornputetwor/d, vol. 23, No. 6,

Feb. 13, 1989, p. 91.

17sW, for a discussion, John Burgess, “Hackers Find New Way To Tap kng Distance Lines,” The Wushingron Post, Oct. 6, 1988, p. F-1.

18A raent rep by c.~Wrs & Lybrand, “The Security of Network Systems,” concludes, for example, that: “in view of the changing environment

and the importance of network system security, increased emphasis should be given to security within ISDN.” As cited in Clare ~es, “Security: A

Management Issue,” Telecommunications, February 1989, p. 37. On the other hand, it has been suggested that the out-of-band signaling on the D charnel

is a major seeurity feature of ISDN, making it easier to audit and authenticate user identification through the network. See, for a discussion, James

Sherman and William Demlow, “ISDN: A Telecom Security Blanket,” Telephony, Mar. 6, 1989, pp. 33, 35.

19fjw Nick v~l~is, “Cel]uiw Radio: Vulnerable to Attack,” Telecommunications, February 1989, PP. 55-56.

Zosanford Sher&n, “Federal Computers and Telecommunications: Security and Reliability Considerations and Computer Ckime ~giSlative

Options,” OTA contractor report, February 1985.
280 ● Critical Connections: Communication for the Future

systems, on the other hand, are designed for maximum use—that is, to be used by anyone, anywhere.21

One measure of this kind of security problem, for

example, is the rapid proliferation of local area

networks (LANs), whose market was estimated to

grow from $2.6 billion in 1987 to $4.2 billion in

1988.22 Moreover, according to one market research

company, by 1992, 35 percent of all personal

computers (PCs) sold will be networked, and 50 to

60 percent of all new PCs acquired by Fortune 1000

companies will be connected to LANs.23 Characterizing the problems of control that this spread of

LANs is likely to generate, one observer has said:

Once stand-alone personal computer users are

given access to a local-area network, controlling

them is like trying to corral fish within a public

fence. 24

The increased concentration of data in fewer and

fewer facilities also makes communication systems

more vulnerable to breaches in security. When

operating a T3 network (circuits that operate at

44.736 megabits per second). network recovery is

critical. The T3 signal is capable of transporting a

total of 672 voice channels at 64 kilobits per second

each; few networks could handle a simultaneous loss

of 672 circuits. And high-capacity digital switches

can connect and process more than a million calls in

a single hour. As the executive vice-president of

Contel has described it: “The network is getting

thinner and thinner, and switches are getting bigger

and bigger.”25 Given this ability of optical fibers and

electronic switches to handle vast quantities of data

through fewer and fewer facilities, the number of

people affected by a system failure will be much

greater than ever before.26

These technological complexities are compounded by organizational ones. Organizations frequently fail to make the important decision of who

will control information, and where within the

organizational structure the responsibility for such

control will reside. These organizational problems

are likely to increase, moreover, to the extent that

businesses employ new communication technologies to expand the scope of their operations. More

often than not, technologies are deployed without

consideration of their security implications.27

Factor 4: A growing divergence in stakeholder

needs for security and reliability.

Although virtually all users are concerned about

some combination of confidentiality, integrity, and

continuity of service, government agencies and the

business community often have very different outlooks and needs when it comes to safeguarding

information in computer and communication systems. Business-users have tended to consolidate

their requirements for common information safeguards through voluntary participation in the activities of U.S. and international organizations that

develop open public standards.28 In contrast, the

National Security Agency (NSA) sets its own

standards in a process that is sometimes open to the

public (e.g., computer security) and sometimes not

(e.g., communication security).

These and other differences raise the question of

whether information safeguards designed by and for

the defense and intelligence agencies are well suited

21B~d on he wow of networking, the market re~~ch company, Frost & Sullivan, h~ e5timated ~at fie overall Market for computer saurlty

would Jump from $588 million in 1988 to $1 billion by 1993. See Kelly Jackson, “Virus Fosters Growth in Sales of Security Products,”

CommunicutionsWeek, Nov. 21, 1988, p. 16.

ZZS%, for me djscu~ion, Michael I. Sobol, “Security Concerns in a Local Area Network Environment,” Telecorrwnuricatiorzs, March 1988, pp. 96,

98-99.

u~s estim~e was made by Forrester Research, Inc., and reported in Marc Cecere, “Backdoor Lans: How to Manage Unsanctioned Networks,”

Corqtwterworid, Nov. 2, 1988, p. 31.

241bid.

25AS quot~ in ibid., p. 9.

26Ellen Block ad H~V D. ~v~e, “Protwting tie Last Mile: The @est for a Robust ~c~ Exchange Network,” Te/e~tics, VOI. 5, No. 10, &tober

1988, p. 9.

27s~ I-SAX, op. cit., footnote 18, pp. 37, 38, 40.42.

28R~nfly, for exmple, tie Comratlon for @n Systems (cOS) has ~n giving thought to tie i~a of establishing a special task force to develop

network security standards. The task force would review current and future security efforts and make recommendations to the American National

Standards Institute. In addition, it would seek to encourage vendors to provide products meeting these standards. See Kelly Jackson, “COS Is Getting

Serious About Network Security,” CommunicationsWeek, Feb. 6, 1989, pp. 34-35.
Chapter I0--Security and Survivability of the Communication Infrastructure ● 281

to the needs of commercial and other users. As noted

by Albert Belisle, the banking community, for one,

is becoming increasingly concerned about:

. . . the move to protect all sensitive information in

the same manner-business information, information of importance to the national interest, and

classified defense information. Within both the

public and private sectors, there is a need for a broad

spectrum of information systems security standards,

techniques, and tools. There must be a range of

security “solutions” that can be matched to the value

of the information being protected, and the nature of

the threats. Outside of the classified and national

security arenas, both the private and public sectors

must select cost-effective security measures.29

Some citizens’ groups have also questioned the

level of security required by government for some

types of information and communication activities.

Responding to the President’s National Security

Decision Directive 145,30 in September 1984, the

American Civil Liberties Union expressed the fear

that such measures went too far, and could be used

to deprive individuals of access to the information

they need to perform effectively as citizens.31

Given these divergent security needs, questions

arise with respect to how much security should be

provided in the public network, how its costs should

be determined, and how it should be paid for. In the

past, these costs were generally included in the

regulated common carrier’s rate base. In is not clear,

however, how they will be allocated in the future.

Some have suggested, for example, that the Department of Defense (DoD) might provide direct funding

for system upgrades.32 In the State of New York,

large users have been negotiating with NYNEX to

provide greater redundancy in the public network.

Elsewhere, other businesses have been informed by

telephone company managers that, although technically feasible, the cost of such security measures

would be too high. As one telephone company

manager characterized it: “There is nothing we can’t

do; there are only things that you can’t afford.”33

Competitors of local exchange carriers argue, moreover, that the best way to provide for a reliable,

secure communication infrastructure is to promote

competition at the local level.34

Factor 5: An increase in the number of people

who have access to communication systems

and who are knowledgeable about their use,

occurring at a time when there is no

consensus about the legitimate use of the

technology.

As more and more people have gained access to

communication and information-based systems, the

problems of piracy and unauthorized use have

mounted alarmingly .35 These occurrences range

from those that might be characterized as “benign

mischief’ to those that clearly constitute serious

29AlIXXI R. Be]isle, Vice Ch@an of tie American Bankers Association’s Information Systems Security Management Committee, teSt.irnOny at

hearings on militaty and civilian control of computer security issues, before the House Committee on Government Operations, Subcommittee on

Legislation and National Security, May 4, 1989. For a perspective that posits a more complementmy relationship between business and defense needs,

see Ashton B. Carter, “Telecommunications Policy and U.S. National Security,” in Robert W. (’randatl and Kenneth Flamm (eds. ), Changing the Rules

Technological Chunge, international Competition, and Regulation in Communications (Washington, DC: The Brookings Institution, 1989).

Swhis dir~tive provid~ NSA with responsibility to secure, “by such means as are necessary,” all government, military, and civilian cOmputer and

telephone systems that handle classified information, as well as “other sensitive” infotmatlon, the loss of which “could adversely affect nationat security

interests.”

31 Na~mW/eber, “TelWommlcatlons Crime,’’&ro~~the Board, vol. XXIII, Noc 2, February ]98~, p. 21. See also Steven L. Katz, “National Security

Controls, Information, and Communications in the United States,” Governmenrlnforrmmon Quurterly, vol~ 4, No. 63, 1987; John Shattuck and Muriel

Morisey Spence, “The Dangers of Information Control,” Technology Review, vol. 91, No. 3, April 1988, pp. 62-73.

szc~er, op. cit., footnote 29, p. 224. As Caner notes: “A precedent exists in the Civil Reserve Air Fleet program, where the department pays

commercial airlines to modify the floors and doors of large aircraft so they can supplement mditary airlift in wartime. ”

mB1ock and ~vine, op. cit., footnote 26> P 1O.

q4For exmple, ~ Robe~ A&insOn, Vice president of regulatoV and externat affairs for Te]epofl Communications, New York, has noted: “The lesson

of Hinsdale is that instead of paying lip service to competition, regulators and legislators must start developing affirmative policies to encourage local

competition. The issue is not how the Bell system companies can be unleashed, but instead how their bottleneck over the local communications network

can be loosened enough so that a Hinsdale catastrophe will not happen again. Both the public sector and private sector have a role to play in insuring

the basic integrity of the nation’s telecommumcation network.” Robert Atkinson, ‘&Wherc m the Blazes is Security?” CommunicationsWeek, Aug. 8,

1988, p. 8.

sjFor some recent cases, see John Burgess, “Hackers Find New Way To Tap Imng-Distance Phone Lines,” The Washington Post, Oct. 6, 1988, p.

F-1; Christine Winter, “Legislators Alerted to Computer Virus Danger,” The Washington Post, Oct. 14, 1988, p. F-1; and Lisa Stein, “The Intrigue and

Art of Hobbling the Hackers,” Cablevision, Sept. 12, 1988, p. 34.

89-148 0 - 90 - 7 QL 3
282 . Critical Connections: Communication for the Future

computer crimes. Moreover, these activities appear

to feed on themselves; what begins as a prank by one

person is later refined into a more destructive or

criminal form by another. As communication systems become more user-friendly and more interoperable, these problems are likely to multiply.

One factor underlying the growth of computer

“hacking” is the lack of an agreed-upon ethic about

the use of new technologies.36 In fact, many of those

using new technologies today share the view that

some “computer crimes,” such as unauthorized entry

to a private computer system or the use of illegal

decoders, are less than serious.

STRATEGIES AND OPTIONS

To address these problems, Congress can pursue

six basic strategies. It can:

1.

2.

3.

4.

5.

6.

undertake further study and analysis of the

changing security and survivability needs of

the communication infrastructure;

facilitate the transfer of information about

security and survivability, garnered in public

agencies, to the private sector;

establish security and survivability standards

for key industrial sectors;

provide special emergency facilities for private sector use;

improve coordination of survivability planning; and

increase activity geared to preventing security

breaches.

These strategies, and the potential options that

Congress might adopt to carry them out, are

discussed below and summarized in figure 10-5.

Strategy 1: Undertake further study and analysis

of the changing security and survivability

needs of the communication infrastructure.

Option A: Continue funding and support for the

National Research Council (NRC) to evaluate the

state of reliability of the U.S. communication

infrastructure for purposes of national security

and emergency preparedness.

In 1983, the Defense Communications Agency

(DCA), acting on behalf of the National Communications System (NCS), commissioned NRC to

address the main problems then confronting National Security/Emergency Preparedness (NS/EP)

telecommunication provision, and make recommendations. In the next 4 years, four reports were issued

that collectively focused on the paramount need for

telecommunication survivability. Acknowledging

the fluidity of the telecommunication market—

within which the motivating forces had become the

emerging technologies, open competitive opportunities, and new commercial studies—the NRC reports

clearly recommended that NCS and DCA should

take stronger initiatives to influence both the market

and new technologies that were in the interests of

national security and emergency preparedness. For

example, suggestions were made that electromagnetic pulse-resistant and radiation-hardened designs should be encouraged in NS/EP-dependent

facilities. or even made mandatory; fiber optic

cables should be specified wherever possible; faulttolerant systems should be employed; and software

for use in switching should be expanded to meet

NS/EP priority capabilities. Emphasis was also

placed on standardization and the need for common

practices to assist and enhance network-to-network

interface interoperability and common channel interoffice signaling.37

A fifth report, issued in May 1989, examines how

society’s greater reliance on information increases

the vulnerability of the Nation’s communication

infrastructure. It concludes:

Already there are disturbing signs of increased

vulnerability of the public networks to disruptions . . . The social and economic consequences of

serious outages can only increase in a society which

becomes daily more reliant upon information transfer services for smooth functioning.38

External evaluations of this kind are critical because,

Sbsteven kV, ~ackers:Heroes of the Computer Revolution (Garden City, NY: Anchor Press/ Doubleday, 1984). As the author points out, hacking

originally occurred among computer science buffs, and it was a practice that actually gave rise to a number of technological advancements in the field.

This origi.nat role has given a somewhat ambiguous meaning to the term “hacker.” and even to the whole concept of “hacking.”

37~onds, op. cit., fcxXnote T, P. 4~.

38Nation~ Re=wch Comcll, Growing vulmr~lll~ of the p~llc .~witched Ne~or~: i~licatio~ for Natio~i security Emergenc y

Preparedness (Washington, DC: National Academy Press, 1989).
Chapter 1O-Security and Survivability of the Communication Infrastructure . 283

Figure 10-5--Congressional Strategies and Options To Address Securitv/Survivability of the

Communication infrastructure

.

Option C

Support the

development of

curricula to be used

in schools, Iibraries,

museums, and other

public facilities to

foster a more positive

computer ethic

Option A

Provide government

incentives to both

vendors and users for

improving computer

security

I

I I

I

Refine computer

crime laws and the

remedies and

penalties for criminal

abuse

Option A

Continue funding and

support for the NRC

to evaluate the state

of reliability of the

U S communication

Infrastructure for

purposes of national

security and

emergency

Preparedness

I

Option C

Use government

procurement policies

to create Incentives

for vendors to build

better security into

their computer-based

communication

systems

support for studies of

the security of

communication

systems

SOURCE: Office of Technology Assessment, 1990.
284 ● Critical Connections: Communication for the Future

short of an emergency, there is no secure way to test

the system’s reliability.

Option B: Provide funding and support for studies

of the security of communication systems.

Although events such as the fire in Hinsdale,

Illinois, and the paralysis created among thousands

of computer systems due to the spread of a powerful

computer virus have recently highlighted the problems of security and survivability, very little hard

data exist on the extent to which the private sector

has experienced these problems. This lack of data is

due in part to the business community’s reluctance

to make this kind of information public. Many

business leaders fear that doing so would not only

increase the problem by challenging others to

engage in similar activities, but would also undermine their credibility with their customers.39

Although the private sector is not inclined to

undertake a broad investigation of the scope of

security and survivability problems, it may be in the

government’s interest to do so. As discussed in

chapter 5, the economy is becoming increasingly

dependent on information-based industries whose

continued operation is dependent on the security and

survivability of their computer-based communication systems. For example, in November 1985, a

computer problem in the offices of the Bank of New

York prevented it from completing an exchange of

government securities. This fault in the system not

only cost the bank $1.5 million after taxes, but it also

forced it to borrow $24 billion from the Federal

Reserve System.40 A major fault in a telephone

company computer system would be even more

problematic; it might affect many more businesses

and last for days, not hours.

Without better information about the extent of the

security/survivability problem in the private sector.

the government will not have an adequate basis for

choosing appropriate courses of action. Hence, this

option would be a prerequisite for the more proactive

options discussed below.

Option C: Use government procurement policies to

create incentives for vendors to build better

security into their computer-based communication systems.

The Federal Government is the largest buyer o

computers and computer equipment in the United

States. The FTS 2000 contract alone, for example, i

valued at between $3 billion and $15 billion.

Moreover, government’s purchase of the UNIX

operating system (with two-thirds of it going to

defense) amounted to $1.93 billion in 1988,41 This

kind of market leverage provides a way for the

government to foster secure communication system:

by structuring government procurement policies in

ways that will induce vendors to enhance the

security of their products.42 Recently, for example,

DoD issued Directive 5200.28, which requires that,

by 1992, all multicomputer systems meet a minimum of C-level security standards. The C-level

standard calls for need-to-know protection, audit

compatibility, and user accountability.43 Moreover,

NSA’s Secure Data Network Systems Project

(SDNS) has been working for over 2 years to

develop open systems interconnection (OSI)-based

security standards. In addition, government regulations sometimes require firms with Federal contracts

to have contingency plans for reliable communication services.44

Vendors are likely to be responsive to such

incentives. To participate in SDNS, for example,

vendors must agree to produce products based on

protocols developed through the program.45 Moreover, as products become more standardized, vendors have been trying to differentiate their wares,

39For one discussion, see John Foley and Jennifer Samuel, “Users Ponder Net security,” CommunicarionsWeek, Nov. 14, 1988, pp. 1, 74-75.

According to Foley and Samuel, users refuse to discuss the security of their communication systems, fearing that public knowledge of their systems could

leave them open to intrusion.

aBlock and Lx%.ne, op. cit., foomote 26, pp. 9-12.

qlshe~en and Engle, op. cit., footnote 2, p. 92.

42For a discussion, 5= George Je]en, ]~ormtion Secwlo: An E/~iVe Gou/ (Cambridge, MA: H~~d University, progr~ On hfOXTTMtlOIl

Resources Policy, Center for Information Policy Research, 1985), especially ch. 10.

AsMitch Betts, “S~~e UNIX Aimed at Fed Deals,” Cornputerwodd, Nov. 7, 1988, pp. 23,25.

44J~es D~ey, “Dis~ter Recove~ TO Hit Big Time, Study Says,” CoWUtc?Worfd, Apr. 17! 1989? P 21.

45A n-r of major vendors Me p~lcipatlng, including AT&T, BBN Communications, J)igit~ Equipment COW., GTE COT., Honeywell hlC.,

IBM, Motorola Corp., Unisys Corp., Wang Laboratories, Inc., and Xerox Corp. See Jackson, op. cit,, footnote 28, p. 35,
Chapter 10-Security and Survivability of the Communication Infrastructure ● 285

and security features represent one way of doing

this.46 However, one limitation to this option is the

lack of well-developed procurement standards within government agencies.

Strategy 2: Facilitate the transfer of information

about security and survivability, garnered in

public agencies, to the private sector.

The Computer Security Act of 1987 assigns to the

National Institute of Standards and Technology

(NIST) the responsibility for developing technical,

management, physical, and administrative standards

and guidelines for security of sensitive information

in Federal computer systems. The act requires,

moreover, that each Federal agency provide mandatory periodic computer security training for employees involved in the management, use, or operation of

Federal computer systems within, or under the

supervision of, that agency.

Given the wisdom and experience gained by

establishing security standards and secure information practices in the public sector, the Federal

Government might want to develop more systematic

ways of sharing this knowledge with the private

sector. For example, NIST might enhance its programs to certify vendors, transfer technology, standardize designs, procure devices, and encourage the

development and use of improved safeguards.47

Closer cooperation between NIST and the private

sector in security-related matters would also allow

the government to benefit from innovations and new

technologies developed in the private sector. One

step that NIST has already taken in this regard is to

set up a program for bringing together government

organizations and private contractors interested in

interoperability and security in the OSI computer

network architecture and the ISDN computer architecture. The fundamental objectives of this program

are to:

●

●

●

develop demonstration prototypes of applications and equipment, including hardware and

software, that provide one or more levels of

security in an OSI and/or ISDN environment;

develop data formats, protocols, interfaces, and

support systems for security in an OSI/ISDN

environment that can be used as a basis for

Federal information-processing standards.

Such standards may then be used as bases for

Federal procurement of services and systems in

the future; and

provide a laboratory in which users, developers,

and vendors can jointly define, develop, and

test systems that will provide a range of

telecommunication, network management, and

security services in a distributed informationprocessing environment.

In addition, DoD’s Advanced Research Project

has recently created the Computer Emergency Response Team (CERT), which is designed to act as a

central clearinghouse for information concerning the

detection of viruses. It will also distribute solutions,

as they become available, to those who have been

affected. Its members include staff from the Federal

Bureau of Investigation, as well as other technical

and management experts. CERT is located in the

Software Engineering Institute, Carnegie-Mellon

University. 48

The major problem involved in the sharing of

security information between government and the

private sector stems from the role that security plays

in intelligence and defense. Whereas businesses are

accustomed to working out criteria and standards in

open processes, the defense community is typically

more secretive. Moreover, as the OTA assessment,

Defending Secrets, Sharing Data,49 points out, this

conflict of interest is exacerbated by the fact that the

law fails to clearly delineate between the responsi4f&t~, op, cit., footnote 43.

47 Since tie early 1970s, NIST has conducted a laboratory-based computer security program to develop cost-effective solutions for pmtating

reclassified information, These solutions are made available to Federal and private organizations through the development and publication of’

tandards, guidelines, and other technical documents; sponsorship of conferences and workships: and other technology-transfer activities. The fiscal

‘ear 1990 budget submission to Congress proposes a NIST research program that provides for activities such as laboratory-based research, the

Ievelopmentofcost-effective management and technical security methods and solutions, leadership m developing national and international information

ecurity standards, encouragement and facilitation of technology transfer, and development of materials to support security awareness and training.

qgc~s R~kl, “(Jser Organizations C)ffer ‘Virus’ prescription,” CommuraicationsWeek, Jan. 16, 1989. p 24.

@Office of TechIIo]ogyAsSssment, Defending Secrets, Sharing Data, Op. cit., footnote 4.
286 ● Critical Connections: Communication for the Future

bilities of NIST and NSA in this area.50 One way of

encouraging private-public cooperation on security

issues, therefore, would be for Congress to clearly

separate the responsibilities between NIST and

NSA, based on defense considerations.51

An additional constraint on the development of

this option might be the limited budget and lack of

personnel that are available to NIST to handle this

task. The Reagan Administration budget, which the

Bush Administration adopted with only minor

exceptions, proposed a reduction in NIST’s budget

from $158 million in 1989 to $153 million in 1990.52

This reduction was budgeted, moreover, even

though in the past NIST has had to contract out to

NSA much of its broad research on security standards.53 Moreover, a recent study by the General

Accounting Office found that NIST has been slow to

implement the Computer Security Act, insofar as 21

agencies reported that, as yet, they did not have

security training programs in place .54 Given this lack

of progress in developing technical standards and

common procedures, many are concerned that the

limited funds available to NIST might prevent it

from carrying out its responsibility in this area.

Testifying recently at Hearings on Military and

Civilian Control of Computer Security Issues, before the House Committee on Government Operations, a spokesperson for the Information Industry

Association, noted, for example:

We believe that NIST is underfunded. It has

insufficient resources to expeditiously carry out its

mission under [the Computer Security Act of 1987].

This resulted, for example, in NIST falling behind its

own schedule for completion of reviews of agency

security plans, even though the agency has the

assistance of NSA in this task.55

Strategy 3: Establish security and survivability,

requirements for key industrial sectors.

Given the increased dependence of many corporations on communication and information-basef

systems, Congress could identify businesses whose

continued functioning is critical to society, and

establish guidelines or requirements for making

their communication facilities secure. As a result o

the destruction caused by a telecommunication cable

fire in Tokyo, for example, the Japanese Government considered ways of establishing safety and

reliability standards, as well as the means 01

implementing them. They mandated technical improvements, including increased redundancy of

critical circuits and better fire-prevention designs;

designated some users whose service should be

restored on a priority basis in case of disruption; and

instigated studies of the need for improved damage

compensation and insurance schemes for communication-related accidents.56

There is a U.S. precedent for such an approach.

Since 1983, for example, the Office of the Comptroller of the Currency has mandated that all national

banks undertake contingency planning for key

operational areas, which now include microcomputers.

57 In accordance with these rules, the bank’s .

management will be held accountable for the failure

to develop a sound plan.

In general, businesses have been slow to adop t

security measures or to prepare for emergencies,

St)Not~th~tand@ tie ~rovl~lon~ of the Computer Sectity Act, NSDD.145 has assljqed simil~ responsibilities to NSA, which is charged with

reviewing and approving all standards, techniques, systems, and equipment for telecommunication and automated information systems security. The

relationship between NIST and NSA was the subject of oversight hearings before the House Committee on Government Operations, Hearings on

Military and Civilian Control of Computer Security Issues, May 4, 1989,

510ptions for reorganizing the responsibilities of NIST and NSA in this area are analyzed in Office of Technology Assessment, Defending Secrets,

Sharing Data, op. cit., footnote 4.

szD~iel S. Gr~nberg, Engineering Times, April 1989, P. 3.

ssFor a discussion, ~ statement of Lance J. Hoffman, ~ofessor of Engin~ring and App]ied science, Department of EIWtrical Engineering ~d

Computer Science, The George Washington University, hearings, op. cit., footnote 29.

54u.s. Con=ew, Gener~ Accounting Office, Computer Securiv: co~lia~e With Traim”ng Requireme~s of the co~uter Securify Act of 1987

(Washington, DC: U.S. Generat Accounting Office, February 1989), p. 17.

ssKeme~ B. Allen, Senior Vice preslden~, Government Relations, ~formation Industry Association, hearings, op. cit., foomote 29. SW alSO

statement of Miriam A. Drake, Dean and Director of Libraries, The Georgia Institute of Technology, on behalf of the American Library Association and

the Association of Research Libraries, ibid.

56N~o T&anwhj et ~., “me ACti]]es’ Heel of tie Information society: soci~onomic Impacts of the Telecommurticatjon Cable Fire h the

Setagaya Telephone Office, Tokyo,” Technological Forecastirtg and Social Change, vol. 34, No. 1, August 1988, pp. 27-52.

STSa~ord Sherizen ~d Albert Belislc, “Begin Contingency pl~ing & You ~ght Become an ~tlaw,” ConpUteWor/d, July 11, 1988, p. S-10.
Chapter 10--Security and Survivability of the Communication infrastructure ● 287

often postponing action until after a problem has

occurred. For example, in a recent survey of users,

it was found that only 17 percent of Fortune 1000

sites were protected by encryption or call-back.58

One major reason cited for the failure to use such

systems is cost.59 Thus, many businessmen are

likely to be opposed to the government setting

security/survivability standards or preparedness requirements on the grounds that such action would

constitute undue interference in the affairs of the

private sector.60 And many would be concerned that,

with standardized security practices, they themselves might be held liable if something were to go

wrong. This is not an idle concern. As Sherizen and

Belisle have pointed out:

There are already an increasing number of laws

defining acceptable business practices. Legal attention will soon be paid for failure to survive a major

business interruption, which will be considered a

malfeasance of duty.61

Others might contend that the market will take

care of the problem. In this view, the decision to

protect against risks is a matter of business strategy;

when businesses experience the increased costs

entailed in communication failures, they will proceed quickly to resolve their own security problems.

Already there is evidence of a growing market for

security products. A recent survey conducted by

Frost and Sullivan Inc., for example, predicts that the

market for computer security will be $1 billion by

1993.62

On the other hand, as noted above, businesses

have generally been slow to respond to security

threats. And they may be particularly reluctant to

invest in communication security because its value

has to be traded off not only against cost, but also

against system access and interoperability.

Strategy 4: Provide special emergency facilities

for private-sector use.

If the two New York Telephone switching centers

were to fail, among those affected would be many of

the world’s largest financial institutions, including

the Federal Reserve Bank, domestic and international banks, investment banking firms, stock exchanges, and large corporations.b3 Given their increased dependence on computer-based communication, many such companies are investing heavily

to protect against natural or manmade failures in

their networks. Some have called for redundant

central offices, for which they would be willing to

pay a considerable fee. Others are taking out special

insurance policies and contacting for redundant

processing capacity, known as “hot spots,” to be

used on an emergency basis. At a cost of approximately $50,000 per month, this option is clearly not

available to all businesses.64

To the extent that the ability to pay for such

protection is not correlated with a company’s

strategic value to the government or to the economy,

the government may want to make special provisions to assist in some emergencies. One way would

be to allow some private companies to make

temporary use of the Nationwide Emergency Telecommunications Service (NETS). 65 At present, this

service is available only for 20,000 authorized

Federal Government users.

Members of the defense community would likely

be opposed to such an option, given the need to keep

the system secure and available for defense-related

emergencies. Moreover, setting rules and procesgs~ey conducted for COmmU nicutionsWeek by Computer Intelligence Corp., as cited in Foley and Samuel, op. cit., footnote 39, p. 75.

sg~id. EXpCYIS estimate that security measures make up about 10 to 20 percent of the overhead costs Of networks.

-s was, in fact, a point emphasized by the American Petroleum Institute in its review of the OTA draft, as well as a point stressed by Albert R.

Belisle in his testimony on behalf of the American Bankers Association, Hearings, op. cit.. footnote 29, May 4, 1989.

GIShe~en and Belis]e, op. cit., footnote 57.

bzJack~n, ~. cit., f~mote 21; see also Clinton Wilder, “Cashing In On Vims Anxieties,” Cornputerworld, Nov. 21, 1988, pp. 1, 6.

63Fo@, op. cit., fm~ote 12. See also U.S. Congress, Office Of Tahno108’Y Assessment> “Information Technology and Securities Markets,” in

~rogress.

@For a discwsion, see Jmes Daly, “ElectroNc Vaulting Catches On,” Computen.vorld, Dec 19, 1988, pp. 21, 26; and James D~Y, “Comdisco

‘urnishes Disaster Recovery Hot Site To Go,” Computerwor/d, Nov. 28, 1988, p. 18.

65AS descri~ by tie Nation~ Research Council, NETS is”. . . one of three programs that will provide telecommunications capabilities as required

y Presidential Order in National Security Decision Directive (NSDD) 97. . . . These programs are designed to meet current and future requirements

f the federal government for nationat security and emergency preparedness telecommunications. NETS is the largest of the three programs and is

~tended to provide survivable, switched, voice, and data service.”
288 ● Critical Connections: Communication for the Future

dures for access might be very difficult. However,

using the service for business-related emergencies

might have some positive defense benefits; it would

provide greater information about how well the

system works in an actual emergency. The arrangement for use by businesses might be worked out and

authorized through the Federal Emergency Management Agency.

Strategy 5: Improve coordination of survivability

planning.

In evaluating the policy planning environment of

national security telecommunication, NRC, in its

1986 report to DCA, called for a “bottom up”

response to emergency situations, and stressed the

need for improved coordination with, and assistance

from, State and local governments. NRC also called

for better coordination among providers of communication services.66

The delayed response to the Hinsdale fire suggests that additional improvements can be made in

the planning and coordination of emergency response measures. Reportedly, the response time

after the switch failed was 10 hours, the delay being

due, in part, to the need for verifying the request for

assistance. 67 Moreover, as described in chapter 13,

State approaches to telecommunication policy are,

in fact, becoming less uniform, making coordination

with them more difficult. Some States, for example,

having greater concentrations of businesses, may

have more incentive for promoting the reliability of

communication systems than do other States. Also

compounding the coordination problem is the failure

of telecommunication vendors to agree on common

standards, as well as the continued migration of

many businesses from the public switched network

to their own private networks. In addition, the

impact of the open network architecture process and

the move towards an intelligent network with

common channel signaling will need to be assessed

in terms of security criteria.68

Strategy 6: Increase activity geared to preventing

security breaches.

Option A: Provide government incentives to both

vendors and users for improving computer security.

As Robert Morris, chief scientist at NSA, has

noted: “To a good approximation, every computer in

the world is connected to every other computer.”69

In this sense, a network’s security is no greater than

its weakest link. For example, over a period of 5

years, a person in London was able to employ a

computer network to break into more than 200

military, corporate, and university computer systems in Europe and the United States.70 And a

network can serve as a “conduit for infection,”

proliferating computer viruses.71

As already noted, despite these interdependencies

and the greater risks that they entail, many users

continue to ignore security issues. Under these

circumstances, where the negligence of some may

have a considerable negative impact on others,

Congress might want to provide incentives to induce

both vendors and users alike to adopt greater

security measures. As in the case of energy efficiency, such incentives might take the form of tax

credits. Developing the appropriate incentives, however, will require a greater understanding than we

now have about the incentives that lead corporate

management to adopt security measures. 72 It may be

necessary, moreover, for government to help de-

@’policy planning Environment for National Security Telecommunications,” final rep(m to the National Communication System, Nationat Research

Council, Washington, DC, July 1986.

67personal com~cation with Martin Edmonds, OTA contractor, NOV. 8, 198~.

6s~ one rwent rem, ~C~ints out how common channel slgn~ing, which 1S a characteristic of the intelligent network, will make nationwide

emergency telecommunication service more vulnerable. “Interim Report to the National Communication System,” August 1988.

@“The Complexity of Computer Securi~,” Scieme iVewS, VOI. 134, No. 13, Sept. 24, 1988, p. 199.

TOJo~ M~koff, “Briton Said To Penetrate U.S. Computers,” The New York Times, Out. 24, 1988, p. D-1.

71 Boyce Rensberger, “Networks Are Conduits for the InfcctiOn, “ The Washington Po~t, Nov. 4, 1988, p. A41.

72Senior mamgementtends not t. ~der~t~d information ~urity, since it seldom receives an evacuation in senior management terms. Consider, fOr

example, the lack of incentives involved with the direct costs associated with improving information security, These costs include negative impact on

organizationat productivity, possible system degradation, unhappy and inconvenienced users, as well as the cost of the security product or device.

Sanford Sherizen, personat communication, Mar. 27, 1989.
Chapter 10--Security and Survivability of the Communication Infrastructure ● 289

velop a better set of tools to help organizations

determine security risks.73 - -

Option B: Refine computer crime laws and

remedies and penalties for criminal abuse.

the

Computer crime and the ability to inflict damage

on computer-based networks have increased significantly in the past several years, keeping pace with

the increased access to and use of these electronic

systems. The typical infringer is no longer a youthful

“hacker” exploring an electronic environment, but

rather an ordinary criminal-quite often an employee—using electronic technology as the tool of

his or her trade.74

This growth in computer crime does not reflect a

dearth of legislation prohibiting such behavior; there

are now two Federal computer crime laws, and all

but three States have adopted at least one.75 These

developments do reflect, however, a lack of consistency in the law, and a lack of agreement about

penalties for infringement and remedies for the

victims of computer crimes.76 In the absence of a

consensus about the nature of computer crime, it is

not surprising that few cases go to trial, and those

who are found guilty rarely receive prison sentences.77 Therefore, Congress could define a more

consistent set of communication/computer crime

laws—together with a set of appropriate, comparable penalties—and establish abetter way of handling

evidential materials in computer-related cases.78 To

execute such a policy, conflicts between Federal and

State laws would have to be resolved.

Option C: Support the development of curricula to

be used in schools, libraries, museums, and other

public facilities to foster a more positive computer ethic.

The lack of agreement in the legal community

about the nature of computer/communicationrelated crime mirrors a more general confusion

about this issue in the community-at-large.79 The

absence of a positive ethic governing the use of

computer and communication technologies is likely

to have even more serious consequences in the

future, when many more people will have access to,

and become more accustomed to using, these new

technologies. To help create such an ethic, Congress

might support the development of a special curriculum to be used in schools, libraries, museums, and

other public facilities. Ideally, such a curriculum

would be available to children when they first come

into contact with information and communication

technologies. Since school curricula are developed

by the States, the Federal Government’s role would

have to be indirect, such as providing funding. One

challenge in fostering an ethical code of behavior for

the use of electronic technologies will be to preserve

the youthful inclination to use technology to explore

and make discoveries, while simultaneously teaching users to respect the rights of others.80

Ts~Wntrisk ~~ysls ~proacheswe typlcal]y bd on rnode]s that are not the most appropriate or useful for computer Udtelecommtication issues.

Ibid.

74J,J. Buck B]oombecker, “The Spread of Computer Crime,” International Computer Luw Adviser, vol. 2, No. 8, May 1988, p. 4.

7sk Wch 1989, Represen~tlVe Wally Herger reintroduced a bill to combat computer viruses, which he first introduced in July 1988. ~ 55 would

make it a Federal crime to knowingly introduce into a computer network a virus or other computer program that causes loss, expense, or risk. In addition,

the bill would also allow affected parties to file civil suits to recover damages. Whereas the earlier version of the bill was included in the Federal Code

under the section dealing with malicious mischief, the new version is included under the section on computer crimes, and would thus provide for a stiffer

20-year maximum prison sentence for second offenders. Robert Midford, “Bill Expands ProtectIon From Viruses,” Federal Computer Week, Mar. 20,

1989, pp. 20, ’24.

TGFor a discussion of tie problems enttiled in specifying difficult concepts such as authorized activities, =Sherizen, op. cit., foomote 20.

771bid.

T13Jo~ A.N. ~, Ger~d Segal, and Rosalie Steier, “Positive Alternatives: A Report on an ACM Panel on Hacking,” Cowununicatwns of the ACM,

April 1986, VO]. 29, No. 4, Pp. 297-230.

T$’E~ic~ issues s~aced ag~n when the Internet network wa.. broken into, as described above, See also Michael Alexander, “Security Etics Under

National Scrutiny,” Computerwor/d, Nov. 4, 1988, pp. 1,6.

fJOFor a discussion of his chal]enge, see Michael Specter, “Hackers’ Easy Ride,” The Wahington Post, NOV. 11, 1988, p. A-1.
Chapter 11

Interoperability in the

Communication Infrastructure
C O NTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . Page

THE PROBLEM . . . . . . . . . . . . . . . . . . . . . . . . ;: ;:::; ;;”.’.-.”.’”,’.-’.”,”.”.”.”.”.”:.”;:; “ ‘ “ “: : ,’ : : : : 293 293

STRATEGIES AND OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . : : : : . . . . . . . 300

General Discussion of Strategies . . . . . . . .

. . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . 

. 

. 300

Figure Figures

11-1. ISDN Subscriber Loop Interface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 Page

11-2. Congressional Strategies and Options to Address Interoperability/Coordination

of the Communication Infrastructure 

. . . . . .. ..,,..+ . . . . 11-3. OSI Reference Model, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R: ~””” ““””””” ““”-” ““” 313 301

$.. . . . . . . . . . . . . . . .

Table

11-1. Integrated Services Digital Network: Factors Affecting the Choice Page

of Federal Options . . . . . . . . . . . . . . . . . . . . .

... ..+. ... C,G . . . . . . . . . . . . . . . . . 11-2. Open Systems Interconnection: Factors Affecting the Choice . . . . . 311

of Federal options . . . . . .

. .......,...,,4+..

. . . . . . . . . . . . . . 11-3. Open Network Architecture: Factors Affecting the Choice 316 . . . . . . . . . . . . .

. . . . . . .

of Federal Options . . . . . . . . +.

. . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . .

. ....,.,.+ 321
Chapter 11

Interoperability in the

Communication Infrastructure

INTRODUCTION

Communication systems are, by definition, designed to interconnect. Thus interconnection, or

interoperability, is a critical dimension of any

communication infrastructure.1 The more interoperable a communication system is, the more connections it can provide and the more accessible it will be

to everyone on an equal basis. By creating economies of scale, interoperability can also reduce the

costs of producing communication technologies,

resulting in lower prices. Because new products and

services that conform to known standards will be

able to interconnect with existing systems, interoperability can foster product innovation. In addition,

because interoperability permits redundancy, it can

support the survivability of a system. Finally,

interoperable communication systems support the

flow of information, a critical feature in an information age.

Interoperability is important not only in a technical sense, but in an administrative sense as well. That

is, to be most useful, the infrastructure needs to be

transparent to users in terms of the technologies they

use and the kinds of services offered, as well as the

prices and rules that govern their use.

Interoperability also has a down side. By facilitating access, for example, it can make a communication system more vulnerable to breaches in security.

Moreover, vulnerabilities in any one part of a system

can easily be transmitted to others (as witnessed

recently with the spread of computer viruses). In

addition, to the extent that interoperability requires

standardization, it will limit diversity of choice.2

Under some circumstances, standards may also

retard innovation by acting as barriers to market

entry or by inhibiting manufacturers and vendors

from venturing forth with a new, but incompatible,

product.3

THE PROBLEM

In the past, achieving adequate interoperability

within the communication infrastructure was relatively easy. In telephony, AT&T provided both

end-to-end service and system interconnection. In

mass media and information-processing technologies, the government played an important role,

assuring, when necessary, that adequate standardization took place.4

However, OTA found that interoperability is

likely to become more problematic in the future,

from both technical and administrative standpoints.

Not only will the need for interoperability become

greater, but achieving it is also likely to be harder.

Seven factors suggest such an outcome.

Factor 1: The growing importance of information

and communication as strategic resources.

Communication systems serve as an infrastructure that supports all social activities. InteroperabilIFor some ~eoretical, ~onomlc discussions of interoperability and commumcation standards, see Stanley M. Be=n and G~h SalOnW~

“Compatibility Standards and the Market for Telecommunications Services,’’ The Rand Corp., February 1988; Stanley M. Besen and 1.x4and L. Johnson,

“Compatibility Standards, Competition, and Innovation in the Broadcast Industry,” The Rand Corp., November 1986; Sanford V. Berg, “TechnicaJ

Standards and Technological Change in the Telecommunication Industry,” Public Utility Research Center, University of Florida, Gainesville, August

1988; Joseph Farrell and Garth Saloner, “Economic Issues in Standardization,” Sloan School of Management, Massachusetts Institute of Technology,

WP #1795-86, October 1985; and David Hack, “Telecommunications and Information-Systems Standardization-Is America Ready?” Library of

Congress, Congressional Research Service, May 21, 1987. For a thorough characterization of standard-setting organizations and processes from an

organizational/behavioraiist point of view, see Carl F. Cargill, Ir$ormation Technology .Standm-duation Theory, Process and Organizations (Rockpml,

MA: Digital Press, 1989).

ZE1l M. Nom, “me political ~onomy of ISDN: E~opean Network Integration vs Arn~rlCan system Frag-nentation,” paper presented to the XIV

Annual Telecommunications Policy Research Conference, Airlie, VA, April 1986.

3Joseph Farrell and Garth Sa]Oner, “Standardization, Compatibility, and Innovation,” Rand Journal of Economics, vol. 16, No. 1, Spring 1985, pp.

70-83; and Joseph Farrell and Garth Saloner, “Standardization and Variety,” Economic L.aers, January 1986, pp. 71-74,

qFor exaple, ~fi tie Dep~ment of Defense and fie Genera] Services Administration played important roles in ~~ standwd-setting Process for

COBOL, a computer language that allowed for program compatibility that was approved by the American National Standards Association (ANSI) in

1%8. Berg, op. cit., footnote 1, p. 10.

-293-
294 ● Critical Connections: Communication for the Future

ity is important, therefore, not only in terms of a

system’s technical characteristics, but also in terms

of whether it can support social activities as well. In

every realm of society, interoperability serves as a

key factor in determining whether, and by whom,

new opportunities afforded by information and

communication technologies will be realized (see

chs. 5,6,7, and 8). Therefore, in considering its role

relative to setting standards for the U.S. communication infrastructure, the government increasingly will

have to take into account the overall societal benefits

of new technologies. For example, against the

danger of retarding innovation by pressing prematurely for standards, the government will have to

weigh not only potential losses in efficiency, but

also the loss of both domestic and international

business opportunities that might result from the

lack of standards. In addition, in determining whether to play a more proactive role relative to

standards, the government will need to balance the

potential loss of diversity and customer choice that

standardization brings against the problems of

equity that might arise if users have to “purchase”

interoperability as a commodity.

Factor 2: The elimination of many of the traditional mechanisms by which interoperability

has historically been achieved, and the emergence of new players.

The divestiture of AT&T, the convergence of

communication and information technologies, and

deregulation have all served to undo many of the

mechanisms used in the past to achieve interoperability in the U.S. communication infrastructure.

Achieving interoperability was relatively easy because there were few stakeholders, and those who

were actively involved generally focused their

attention on a circumscribed set of technologies.

Today, this is no longer the case.

Before the divestiture of AT&T, for example,

telecommunication standards were established by

the Bell Telephone System, and they were based, for

the most part, on a commonly accepted set of

engineering criteria. As Horwitt has described it:

The market has changed since predivestiture days,

when Ma Bell set telecommunication standards and

other carrier and equipment vendors had no choice

but to follow. Now AT&T is just one more

vendor—albeit a formidable one—lobbying for

industry-wide adoption of the technological protocols it wants to uses

With respect to long-distance carriers alone, instead

of one service provider there are now a number of

equipment providers, interexchange carriers, enhanced-service providers, service resellers, and private-line networks, all with a stake in standards

issues. Divestiture also created the seven Regional

Bell Operating Companies, each with a somewhat

different business strategy and a distinct view of

network standards.6 Moreover, in the wake of

divestiture, a number of companies have emerged to

provide gateway, translator, and network management services.7 Because their products can serve as

substitutes for standards, they, too, have a very basic

interest in issues involving interoperability and

standards.

In addition, with the convergence of communication and computer technologies and their markets.

computing companies have a large stake in communication standards, as do communication companies .

5Elizabeth Horwitt, “protocols Don’t Stand Alone,” Computenvorld, Oct. 20, 1986, p. 27.

Wo facilitate the development of standards among the regional holding companies, the Exchange Carriers Standards Association (ECSA) was

established at the time of divestiture. The ECSA T1 Committee on Telecommunications has been accredited by ANSI, and today is chiefly responsible

for providing the telecommunication indusny with an open public fomm for developing interconnection, interoperability, and performance standards.

Its 140 member organizations represent exchange carriers, interexchange carriers and resellers, manufacturers, and vendors, as well as users and general

interest participants. For a detailed description see, A.M. Rutkowski, “The Exchange Carriers Standards Association,” Teiecommunicutions, January

1987, pp. 77-87.

7@e mea that hm rwen~y demonstrated ~emendous ~o~ is that of system Integration. System integrators help organizations to develop

communication systems comprised of an enormous variety of hardware, databases, and software, and to link them together in a seamless fashion.

According to some analysts, the system integration business is growing at an annual rate of 20 percent, and its revenues are expected to increase from

$8 billion in 1987 to $22 billion in 1993. For a discussion, see Mark Breibart, “Systems Integration Surge,” Computerworld Focus on integration, a

supplement to Computerworld, Feb. 6, 1989, pp. 29-33; see also, Mary Jo Foley, “Private Sector Systems Integration,” Da[umurion, Dec. 1, 1987, pp.

77-79. Given the variety and complexity of the technology, it should be noted that the term “system integrator” is, itself, very confusing. As one trade

journal analyst notes: “Talk to 40 different suppliers and you will get 40 different definitions, Specialist system integrators define it as a business for

coordinating the elements of a customer solution. Vendors define it a dozen different ways, and many claim that they have been doing it all along and

can’t see what the fuss is about. Service firms define it as a service business. Software firms define it as a software business, Communication companies

define it as a network business.” Brian Jeffery, “The Drive for Integration,” Co~uterworld, Sept. 7, 1988, pp. 15-17.
Chapter 11--Interoperability in the Communication Infrastructure ● 295

in computing standards. This was illustrated recently by the protracted battle among communication and information technology companies about

how and by whom the next version of UNIX will be

developed. 8 In these two arenas, the attitudes towards standards, the values placed on them, and the

processes for achieving them have historically been

somewhat distinct, raising questions about how

these two cultures will reconcile their differences in

the future.9 As the technologies converge, there is

also likely to be an increasing number of jurisdictional issues emerging among organizations, such as

the International Standards Organization (ISO) and

the Consultative Committee for International Telephone and Telegraph (CCITT), which traditionally

have been responsible for the development of

standards in a particular area.

There are new players in the administrative arena

as well. With deregulation taking place at the

Federal level, many States have begun to take a more

assertive role in regulating communication (see ch.

4). With respect to standards, for example, many

States have demonstrated their intent to be active

participants in the open network architecture (ONA)

process.

10 The States are also likely to have an

interest in the development of Integrated Services

Digital Networks (ISDN), especially with respect to

how services are defined and whether or not they

will be regulated. Foreign governments, all with

their own objectives, are also becoming critical

players in the standards-setting process.

Factor 3: The globalization of the economy and,

hence, a greater need for international standards and the extension of standards-setting

efforts to the international arena.

With the globalization of the economy, U.S.

standards now have to be brought into line with

international standards. As Ithiel de Sola Pool has

pointed out:

Until now in the telecommunications field there

have generally been two sets of standards, the

CCITT standards of the International Telecommunications Union followed in most of the world

and the Bell system standards which prevailed in

America.11

Given the breakdown of geographic boundaries,

American vendors now need to take international

standards-setting processes and the entire world

market into account when considering what standards should be adopted for the United States. Thus,

although many American computer vendors and

telecommunication carriers were reluctant to adopt

the CCITT X.400 standard for electronic mail, they

found that they needed to support it if they wanted

to compete in the world market.12 Similarly, although the Federal Communications Commission

(FCC) was hesitant about setting standards for high

definition television (HDTV), it found that it had to

move the U.S. standards-setting process along,

given that HDTV standards were being developed

and adopted in other countries.

13 Two major sets Of

standards-for ISDN and open systems interconnection (OSI)—are presently being debated and discussed in international fora.14

The need for U.S. vendors to align their standards

with those of the rest of the world will become even

greater after 1992, when the nations of Europe merge

into a unified economic market made up of approximately 620 million people. Fully cognizant of how

standards can serve as barriers to trade, the European

nations are trying to speed up their efforts to achieve

8S&, for ~xmple, c~stine Bonafield, “UNIX Spli( Gets Wider,” Cornmunicationskveek, NO V. T, 1988> P. 1.

9A.s Besen and Sdoner have pointed out, in the information industry, “standardization issues revolved mainly around the ability of manufacturers

of peripheral equipment to connect their products to the Central Processing Units of other manufacturers. Since there were only a few mainfi-ame

manufacturers, and they provided integrated systems, and thus were not dependent upon Lhe equipment of peripheral manufacturers, they had little

incentive to ensure that interfaces were standardized.” Besen and Saloner, op. cit., footnote 1, p. 18.

1OF]l M. NO*, “~plementating ONA: Feder~ State p~ership N~ed to conn~[ Network of Networks,” Comunicatiomweek, Miiy 2, 1988,

p. 16.

1 II~el de Sola pool, “competition and Universal Service,” Harry Shooshan (cd.), Disconnecting Bell, The Impact of the AT&T Divestiture (New

York, NY: Pergamon Press, 1984), p. 119.

lzBesen and Saloner, op. cit., fOOtnOte 1, P. 3.

13’l”he FCC hu ~i~ mat whatever HDTV broadcast s~ndard is ultimately sel~ted it must be compatible with existing TV sew and WittSmltt~S,

Advanced Television Systems, MM Docket No. 87-268,65 R.R. 2d 295 (1988).

lq’rhe~ st~tids, and tie issues to which they give rise, are discussed in detail later in the chapter.
296 ● Critical Connections: Communication for the Future

regional standardization by the 1992 deadline.15 To

facilitate this process, the European Community

established the European Telecommunications

Standards Institute (ETSI) early in 1988. This

independent body, financed by all of the postal,

telegraph, and telephone authorities (PTTs) and

major telecommunication suppliers, assumed responsibility for the standards’ work that was previously carried out under the Conference of European

Post and Telecommunications Administrations

(CEPT). Moreover, in April 1989, 18 European

countries signed a memorandum of understanding,

which states that, effective immediately, those

countries will provide a common range of basic

services and a list of optional services that will be

made available to common standards as demand

develops. l6

How international standards are resolved will

affect not only U.S. trade, but also economic and

technological developments in the United States.

Without common standards, for example, it is not

easy for U.S. users with international networks to

transport their own company-standard equipment

into other countries.17

The international process for setting standards

also affects and is affected by U.S. regulatory policy,

as the history of the debate over the “U” interface

clearly illustrates. In ISDN standards, for example,

the “S” “T” and “U” interfaces define the possible

points at which customer premises equipment can

link up with the national, public network (see figure

11-1). By picking the “U” interface, the U.S.

Government provided the greatest leeway for competition within the customer-premises equipment

market. The governments of Europe, who were less

concerned about competition in the customerpremises equipment market, selected the “S” and

“T” interfaces. These conflicting choices proved to

be a matter of considerable contention in the process

of establishing ISDN standards.l8

Factor 4: The increased politicization of standards-setting issues.

A standard, as described by Sanford Berg, can be:

. . . a potentially private good whose ownership

assignment is handled via technical committees. Just

as the radio spectrum is a scarce good whose

allocation affects the wealth of firms, assignment of

points (or specification of a protocol) can give

advantages to one firm.19

Once a standard has been set, for example, firms

whose products are incompatible may no longer be

able to compete. Thus, many firms may try to avoid

having a standard adopted, unless their own products

are likely to be favored. Users, on the other hand,

generally welcome standards. With systems that are

open or standardized, users have more market power

vis a vis vendors. Not only can they mix and match

the components of their communication systems,

picking and choosing among different vendors; they

can also migrate more easily to a new system,

phasing out their older equipment more gradually

and without disruption. 20 In addition, when products

are standardized, users often benefit from lower

prices and lower searching costs (costs entailed in

locating and comparing products). However, users

will often disagree about the best standard. Having

invested heavily in one technology, for example,

they may oppose a standard that would require

switching to another.

Given these competing interests, and the tremendous potential for gains and losses, it is clear why

setting standards has often been a contentious

process requiring considerable negotiation and bargaining. As Besen and Saloner have described it:

. . . standard-setting has moved from the technical

concern of a single firm to a factor with important

implications for competition. As a result, the processes by which standards are set have come to be

subject to detailed scrutiny by both the regulatory

authorities and the courts. In a sense, telecommuni15T0 encourage standardization in Europe, for example, the European Commission, in February 1988, mandated that governments of ~1 member

nations invest in computer equipment conforming to the standards of the International Standards Organization (ISO).

IGJohn Willimson, “CEPT Agrees To Speed ISDN,” Telephony, Apr. 17, 1989, p 15.

IvSteve Titch, Margie Semilof, and John Berngam “Missing Links,” ContmunicattonsWeek, CLOSEUP, Sept. 12, 1988, p. C-7.

1%+x, for a discus~on, Ian M. Lifchus, “Standards: Technicat Umbrellas for the Information Age,” Telephony, Apr. 25, 1988; see tdso, Alan stew~i

“A Users Guide to ISDN Standards,” Telecommunications, May 1988, pp. 34,35,36, and 37.

lgBerg, op. cit., footnote 1 ) P. 9.

z~w DeB~ver, “Trek Tow~d Connection,” Computerworfd, NOV. 16, 1987, PP. S1-S13.
Chapter 11--Interoperability in the Communication Infrastructure ● 297

Figure 11-1—ISDN Subscriber Loop Interface

ml Functional groups

II

TE1 IReference interface

digital locations

sets -—.— - — ——-— — — — -- -

TE1

terminal

(type 1)

‘~+~=~i~=~~~ j~~j’J

I 1; I

L J, I--— . — . - — . — — — — —-— I

I

Subscriber premises I

I Subscriber [ Central

TE1 Telemetry

telemetry devices

1 line I

I I

office

I I

U Interface–Two-wire transmission carrying the 2B + D channel format Implemented by the MT8972 DNIC

~ {~[~~~~~ > Four-wire Interfaces intended to be physically identical for Star or Passive bus configurations

R Interface–Existing standard interface such as RS-232-C or X 21.

Network Termination 1–Transmission line terminating equipment at subscriber side of network

NT2–Network Termination 2– Intelligent device to convert the single T interface to multiple S interfaces.

Terminal adaptor–Conversion between the ISDN interface (S) and existing interfaces (R) such as RS-232-C or X 21

Terminal equipment (type 1 )–intelligent digital devices that can interface directly to the ISDN specified S or R interfaces.

Terminal equipment (type 2)–Existing terminal equipment used with existing Interface standards such as RS-232-C or X 21

SOURCE: Reprinted with permission from Telephony, June 17, 1985, p. 31.

cations standards have become too important to

leave their determination to the telephone companies.21

The involvement of so many players with conflicting perspectives is likely to make standardssetting processes more visible, more intractable,

and, hence, more politicized in the future. Increasingly, issues are emerging not only with respect to

what standards should be adopted, but also with

respect to how, and by whom, decisions about

standards should be made. Recently, for example,

there has been a sizable increase in the number and

variety of groups getting involved in standardsmaking issues. Many user groups are now seeking a

much more active role, in some instances even

bringing their cases directly to international standards-setting groups.

22 The desire for an increased

role is not surprising, given that users’ network

requirements are now so much more sophisticated

and mission-critical to their business operations.23

Vendors and suppliers are also taking note of this

zlBe~n and %loner, op. cit., footnote 1, P. 1.

ZzFor a discussion, see, for example, SUZannc WiSemari, “ICA Seeks Strong User Role in Standards,” CornmunicutumsWeek, June 27, 1988; see also

discussion of the role of users in developing the Manufacturing Automation Protocol (MAP) and Technical and Office Protocol (TOP) standards, Stan

Kolodziej, “No More Money to Burn: Industry Demands Solutions, MAP Begins to Deliver,” Cornputenvor/d, Dec. 7,1988, pp.31 -34. It should be noted,

moreover, that users can also be vendors, a fact that can cloud motivations.

‘2sD~e Kurnick, “0s1 a H@-Stakes Game to Play,” Computcrworfd, Sept. 12, 1988, p. 19.
298 ● Critical Connections: Communication for the Future

new situation, and are sending more of their

top-notch people to handle standards issues.24

Factor 5: Increased technological complexity and

the shift from product-implementation standards to anticipatory-process standards.

The rapid pace of technological change, combined with the convergence of communication and

information technologies, has made standardssetting much more complicated. In the past, standards were generally established in response to

pre-existing products in order to facilitate their

implementation. 25 Today, however, this is no longer

typically the case. Standards are now much more

future oriented, and the process of setting a standard

often anticipates the actual creation of a product. The

need for these new kinds of standards, known as

anticipatory-process standards,26 reflects the fact

that, today, there is a much greater need for

interoperability in the area of information technology, given an environment where the technology is

rapidly changing, there are many vendors, and there

is a growing value attached to the exchange of

information. 27 One example of an anticipatoryprocess standard is the OSI reference model. It

describes how open systems should operate from a

generic perspective, as well as the full range of

implementation choices that are compatible within

this framework.

The shift from product-implementation standards

to anticipatory-process standards will create new

kinds of problems, and there is little historical, or

analytic, guidance for addressing them. For example, the traditional, academic economic literature on

standards, which focuses heavily on the development of domestic product standards and the economic factors that drive them, is becoming less and

less relevant to, and less able to account for, the

process of setting international, anticipatory-process

standards, such as those for ISDN and OSI. As

Cargill has noted, the outcomes of such processes do

not depend on economic variables alone, but on a

number of variables, which can range from national

goals to personalities and preferences of individual

participants. As he has described the intricacies and

complexities involved in standards-setting:

imagine a typical international standards meeting

working on a conceptual/process standard for the

information technology industry. Assume a small

meeting of approximately thirty representatives—

say twelve from providers, eight from government,

five from impacted users or quasi-governmental

bodies, several consultants, and a couple of academics. Then consider the national, regional, and international aspects of the meeting, the needs of the

providers to ensure that their processes are not

compromised, the governmental issues such as

security and national prestige and protection of

industry, and the academic sections insistence on a

good and technologically sound solution. Finally,

factor in the personal characteristics of the delegates,

most of whom are highly competent engineers who

have been working on this type of technological

24Stm Kolodziej, C<Egos, Infighting md Politics: Standards fkOgre5s Bogged DOW. “ Computerworld, Focus, Sept. 7, 1988, p. 17. As Cargill has

noted,”. . . industry-both users and providers alike-is more and more aware that standards are a serious business concern that can cripple or aid effons

to minimize exposure to the vagaries of the market. As this realization has grown, the composition of the standards groups has begun to change. Instead

of coming from a regulatory or internal standards background, more and more representatives have a background in technical management. Perfect

standards are no longer the goal; instead, the focus is on obtaining a workable and acceptable standard within a time frame that will allow it to be usetld.”

Cargill, op. cit., footnote 1.

25AS c~glll hu defined his kind of standmd: “A product standwd describes a product or service being standardized. The product, which shodd have

a future orientation (although this is not an absolute necessity), defines the standard in that the standard merely exists to serve as a paradigm for the product

within the industry. In other words, the standard and the productAervice being described are equivalent within the confines of a single discipline/structure,

free of external dependencies. The standard assumes that the externaJ interfaces to the product it described are relatively constant and consistent. Although

the standard can accept a wide variability of input if the standard specifies the variability, it is more usual for the product standard to be constructed rather

tightly. If a standard calls for a series of options, which can be randomly implemented, m terms of numbers, sequences, and fashions, then its purpose

is de feated.” Ibid.

26Ag~n, ~ defm~ by Cagill, “me process stand~d focuseson the transmutation of a CuStOmernW?d hItO acustotner SOhitiOn, examining those things

that are input and output to a system, but not concerning itself especially with the products that accomplish that transmutation. In other words, it is

concerned with the ends, not means. . This concept has substantial implications for the development of standards because it is device

independent-rather than specifying a certain product or service to accomplish a need, it merely describes the need, the constraints to achieving the

solution, and the output necessary to allow the results of the standardized solution to interplay with solutions from other process standards.” Ibid. For

a discussion of anticipatory standards see also, Martin B. H. Weiss, “Compatibility Standards and Product Development Strategy: A Retrospective of

Data Modern Developments,” Carnegie-Mellon University, March 1988.

27 Cage]], op. cit., fOOtnOte 1.
Chapter 11--Interoperability in the Communication Infrastructure ● 299

problem for years and for whom this arena is a

chance to air their theories to their peers.28

Factor 6: The growing divergence of vendor/user

goals and interests.

The move from product-implementation to anticipatory-process standards has also made it more

difficult to reconcile the needs of vendors and

users.

29 In the past, the needs of users and Providers

generally coalesced, once they had agreed among

themselves that a standard was required. The vendor

sought to design his product to the standard that best

met the user’s need. Today, however, providers’ and

users’ needs are much more divergent. Trying to

leave their options open in a rapidly changing

technological environment, while at the same time

providing for some kind of predictability, providers

favor the creation of generic standards that, by

laying out all technical possibilities, allow them to

build to the future capabilities of their systems.

Users, on the other hand, have no interest in a broad

range of technical possibilities; they want very

specific standards that can be designed to meet their

particular business needs. They find the process of

developing such complex genetic standards much

too slow for their purposes. From the users’ point of

view, participation in this process can be quite

expensive since, unlike vendors and suppliers, they

are primarily engaged in other economic activities .30

Reflecting this growing gap between vendors* and

users’ perceptions of standards and the standardssetting process, some users established special

consortia to speed up the process. In addition to

developing specialized standards protocols based on

the OSI model, these groups also sought to use their

organizational influence and buying power to encourage vendors to implement products designed for

their needs.31 At the initiative of General Motors, for

example, users developed the Manufacturing Automation Protocol (MAP), which is considered to be

an essential building block for computer-integrated

manufacturing. In addition, the Technical and Office

Protocol (TOP) was developed under the auspices of

Boeing, while the Government Open Systems Interconnection Profile (GOSIP), a protocol designed to

meet the information-processing needs of government agencies, was developed under the auspices of

the National Institute for Standards and Technology

(NIST). Most recently, a number of electric utility

companies, working through the Electric Power

Research Institute, have agreed to develop a set of

OSI-based communication protocols that will allow

them to interconnect their dissimilar systems and

networks. 32 Libraries, bankers, and the weatherforecasting industries are also considering the development of special protocols.

Factor 7: The increasing demands on international standards-setting organizations.

The growing complexity of standards issues also

puts additional burdens on standards-setting institutions. This is reflected in the extended period of time

required for standards to be formally ratified, and the

rapid multiplication of standards-setting committees

and subcommittees. As one journalist observing

international standards meetings has described these

sessions:

The content [of the materials discussed] is technical, voluminous, and difficult. . . . the minutes look

like telephone books. . . . Readings come to several

hundred pages of technical matter each month.33

Under these circumstances, it is estimated that the

volume of the CCITT “colored books,” which

comprise all standards recommendations, is doubling approximately every 4 years.34 It can take

between 4 to 8 years for an international standard to

be written. Even after standards have been set in a

formalized, international, consensus-based process,

users still have to specify the particular uses to which

these standards will be applied, and vendors have to

implement compatible technologies that meet these

standards and specifications. Given the increased

demands on standards-setting institutions, some

people fear that the process may become so bogged

down that many standards will actually become

zgIbid.

29For ~ di~cw~ion, s= ibid.

sOIbid.

slsm for a disc~sion, Koloctziej, op. cit. footnote 22, pp. 31-33.

32KC11Y Jackson, “Utllltles t. Link Nets Via 0S1,” CmnmunicatimsWeek, Mar. 2711989, PI 1.

ssTimo~y Htight, “Sundwds.Setting and the Limits of Journalism,” ComrnunicationsWeek,Ma. 14, 1988, p, 14.

WWfis Gil~ly, “Expanding Scope for CCITT,” CommunicationsWeek, Jan. 16, 1989
300 ● Critical Connections: Communication for the Future

obsolete before they are officially ratified.35 There is

also concern that new standards groups might

emerge that would challenge the central role of the

existing organizations, creating even greater coordination problems. With these concerns in mind, many

have urged that the existing standards-setting institutions be revamped and reformed.36

STRATEGIES AND OPTIONS

Interoperability in communication systems can be

accomplished in two ways—through a process of

standardization, whereby the components of a system are designed to conform to one another; or

through the use of translator devices, or “black

boxes,” designed to connect incompatible parts.

Standardization processes themselves are also varied. For example, standards can be established de

facto in the marketplace; they can be agreed to on a

voluntary basis, by consensus, worked out through

negotiation; or they can be mandated by government. In many cases, the process does not end with

the setting of standards; before interoperability can

be achieved, standards must be further specified and

ultimately implemented.37

Given these different phases and the multiple

routes for achieving interoperability, Congress

might select from a broad range of strategies

designed to enhance the interoperability of the U.S.

communication system. These strategies include:

. supporting research to provide better data and

a more analytic rationale for standards-setting

decisions;

● allowing for the emergence of market solutions,

either in the form of gateway technologies or

through the de facto setting of standards;

● indirectly influencing the standards-setting

process by providing assistance and guidance

to foster the setting of standards;

. influencing the setting of particular standards

by providing incentives or imposing sanctions;

and

● mandating industry-wide standards.

Research on standards, as well as past experience,

clearly illustrate that there is no single optimum way

of arriving at interoperability.38 The level of interoperability to be strived for, and how it should be

achieved, will vary in each case, depending on the

state of the technology’s development, market

demand and preferences, the structure of the industry, and the social, political, and economic stakes

involved.39 Thus, although some generalizations can

be made about the overall circumstances under

which particular government strategies and options

are likely to be the most appropriate, these generalizations will need to be tailored to the specifics of

each case. For this reason, the discussion below is

divided into two parts. The first examines strategies

and options for arriving at interoperability from a

general perspective (see figure 11-2), and the second

looks at three specific cases where interoperability,

or the lack of it, has generated significant policy

issues. These three cases include a discussion of the

standards issues relating to: 1) the establishment of

ISDN, 2) the evolution of OSI, and 3) the creation of

ONA.

General Discussion of Strategies

Strategy 1: Support research to provide better

data and a more analytic rationale for standards-setting decisions.

As discussed in chapters 3 and 4, setting standards

often entails trade-offs between efficiency and ease

35se13, for one discussion, James G. Herman, “Is ISDN Obsolete’?” Network World, Aug. 10, 1987. As HemIan points out, “The ISDN stand~ds

committees are caught in a squeeze between falling requirements for voice and rapidly rising requirements for data. The long-awaited standards may

be too little, too late for data and yet be wastefully oversized for voice. It will ~ interesting to see whetier they gain acceptance and fulfill their promise

or wither and die from premature obsolescence. ”

36For a discussion SW, 6’Irr-ner CallS for Reform of CC1~,” Teiecommunicarwns, October 1988, p. 11; and Denis GilhooIy, “CCITT Adop~ plan to

Speed Standards Approval Process,” Commu nicationsWeek, Dec. 19, 1988, p. 24.

37&.1 Ctigill h~ descri~ a Slx.phase proce5s of stmdwdlzatlon: 1 ) he pre.conceptu~ization stage, z) he form~ process, s) coIICepttldlZdOIl,

4) discussion, 5) writing the standards, and 6) implementing the standard. As he notes: “If the proposal for a standard makes it over the first hurdle, and

enters the formal process, it must go through tir~ pha~s of tie fo~~ process. /fit successfully completes all of Aese steps, it has the potential for

being a viable standard-+me hat is accepted by the IT [information twhnology] community, and which will and can be used. The final hurdle is the

implementation stage. Failure to complete any of ~ese s~ge5 W1ll not disqualify it from being a standard-it may only disqualify it from being a standard

that is both used and useful.” cad F. Cargill, “A Modest proposaJ ibr Business Based Standards,” unpublished paper, p. 6.

3gBesen and SaIoner, op. cit., footnote 1, P. 2.

W3ec, for example, Besen and Johnson, op. cit., footnote 1; Besen and Saloner, op. cit., fOOtnOte l; and Berg, Op. cit., foomote 1.
Chapter 11--Interoperability in the Communication Infrastructure ● 301

‘5

I
302 ● Critical Connections: Communication for the Future

of access on the one hand, and innovation and

technological change on the other. Understanding

these trade-offs requires not only an understanding

of the many policy issues that standards raise, but

also considerable technical expertise. For policymakers, keeping pace with technological change

is becoming increasingly more difficult. As one

critical observer of the present situation has described it:

Many of our institutions—both public and private---do not seem to have evolved along with the

technology. Our present public institutions consist of

the FCC [Federal Communications Commission],

largely operating with a diminished capacity, and

pieces of a few other federal agencies, mixed with 50

state commissioners, each with the notion of what

the telecommunication network should be. . . . Far

more ominous, however, is NARUC’s [National

Association of Regulatory Utility Commissioners’]

decree that on matters of ONA, each state will feel

free to go its own way.40

One action that Congress might take, therefore, is to

further enhance the economic and technical knowledge within government agencies about the new

communication and information technologies, and

how they may change the Nation’s communication

infrastructure.

To this end, Congress might fund the National

Science Foundation or NIST to conduct further

research on the policy and economic implications of

standards and standards-setting processes in communication. Such research would be opportune

because the academic literature on standards is just

beginning to come to grips with the changes wrought

by the divestiture of AT&T and the convergence of

communication and information technologies.

However, it will be important to ensure that this

work is shared among all agencies involved with

standards. At present, there appears to be little, if

any, formal effort to share such research and

experience. In part, this lack of coordination stems

from the fact that, in the United States, most

standards’ activities have taken place in nongovernmental fora, such as Accredited Standards Committees of the American National Standards Institute

(ANSI). Ironically, it is said to be in these private

sector meetings that many people from different

government agencies get together.

However, if too formal a coordination process

were established, the sharing of information might

provoke some jurisdictional disagreements among

agencies. As noted in the discussion of jurisdictional

issues (see ch. 13), efforts at coordination are rarely,

if ever, neutral with respect to the distribution of

power and authority. And those who are bound to

lose in the process of coordination are likely to resist

any change.

Strategy 2: Allow for the emergence of market

solutions, either in the form of gateway technologies or through the setting of de facto

standards.

Both research on standards and past experience

make it clear that, because of the costs and trade-offs

involved, government efforts to bring about interoperability by establishing standards have not always

worked in the public interest. On the contrary, when

standards have been prematurely set—as in the case

of color television—they have often hindered the

development of a better technology .41 Because of

these experiences, many recommend that the government intervene in the standards-setting process as

little as possible, allowing the marketplace to

provide solutions to the problems of interoperability. Such solutions may take the form of either de

facto standards or gateway technologies that serve as

translators between otherwise incompatible equipment or systems.

Generally speaking, this minimalist approach is

the one preferred by many vendors and suppliers,

especially those in the information industry. Because the choice of standards can have a major

impact on competition, many of them are deeply

suspicious of, if not opposed to, the government

playing an active role in the standards-setting

process. This point of view has been aptly stated by

Carl Cargill, senior standards consultant at Digital

Equipment Corp. Defending the present system of

voluntary, consensus standards against the criticism

that it is too slow and inefficient, he contends, for

example, that:

~Anthony M. RuAow~i, “Toward a National Information Fabric: organizing fOr Success,” Telecommunications, September 1987, p. 8.

41Na~an Ro~n~rg, “Refle~tions on the Future of the Telecommunications Industry, ” OTA con~actor rePortt ~cember 1986! P“ 10
Chapter 11--Interoperability in the Communication Infrastructure ● 303

. . . a specialist who does not work for a company

that either makes or uses the product will very likely

lose sight of why standards exist. . . . the bureaucracies that currently control much of the standardization process in Europe . . . have spawned disasters.

Standards planning in the U.S. is where it should be

right now—in the hands of the people most directly

impacted. This combination of providers and users

creates an understanding of what is needed far better

than any expert consultant planning agency .42

This minimalist approach is reflected in the

FCC’s policy strategy for standards over the past

several years. The FCC’s rationale is exemplified,

for example, by its decision on cellular radio, in

which it stated:

We believe it would be inappropriate at this time

to embark on a proceeding to select technical

standards for future cellular systems. Such a course

would be premature given the early stage of development of new cellular and is likely to discourage

technical innovation. Instead we seek to foster the

development of competing technologies that could

then be evaluated in the market.43

Economic research and analysis on standards and

past experience suggest that this market approach is

most likely to result in standardization when all

interested parties: 1) prefer the same standard, 2)

have something positive to gain from standardization, and 3) have adequate information about the

intent of other parties. This optimal situation occurs

only rarely.44 However, even when all of these

conditions do not hold true, economists argue that

government intervention in the standardization

process is likely to have more negative than positive

consequences—measured in terms of the criterion of

economic efficiency-when: 1) no single technology stands out as being preferable, 2) technologies

are undergoing rapid change, and 3) a technology

has a variety of different uses. They contend that,

under these circumstances, it is often best to allow

users to work out their own compatibility problems,

either by negotiating among themselves or with the

help of companies that will provide them with

gateway and integration services.45

Standards decisions, however, also need to be

weighed against noneconomic criteria. There are

times when having “a” standard (even if it is not the

optimal one from an economic criterion of efficiency) might be better than having no standard at

all. Standards might be required, for example, in

order to effectively use defense technologies. It was,

in fact, for this reason that the National Research

Council (NRC) urged the adoption of UNIX as a

standard operating system in its evaluation of the

Nationwide Emergency Telecommunications Network.46 Or, as in the case of HDTV, standards might

be sought in order to promote U.S. access to the

international market.47 The government could also

press for standards as a way of encouraging the

development of what it considers to be an essential,

but inchoate, market. It might be argued, for

example, that one way of fostering information

services for residential and small-business users

would be to encourage the development of teletext

and videotex standards. Finally, government might

become involved in standards-setting processes as a

way of structuring competitive markets, as it may be

further required to do in the case of implementing the

ONA process.

Strategy 3: Indirectly influence the standardssetting process by providing assistance and

guidance to foster the setting of standards.

Option A: Facilitate the gathering and exchange of

information.

At times, the failure of an industry to set standards

is due not to disagreements among parties about the

need for standards, or even about the preferred

technology that should be adopted, but rather to the

fact that the parties involved are unaware of the

preferences and intentions of others. As Besen and

Saloner have pointed out, vendors might hesitate to

take the first step towards the standardization of a

4ZCW1 Cwglll, “ANSI Me This: Who Has Control Over Standards?” Computenvorfd, July 4, 1988, p. 17.

43A.S quot~ in Dr. George C*OUnT “The Next Generation of Cellular Radio,” Telecommunicuzions, June 1988, pp. 41-45.

us= fwmote 1. ~s is not t. say, however, hat tie optimum standard will be set in the marketplace. For, m Besen and Johnson have pointed Out!

there are some types of market situations in which the wrong technology (based, that is, on the criterion of economic efficiency) might be selected as

a standard. Besen and Johnson, op. cit., footnote 1.

q%ee footnote 1.

46M~~ ~mds, “~fenw ~tere~ts and United States policy for Telecommunications,” OTA contractor report, June 1988.

47sW Norm Alster, “Tv’s High-Stakes, High-Tech Battle,” Fortune, tit. 24, 1988, pp. 161-170.
304 ● Critical Connections: Communication for the Future

product if they are unsure whether other vendors will

follow or if they have no way to bargain and

negotiate for the exchange of side payments.48 In

cases where the lack of information exchange seems

to be the direct cause of the lack of standards, the

government may want to intervene to foster an

exchange among interested parties.

One way to do this would be through FCC

fact-finding proceedings. For example, acting either

on its own or in response to industry petitions, the

FCC might initiate an inquiry, or Notice to a

Proposed Rule Making, to ascertain the views of the

public about the need for, or feasibility of, a

particular standard. This approach works best when

interested parties basically agree on what constitutes

the best standard. Where there are strong disagreements, however, this method might actually exacerbate differences, and hence serve to hinder the

development of standards.49 Another problem with

this approach is that it does not call for parties to get

together to work out their differences. Moreover,

because industry comments are presented independently of one another, the data that it generates may

not be comparable, making it difficult for the FCC

to interpret them.5o

Alternatively, the FCC might encourage the

establishment of an interindustry committee to look

into a standards problem and report its findings. This

was done in the case of HDTV with the establishment of the Advanced Television Services (ATS)

Advisory Committee. Comprised of top executives

of television and related industries, this committee

was established by the FCC in July 1987 to advise

the agency on standards and spectrum allocation.

Broadcasters, themselves, set up the Advanced

Television Test Center (ATTC) to advise the FCC’s

ATS Advisory Committee. One advantage of this

kind of initiative is that it allows interested parties to

work out their differences first and then present the

FCC with more uniform information.51

Option B: Reduce the costs of participation, or

increase the costs of nonparticipation, in standards-setting.

Attempts to set standards might also fail because

the effort required to participate in the standardssetting process appears greater to the relevant parties

than the perceived benefits. The classic case is that

of trying to set up a system of weights and measures;

because all parties benefit in the same way from the

existence of standards, the costs of trying to develop

them may be greater than the perceived benefits.52

But such a situation might also arise, for example, if

the market for a product is small and perhaps

undeveloped. 53 When there is no present or perceived future market for a product, industry may

have little incentive to spend the time, money, and

effort required to develop standards for it. And, in

the event that standards are required for a market to

develop, the situation might result in a state of

inertia, engendering neither standards nor a market.

Some say, for example, that this situation accounts

for the failures of AM stereo, teletext, and videotex.54 It may also explain why vendors have been

hesitant to implement ISDN standards.

In such cases, the government might try to

overcome the inertia by initiating proceedings as

described above. As always, the government would

have to weigh the cost and potential risks of action

against the benefits to be gained by such efforts. It

should be noted, however, that the risk of the

government forcing a standard prematurely is less

when there is inertia and there are no strong

advocates of a particular standard.55

Option C: Encourage and facilitate the inclusion of

all interested parties.

48sW fmmote I. Side payments refer to bargains struck between companies to further the standards-setting process.

QgIbid.

sOBesen and John80n, for exmple, suggest that this lack of comparable data accounts in part for the FCC’s hesitancy to set standards for stereo TV.

Op. cit., footnote 1, p. 54.

511t sho~d ~ ~ot~ hat ~thou~ the cable ~dus~ was represent~ on the ATS Adviso~ cornmitt~, the National Cable Television Association

dedined an invitation to participate in the ATTC.

52As Be=n and Sdoner note, “paradoxically, when stand~dization cannot create a com~tltive advantage, so that achieving a consensus shotdd be

easy, the incentive to free ride N greatest. ” Op. cit., footnote 1, p. 6.

53Be~n and Johnson, op. cit., footnOtc 1, p. 54.

541bid.

5sIbid.
Chapter 11--Interoperability in the Communication Infrastructure ● 305

With the growing importance of communication

and information-based services, more people have a

stake in the outcome of decisions about interoperability in the communication infrastructure. One role

that the government might play, therefore, is to

assure that all interested parties are included in the

debates about standards. The government has already taken some steps in this direction. For

example, one reason NIST organized the North

American ISDN User’s Forum was to assure users a

voice in ISDN implementation.56 Users were also

incorporated into the ONA proceedings, as required

by FCC rules. Not every group has such leverage,

however. Thus, government may have to take further

steps to assure that a wide assortment of views are

incorporated into the standards process. Small businesses, in particular, have expressed concern that

they not be left out. Moreover, as described below,

there is clearly a need for greater coordination

among State, Federal, and international jurisdictions

in working out standards problems.

Strategy 4: Influence the setting of particular

standards by providing incentives or imposing

sanctions.

In a number of cases, a firm (or fins) may have

a strong proprietary interest in particular technologies, and therefore be unwilling to cooperate in

establishing an industry standard. Instead, they will

try to have their own technology established as a de

facto standard in the marketplace. Until recently, for

example, this was IBM’s style of dealing with

standards. Similarly, when users already have an

installed base of technology that is built around one

particular set of standards they will probably be

opposed to switching to anew set. If the government

were to promote standardization under such circumstances, it would most likely have to provide

sufficient incentives and/or sanctions to induce the

parties-at-interest to compromise.

Option A: Use government procurement power to

encourage standards-setting.

Because the Federal Government is one of the

largest purchasers of both communication and information technologies, it has considerable leverage in

these markets. Thus, one way in which the government can encourage standardization is by using its

procurement power. By doing so, the Federal

Government was able to press IBM to support the

computer language, COBOL. More recently, the

Department of Defense, responding to NRC recommendations calling for greater standardization of

operating protocols, has required that the existing

Transport Control Protocol/Internet Protocol (TCP/

IP) be replaced by the International Standards

Organization’s OSI protocol, within 2 years. It

should be noted, however, that many equipment

vendors disapproved of this decision and formed a

lobbying group, the Coalition for Working Systems,

to resist the proposal.57

Option B: Provide support for a particular standard.

Without mandating a particular standard, the

government might make its preferences clear, focusing on one kind of standard over others. Such an

approach might be used to restrict or delay the

adoption of a particular standard, if the technology

is considered to be immature. For example, the FCC

used this approach when considering standards for

stereo television. The industry was eager for government to establish a standard, which is not surprising

given the interdependence of, and hence the need for

compatibility between, transmission and receiver

systems. However, instead of adopting the standard

put forward by an industry committee, the FCC

decided to forgo mandatory standards and allow

other technologies to evolve. But it did support the

industry’s choice by protecting their system from

interference by others.58 Given the agreement

among stakeholders, this limited support was sufficient for a standard to evolve; when no competing

system emerged, the system, with the government’s

support, became the de facto standard.59

Strategy 5: Mandate industry-wide standards.

In recent years, the government has tried, whenever possible, to avoid taking direct control over the

standards-setting process and mandating industry56NIST, “Nortb American ISDN User’s Forum, ” undated.

STE&nonds, op. cit., footnote 46, p. 44.

sSBe~n and Jolmson, op. cit., footnote 1, p. 65.

SgIbidc
306 ● Critical Connections: Communication for the Future

wide standards. This approach is designed to foster

the development of new technologies, and it appears

to be appropriate in the light of rapidly changing

technologies. However, it may be less workable in

the future, given the globalization of the communication system and the economy. As other countries

establish standards in such key areas as ISDN, OSI,

and HDTV, the U.S. Government may, at the very

least, have to foster the domestic processes for

deciding on standards. If the rest of the world moves

forward on standards without the United States,

waiting for the domestic market to set de facto

standards may be costly in terms of U.S. participation in world trade. Thus, in a few instances, the

government may have to play a more active role,

even mandating an industry standard in some

circumstances. Such a decision, however, would

face strong opposition from a number of industry

stakeholders, especially those who benefit from

existing proprietary technologies.60

Strategies and Options in Three Cases

Integrated Services Digital Network

The term “integrated services digital network”

(ISDN) is a confusing one, referring to both a

particular kind of communication network61 and the

set of standards that support it.62 Understanding the

term is further complicated by the fact that it has

been used to refer to both narrowband ISDN

(N-ISDN) 63 as well as to broadband (B-ISDN),64

Although this section focuses specifically on the

setting of ISDN standards, consideration of the value

of ISDN communication networks—narrowband

and/or broadband—will serve as an important criterion for determining the appropriateness of any

government role in the development of these standards.

As discussed earlier, standards are generally

accepted criteria that serve as a basis of comparison.

In telecommunication, standardized interfaces consist of specified sets of values, or rules, to which

devices and systems must conform if they are to

work correctly and consistently. ISDN interfaces

serve “to handle electrical signals that contain

information and conform to certain values of size,

shape, repetition rate, pulse sequence, and noise

environment.” 65 They are designed to transport

voice, data, video, or some combination of these. To

do so, ISDN standards need to be established for the:

1) transport mechanisms (transmission), 2) supervisory control signaling (protocols), 3) procedures for

interconnecting terminals (connectivity), and 4) the

type of intelligence to be passed (services).66

ISDN standards have been characterized as “anticipatory” standards-that is, standards that are

produced prior to a product’s introduction. One

purpose of establishing standards in this fashion is to

facilitate the evolutionary or orderly development of

a technology by allowing for backwards compatibility. Another purpose is to foster multiple development efforts by providing a cohesive structure into

which future products can be integrated.67 In the

specific case of ISDN, standards are being developed to support the evolutionary transformation of a

voice-based telecommunication network into a gen-

~eviewing the OTA draft report, some industry stakeholders (for ex~ple, AT&T and the American Petroleum Institute) questioned the OTA

proposition that government involvement in the standard-setting process can mwe a signific~t, and positive, difference under some circumstances, From

their perspective, the arguments in favor of this option are unsubstantiated.

61As descri~d by the CCITT Study Group XVIII, which is responsible for coordinating R3DN standards, ISDN is “a network evolv~ from the

telephony ISDN that provides end-to-end connectivity to SLIppO~ a wide v~iety of services, to which users have access by a limited set of standards of

multipurpose customer interfaces. For a discussion, see Rolf Wigand, “Integrated Services Digital Networks: Concepts, Policies, and Emerging Issues,”

Journal of Corrvnunicatwn, Winter 1988, pp. 29-49.

bzFor a discussion of the confusion caused by this term, see Tom VdOvic, “Fourteen Things You Should Know About ISDN,” Tefecommunicariom,

December 1987, pp. 3742.

@’rhe two standwd u~r interfaces for N-lSDN were adopted in 1988 at the Melbourne meeting of the CCIIZ after 4 years of discussion. They ~c

the Basic Rate Interface (BRI) and prim~ Rate Interface (PRI). The BRI is composed of two channels (each of which transmits at 64 kilobits

simultaneously) anda D chwel that transmits at 16 kilobits ~d c~ies information for sign~ing and for controlling the B channel. In the United States,

the PRI consists of 23 channels (each of which transmits at 64 kilobits) and a D channel that signals at 64 kilobits.

~Considerable confusion and disagreement still exist with respect to the actual form that broadband ISDN will take. The [em USU~lY refers to very

high capacity transmission channels, generally in excess of 100 megabits per second (Mbps),

bsAlan Stew~, “A User’s Guide to ISDN Standards,” Telecommunication.s, May 198~, PP. 85-90.

‘iIbid., p. 86.

b7Hack, op. cit., foomote 1, P. s.
Chapter 11-Interoperability in the Communication Infrastructure ● 307

eral-purpose network, equipped to carry all kinds of

electronically transmitted, digital information.68

The original impetus for ISDN standardization

came from Europe, where the postal, telegraph, and

telephone authorities (PTT’s) saw it as a means of

both upgrading the public network and discouraging

the development of private networks, which they

feared would be outside of their control.69 Moreover,

by providing interoperability for data communication, ISDN would also make it easier for the

European communication industry to compete with

IBM, which, through the development of system

network architecture (SNA), was preparing to provide interoperable data transport among computers

on a proprietary basis.

70 The importance attached to

this strategy is clearly revealed in the Nora-Mine

Report, which advised the French Government:

Controlling the network system is thus an essential objective. This requires that its framework be

designed to serve the public. But it is also necessary

for the state to define access standards; otherwise the

manufacturers will, utilizing the available routes but

subjecting them to their own protocols . . .

The level of standardization will thus shift the

boundary between the manufacturers and the telecommunications organizations; it will be a bitter

struggle, since it will develop out of a reciprocal play

for influence. But the objective of public control

indicates the strategy to follow: increase the pressure

in favor of standardization.71

Today, European ISDN standards are being developed by the Conference of European Postal Telecommunications Administrations (CEPT),72 as well

as by the European Computer Manufacturing Association’s (ECMA) Technical Committee 32 Technical Group 1, and the recently established European

Telecommunications Standards Institute. Although

there has always been a general European consensus

in favor of ISDN, some significant differences

persist among country approaches.73 Concerned that

incompatible standards might retard the development of a pan-European telecommunication market,

the European Council of Ministers, in November

1987, called for immediate joint action to develop

precise interfaces, a common timetable, and a user

community large enough to establish new services .74

In addition, between 1987 and 1991, the European

Commission plans to spend about $9 million to

monitor the telecommunication administrations’

ISDN developments and to finance promotional

activities in support of ISDN.75 Notwithstanding all

of these joint activities, progress on ISDN to date has

been disappointing to the European Commission. As

a result, it has had to slow down its push towards

developing B-ISDN.76

Given the competitive motivations behind much

of the European interest in ISDN, it is understandable that the original U.S. response to it was less than

enthusiastic.77 This skeptical attitude was reinforced

by the fact that ISDN, built around a uniform set of

standards, was seen by many as having an inherent

bias in favor of the centralized provision of telecom6sWi11i~ I.ehr, “ISDN: An Economist’s Primer for a New Telecommunications Technology,” Stanford University, Technology and Progress

Seminar, Feb. 14, 1989, p. 8.

69jme~ G. Herm~ ad M~ A. J~hnSton, “ISDN when? what Yow Fit-m Can Do in the Intefirn,” Data co~~icutio~, October 1987, p. 226.

T~or a discussion, see Noarn, “The political Economy of ISDN,” op. cit., foomote 2, Pp. 28-35.

71s. Noraand A. Mine, T~ CoWuterlzatlon @SocieV, Rewfi to the Resident of the French Republic (C~bfidge, MA: MIT press, 1980), pp. 74-75,

as cited in Noam, ibid.

i’zForadi~cussion, ~~ug B~, “EuroPan S~ndadsGa&erPace,” Te~eco~nicatio~, J~u~ 1989, pp. 64-70. ~thou@I the ~S arepressing

forward with their plans for ISDN, some public opposition has emerged over time. In Germany, for example, the Green Party has questioned the value

of moving rapidly towards the deployment of information technology, while unions, churches, and other groups have raised questions about the impact

of ISDN on jobs. Wigami, op. cit., footnote 61, p. 37.

73~e mea of diffe~nce, for exwple, is in proposed user interfaces. France plans to implement “telephone user ptul plus,” a swcification by cm,

for user-to-international network links. West Germany is going ahead with “ISDN services user part” through CCI’lT Dawn Hayes, “Planning ISDN:

Can the Nations Become United?” in “Grand Designs for ISDN,” CommunicatwnsWeek, CLOSEUP, May 2, 1988. See also, P. Slaa, [SDNAS a Design

Problem: The Case of fhe Netherlands (The Hague: The Ntxierlandse Grganisatie voor Technologisch Aspectenonderzoek, March 1988).

TqWigad, op. cit., footnote 61, P- 38”

751bid.

76Hayes, op. cit., fOOt.TtOte 73, P, c4-

77For a cmp~mn of early interest, see Wigand, op. cit., footnote 61.
308 ● Critical Connections: Communication for the Future

munication services.78 This perception was bound to

work against ISDN, insofar as the United States was

just beginning to move away from the integrated

Bell System towards divestiture and deregulation at

the time when the idea of ISDN was gaining

momentum in Europe.

To the extent that discussions about ISDN have

occurred in the United States, they have generally

taken place in technical rather than in political

forums. National ISDN standards are developed, for

the most part, by ANSI’s TIS1 subcommittee, one

of six subcommittees that comprise the larger T1

committee sponsored by the Exchange Carriers

Standards Association (ECSA). This is a trade

association of U.S. communication carriers and

suppliers that was founded after divestiture, and

subsequently received accreditation for its T1 Committee from ANSI.79 Once the T1 S 1 subcommittee

agrees on recommendations, it sends them to the T1

Committee. After reaching a consensus, the T1

Committee forwards them to the Department of

State, which forwards them to CCITT as representing the official, unified U.S. position.80

In keeping with the U.S. tradition of developing

voluntary consensus standards, the Federal Government has not been deeply involved in setting ISDN

standards. The FCC has intervened, however, in the

few cases-such as that of the “U” interface—when

it appeared that international ISDN standards developments might have anticompetitive consequences. 81 More recently, NIST has established the

North American ISDN User’s Forum. This is

intended to provide users with a platform for voicing

their needs for standards, and to facilitate the

development of implementation standards by bringing users and vendors together.82

To date, State governments and State regulators

have not shown much interest in the issue of ISDN

standards. Their involvement, however, may become greater in the future, as ISDN tariffs begin to

be filed.83 The New York State Public Service

Commission, for example, recently held a major

inquiry on the subject.

The responsibility for reconciling conflicting

national ISDN standards on a worldwide basis rests

with the CCITT, the standards-setting arm of the

International Telecommunications Union. In November 1988, the CCITT plenary session, held in

Melbourne, Australia, unanimously accepted the

Basic and Primary rate interfaces that had been

under discussion since the last plenary session held

4 years before. Discussion groups are now turning

their attention to the proposed broadband standards,

which are scheduled to be presented to the 1992

plenary session for ratification.84 One major breakthrough with respect to broadband ISDN was the

7%= Noam, “me political &onomy of ISDN,” op. cit., footnote 2, p. 38; see also, hhr, op. cit., footnote 68.

W*ISDN,~JDam Commicatwm, December 1987, p. 52. In the United States, most commercial standards are volmtary smndards developed through

consensus proceedings in nonprofit, nongovernmental organizations. ANSI is the organization in the United States that has the major responsibility for

developing national standards. ANSI, itself, does not make standards; it endorses groups of experts and the processes by which standards are arrived

at. Among those involved in ANSI proceedings are the Electronic Industries Association, the Institute of Electrical and Electronics Engineers, and NIST.

For a discussion, see Hack, op. cit., footnote 1, pp. 8-9.

Wbid.

81Nom, ~~~e politic~ ~onomy of ISDN,” op. cit., fwmote 2, pp. 4.0-41. It was t. ~ls end, fm example, that fie FCC, in August 1983, issued a

Notice of Inquiry (Docket 83-841). As described by Noam: “Its goals were both to generate comments on the FCC’s role in ISDN and to stimulate interest

in the policy discussion on ISDN itself. The first report, issued in April 1984, restate[d] the FCC’s intention for a limited role. [t set, however, several

policy principles for ISDN design: a flexible numbering plan that permits user choice of carriers, domestically and internationally; . . . and no limitation

of satellite hops in international connections. Secondly, the FCC d~lared that customer provision of the network termination device (NT1) should be

a national option and asked for comments on the definition of the so-called “U” interface point between the customer premises equipment and the network.

Thirdly, the FCC described as fundamental that CCITT recommendations must be flexible for national options, and tiat the American distinction between

basic and enhanced services be maintained.” The FCC examined ISDN again in its 1986 Report and Order on Computer III, which probed the relationship

between ISDN and the FCC’s comparably efficient interconnection (CEI) proposals, concluding that any problems that might emerge would be

manageable.

82u.s. D~p~me~t of Comerce, ~ess Advisory, “NBS, 1ndus~ Fo~ ISDN User’s Forum.” The Forum consists of two workshops: one for ISDN

users and one for ISDN implementors. The User’s Workshop is set up to develop requirements for specific business applications for ISDN, whereas the

Implementor’s Workshop will prepare specification agreements necessary to implement the applications. The activities within the two workshops are

being coordinated by the North American ISDN User’s Forurn Executive Steering Committee. Contributing to the work of the forum is the 0S1

Implementor’s Workshop and the Corporation for Open Systems. Also involved are user organizations (such as General Motors) that have been deeplv

involved in the development of MAP (Manufacturing Automation Protocol).

83LOU Feldner, FCC, personal communication.

gQKei~ Newman, “ISDN Standards Ratified,” COmpWeWOrfd, ~. 19, 1988, p. 45.
Chapter 11--Interoperability in the Communication Infrastructure ● 309

recent agreement on Synchronous Optical Network

(SONET), the international optical-interface standard or, more specifically, the Network to Network

Interface (NNI) for B-ISDN.85

Although the CCITT has clearly been moving

forward in developing ISDN standards, the lengthiness of the process may, in the long run, actually

make it more difficult to achieve interoperability and

to gain user acceptance for ISDN. For example,

many companies—as well as countries-are now

building their competitive strategies around the

existence of ISDN, and the likelihood of an evolutionary, technological development towards it. To

execute these strategies, and to attract future customers, they need to begin now to develop products and

test them in trials. These efforts need to be undertaken despite the fact that, in many cases, application

specifications and implementation standards are as

yet undefined. It would be unfortunate if, as a result,

vendors were to develop a number of products that

are purported to be designed to ISDN standards, but

are actually incompatible with one another.86 This

would dampen users’ interest in ISDN, an interest

that is still somewhat skeptical at best.87 A second

problem might be that regional standards-setting

bodies may begin to supersede CCITT in setting

standards, generating centrifugal forces in the international standards-setting arena.88

Also stemming the tide towards the development

of ISDN standards is the fact that, like any standardssetting, the advantages and disadvantages to be

derived will not be distributed evenly among stakeholders. Among the key U.S. beneficiaries of the

early adoption of ISDN standards will be AT&T and

the regional Bell operating companies (RBOCs). As

discussed in chapters 5 and 12. AT&T and the

RBOCs will need to continually upgrade, and add

intelligence to, their networks if they are to successfully compete with other communication providers

for the lucrative business-user and prevent further

bypass. To do this, ISDN is essential. Together with

signaling system 7 (SS7), ISDN will permit telephone companies to allow customers to tailor their

communication circuits on public networks in much

the same fashion as they do now on private

networks. 89 As one observer has described the

relationship between ISDN and the competitive

prospects of the RBOC and AT&T:

. . . from a purely strategic standpoint, it came as no

surprise to see both AT&T and the BOCs enthusiastically embrace the concept of ISDN in the aftermath

of divestiture, sensing the potential for both real or

virtual remonopolization and the need to regain

marketing initiatives towards the large corporate

user-the lack of which was the short-term price of

the complicated trade-offs inherent in divestiture.

Most especially, ISDN became important because

it offered a universal scheme whereby significant

new functionality for both voice and data (and

possibly even higher bandwidth applications such as

video) could be offered to corporate customers but

be controlled and managed via AT&T and BOC

custody of the public networks. This was reinforced

by the realization that unless they moved to create

these new levels of both network intelligence and

control for their customers, they would lose serious

competitive advantages as corporate users plunged

ahead with their private networking efforts.90

While most vendors have publicly declared their

intent to move towards ISDN standardization, they

have not been uniformly supportive of its development. Many private network vendors, such as those

selling T1 multiplexer and PBXs, are fully aware of

8STMS amment repre~nt~ an impo~nt bre~through because the SONET standard. which was developed in the T1 committee of tie Exchange

Carriers Standards Association, was initially opposed by both the Japanese and the Europeans. The compromise specification is based on SONET, but

has additional capabilities to allow it to deal with the European 2-MBps digitat hierarchy. For a chscussion see, Rodney J. Boehm, “SONET: An

International Standard,” Telecommuw”cations, March 1988, pp. 73-76; Rodney J. Boehrn, “SONET: A Standard Optical Interface Emerges,” Telephony,

Apr. 4, 1988, pp. 54-57; and Alistair Henderson, “Into the Synchronous Era,” Teieconvruoucations, December 1988, pp. 29-33.

86s=, Byron Belitsos, “Competition Threatens Progress of ISDN in the USA,” Communications International, October 1986, p. 29; and Sarah

Underwood, “ISDN On Trial,” Dumrruztion, Feb. 1, 1987, pp. 53-56.

sTSee, forexmple, clue hes, “ISDN-User Doubt and Ttiff Issues,” Telecornmunicatwn.s, April 1988, pp. 56-63; John Foley, “ISDN haves Early

User Hanging,” CommtdcatwnsWeek, July 4, 1988, p. 39; and Warren S. Gifford, “ISDN Performance Trade-Offs,” Telecommunications, April 1988,

pp. 65-68.

88~ rao~tionof this possibility, CCITT adopted a num~r of reforms at is November 1988 meeting, which are designed to accelerate the approval

procedure. Gilhooly, op. cit, footnote 34.

Wstti Zlppr, “Tel~om Firms Arm VS. RBOCS in Bid for ISDN, SS7 Public Net Market,” Electronic Ntws, &t. 5, 19%’.

~om Vatovic, “Public and Private Networks: Who Will Manage and Control Themv” Tefecommunicafions, February 1988, pp. 42-45.
310 ● Critical connections: Communication for the Future

the potentially negative impact that ISDN can have

on their competitive position vis a vis the regional

Bell companies and AT&T91 With this in mind, they

have rushed to sell their products, thereby locking up

customers for private digital networks before ISDN

and SS7 can become a reality on the public

network. 92 Some of the large vendors of switches are

employing a mixed strategy-pressing to sell now to

private networks, but planning to be the primary

suppliers of ISDN switches in the future when a

market for ISDN services emerges.93 While IBM

was initially slow to warm up to ISDN, it has

recently become a much greater supporter. ISDN is

now an important part of IBM’s strategy to become

a key provider in the telecommunication networking

market. One additional factor that was clearly

important in changing IBM’s stance on ISDN was its

desire to sell its networks in Europe, where standardization with the public networks is essential.%

Most large users have yet to become enthusiastic

about ISDN. Because the kind of functionality they

need is still along way off in an ISDN environment,

they are developing their own private networks,

using the TI, T3, and local- and wide-area network

technologies that are available to them at the present

time.95 Many question whether ISDN will ever be

more cost-effective than their existing networks,

given the magnitude of their data needs and, hence,

the tremendous economies of scale they enjoy.96 In

addition, as other networking standards are developed and private networks themselves serve to

integrate voice and data, ISDN may prove redundant. 97 As a result, whereas large users have been

strong proponents of the move towards OSI standards, they have not been as active in the ISDN

standards-setting process. Their most important

input to date has come from their participation in the

ISDN User’s Workshop established by NIST98

Small-business, residential, and rural users may

actually have a much greater stake than large users

in the timely development of ISDN standards. As

described in chapters 5 and 8, they do not have the

resources, nor do they enjoy the economies of scale

and scope, that are required to establish and manage

a private communication network. Thus, without

ISDN, they will not have access to many of the

economic advantages that new technologies afford.

Notwithstanding the potential value of ISDN to

these users, they have played a very small role, if

any, in the ISDN standards-setting process.

In considering whether Congress should take

additional steps to encourage the ISDN standardssetting process, certain questions and answers need

to be kept in mind. These appear in table 11-1.

Open Systems Interconnection

Open systems interconnection (OSI) is an architecture for computer networks and a family of

standards that permits data communication and data

processing among diverse technologies. Like ISDN,

OSI-based standards anticipate the development of

particular applications or products. They provide a

reference model that defines and categorizes seven

layers of functions that need to be performed in any

computer network if effective communication is to

take place, as well as the protocols and services at

91As one PBX vendor descri~ the competitive situation, given ISDN, it will be all too easy for third-party vendors to attach their voice and data

devices to proprietary PBX systems. “Why should vendors go through the R&D expense of developing and implementing the standand [on their products]

when someone else can come out with a nicer terminal to plug into their PBX?” as cited in, Elizabeth Horwitt and Kathy Chin hong, “PBX Vendors

Pressured For ISDN Links,” Computerworld, Sept. 12, 1988, p. 80.

gZIbid; ~also, Valovic, op. cit., footnote 90; and Joseph Brau, “1987: The Year When Networking Became Part of the Bottom Line,” Data

Co?n?nunication.r, kmuary 1988.

gs~id. SW ~so Vdovic, op. cit., foomote 90, and Eliza~th Schultz, “pBX upgrades Travel the Bumpy Road to ISDN,” Telephony, NOV. 28, 1988,

pp. 36-39. The position that AT&T finds itself in is telling. As noted by Steven Titch, having invested so heavily in developing the 53SS switch, AT&T

has a tremendous interest in seeing ISDN come to market. However, its aggressive sales efforts have offended many of the BOCS, who have now accustxi

the vendor of failing to support the embedded base of IAESS. Steven Titch, “Network Gear,” CommunicationsWeek, December 1988, p, C1O.

9dBWbwa ~Wma, ‘c~to ISDN in a Big Way: ~ce a Skeptic BM is Quickly Becoming a Major ISDN Proponent,” CoHnicatiomWeek, @t. 26,

1987.

95 Valovic, op. cit., fOOmOte 90.

%T Travers w~~p, “ISDN and the Lage Corporation: 1s ISDN the Best Solution f~>r Big Telecom Users in the Corporate World? Maybe No,”

Telephony, May 9, 1988.

971bid.

98Jo~ Foley, “U~~ Demand Ro]e in ISDN, ” ComWicatlomWeek, June 13, 1988, pp, 1,70. Among the major ISDN problems remaining that were

cited by users were the ISDN numbering plan, wiring standards, subrate adoption, and equipment incompatibility.
Chapter 11--Interoperability in the Communication Infrastructure ● 311

Table 11-1--Integrated Services Digital Network: Factors Affecting the Choice of Federal Options

1. Apart from the value to individual stakeholders, of what

value IS the setting of standards in this area from a societal

perspective?

2. What is the cost of waiting for standards to be developed in

the marketplace or through a voluntary consensus process?

3. How likely is it that, in the absence of government intervention, de facto or voluntary standards will be adopted in

the near term?

a. To what extent do vendors share a common interest in

developing standards and agree on the appropriate

standard?

b. To what extent are users eager to standardize? Do they

agree on a standard? What leverage do they have vis a

vis vendors in the marketplace?

4. To be effective in promoting standards, what level of

government involvement would be required? How far would

the Federal Government need to go in the direction of setting

standards? What kinds of government involvement might be

appropriate?

5. How susceptible are standards to technological change?

How many possible options or choices of standards are

there?

SOURCE: Offi~ of Tsehnology Assessment, 1990.

each layer (see figure 11-3).99 These layers are

designed to be independent of one another so that

altering one layer will not require alterations in

others.100 These seven layers are, themselves, generally

●

●

divided into three groups:

the four lower layers (physical, data linking,

networking, and transport), which handle the

interconnections of end systems;

layers 5 and 6 (session and presentation), which

support the exchange of information between

Important for maintaining the viability of the public switched

network. For reasons of equity, so as to assure that the new

information services are available to residential users, to small

businesses, and in rural areas.

In the case of ISDN standards, there is some danger that, given

the growing competition among vendors, proprietary solutions

will be implemented before specifications can be adopted and

products implemented to conform to them. There is a danger

also that U.S. standards, and the U.S. standards-setting

process, will become out of sync with international standards

developments, with negative consequences for the communication industry.

Not likely, given the lack of user demand and the uncertain market

for ISDN products.

Vendors have all committed to conforming to ISDN narrow band

standards, although some have greater stakes in these standards (AT&T, the RBOCs) than do others (IBM, providers of T1

multiplexer, other system integrators). Competition among

vendors is extremely intense.

Many users, especially large users, remain unconvinced about

the value of ISDN, although interest in ISDN products is dearly

growing.

Moderate effort. Greater technology/R&D support. Support for

broader public policy input into the standards-setting process.

Increased coordination of U.S. position on ISDN for presentation at international standards-setting fora.

Moderately susceptible to change. Integrated approach attempts

to allow for compatibility over time. However, the time required

for moving towards B-ISDN appears to be getting shorter and

shorter.

●

end systems using data transfer facilities provided by the transport service; and

layer 7, the applications layer, which provides

for interworking between applications processes in end systems.lO1

Like ISDN, OSI-based standards are international

in scope and are being developed in international

standards-setting bodies. However, whereas ISDN

99H~Ck,~p. ~ito, foom~~ 1, p+ 15. See, for ~ ffi~rdescription anddiscu~ion, H~old C. Folts, “A ~tori~on tie ~terconn~tionReference Model,”

Open SystenwData Transfer 2-21, June 1982. Reprinted in William Stallings (e&), Computer Communications: Architecture, Protocols, and Standards

(Silver Spring, MD: IEEE Computer Society Press, 1985).

loOHa~k, op. ~it., fwmote 1. S= ~W, Bryan Wd, “Standmds for OSI—Present Status, Future Plans, ’’Telecommunications, MMCfI 1988! PP. 32-36.

lol~id.
312 ● Critical Connections: Communication for the Future

standards are being established by CCITT, OSI

standards are being worked out by the Joint Technical Committee 1 (JTCl)102 of ISO and the International Electrotechnical Commission (IEC).103 Although CCITT and ISO cooperate in setting standardsl04 —and ISDN is being developed to conform

to the OSI reference model—there are some important differences between the two organizations.

These are sometimes reflected in how stakeholders

perceive the standards-setting processes and the

standards that emerge from them.105 Developed to

coordinate telecommunication among nations,

CCITT is a treaty organization whose decisions are

binding on its signatories. ISO, on the other hand,

evolved in response to the market need for standards;

thus, it is a voluntary organization that develops

standards through a consensus-building process, and

its decisions are not binding on the participants.lO6

Just as the European nations provided the initial

support for ISDN, they were also quite prominent

among the original supporters of OSI, and for much

the same reason. The Europeans were eager to

prevent the further consolidation of IBM’s control of

network standards through SNA, its proprietary

network model.107 But unlike ISDN, the demand for

OSI among users, both in the United States and

Europe, was quite high. This demand reflected an

appreciation of the need for computer interconnectivity to keep pace with the enhanced role of

information and communication in a service-based

economy.

108

The development of standards for OSI is now

maturing as a process, both with respect to the

evolution of the standards themselves and in terms

of their use in information technology systems and

related equipment.109 Considerable progress has

been made since ISO published its first OSI documents. The standards for levels 1 through 6 are quite

well developed. Although some applications standards for level 7 still need to be set, during the past

year the progress in this area has been quite

impressive.

Looking at these developments, most observers

agree that, over the long term, the move to OSI

standardization is inevitable.110 However, there is

much less agreement about when and how this will

come about. There are still a number of obstacles to

full implementation of OSI, and considerable uncertainty with respect to how these might be overcome.

102~e Joint Comlttee is made up of tie information t~~o]oa commltt~s of (,he ISO and tie International Elecwotwhnical COMMISSIOn, ti

voluntary standard-setting body that is devoted to developing electrical and electrotecbnical standards. TO avoid a growing competition between these

two organizations for the responsibility of setting computer standards, the information technology activities of these two groups were merged in 1987.

103~e ~termtlon~ s~~ds Orgmlzatlon ~m established in 1946 by delegates from ~ counties. Simil~ to ANSI, tie IS() is a nongovernmental,

voluntary institution. There are presently 72 “full members” of the 1S0 representing national stan@ds associations, such as ANSI. In addition, there

are 17 “correspondent members,” representing governmental institutions from countnes that do not have national standards bodies. Besen and Saloner,

op. cit., footnote 1, pp. 14-15. See, for a further description, Edward Lohse, “The Role of the 1S0 in Telecommunication and Information Systems

Standardization,” 23 IEEE Communications Magazine, January 1985, pp. 18-24.

l~The Ccm hm ~n involved in sett~g some data Commmlcation stand~ds, the mo~t irnpo~~t of which was CCITT R~ommendation X.25 for

packet switching. Unlike the 0S1 standards, the CCITT data communication standards were developed on an ad hoc basis and not as part of a grand design

that would provide compatibility of different protocols and system architectures. Besen and Saloner, op. cit., footnote 1, pp. 17-18.

105cM1 Cmgill, Senior Standards Consuhant, Digital Equipment Corp., personal commumcation, MLW. 13, 1989.

l~Ibid. To ~ome a Drtit Intemation~ Standard, a proposal must have the approval of 75 percent of those p~l~ipatlng in a relevant technic~

committee. These draft standards become international standards once they have been adopted by the Council of the 1S0. Besen and Saloner, op. cit.,

footnote 1, pp. 15-16.

lo7Hack, op. ~lt., fwmote 1, p. 17. SNA, which Ww developed by IBM in 19’74, provides a layered architecture SIITIihU tO that of OSI* wi~ tie highest

layer---equivalent to 0S1’s Layer 7—being served by several IBM applications, including Systems Network Architecture Distributed Service (providing

store-and-forward facilities), Distributed Office Support Systems (providing centralized document storage and distribution services), and Document

Interexchartge Architecture/Document Content Architecture (providing support and defining the format for document transfer across the network). SNA

strengths are that it is now available and supported by IBM and virtually every major computer vendor. It has an installed base of 40,000 networks

worldwide, is coherent, and its extensions appear to promise a substantial gain in functionality. For a discussion, see DeBoever, op. cit., footnote 20.

108& some Obwmers have descri~d he st~e for Uwrs: “The rapid irnplernentatlon and growh of data communication systems in recent years h~

left far too many users and suppliers unable to adequately design, control, and deploy and manage networks. Because product standardization remains

more theory than practice, mismatched equipment and islands of incompatible networks are preventing too many companies’ various departments and

branches from sharing data. That’s too bad, because the data invariably represents wtal mfmrnation, which the companies could usc to do a better job

at whatever business they are in, if only interpremises networking weren’t such a devilishl) difficult garne.’’Titch, Semilof, and Berrigan, op. cit., footnote

17, p.m.

I@For a discussion, w Wood, op. cit., footnote 100.

ll@rlMorIIy Haight, “() Say Can YOU See 0S1 Yel,” CornmunicationsWeek, CLOSEUP June 6, 1988, PP. C1O-C14.
Chapter 11--Interoperability in the Communication Infrastructure . 313

Figure 11-3--OSI Reference Model

LAYERS FUNCTION LAYERS

User

Program

Layer 7

Application

Layer 6

Presentation

Layer 5

Session

Layer 4

Transport

Layer 3

Network

Layer 2

Data Link

Layer 1

Physical

I

Application Programs

(not part of the OSI

model)

Provides all services

directly comprehensible

to application programs

Transforms data

to and from negotiated

standardized formats

Synchronizes and

manages dialogues

Provides transparent{

reliable data transfer

from end-node to

end-node

Performs message

routing for data

transfer between nodes

Detects errors for

messages moved

between nodes

Electrically encodes

and physically

transfers messages

between nodes

User

Program

Layer 7

Application

Layer 6

Presentation

Layer 5

Session

Layer 4

Transport

Layer 3

Network

Layer 2

Data Link

Layer 1

Physical

I

Physical link

SOURCE: Nationa Institute of Standards

National Bureau of Standards),

and Technology (Formerly

One obstacle already noted is the lack of application standards. It is at the level of applications, layer

7, where the greatest functionality is provided. This

is where choices are made about how to treat a

communication-as a file transfer, a virtual terminal

session, or a computer-aided design.lll And, in line

with this choice, it is at layer 7 that the protocols in

the 6 lower layers that are required to execute this

function are automatically selected. Now that the 6

bottom layers of the OSI reference model are near

completion, the application layer is expected to grow

dramatically, in number as well as usefulness. There

is, however, still much to be done.l12

In addition to defining the seventh layer of the

OSI reference model, further steps also need to be

taken to specify standards for specific environments,

as well as to implement products that conform to

these specifications.113 Without such specifications,

there is a strong possibility that vendors will, in the

meantime, develop incompatible, proprietary interfaces. The problem, however, is in getting this

process under way. As Haight has described it:

Products to interconnect many different computers via OSI may not be released until vendors see the

market, which may not exist until users see applications . . . which may not be written until software

developers see OSI on enough systems to be sure that

a market will exist. . . 114

Another major question that needs to be resolved

is how the migration to OSI will take place.115

Competing with OSI as a networking standard are

IBM’s SNA, and TCP/IP,ll6 which was developed in

the late 1960s with the support of the Department of

Defense. Some companies have already invested

heavily in these other networking products, and they

lllEvel~ ROUX, “0S1’S Final Frontier: The Application Layers,” Dura Communicunons, Janwwy 1988, pp. 137-See also, k Mantelman, “UPPer

Layers: From Bizarre to Bazaar,” DarA Communicarwns, January 1988, pp. 110-128.

llsHe~en p~e, “Wl]l T@~ Witier on the Vine?” Cornputerworld, Sepl. 7, 1988, PP. 27-30.

114H~@, op. cit., foomote 110.

115For adlscusslon, ~ibid.;~~W, pike, op. ~itc, f~ote 113, pp. 27-30; ad Elizabeth Horwitt and parncia Kefe, “Firms Forecast 0S1 Migration

Plans,” Computerworld, Nov. 7, 1988.

1 l~@@ ~w tie fwst ~r-to-xer pro~oco] developed for rnultivendor enviro~ents. T~ay, TCP/lP SUppOII is availabie for IIIOSt prOcesSOfs, ~d

this is its chief strength, For the long term, however, it is considered by many to be outdated and incomplete, For a discussion, see DeBoever, op. cit.,

footnote 20; see also, Haight, op. cit., footnote 110; and Pike, op. cit., footnote 113.
314 ● Critical Connections: Communication for the Future

are unsure about what their next steps should be.117

Their choices are quite numerous—perhaps so

numerous as to be overwhelming.

118 But not making

a choice can be very costly for users. Also, if many

users fail to act, the move towards OSI standardization would certainly be curtailed. Depicting the

dilemma faced today by users, and the potential

consequences for standardization, one trade journal

notes, for example:

For many organizations, the network has become

a leviathan, clumsily adrift in a sea of equipment

from a fleet of vendors. With each passing day, these

networks grow more cumbersome for users to

manage and vendors to keep afloat. If not brought

under control soon, such networks may become

impossible to streamline-either because the unifying technology doesn’t exist or because integrating

all the pieces would be prohibitively expensive . . . . As companies continue to grow and diversify, it becomes increasingly difficult to create

corporate standards. 119

Vendors also find themselves in a difficult situation with regard to OSI. They all recognize the need

to provide connectivity and interoperability, given

the growing user demand. To effectively compete to

do so, however, means becoming a “total solution”

provider. Taking such a step can be quite costly,

entailing:

. in-house research and development;

. the acquisition of companies with specialized

skills; and

. the development of strategic alliances with

vendors who can offer complementary skills

and products.120

Not only will companies have to build bridges and

move towards OSI; they will also have to provide

support for their old network architecture, at least

during the transition, as well as provide interfaces to

IBM’s latest extensions to SNA—all the while

offering high functionality and efficiency.121 Not all

vendors will be able to acquire the resources

necessary to execute such a strategy, especially

since, as a result of standardization, many traditional

communication products—PBXs, T1 multiplexer,

and modems—are beginning to resemble commodities, drawing in narrower and narrower profit margins. ’ 22

Despite these difficult problems, there are a

number of reasons for being somewhat optimistic

about the future of OSI standards. Users, for

example, continue to be very active, and very

effective, in pressing for OSI interconnectivity.

Recent surveys of Fortune 1000 companies indicate

that more than 50 percent intend to use at least some

OSI-based networks by the early 1990s.123 In 1986,

a number of vendors and some users joined together

to form the Corporation for Open Systems, whose

purpose is to develop conformance testing tools and

procedures to aid vendors and users. In addition, user

and vendor working groups and organizations have

developed to define specifications of more general

protocol definitions. To this end, for example,

Boeing Corp. successfully took the lead in generating the Technical and Office Protocol (TOP) initiative, while General Motors did the same for the

Manufacturing Automation Protocol (MAP).

1 ITFor a discussion see, Mstine Bontileld and paul L. Korzeniowski, “Neither Standards, Nor Understanding,” Commun”cutionsWeek, CLOSEvp.

Sept. 12, 1988, p. C1O. As noted: “Within corporations that employ data networks . . senior management often is reluctant to invest in complex new

technologies-either because the decision-makers don’t recognize the potential benefits or because these executives worry that the technology will

become too quickly outmoded. Within many vendor and user companies alike, moreover, there’s often a culture gap. The staff assigned to designing,

implementing and administering local area networks may not be the same group of people who oversee wide area networks. Under such circumstances,

network integration doesn’t happen naturally, If at all. And within the communications industry m general, the networking technology and concepts are

so complex that few organizations are able to find and retain enough people sufficiently skilled to cope with the challenges. ”

1 ISAS ou~in~ by Hai@: “According to the people at the crossroads, there is no singular smooth migration path. There are at leaSt six. The waY to

0S1 can lead through gateways, either at the applications or at the transport level. h can wind through dual protocol stacks, located either at a host

computer or at a workstation. Finally, some say the answer is writing 0S1 applications on top of TCP/IP transports, while others say exactly the reverse,

putting applications now used with TCP/IP onto 0S1 transports. ” Haight, op. cit., footnote 110, p. Cl 1.

l19Titch, Semilof, and Berrigan, op. cit., footnote 17.

lzOBon~leld and Korzeniowski, op. cit, foomote 117.

121D~e Kurnick, “0S1 A High Stakes Game to Play,” Computerwor&i, Sept. 1*, 1988, P. lg.

1221bid,; w ~so, Bonaileld and Korzeniowski, op. cit., footnote 117.

123 Ku~ck, op. cit., fOOtn@e 1*1. p. 19.
Chapter 11--Interoperability in the Communication Infrastructure ● 315

One of the most prominent of the user groups

working on behalf of OSI is the U.S. Government. 124

After 10 years of providing general support for OSI

standards, the U.S. Government has recently developed the Government Open Systems Interconnection Profile (GOSIP), a specification that is compatible with industry specifications for OSI.125 Moreover, in 1983, when it became increasingly obvious

that the OSI standards-setting process was becoming

bogged down for lack of specifications, the National

Bureau of Standards (now the National Institute for

Standards and Technology, or NIST) organized a

workshop for implementors, which is held five times

annually. The workshop is an open international

forum, representing more than 200 computer manufacturers, semiconductor manufacturers, wordprocessing vendors, process control vendors, communication carriers, and industry and government

users from the United States, Canada, and Europe.126

Also creating an impetus for OSI is the further

development of layer 7 applications standards. For

example, two crucial OSI applications-Directory

Services (DS) and Virtual Terminal (VT)--are

scheduled to be approved by ISO by the end of this

year. While these standards are being brought

forward for approval, some vendors have formed an

industry support group to develop standard interfaces between these OSI protocols. Comprised of 12

industry members, this group will initially develop

standard programming interfaces between OSI’s

messaging standard (X.400) and software applications for OSI, such as spread sheets and electronic

mail. 127

Taking all of these factors into account, some

observers of the standards scene look to the future

and predict that OSI and SNA will provide dual

standards for computer networking that serve to

complement, rather than compete with, one another-although the cost of interconnection may not

be trivial.128 Others are less sanguine. Concerned

that competition among vendors to become the

dominant system integrator will forestall the move

towards interoperability, some have even suggested

that the government play a more active role in

facilitating the transition to OSI.129 In assessing

what role Congress might play in this regard, certain

questions and answers, which serve to summarize

the discussion above, need to be taken into account.

These are listed in table 11-2.

Open Network Architecture

As a key component of the FCC’s Computer 111,

Phase 1 Decision, Open Network Architecture

(ONA) is the network design conceived by the FCC

to assure that enhanced service providers could gain

equal access to exchange carriers’ networks for the

purpose of implementing new services.130 The

underlying idea was that, if the Bell Operating

Companies could provide their competitors equal

access to their networks, they would no longer be

required to provide enhanced services through

separate subsidiaries.131 To assure that such access

would be available, it was necessary to make the

telephone companies’ basic network services (referred to as Basic Service Elements, or BSEs)

available in a uniform fashion.

124Wi~n he government, NIST has responsibility for helping agencies to implement OSI.

125The ~partmentof ~fenx has taken the lead in rquiring GC)SIP in future network acquisitions, having issued a policy statement in 1987 outlining

a 2-year transition from TCP/lP to 0S1. Shirley M. Radack, “U.S. Government Moves Towards Implementing 0S1 Standards,” Standards, Department

of Commerce, pp. 82-83.

126~id.

lzTKelly Jackson, “New Applications Move 0S1 Closer to Implementation,” CommuticationsWeek, Nov. 4, 1988, p. 31.

128~BWver, op. cit., fOOmOte 20.

129sW, for exmple, T~othy H@@, “Industry Standards: The Book, The Movie,” Comnwnicationsweek, JMe 13. 1988! P. 20.

130As defm~ by Computer 111, “ONA is the over~l desi~ of a ~~er’s basic network facilities and services to permit ~1 uxrs of the bmic network,

including the enhanced service operations of the carrier and its com~titors, to intercomect to specific basic network functions and interfaces on an

unbundled and equal access basis.”

lsl~cording t. one accout, the concept of ONA stemmed from an Amerltah propos~ to develop a concept c~led Feature Node/Service Interface

(later to be called Irtteiligent Network 2), which would permit exchange carriers to program their own switching machines. Ameritech’s suggestion to

the FCC that, if such a capability were made available on an equal basis to the exchange carriers competitors there would no longer be a need for separate

subsidiaries, was the seed from which the ONA idea evolved. However, telephone companies now avoid associating ONA with the Intelligent Network

2, since the technology to execute such capabilities is still a numkr of years away. See, for a discussion, John G. Williams, “ONA and the Future of

Exchange Networks,” Teiemutics, vol. 5, No. 8, August 1988, pp. 1-6; See also, Henry Levine, “Implementing Open Network Architecture: Will Push

Ever Come to Hug? Te/emarics, vol. 4, No. 12, December 1987, pp. 3-6,” In appreciating this account, it should be remembered that the idea of achieving

a common general network model that would allow for inflexible interconnection and intcroperation with all other networks was already in the air, with

the study of ISDN and 0S1. See A.M. Rutkowski, “Open Network Architectures: An Introduction,” Telecommunications, January 1987, pp. 3040.
316 ● Critical Connections: Communication for the Future

Table 11-2-Open Systems Interconnection: Factors Affecting the Choice of Federal Options

1. Apart from its value to individual stakeholders, of what value

is the setting of standards in this area from a societal

perspective?

2. What is the cost of waiting for standards to be established in

the marketplace or through a voluntary, consensus process?

3. How likely is it that, in the absence of government involvement, de facto or voluntary standards will be adopted in the

near term?

a. To what extent do vendors have a common interest in

standardization and agree on the appropriate standard?

b. To what extent are users eager to standardize? Do they

agree on a standard? What leverage do they have vis a

vis vendors in the marketplace?

4. To be effective in fostering standardization, what level of

government involvement would be required? How far would

the Federal Government need to go in the direction of

mandating standards? What kinds of government involvement might be the most appropriate in this regard?

5. How susceptible are standards to technological change?

SOURCE: Office of Technology Assessment, 1990

As described by Besen and Saloner, ONA creates

standards requirements in two different respects:

Both the interfaces with the basic service elements

and the number and nature of these elements are

standards issues. The first involves an obvious

standards concern since the design of these interfaces

will determine whether a competing supplier can

employ a particular element in offering his service.

Less obvious is why the second is a standards issue.

If components can be obtained only on a bundled

basis, the interface between them is completely

inaccessible to the competing supplier. But the

economic effect of an inaccessible interface is

exactly the same as if it were accessible but

incompatible with the supplier’s equipment. Providing components only on a bundled basis is the

limiting case of interoperability.132

Important to support strategic use of communication technologies by the business community, and to foster service-based

economy. Important for industry structure, insofar as the cost of

gateways and other forms of system integration are not trivial,

and may not be affordable to small- and medium-sized

businesses.

There is some danger that, given the intense competition among

vendors, proprietary solutions will be implemented before

specifications can be adopted and products implemented to

conform to them.

Increasingly likely, given the pressure and leverage of large user

groups. Possibility for dual standards.

All vendors are moving to support OSI. Continued support for

IBM’s System Network Architecture also likely, given size of

installed base.

Most vendors plan to move towards OSI. Migration strategies

differ, however. Eager for standards and migratory solutions.

Considerable market power.

Low to moderate effort. Greater technology/R&D support. Support

for broader public policy input into standards process. Continued facilitation of user/vendor interaction.

Moderate. Integrated approach tends to allow for compatibility

over time. No apparent rival approach on the horizon.

In contrast to OSI—where the impetus for standardization stemmed, to a large extent, from the

activities of the marketplace-the Federal Government has been the primary moving force in ONA

standards, with ONA becoming the cornerstone of

the FCC’s deregulatory policy.133 To achieve its

ends, however, the government did not become

directly involved in setting standards, or even

provide much guidance; rather, in its Computer III

orders, it called on the RBOCs to meet with the

competitive enhanced service industry in an ONA

Forum Process.

134 Lacking expertise in advanced

architectures, the FCC left many ONA details to be

worked out by the industry players involved.135 It

called for the filing of plans by February 1, 1988,

merely stating that its approval of them would

132Besen and Saloner, op. cit., footnote 1. pp. 40-41.

lssIt should ~ not~ hat this is not tic first time that the Federat Government has used standards to promote competition and deregulation. AS part

of the Carterfone decision, for example, all terminal equipment was required to be comected through standard plugs and jacks. Similarly, the Modified

Finat Judgment, which requires that the Bell Companies provide equat access, prohibits them from employing technicaf standards or network plans to

discriminate against users. For a discussion, see ibid., pp. 38-40.

lsdRe~fi and Gder, CC Docket No. 85-229 (released June 16, 1986) at paragraph 217.

135&cording t. Ru&owski, the FCC ~lleved mat: “private Slan@& organizations, such w the [ECSA] TI Cornrnittee, should play a major rOle in

resolving relevant standards issues that may arise among carriers and enhanced service providers participating in enhanced service markets.” Op. cit.,

footnote 131, p. 34.
Chapter 11-Interoperability in the Communication Infrastructure ● 317

depend on the extent to which they met the

requirement of Comparably Efficient Interconnection (CEI)--that is, interconnection on an equal

access basis. Not much consideration was given to

the role of the States in the ONA process. However,

the FCC did point out the difficulty involved in

differentiating between intrastate and interstate

service elements, and suggested that if jurisdictional

differences were to occur, they might be worked out

in the Federal/State Joint Board.136

The forum process consisted of national meetings

conducted with the aid of Bell Communications

Research Inc. (Bellcore) and meetings that were

sponsored by the individual holding companies. As

an additional input into the process, the RBOCs also

commissioned studies to be undertaken by the

enhanced-service providers, and conducted a number of meetings with users. The first public forum

was held in October 1987, and the second in January

1988.137 Although the participants skirted many of

the toughest issues, these forums did serve to initiate

a dialogue.138

That more was not accomplished at these forums

can be explained, in part, by the absence of FCC

guidance, by the general “marketing” approach

pursued by the RBOCs, and by the discrepancy

between the short time period in which participants

had to prepare, and the complexity of the problems

with which they had to deal. To gain a sense of the

complexity of this issue, one need only compare the

situation created by ONA to the problems generated

by long-distance equal access requirements. As one

commentor summarized it:

. . . equal access required one of the largest mobilizations of manpower and capital the communication

industry has ever known. Even before implementation, the government and private sector poured

considerable energy into it. . . . And yet, equal access

was basically a single application-a network interface developed through discussions between experienced local exchange carriers, and technically sophisticated long distance carriers. . . . By contrast,

ONA is not one interface, but dozens---conceivably,

hundreds-at many different levels in the network.

Wrestling with the concept at industry forums are

local exchange carriers less knowledgeable about

data than they are about voice, sharing the mat with

information service providers of varying sophistication and size.139

Given the perpetuation of a number of ONA

issues, the RBOCs called for the creation of an

Information Industry Liaison Committee (IILC), to

be established under the sponsorship of the Exchange Carriers Services Association (ECSA).140 Its

stated purpose is “to serve as an inter-industry

mechanism for the discussion and voluntary resolution of industrywide concerns about the provision of

[ONA] services and related matters. ’’141 Although

somewhat less formal than other standards-setting

committees, the IILC conforms to the voluntary,

consensus approach typical in the United States.

However, whereas a positive value is generally

placed on this approach in other standards-setting

bodies, in the case of the IILC it has proved to be a

source of some criticism. A number of participants

feel, for example, that if the difficult issues are ever

going to be addressed, there will have to be greater

interest and participation on the part of the FCC. 142

1361bid.

13TFor ~de~cfiption of tie pr0~~ed1n8~ of ~ls Fomm, and the Positions adopt~ by the p~iclpants, see A.M. Ru&owskl, M. Gawdun, and N. Merely,

“The RBOC’S Views on ONA, Telecommunications, January 1987, pp. 43-54; and Amy G. Epstein, “Doubts in the User Community,”

Teiecommunica.riom, .Jammry 1987, pp. 88-W.

lssca~y Clarke, “me Swategic Implications of Open Network Architecture,” Tefecommu rucations, March 1988, p. 47; see also A.M. Rutkowski,

“OpenNetworkArchitectures: A February 1987 Update, ’’Tefecomrnum”cations, March 1987, pp. 79-83, According tomostobservers, the second meeting

was the more substantive of the two. At the first meeting, many of the participants reported that they were distrustful of the proceedings and the intentions

of the RBOCS, believing them to be only participating perfunctorily in the forum process Responding to these concerns at the second workshop, and

using Bellcore’s Notes on the BOC /rztra-LAT.A Nework as a primer, the BOCS shared their views of the network with the other members of the

communication industry.

Isgsteven p. NoWick, “For openers . .,” CommunicationsWeek, ONA Report, June 29, 1987, p. 4.

140~cordingto one Obxwer, the proWsal follow~ acntlc~ comment by Judge Harold Greene, chastising the ECSA for not having yet issued a single

standard. See John Foley, “ECSA Establishes New Committee to Meet FCC’s ONA Requirements,” CommunicationsWeek, Oct. 26, 1987, p. 42; for

a discussion of the HLC, see Joseph W. Waz, Jr., “inter-Industry Consultation on ONA Plans: Is the IILC the Answer?” Te/emarics, vol. 5, No. 12,

December 1988, pp. 1-5.

141As quoted in ibid., p. 2.

1421bid.
318 ● Critical Connections: Communication for the Future

Participants have also criticized IILC on the grounds

that its rules and membership tend to favor the

carrier industry.143

Building on the common ONA model developed

by Bellcore,144 the forum process, and inputs from

groups such as the IILC, the RBOCs filed their ONA

plans in February 1988, as required.145 Common to

all plans is the division of the network services into:

1) Basic Service Arrangements (BSAs )-the underlying method of connecting an enhanced service

provider to and through the RBOC network; 2) Basic

Service Elements (BSEs)—the optional network

capabilities such as automatic number identification, which are associated with a particular BSA; and

3) Complementary Network Services-the network

functions that allow customers to connect to the

network. 146 All plans include essentially the same

list of 118 network capability requests made by

enhanced service providers. The RBOCs generally

agree, moreover, that equal access can be provided

without collocation (i.e., physically located within

the central office), which some argue would be

damaging to the network. They also agree that

services should not be technology-driven, but rather

developed in response to market demand. The plans

differ considerably, however, on a number of

fundamental items, including those involving the

allocation of costs, pricing, and the order of deploying services.

Not surprisingly, given the RBOCs hesitancy to

use the ONA process to confront fundamental

issues, many of the concerns expressed by stakeholders upon review of the ONA plans had already

been foreshadowed in previous interactions among

the RBOCs and other stakeholders in the communication industry. Considered to be most problematic

were: 1) the lack of uniformity among plans; 2) the

inadequate degree of unbundling of services; 3) the

failure to provide for collocation; and 4) the bases for

establishing costs and, hence, pricing.147 As one

remedy to resolving these problems, many proposed

that the FCC take a more active role in the

standards-setting process.

The National Telecommunications and Information Administration (NTIA) also took issue with the

ONA filings, characterizing them as “an important

first step,” but “not acceptable as filed.” Like an

increasing number of others, NTIA called on the

FCC to “set forth a definitive set of principles for

ONA” and to provide for a “neutral interindustry

entity” to work out unresolved ONA issues.148

Many State representatives also were displeased

with the outcome of the ONA process. 149 Some were

concerned about the impact it might have on the

public network and on the ratepayer. 150 Others

viewed the ONA plans as providing for just one

more encroachment by the Federal Government on

State jurisdiction. As Gretchen Dumas, principal

counsel for the California Public Service Commission, pointed out:

. . . All these problems and questions for states arise

because there is a basic question as to where state

jurisdiction is in the midst of this significant change

in regulatory practice. . . . The FCC has tried to

resolve this problem . . . by finding that the states

can regulate any non-enhanced service “use” of a

BSE. The problem is how can a state ensure that

BSEs are not being used for basic service. . . . the

basic thrust of the new FCC policy in Computer 111

is to allow telephone company involvement in

enhanced services on a nonstructurally separated

basis, to consider such services as competitive and

unregulated, and to preempt any state regulation of

14JIbid.

ld4The BOC s~i~ Repofi No, 4, pub]lshed by Bellcore in November 1987, provided tie BOCs wi~ a common basis for communication in planning

for ONA.

145sW Clarke, op. cit., footnote 138; see also, Michael Warr and Ellis Booker, “Comparmg the ONA Plans: A First bk.” Telephony, Feb. 23, 1988.

I*Ibid.

147Ame_Mfie Rou~~el, *’Bells (JNA proposals Deemed unacceptable,” co~~’cutionsweek, May 23, 1988, pp. 42~3. see dSO, “cOiOCadOn ISSUf2

Heating Up, Likely to Stall ONA Progress,” Data Communications, March 1988, pp. 70-74, and Ellis Booker and Deborah Pfeiffer, “Interface ’88: A

Smoldering ONA Controversy,” Telephony, Apr. 25, 1988, pp. 3840.

l@’RHCs Say ONA Plans Meet FCC Rules: NTIA Catls Rules Insufficient,” Enhanced Services Oufiook, June 1988, p. 3.

149sW, for one diScMS1on, GretChen Dmas, ‘*(@n Network Architect~e: Equ~ Access for Enhanced Services,” Te/e~tlCs, VO1. 4, No. 7, Jtdy 1987,

pp. 5-7; see also, “Supreme Court Case, FCC Jurisdiction and ONA,” The ESC klonthl~$ Reporr, March 1988, vol. 2, p. 3.

Isosteven Titch and John FOley, “Bell Filings Portend More, Trickier Talks, Communl(arionsWeek, Feb. 8, 1988, pp. 1, 56.”
Chapter 11--Interoperability in the Communication Infrastructure ● 319

intrastate enhanced service which is not entirely

consistent with FCC policy.151

Given the tremendously high stakes involved, it is

only natural that the setting of ONA standards would

generate such strong controversy.152 As was intended, ONA will have major impacts on competition in the telecommunication market, redefining the

boundaries among market segments, altering barriers to entry, changing the economics of providing

services, and restructuring the delivery technologies

that are used.153

The local exchange carriers will be radically

affected by ONA, one way or another. 154 B y opening

up their networks, they risk exposing themselves to

much greater competition. At the same time, they

will need to absorb the cost and disruption entailed

in implementing their ONA plans. However, if they

fail to follow through on ONA, they could lose the

opportunity of taking part in developing and profiting from the potentially lucrative information services market. Thus, adopting a company position on

ONA has entailed many complex and critical

choices, each made under conditions of considerable

uncertainty and within a very short timeframe. These

decisions will have far-reaching ramifications within the RBOCs, affecting their marketing strategies,

regulatory posture, relationship to their competitors,

as well as their network plans.155 As one observer

has described this impact:

new services-determined by inputs from the

[RBOC] marketing plans—will influence network

evolution and planning for open interfaces. . . . The

consequences of these decisions, moreover, will

have a direct effect on potential revenue, profitability

and growth. 156

Despite these difficult choices, most RBOCs welcomed the ONA process, envisioning it as a significant market opportunity.157

Moreover, the ONA process has the potential not

only to restructure the telecommunication industry,

but also to radically alter major segments of the

information services market, ranging from those

industries involved with electronic publishing, database retrieval, and voice message storage, to those

providing network burglar alarms.158 Like the local

exchange carriers, information service providers

face a future fraught with uncertainty. No one knows

what the size of the actual market for information

services will be, or how information providers

should relate to telephone carriers in order to

maximize it. Many in the information industry have

already made substantial investments in the network

architecture as it has traditionally existed, based on

existing industry boundaries. As these boundaries

change, information providers could find themselves in the wrong business, with technically

obsolete equipment and vulnerable to the competition of new and more up-to-date players.159

In spite of the controversy surrounding ONA,

FCC tentatively approved large portions of the

RBOCs’ ONA plans, on the provision that some

revisions would be made. The ONA process is far

from over, however; many outstanding issues remain. Still to be addressed, for example, are the

issues of how costs will be allocated and services

priced, as well as how jurisdictional authority will be

divided between the Federal Government and the

States. l60 There also continues to be considerable

disparity among the different RBOC approaches to

ONA, a fact that, as many have pointed out,

undermines the very nature of standards. The one

factor that will certainly ensure that ONA remains on

the policy agenda for a long time, however, is the

rapid pace of technological change. Designed, for

the most part, around the technology as it presently

exists, the ONA plans will need to be continually

151DU=, OP. Cit., foomote 149* p. 6“

152For ~ di~CUSSio~, S& Jfi Ke~edy, “F~~ whom the BellS Toi],” co~unicatio~week, June 29, 1987, pp. 10-11, p. 21.

153~id,

154 fi1d.

155~id. See also, Robin Williamson, “Planning the Right Moves,” CommunicationsWeek, Special Issue on ONA, June 29, 1987, p. 15.

1561bid.

157~id.

158Je~ife~ B~te~, “Co~Ptitive ~11,” co-nlcatio~week, s~i~ Issue on ONA, June 29, 1987, pp. 17, 20.

15QIbid,

l~cl~ke, op. cit., foomote 138.
320 ● Critical Connections: Communication for the Future

revised to take into account the changes that will

come with the Intelligent Network 2 and ISDN.161

Although there have been many critics of the

ONA process over the past 2 years, most people

agree that the idea still has merit. In fact, many

would like to see the concept of ONA developed

further.162 In the minds of some, the importance of

ONA cannot be overestimated. As one who has

thought extensively about the subject described it:

The importance of ONA is tied to the fact that

ultimately, if successfully implemented, it will

become a gateway between public and private

networks and become the means whereby a host of

smaller entrepreneurial service providers will gain

critical access to the next generation of increasingly

software driven and highly programmable BOC

super switches. . . . If ONA can be made to

work. . . then the same kind of creative explosion

that took place in the development of an extraordinary range of PC software and service in the

computer industry will finally be free to occur in

telecommunications . . . . More importantly, it

would allow this type of creative development to be

done by those who should be doing it—smaller,

creative, and entrepreneurially minded service providers who can then “test run” their services in the

open marketplace .. ..163

As already noted, many believe that to carry this

process further, the government will need to assume

a greater role. Others, although acknowledging that

the government might play a facilitating role,

believe that the process can be best worked out in the

marketplace.

164 In assessing which role is most

appropriate for the Federal Government, consideration should be given to the questions and answers

outlined in table 11-3, which draw from this

analysis.

lblFor a discussion of tie impact of technological change on the ONA process, see Richard Solomon and I.mretta Anania, “Paradoxes and puzzles of

Digitat Networks, Part l,” Tefecmmnu nications, January 1987, pp. 26, 28; and Anthony Rutkowski, “Computer IV: Regulating the National Public

Information Fabric,” presented at ICCC-ISDN ’87, Dallas, Texas, Sept. 16, 1987.

lbzs~, for one, Williams, op. cit., footnote 131.

163Tom Vdovlc, 4$0NA: ~e Gateway Between public and Private Networking,” Telecommunications, March 1988, P, 31

l~sW for exmple, Dan Hubbard, “ONA: A BOC perspective, “ Telecommunications, March 1988, p. 36.
Chapter 11--Interoperability in the Communication Infrastructure 321

Table 11-3--Open Network Architecture: Factors Affecting the Choice of Federal Options

1. Apart from its value to individual stakeholders, of what value

is the setting of standards in this area from a societal

perspective?

2. What is the cost of waiting for standards to be established in

the marketplace or through a voluntary consensus process?

3. How likely is it that, in the absence of government

involvement, de facto or voluntary standards will be adopted

in the near term?

a. To what extent do vendors share a common interest in

developing standards and agree on the appropriate

standard?

b. To what extent are users eager to standardize? Do they

agree on a standard? What leverage do they have vis a

vis vendors in the marketplace? In the political arena?

4. To be effective in promoting standards, what level of

government involvement would be required? How far would

the Federal Government need to go in the direction of setting

standards? What kinds of government involvement might be

appropriate in this regard?

5. How susceptible are standards to technological change?

How many possible options or choices of standards are

there?

Extremely important insofar as entire regulatory policy is built on

the assumption of achieving acceptable ONA standards.

Important for industry structure/antitrust implications, as well as

for assuring rules of access.

Costs would be great in terms of slowing down decisions relating

to the structure of the communication industry. Negative

implications for network modernization, as well as for extent of

access to information services. In the long run, could have costs

in terms of ability of the United States to compete in the global

economy.

Unlikely, given the complexity of the problem, differences among

stakeholders, and jurisdictional issues that need to be resolved.

RBOCs are basically agreed on value of standards. However,

they differ with respect to some aspects of their approaches.

Approaches adopted are a significant determinant of

competitive position. Competition among vendors likely to grow

with standardization.

Users warming up to the standards process after initial skepticism.

Unsure of their own needs from the process. Outcomes in terms

of competition are highly uncertain. Market power vis a vis

vendors more or less balanced, with both requiring cooperation.

Political power to stall process.

Extensive/long term. Need to establish guidelines that reflect

public policy goals. Greater technology/R&D support to deal

with complexity. Support for broader public policy input into the

process Resolution of outstanding jurisdictional issues.

Very susceptible to technological change. Complexity of problem

confounded by need for multiple standards.

SOURCE: Office of Technology Assessment, 1989.
Chapter 12

Modernization and

Technological Development in the

U.S. Communication Infrastructure
CONTENTS

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325

THE PROBLEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .325

STRATEGIES AND OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .341

Boxes

Box Page

12-A. Factors Affecting Control of Public and Private Networks . . . . . . . . . . . . . . . . . . . . 336

12-B. Summary of Market and Government Influence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347

Figures

Figure Page

12-1. Comparison of U.S. Exports and Imports of Computer, Business, and

Telecommunication Equipment, 1982 and 1987 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327

12-2. Projected Growth in Communication Networks, 1988-90 . . . . . . . . . . . . . . . . . . . . . . 333

12-3. Telephone Company Revenue Lost to Bypass . . . . . . . . . . . . . + . . . . . . . . . . . . . . . . . 334

12-4. Number of ISDN Users by Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 337

12-5. Congressional Strategies and Options To Address Modernization of the

Communication Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343

Tables

Table Page

12-1. The Regional Bell Operating Companies’ Digital Status: Lines and Switches,

June 30,1988,........,.. . . . . . . . . . . . . . . . . . . . . . . . . . . .. .., .. ., ti. ... ... ti. . . . . . 329

12-2. Top 20 Countries: Comparison of Total Expenditures for Communication,

1987-1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342

12-3. Top 10 Growth Budgets for Communication, 1987-88 . . . . . . . . . . . . . . . . . . . . . . . . 342
Chapter 12

Modernization and Technological Development in the

U.S. Communication Infrastructure

INTRODUCTION

As information comes to play a greater role in all

aspects of life, many more demands will be made on

the communication infrastructure. As seen in chapter 5, for example, a growing number of large

businesses, dissatisfied with the limited capabilities

of the public communication infrastructure, have

begun to develop their own, more technologically

advanced networks. In addition, it is clear from the

discussion in part 11 of this report that taking full

advantage of new communication technologies in

the realms of politics and culture, or for individual

development and growth, will require significant

advances in the communication infrastructure. As

the United States takes its place in the emerging

global economy, its communication infrastructure

will have to be more and more advanced to compete

in meeting communication requirements at the

international level.

For the U.S. communication infrastructure to

adequately meet and balance all of these communication needs, it needs to keep pace with, and take

maximum advantage of, advances in communication and information technologies. And it needs to

do so in the most efficient and cost-effective manner.

However, there is no real consensus concerning

which needs should be met. Although people

generally agree on the need for a modern communication infrastructure, they view questions of how

much modernization is required—as well as how

and by whom it should be accomplished, where in

the communication infrastructure and in what timeframe it should take place, and how and by whom it

should be paid for—as matters of intense debate.

THE PROBLEM

Historically, the United States has set the international pace for technological development in the

realm of communication and information technologies. As described by one communication scholar:

Regulated monopoly produced exceptional performance. Rapidly advancing technology, arising in

part from AT&T’s [American Telephone and Telegraph’s] stellar research arm, Bell telephone laboratories, caused the real costs and prices of products

and services to decline while, simultaneously, service was extended to virtually all the nation’s rural

communities, where costs were several times as high

as in the larger cities. This was accomplished in part

by direct federal subsidy through the Rural Electrification Administration, and in part by a system of

price regulation that massively cross subsidized

customers in high-cost areas. By the time the federal

government began to question the desirability of and

necessity of monopoly, virtually all households were

connected to the network.l

However, in the late 1970s technological advances

began to outstrip the pace of change within the

public shared telecommunication network, leading

ultimately to the divestiture of American Telephone

and Telegraph (AT&T) and the emergence of a

number of competing communication networks and

service providers.

Competition has clearly contributed to growth

and economic activity in the communication sector.

According to a study conducted by the Computer

Business Equipment Manufacturers Association

(CBEMA), total service and equipment revenues in

the U.S. telecommunication industry are likely to

rise to $215.8 billion by 1990, as compared to $186

billion in 1987 and $196.6 billion in 1988.2 Viewed

from the perspective of shareholders, it is clear that.

in the first 4 years following divestiture, the stock

prices of the regional Bell operating companies

(RBOCs) increased by more than 100 percent (if

dividends are included in the analysis) and the total

return on equity has averaged about 25 percent,

which puts these companies in the same rank as the

top third of the Standards and Poor 500.3

Notwithstanding these gains, the OTA analysis

identified a number of factors that suggest that, in a

global information-based environment, the United

IRoger No]], “Tel~omm~ca~ons ReW]ation in tie 1990,S,’” Center For 13conomic Policy Research, Stanford University, Stanford, CA, AUgUS~

1988, p. 2.

ZCBEMA, “The Information Technology Industry Data Book, 1960- 1998,” 1989, p. 12.

JDavid Werner, “Management in the Tough 1990s: It’ll Be a High Stakes, High Risk Challenge,” Telephony, Jan. 2, 1989, p. 26.

-325-
326 ● Critical Connections: Communication for the Future

States may find it increasingly difficult to adequately meet the multiplicity of demands placed on

the communication infrastructure. These factors

include:

Factor I: The extension of competition to the

international arena and, with it, an increase

in the requirements for technological advancement in the communication infrastructure.

The ability to keep pace with technological

change becomes critical in a competitive environment. The recent history of telecommunication in

the United States suggests that, with the introduction

of competition, telephone companies are no longer

able to time the introduction of new technologies to

optimize the life-span of their capital resources.

Instead, to retain old customers and capture new

markets, they must be the first to adopt new

technologies and offer new services.

Just as the introduction of competition in the

domestic telecommunication market has increased

the requirements for technological advancement in

the U.S. domestic communication infrastructure, so,

too, has the extension of competition to the international arena. In recognition of this growing need to

be on the technological cutting edge, the European

Community is pressing ahead to be first in the

development of broadband integrated services digital network (ISDN) technology.4 Thus, in a global

economy, U.S. performance must compare favorably not only with its own past performance, but also

with the performance of those countries that are its

primary competitors.

Recent trade figures are not reassuring in this

regard. They suggest that the United States is finding

it increasingly difficult to retain its world technological leadership.5 The declining performance in

the area of communication and information technologies is particularly alarming because the United

States has traditionally been a world leader in this

area. As noted in figure 12-1, U.S. exports of

computer, business, and telecommunication equipment decreased from 32.0 percent of the world total

in 1982 to 26.5 percent in 1987, while at the same

time U.S. imports of these products increased from

15.6 percent of the world total to 27.2 percent.6

The economic stakes in this sector are likely to be

even higher in the future, given the growing

importance of communication and information

products and services as a factor in world trade. A

recent study by Booz, Allen & Hamilton Inc.,

predicts, for example, that the world market for

moving and managing information will grow 43

percent by 1991, from $390 billion in 1987 to a total

of $560 billion.7 The competition for this market is

becoming increasingly intense, prompting many in

the United States to view competitiveness in

telecommunication trade as a priority issue. For

those who do, it is essential to move quickly to

modernize the communication infrastructure. As

two observers have described the present international situation:

As competition intensifies the stakes will increase

rapidly. Winners will be amply rewarded and losers

will be devastated. The big players are laying their

wagers right now for a game in which coming in

second means coming in last.8

Factor 2: The high capital costs of modernization and uncertainties with respect to how

these capital requirements will be met.

Success in modernizing the U.S. communication

infrastructure will depend, in part, on the Nation’s

ability to raise the capital required to develop and

deploy new communication and information technologies. At present, it is difficult to determine

where the United States stands in this regard. How

much capital will be required will depend not only

on what is entailed in modernization, but also on the

4SW, for a discussion, Establishing Advanced Communications in Europe, IBC Strategic Audit, 1988, Chateau St. Anne, Febmw 1989.

sAs not~ in a ~ew~ by tie congre~~lon~ Re~~ch Semice: “me U.S. deficit in tic balance of wade incre~d from $36.2 billion in 1980 to

approximately $170 billion in 1986. . . . Until recently, the strength of U.S. advanced technology exports helped to compensate for declining trade in

other manufactured goods. However, according to a report issued by the Joint Economic Committee, since 1982 U.S. advanced technology exports have

not been able to keep manufactured trade out of a deficit position. The trade surpluses in these products began to decline and in 1986 ran a deficit. ” Wendy

H. Schact, Library of Congress, Congressional Research Service, “Trade, Technology, and Competitiveness, “ Issue Brief 87053, updated Apr. 14, 1988,

p. 2.

6The (_JLobal Positwn of the Uw”ted Statey in: CoWuter Eq~”pment, Business Equipment, and Te/ecommum’~ation Equipment Markets, A Globid

Market Analysis Project performed in conjunction with CBEMA Industry Marketing Statistics Committee, October 1987, p. 9.

764A Scramble for Global Networks: Companies Are Spending Big On Worldwide Communication Systems, ’’Business Week, Mar. 21, 1988, p. 141.

8Lm Lamon and Czatdana Inan, b’htemational Telecom Spending on the Rise,” Telephony, Feb. 22, 1988, P. 36
Chapter 12--Modernization and Technological Development in the U.S. Communication infrastructure ● 327

Figure 12-1-Comparison of U.S. Exports and Imports of Computer, Business, and Telecommunication

Equipment, 1982 and 1987

EXPORTS

Billions of U.S. dollars

w

World CAGR*

15.5% per yr

‘[~

20.5%

united

States

U.S. CAGR Rest of world

11.3% per yr 73.5%

Total world $37.2 billion Total world $76.5 billion

United States $22.9 billion United States $20.3 billion

1982 1987

IMPORTS

Billions of U.S. dollars

{

Rest of world

)

U.S. CAGR

31.2% per yr {

Rest of world

84.4 % 72.8% )

Total world $33.3 billion Total world $74.2 billion

United States $5.2 billion United States $20.2 billion

1982 1987

● CAG R=C o m p ou nd Average Growth Rate

SOURCE: “A Global Market Analysts Project,” The Center for Economic Analysis, Inc , performed m conjunction with CBEMA Industry Marketing Stahstlcs

Committee, Oct. 20, 1987, p. 10. Reprinted with Permwslon.
328 ● Critical Connections: Communication for the Future

timeframe in which modernization is assumed to

take place. For example, the capital costs of gradually developing narrowband ISDN services in response to market demand, and of moving in an

evolutionary fashion to develop broadband ISDN,

will be considerably less than those entailed in

moving quickly and uniformly to deploy an integrated broadband network.9

One measure for assessing how far the United

States needs to go in modernizing the communication infrastructure is to look at how equipped the

communication network is, at present, to provide

advanced communication services, Table 12-1,

which depicts the deployment of equipped lines and

digital switches, gives one rough estimation.

Another way to measure the extent of modernization is to consider U.S. progress in implementing the

intelligent network. The intelligent network makes

use of the technological advancement and convergence of telecommunication and computer systems,

and especially the emergence of stored program

control, digital telephone switching, and fast common-channel signaling systems, such as the Consultative Committee for International Telephone and

Telegraph’s (CCITT's) No. 7.10 The research and

development of this intelligent network architecture

is being conducted at Bell Communications Research (Bellcore), with the assistance of interested

vendors, as part of a phased-in process that will

ultimately lead to the Advanced Intelligent Network.

According to Bellcore, major technology releases—

envisioning sophisticated intelligent network products—are scheduled for 1993 and 1995. The longterm network architecture is intended for completion

around 1998.11 Among the services that are presently available (or likely to be available in the near

future) through the intelligent network are advanced

8(K) service, 911 public emergency service, automatic calling card, and televoting.

Even if there were agreement on what is entailed

in modernization, and where the U.S. communication system stands with respect to it, it would be

difficult to estimate the capital requirements. Historical data on the actual costs of providing communication services are very limited because of the

problems entailed in identifying costs under the

predivestiture telephone system. As Anthony Oettinger has described the problem:

From an angle whence the very definitions of

products and of services along with the definitions of

their costs and of their prices all look discretionary,

such questions as “what are the true costs?” and

“what are the associated cost-based prices?” amount

to hunting the unicorn.12

Moreover, as Bruce Egan and Lester Taylor have

pointed out:

The current decision to invest in digital fiber

technology is unprecedented relative to decisions of

the past, since it represents a major transformation of

the network in a competitive environment. Every

other major investment decision was made in a

monopoly environment and the investment decision

was therefore almost completely dominated by

considerations of service quality, cost savings, and

regulatory assurance of capital recovery.13

Nor is it easy to predict future costs, given rapid

technological change and numerous uncertainties

about the nature of the communication infrastructure. It is only recently, for example, that tariffs have

9Fo~ ~ffonS t. ~xwlne costs, see Bruce L. Egan and Lester D. Taylor, “capital Budgeting for Technology Adoption in Telecommunications: The

Case of Fiber,” prepared for presentation at Bellcore/Bell Canada Industry Forum, “Telecommunications Costing in a Dynarmc Environment,” San

Diego, CA, Apr. 5-7, 1989. See also the discussions on cost in William Izhr, “ISDN: An Economist’s Primer for a New Telecommunications

Technology,” Department of Economics, Stanford university Technology and Progress Seminar, Feb. 14, 1989; and Robert Pepper, “Through the

Imoking Glass: Integrated Broadband Networks, Regulatory Policies, and Institutional Change,” Office of Plans and Policy, Federal Communications

Commission, Washington, DC, November 1988.

1OBy increM~g network intelligence, network decisionmaking carl be distributed outside of switching centers. This distributed kind of architecture

is extremely flexible, allowing for much greater ease in introducing new services as well as for virtuat private networks, and hence much greater user

control. For descriptions and discussions, see Denis Gilhooly, “Towards the Intelligent Network,” Te/ecomrnunications, December 1987, pp. 43-45, 48;

John O. Boese and Richard B. Robrock, “Service Control Point: The Brains Behind the Intelligent Network,” Be/kore Exchnge, November-December

1987, pp. 13-17; Allen Adarns and John Wade, “Imoking Ahead to the Next Generation,” Telephony, May 23, 1988, pp. 157-159; Art Beaty, Jr., “The

Evolution to Intelligent Networks,” Telecommunications, February 1989, pp. 29-36; and Paul Bloom and Patrick Miller, “Intelligent Network/2,”

Telecommunicarwns, February 1987, pp. 57-65.

114*perswtive on fie Advanced Intelligent Network,” Bellcore Press Release, Mar. 27.1989.

12~thony G. @ttinger, “me Formula IS Everything: Costing and Pricing in the Telecommunication Industry,” Center fOr InfOrrnatiOn policy

Research, Harvard University, Cambridge, MA, October 1988, p. 1.

13Egan and Taylor, op. Cit., foomote 9, p. 1“
Chapter 12--Modernization and Technological Development in the U.S. Communication Infrastructure ● 329

Table 12-1—The Regional Bell Operating Companies’ Digital Status: Lines and Switches, June 30,1988

Equipped Iinesa Percent digital Local switches Percent digital

Nynex . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,392,000 38 1,292 56

Bell Atlantic . . . . . . . . . . . . . . . . . . . . . . . . 16,919,000 35 1,585 39

BellSouth . . . . . . . . . . . . . . . . . . . . . . . . . . 17,515,000 34 1,323 36

Ameritech. . . . . . . . . . . . . . . . . . . . . . . . . 17,594,000 26 1,262 36

Pacific Telesis . . . . . . . . . . . . . . . . . . . . . . 13,900,000 23 744 33

us west . . . . . . . . . . . . . . . . . . . . . . . . . . 13,456,000 22 1,321 21

Southwestern Bell . . . . . . . . . . . . . . . . . . 13,017,000 18 1,706 20

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,793,000 9,233

● Total central office line capacity (access lines average 85 percent of equipped lines).

SOURCE: Reprinted with permission from Te/ephony, Jan. 9, 1989.

begun to be set for the first ISDN offerings.14 Not

surprisingly, therefore, the range of estimates is very

broad. Looking only at the cost of deploying fiber

technology to the local telephone loop, for example,

estimates range from as low as $1,500 per subscriber

to as high as about $20,000 per network subscriber.

Considering these costs together, the total cost of a

fiber network might be anywhere between $150

billion and $2 trillion.15

Estimates, of course, will depend on the indicators

used. One analysis looks at the $5 million to $15

million per switch that would be required to replace

approximately 12,000 central office switches with

the latest digital switch.l6 Another uses the figure of

$1,500 per subscriber to estimate the total network

cost of installing fiber as $100 billion.17 Another

analysis, which looks only at the incremental cost to

the local exchange companies of upgrading their

networks for the provision of narrowband ISDN,

concludes that the amount of money required for

modernization will be approximately $17.6 billion. 18

Another major factor affecting modernization

costs is the rapid pace of technological change, and

hence the likelihood that newly deployed technologies may have only a short lifespan. For example,

developments in broadband ISDN technologies may

soon make narrowband ISDN obsolete, even though

the deployment of narrowband technologies has

only just begun. 19 In fact, the cost of recently sunk

investment may be high enough to significantly

retard modernization.20 It has been suggested, for

example, that ISDN’s slow rate of adoption has been

due in part to the fact that so many new private

branch exchanges (PBXs) have been installed over

the past 5 years. Against this problem of obsolescence, however, one must weigh the fact that new

technologies decline in cost as they mature. For

example, there have recently been such declines in

the costs of PBXs and T1 multiplexers.21 And, of

course, the extent to which technological change

serves to retard modernization will depend, in part,

on allowable depreciation rates.

The problem of determining whether the United

States will be able to provide sufficient capital to

modernize the Nation’s communication infrastructure is not merely one of estimating the costs

involved. It is also necessary to ascertain whether

such a large amount of capital will be forthcoming,

and, if so. from whom and through what processes.

In the United States, there has been very little

1

4

’’ Illinois Bell First With ISDN,’’7’he flKMontMy Report, April 1988, v01. 3, p. 13. Recently, AT&T has also released tariffs for some ISDN services.

ISEgan and Taylor, Op. Cit., fOOmOte 9} P. 3.

lb~k, op. cit., footnote 9, p. 57.

17pepPr, op. cit., fOOmOte 97 P- 1O.

ls~~, op. cit., fmmote 9, p. 56. This estimate is based on the $2 billion that Pacbell plans to spend to complete its digital switch up~ade Progr~

and the over $200 million that wiil be required to deploy signaling system 7 (SS7). To get the $17.6 billion figure, Lehr multiplies this total cost by seven

regional holding companies plus GTE. He notes, moreover, that additional investments would need to be made by the interexchange carriers,

19sw ~retta ~aia and RiCh~d J, Solomon, “The Beauty ~d the Beast: vi~u~ Networking in B-lSDN,” Te/eco~unicutiom, September 1987,

pp. 33-34.

ZOCIW k, “lSDN-U~r Doubt and Tariff Issues,” Te/ecornmunicarions, April 1988, p. 57.

2AFor Cxmple, ~ Neil wa~on, “T1 Vendors Play ‘Price is Right’)” CornmunicanonsWeek, Dec. 26, 1988, pp. 1, 18.

89-148 0 - 90 - 8 QL 3
330 ● Critical Connections: Communication for the Future

discussion of this issue.22 As Anthony Rutkowski

has described the situation in reference to the open

network architecture (ONA) process:

The costs of openly providing the necessary

network interfaces and BSEs [basic service elements], especially on a nation-wide scale and with

older equipment, can be enormous. No guidelines

presently exist as to how to separate the necessary

from the frivolous, nor to decide what is funded out

of the existing regulated rate base versus what is

derived from other sources of revenue, nor how to

separate those functionalities which are employed

for interstate vs. intrastate service.23

The general operating assumption appears to be

that where there is a demand for modernization there

will be profit-making opportunities, and hence

sufficient incentive to generate the necessary capital

resources. However, notwithstanding impressive

economic growth in the communication sector and

the emergence of a vast array of new providers of

communication goods and services, there are a

number of reasons why policymakers might be

concerned about the future prospects of capital

accumulation for infrastructure development.

Among these are:

Reason 1: The sheer magnitude of the costs

involved.

Although there has been no detailed analysis of

the costs of developing and deploying a fully

modernized U.S. communication infrastructure,

most people agree, on the basis of informal estimates, that these costs will be extremely high. Such

estimates are corroborated by those of foreign

governments. The Government of the Federal Republic of Germany, for example, assumes that the

cost of converting their telecommunication system

into an ISDN will be approximately $40 billion over

the next 30 years.24

The increasing cost of R&D also suggests an

increase in the costs of modernizing and keeping the

U.S. communication infrastructure up to date. According to the National Science Foundation (NSF),

for example:

Over the next decade, the U.S. will have to more

than double its annual expenditures on academic

R&D merely to maintain its base level. One personyear of senior R&D effort will increase from

$155,000 to $180,000-$205,000 by 1996 [in constant dollars].25

Increased R&D costs can have a major impact on the

costs of modernizing the communication infrastructure because communication technology is so R&Dintensive.26 As Karl Frensch, executive director of

Siemen’s public switching division in Munich, has

pointed out with respect to the R&D required to

develop a modern switching system:

Developing a large public switching system

requires an immense amount of R&D, let’s say on

the order of $2 billion for the whole system over its

lifetime of about ten years . . . You can only make

this investment if you have 10% to 15% of the world

market.27

The cost of capital can also be expected to

increase, insofar as it is unlikely that internally

generated funds will be sufficient to meet future

needs, and much of the cost will have to be financed

through borrowing. 28 The cost of such funds maybe

quite high, given the risks entailed in investing in an

zz~e of tie few discussims of tiis issue is in Egan and Taylor, op. cit., footnote 9. According to their analysis: “The LECS [local exchange carriers]

face a large capital shortfall in their efforts to aggressively pursue widespread deployment of fiber to homes and businesses. Under current market

conditions and fiber cost levels, it appears that the LECS will require about $100 bilhon in new revenues beyond the internal cash flows over the

construction horizon just to cover the costs of fiber for plain old telephone service (POTS) functionally. Advanced fiber systems providing for a wide

range of new customer services would cost even more. ”

zs~thony M. Ru&owski, testimony before the House Committw on Energy and Commerce, Subcommittee on Telecommunications and Finance,

Jdy 30, 1987.

24RolfT. wiga~,’’~tega~ Semlces Digital Networks: Concepw, policies, and Emerging Issues, ’’JO~~/O~CO~nica~O~, VOI. 38, No. 1, Winter

1988, p. 36.

25Natim~ Science Fo~dation, “FutWe Costs of Research: The Next D~ade for Academe,” Repofi pRA.87 by NSF’S Division of policy Research

and Analysis.

26As no~ by Kenne~ Flamm: “()~y fie aircraft and mis511e industry, wi~ significant ,SUppOII from the Defense Dep~ment, spends a fleater share

(14 pereent) of its sales on R&D.” Kenneth Fhunm, “Technological Advance and Costs: Computers Versus Communications,” in Robert Crandall and

Kenneth Flarnm (eds.), Changing the Rules: Technological Change, International Competition, and Regdation in Communications (Washington, DC:

The Brookings Institution, 1989), pp. 13-14 (footnote 2).

zTAs clt~ in Jefferson Grigsby, “Global Report: Telecommunications,” Fimncial World, Apr. 18, 1989, p. 34.

~SiX Eganand Taylor, op. cit., fOOtnOte 9.
Chapter 12--Modernization and Technological Development in the U.S. Communication Infrastructure ● 331

economic sector characterized by rapid technological advancement.29

Reason 2: The potential problems entailed in

generating funds for research, development

and deployment.

Capital for research, development, and the deployment of new communication and information

technologies is derived from government funding,

the reinvestment of profits, and borrowing in financial markets. Looking at these basic sources, it

appears that obtaining capital for modernizing the

U.S. communication infrastructure may be somewhat problematic in the future.

One factor suggesting such an outcome is the

reduced levels of government funding in R&D,

especially in relationship to the commercial applications of new technologies. For example, according

to a report recently released by Battelle Memorial

Institute:

After adjusting for projected R&D inflation, real

outlays will increase about 2% next year, down

markedly from the 10-year average of

3.518% . . . Defense Department research spending

will decline slightly next year because of pressures

to reduce the federal deficit. Nonetheless, the Defense Department will account for 28% of total R&D

expenditures next year, and will get 60% of federal

research funds.30

Regulatory policies may also discourage investment in modernization. For example, some have

suggested that rate-of-return regulation, by capping

the potential payoffs at levels too low to offset the

risks of failure, discourage private, equity investment in the public telecommunication network.31

Others have argued that present methods of calculating depreciation rates provide inadequate incentives

to attract investment for innovation.32 Still others

say that the uncertainty concerning the rules that

govern communication companies’ activities and

operations is, in itself, enough to discourage investors.33 As one market analyst has noted:

Since the return on investment is not immediate

and transition uncertainties loom large, telecommunication companies tend to be valued at some

discount to their actual revenues. over the past 4

years telecommunications has not been an attractive

area to achieve investment return.34

An additional factor inhibiting investment might

be increased political contention at the local level

concerning the need for modernization and the

manner in which it should be financed. In the face of

growing pressure for modernization, State regulators, for example, want greater assurance that the

capital required for modernizing the network is not

paid for by ratepayers who will not benefit from new

services .35 Many States now require that decisions to

construct new plant be based on an economic

analysis that can demonstrate that ratepayers’ benefits exceed the cost of development.36 Such decisions can be highly contentious. For, as Wheatley,

Selwyn, and Kravtin have pointed out:

. . . an assessment of specific capital decisions is

rarely straightforward. The introduction of new

technologies often brings with it the availability of

new services along with cost efficiencies in the

provision of existing services. There is seldom

agreement among all parties as to the relative merits

of the new services for different classes of customers

2gFor a discussion, see Wenner, op. cit., footnote 3, pp. 24-3& See also discussion on ra]sing capital that directly fO1lOws.

SOA5 cited in, “Group For~mts 3.4~0 Rise to $129.2 Billion Level After a 6Y0 Jump in 1988,” The Wall Street .fournd, Dec. 21, 1988, T~hnologY

Section, p. 1. As Professor bwis Branscomb has noted, the strong emphasis on military apphcatlons has drained critical resources from the commercial

sector. Testifying before the House Committee on Science, Space, and Technology, Technology Policy Task Force, he pointed out, for example, that:

“While recent federal budgets have permitted growth in some agency research programs-notably the NSF—the overall federal pattern is weak, primarily

because of the failure of the Department of Defense to build its fundamental research base at the same time it extsacts from the existing base with massive

increases in applied research and development . .iust as each corporation funds its share of Industrial research, so loo federaI agencies must each

re-invest in the knowledge base their program draws from. ” Testimony, June 25, 1987.

31sW, for one discussion, Loretta Anania and Richard Jay Solomon, “Capital Formation and Broadband Planning: Can We Get There From Here?”

Telecommunicunons, November 1987, pp. 26, 28. See also discussion in Egan and Taylor, op. cit., footnote 9.

s2See, for instace, T. Nousaine, S. Brant, and J. Murray. “Give Depreciation the Appreciation It Deserves,” Telephony, July 18, 1988, pp. 52-58;

and Larry F. Darby, “The ABCS of Telecommunication Depreciation . . . And Why They Matter,” Telematics, vol. 4, No. 1, January 1987, pp. 3-9.

33sw, for a discussion, “Progress on Hold? Telecommunication Needs Less Regulation, More Competition,” BarrOn’s, &t. 5, 1%7.

q4Jon w. Bayle5s, “Telecotnmunications: A Venture Capital perspective, “ Telecommunications, January 1989, p. 25.

ssForone discussion, we Wslle Albin, “Digit~ Tomomow]and: Who will pay for tie Gold plated Network,” TeLe~rics, VO1. 3, No. 10, OCtObCr 1986.

See also, Nancy J. Wheatley, he L. Selwyn, and Patricia D. Kravtin, “Tclecommunlcations Modernization: Who Pays?” prepared for the National

Regulatory Research Institute by Economi~s and Technology, Inc., September 1988.

361bid., p. 10.
332 ● Critical Connections: Communication for the Future

or as to the benefits of the operating efficiencies that

should be attributed to existing services.37

Raising capital for modernization may also become more difficult, given increased competition for

funds among high technology firms (especially in

the venture capital market) to finance new companies selling advanced products. There is also a

growing disinclination on the part of financiers to

fund communication or information-related technologies. For example, in a recent survey of the

largest venture capital firms, it was found that of the

209 firms that responded, 70 percent planned to

invest from $1 million to $10 million in high

technology companies in 1988. Rating their preferences, they put software, computers, and communication second, seventh, and eighth on their lists.

Only three firms expected to invest in fiber optics,

and only one was interested in network management

and/or networking systems.38

Reason 3: The shift of resources to privately

owned communication systems.

As emphasized in chapter 5, the need for specialized, upgraded, and technologically advanced communication systems is particularly felt in the business community, where communication increasingly provides the leverage for competitive advantage. Dissatisfied with the technical limitations, lack

of corporate control over, and high costs of publicly

provided telecommunication services, many corporations have begun to establish their own private

and/or competing systems. By 1986, more than

one-third of all U.S. spending on capital facilities for

telecommunication was accounted for by individuals and firms apart from communication common

carriers. 39 And in 1987, sales of transmission lines

and equipment for private networks were estimated

to be $14 billion, an increase of 6 percent from

1986. @ Most recently, expenditures on private

networks have been estimated to be in the range of

$16 billion.41

The development of these private networks has

been facilitated by the emergence and availability of

new technologies that allow users to purchase

communication products and services in an unbundled fashion. They have also been encouraged by

regulatory policies, such as open network architecture (ONA), that call for increased competition and

the unbundling of network services. Commenting on

the effect of these developments, one observer

noted, for example, that:

[After divestiture, the] transition from a monopolistic to a competitive environment, coupled with

the availability of affordable alternative transmission media such as optical fiber, DTS microwave, and small aperture satellite communication

terminals, witnessed mounting “bypass” activity.

Protests about lost revenues were heard from the

carriers. Competition would now come from two

directions: private networks and alternative service

providers .42

One way of looking at the extent to which

communication systems may become privatized is

to examine the rapid development and deployment

of T1 technology in the corporate business environment. (See figure 12-2 for projected growth in

communication networks. ) Providing for the integrated transmission of voice, data, and image traffic,

voice compression, the flexible use of bandwidth, as

well as alternate routing, T1 offers users considerable cost savings and much greater network con371bid., p. i. As they note: “Regulatory commissions will be required to assess modernizing projects involving facilities that are used to furnish both

regulattxi and unregulated services. A mismatch of costs and benefits from these projects can occur if costs and revenues are not consistently allocattxi

between the ratepayers and the shareholders. A mismatch can atSO occur if there is a change in the regulatory status of one of the scrviccs furnished using

upgraded plant subsequent to its acquisition. Finally, the cost of capital of a regulated firm may change as the firm takes on increasingly risky activities.

Each of these potential cost/benefit matches arises because the telecommunications utility is no longer providing only regulated services. . the policy

challenge is to devise a method to reduce or eliminate these potentially significant cost/benefit mismatches.” Ibid., p. ii.

StlSph by Hem-y J. Mayer, ~esident, Mayer Frank& CO,, Inc, as reported in The E,$’C Monthly Report, vol. 3, April 1988 Edition, PP. 4-6; see ~so

Bayless, op. cit., footnote 34.

3gRo~~ W. Qa~l, “Fragmentation of the Telephone Network,” The M~kle Foundation, New Directio~ in Te/eco~unicatio~ Po/icy, VO]. 1,

Regulatory Policy: Telephony and Mass Media (Durham, NC: Duke University Press, June 1989), p. 49.

~B~ine~~ Week, op. cit., footnote 7, p. 140.

41 Willia H. Davi~n, “Trends in Te]ecomm~ications Networks: Re@atoq Issues and tie @dook for the U.S. Information monomy,’’university

of Southern California, Los Angeles, CA, April 1988, p. 44. A recent study by Coopers& Lybrand puts worldwide sales of equipment and transmission

facilities for private networks at $52 billion in 1988, and projects that such sales will reach $147 billion by 1992. Coopers& Lybrand, “The Impact of

Emerging intelligent Networks in New York State,” February 1989, p. 2.

dzvictona A. Brown, “T1 Networking and open Systems,” Telecomnaunications, January 1989, p. 56.

4ST1 cim~ts owra~ at 1.5~ megabi~~ per ~cond ~d Consist of @ kilobits per s~ond voice or data, plus a fr~ing bit. For a description, .SW ibid.
Chapter 12--Modernization and Technological Development in the U.S. Communication Infrastructure . 333

trol. 43 Hence, it is appealing to the large-volume

business user.

Although T1 services were originally provided by

AT&T in the early 1960s, vendors of customer

premises equipment (CPE)—responding to the

growth in data traffic as well as to the entrepreneurial

opportunities presented by the divestiture of

AT&T—began in the early 1980s to provide high

performance point-to-point T1 multiplexer specialized for business use.44 The corporate demand for T1

services grew rapidly, at an annual rate averaging

from 30 to 40 percent.45 The growth of this market

should continue steadily into the future. In fact,

given an ever-increasing demand for data communication (estimated to have grown by 40 percent since

1970, and predicted to account for 40 percent of all

communication services by the early 1990s), some

large companies are now beginning to employ T3

circuits, which operate at 44.736 megabits per

second (Mbps).46 Moreover, because it is now

becoming possible for vendors to offer fractional T1

services, smaller businesses may also enter the

market, finding it economically more feasible to

develop their own telecommunication systems.47

Also driving the future demand for T1 and T3

services will be applications such as videoconferencing, computer-aided design/manufacturing

(CAD/CAM), bit-mapped work stations, image

transfer, high-speed local area network (LAN)

bridges, and mainframe-to-mainframe links, which

all exhibit appetites for bandwidth in the megabit

range.

48

How the use of such technologies in private

networks will affect the public communication

infrastructure is a matter of considerable debate,

focusing heavily on the issue of bypass. Defined in

a variety of ways, bypass generally refers to the act

Figure 12-2-Projected Growth in Communication

Networks, 1988-90

Percent of respondents a

o n -— —.

vu I

60

I

I

01 Public -

defined

net work

I

dSoft warede fined

net work

~~ 1988’ ~ 1990°

0 Base of’ 100 $100 million-plus companies surveyed

SOURCE: Copyright 1988 by CW Publishing Inc.,Framingham,MA01701.

Reprinted from Cornputerworld.

of avoiding the local exchange carrier (LEC) in

transmitting messages. The term, however, can refer

specifically to the circumvention of LECs’ facilities

(known as facilities bypass) or to the circumvention

of various services that the exchange carrier provides (known as service bypass). Moreover, the

notion of bypass can be differentiated on the basis of

whether it allows for the most efficient allocation

and use of resources (known as economic bypass), or

whether it is inefficient, resulting from distortions in

price (known as uneconomic bypass).

How one measures the impact of bypass on the

public communication infrastructure will depend in

large measure on the type of bypass. For example,

the extent of damage to the LEC due to bypass may

be much less if it is only a number of services, and

not the entire physical facility, that are circumvented. Or, in the case of economic bypass, it can be

441bid+ S= ~W s~p~n Fleming, “The Evolution of T3 Networking,” Te/ecommutucations, December 1988, pp. 16-20. AS the author nOles: “BY lh~

first half of the 1980s, three major events occurred to change the usage pattern of digital transmission links. First, telephone operating companies began

converting major portions of their networks to digital transmission, making TI pipes more accessible. Second, divestiture opened up competition in the

telecommunications marketplace so that the time-to-market of new products and services became much shorter. Third, the continuing revolution in

end-user computing power meant that a corporate telecommunications manager now had to administer complex data networks in addition to existing

voice networks. Entrepreneurial companies such as Network Equipment Technologies, [’ohesive, & Infotron, began adapting public network T1

technology for sophisticated private network requirements. TI usage by end users began skyrocketing.” p. 16.

‘lSTom Vdovic, 4*AsWss~g the Complexities of the T1 Marketplace, “ Telecommunicatwrn, December 1988, p. 16; see also M. Gawdun, “Future

Directions in Transmission,” Telecommunications, December 1987, pp. 48-49.

MA r=ent study by the Yankee Group reports that there are now about 25 corporations involved in T3 networking, including General Motors,

Monsanto, McDomell-Douglas, and American Airlines, Tom Valovic, “T1, T3, and the Never-Ending Bandwidth Argument,” Telecommunicafwns,

December 1988, p. 6.

47FOr a discussion, sx Neil Watson, “MUX Market Moves,” ComrnunicationsWeek, Dec 26, 1988, p. 17; Elizabeth Horwitt, “Data Seen hcrewing

On T1 Links,” Computerworld, Jan. 9, 1989, p. 27; and Nathan J. Mtdler and David Hoist, “Customers and Carriers Can Benefit From Fractional T1

Services,” Telephony, December 1988, pp. 33-37.

4sF1eming, op. cit., fOOtnOte W, P. 19.
334 ● Critical Connections: Communication for the Future

argued that, while LECs may suffer losses, society

as a whole is better off, since resources are allocated

most efficiently .49

Given these alternative ways of ascertaining

bypass, it is not surprising that stakeholders strongly

disagree about the actual extent to which bypass of

the public telephone network has taken place and the

impact it is having.50 Telephone companies have

claimed major losses. In their most recent assessment to the Federal Communications Commission

(FCC), for example, the RBOCs claimed that they

had lost $3.7 billion to bypass, as can be seen in

figure 12-3.51 On the other hand, telephone company

competitors, together with local regulators and many

consumer groups, have tended to minimize the

damage due to bypass. As noted in a report prepared

for the National Association of State Utility Consumer Advocates, many of these groups challenge

FCC’s conclusions about bypass on the grounds that

they overemphasize price as the motivation for

bypass and fail to consider bypass in the context of

RBOCs overall growth. According to this perspective, FCC’s analysis:

. . . largely ignore[s] the critical role of services

considerations in the bypass decision. Bypass surveys performed by user groups have generally

concluded that non price, service factors, including

the unavailability of a service from the local

telephone company, are more powerful bypass

motivators than price.

The case has not been made that bypass is now, or

will be, of such magnitude as to have an impact on

the revenues of the local operating companies. There

is no evidence that companies currently employing

bypass alternatives have generally reduced their uses

of the local telephone company switched services.52

Measuring bypass is likely to be even more

difficult in the future, given rapid technological

advancement. For example, confusion will arise

when greater intelligence is built into the network,

Figure 12-3-Telephone Company Revenue

Ameritech

BeIl Atlantlc

Bell South

Nynex

Pacific Telesis

Southwestern Bell

US West

GTE

Lost to Bypass

$5127 ~

$4285 ]

I 1 !

() 100200 300 400 500 600 700 800 900

MilIions of annualized dolIars for 1988

_ Service bypass m Facilities bypass

SOURCE Copyright 1988 by CMP Publications, Inc., 600 Community

Drive, Manhasset, NY 11030. Reprinted from Comrnunbationsktbek with permission.

insofar as it becomes more and more difficult to

distinguish between what constitutes facilities and

what constitutes service. As Solomon and Anania

have pointed out:

These problems arise because the digital switch

will be thoroughly integrated with digital transmission and with customer premise digital terminal

equipment (voice, data, or hybrid). The seamless,

digital integration creates paradoxes for regulators,

service providers and customers. Since multiple

computers will be accessing each other at the control

levels of their central processors, how will each

switch (computer) know the difference between

lineside traffic and trunkside traffic? How will the

computer switches handle contention for resources?

How will each switch know what is public and what

is private?53

Moreover, the problem of distinguishing between

economic and uneconomic bypass will be compounded by the difficulties entailed in sorting out

costs and prices in an integrated broadband network

(IBN) environment. As Robert Pepper has noted:

The inherent arbitrariness of old fashioned rate

base rate-of-return ratemaking, where tariffs are cost

d~For a discussion of tie~ distinctions, see U.S. Congress, General AcOunting ~fice! “Telephone Communications: Bypass of the Local Telephone

Companies,” GAO/RCED 86-88, August 1986.

5oGovement studies on bypms have included: “Bypass of the Public Switched Network.” Common Carrier Bureau, Federat Communications

Commission, Dee. 19, 1984; U.S. Gener~ Accounting office, op. cit., footnote 49; Gerald Brock, “Bypass of the Local Exchange: A Quantitative

Assessment,” OPP Working Paper #12, Federal Communications commission, September 1984; Racster, Wong and Guldman, “The Bypass Issue: An

Emerging Form of Competition in the Telephone Industry,” No. 84-17, The National Regulatory Research Institute, Columbus, OH, December 1984;

and Peter W. Huber, “The Geodesic Network: 1987 Report on Competition in the Telephone Industry,” prepared for the Department of Justice in

accordance with the Court’s decision in US, v. Western Electric Company, Supp. 131, 194-5.

s]Mofitofig ReP~ Prepwed by fic Staff of tie Feder~.State Joint Board, CC DO~ke~ ~()-’286, p. 98, table 601. Telephone company bypass IS

monitored and assessments are made to the FCC on a quarterly basis.

52’’ Bypass and the Subscriber Line Charge,” prepared for the National Association of State Utility Consumer Advocates, Bethesda Research Institute,

Ltd., Bethesda, MD, June 1987, pp. ii-ill.

5sRichmd J. Solomon ad kretta Anania, “Paradoxes and Puzzles of Digital Networks, paXI 1.” Telecommunications, January 1987, pp. 26-28.
Chapter 12--Modernization and Technological Development in the U.S. Communication Infrastructure ● 335

supported by attempting to assign costs to “cost

causers,” will become even more apparent if such

regulation is applied to tomorrow’s IBNs. Traditional voice telephony and broadband video transmission are so different that any attempt to price

them using the same procedures or measures will

likely prove futile.54

The extent to which bypass will actually occur in

the future will depend on a number of factors,

including:

● how quickly the telephone companies can

upgrade their networks and develop services

that meet the needs of business users,

. the positive and negative experiences that large

users have in developing and operating their

own private communication systems, and

. the regulatory context that sets the ground rules

for the provision of communication services.

Since these factors are, themselves, quite uncertain,

the outcome with respect to privatization is very

difficult to predict. (See box 12-A for a more

detailed itemization of these factors.)

Traditional telephone companies have generally

considered the development of broadband intelligent networks (moving in an evolutionary fashion

from narrowband ISDN to broadband ISDN) as their

primary strategy for competing to meet the communication needs of business.55 However, as already

noted, the full implementation of these systems is

still a long way off. Thus, in the interim, telephone

companies are undertaking a number of measures to

forestall the migration of large users from their

networks. To this end, they have moved to upgrade

and enhance traditional Centrex services56 and to

develop hybrid network solutions that combine

intelligent customer-premises equipment with telephone company transmission and multiplexing services, allowing customers much greater flexibility

and control at reduced costs.57 To meet the growing

demand for data transmission services, for example.

RBOCs are now offering CO-LANS, a centraloffice-based local area network service .58 These new

offerings have proved quite successful, not only m

terms of restraining the growth of the customerpremises market,59 but also in terms of providing the

telephone companies and their customers a solid

transition path for moving toward and implementing

ISDN.60 TO avoid the loss of business customers, the

traditional telephone companies have also been

more aggressive in their pricing and marketing

strategies, offering much greater flexibility in the

pricing and packaging of services. In a recent effort

to generate interest in ISDN, AT&T, for example, — -—

54pepPr, op. cit., fOOtnOte 9! P. 46.

55A~ noted by Tom Vdovlc: “Mo~t ~~pwlally, lSDN be,comes impoflant because it offered a universal scheme whereby significant new fUnCtlOnaJlly

for both voice and data (and possibly even higher bandwidth applications such as video) could be offered to corporate customers but controlled and

managed via AT&T and the BOG custody of the public networks. This was reinforced by the realization that unless they moved to create these new

levels of both network intelligence and control for theu customers, they would lose serious competitive advantages as corporate usrs plunged ahead

with their private networking efforts . .“ Tom Valowc, “Public and Private Networks: Who Will Manage and Control Them?” Tefecommunicafiom,

February 1988, p. 42.

56cenuex is tie general nae for a switched business telecomm~icatlon service tha[ IS provided from he telephone company cenmal office. An

alternative way of achieving switching services is through the purchase of a PBX chat IS located on [he customer’s premises and IS controlled and

maintained by the customer. For a comparison of these two types of service, see John R. Atwahams, “Cmrex Versus PBX: The Battle Ior Features and

Functionality,” Teiecommunicarions, March 1989, pp. 27-28,31-32.

sTFor discussions of these strategies, see Martin H. Singer, “Hybrid Networks Move to Telecom’s Center Stage,” Telephony, Mar. 6, 1989, pp.4l-51;

Bob Vinton, “Bells Eyeing MAN Market,” CommunicarionsWeek, Apr. 10, 1989, pp 34, 38-W; and Martin Pyykkonen, “Centrex Now, LSDN L.atcr.”

Telecommunications, Febmary 1987, pp. 53, 54, 84.

SgFor a discussion, see Anne-Marie Rousscl, “Central Office stepping Stones,” CommunicationsWeek, CLOSEUP, June 27, 1988, p. C-6.

59 M~ern dlglt~ cen~ex ~N1ce has been ~ainlng ~l~ket share since it first became available in 19xzl, With tie number of Centrex telephones [n the

United States growing at about 5 percent per year. However, over 50 percent of all Centrex Iincs in the United States are still provided from analog central

offices. Abrahams, op. cit., footnote 56, pp. 27-28.

60As ~ykkonen hasnot~: “For tic loc~ Opratlng Companies here is ~ made-off to be made regarding tie pace at which ISDN services are introduced

versus the degree of gracefid upgradability which can be implemented in the central office switch. . . . The commitment that has been made by carriers

and equipment vendors to ISDN is sufficient to overcome these obstacles over the long teml The question is, how quickly can the obstacles be overcome

while being economically feasible for all pames concerned?” Op. cit., footnote 57, p. 54. For one discussion arguing in favor of an evolutionary stratcgz,

see Ye-Sung Cho, “For ISDN, There’s No Need to Dismantle the Network: A Smooth Transition is Possible,” Communication.~ Week, May 23, 1988,

p. 17. Bellcore recently announced a technological breakthrough in internetworking that WII1 facilitate an evolutionary strategy and thus might boos[

ISDN use. Currently, to offer ISDN services, L,ECS may have to invest between $3 million and $5 mdllon in a new digital switch for each ISDN central

office. However, with Bellcore’s new breakthrough, telephone companies can mternet 1 A iw~tches with modern digital switches, and thus protect some

of their investment in embedded equipment. Sec Steven Titch, “Bellcore Breakthrough M,iY Boost lSDN LIse,” CommunlcatiomWeek, Nw’. 7, 1988,

p. 1.

GIBe~ Schultz, “AT&T TO Let Telcos offer Users Free ISDN,” Communications We?h Mti 20. 19891 P. ~.
336 ● Critical Connections: Communication for the Future

Box 12-A—Factors Affecting Control of

Public and Private Networks

. Ongoing convergence of computers and telecommunications

. Development of ISDN and other intelligent

network capabilities

. Increased use and deployment of T 1 networks

in private networks

. The Be-Your-Own Bell phenomenon whereby

companies can sell excess capacity

. Increasing utilization of central office switches

as virtual PBXs

. BOC initiatives to create more “hands-oncontrol” for customers

. Acceptance of telecommunications as a corporate, strategic resource

. IXC/BOC success and lack of success in

traditional data communication/computing

markets

. The success of traditional data communication/computer equipment providers in traditional telecommunication markets

. ONA and the distribution of network control to

“private” service providers

KEY: BOC=Bell operating company; ISDN=Integrated services

digital network; IXC=Interexchange Carrier; ONA=Open

network architecture; PBX=Private branch exchange

SOURCE: Tom Valovic, “Public and Private Networks: Who

Will Manage and Control Them?” Telecommunications, February 1988, pp. 42-47.

has agreed to let its telephone customers offer their

users free ISDN.

61 -

What still needs to be determined, however, is

how responsive the business community will be to

these telephone company overtures. Today there are

more than 50 organizations involved in ISDN trials.

(See figure 12-4 for a breakdown based on organizational type.) However, many corporate executives

continue to be unaware or quite skeptical about the

promises of ISDN, questioning its value in meeting

their needs.62 As Travers Waltrip, Vice President of

Travelers Co., has noted:

In actuality, large corporations have built their

own de facto ISDN. The environment . . . is a

seamless, integrated data, voice and image all-digital

network that has tremendous flexibility. Therefore I

do not believe large corporations will benefit (at least

initially) from commercial ISDN for intracorporate

communications . . . At least through the early

1990s, most large corporations will follow their

existing communications strategies.63

In addition to functionality, cost will also be a

critical factor determining demand for ISDN in the

corporate business community. According to a

number of surveys, most users want cost savings

above all, and thus would be unwilling to pay more

for ISDN than they are presently paying for telecommunication services. Those most reluctant to spend

a lot of money are businesses that have recently

invested in new sophisticated telecommunication

and switching systems based on pre-ISDN technologies, a sizable sector of the potential ISDN market by

most accounts.64 What ISDN will cost, however,

remains uncertain. Until very recently there was no

pricing information available to potential customers.

Those who signed up early for ISDN trials did so on

the basis of customized contracts, with many of the

details kept under wraps.65

The time required to modernize the public communication infrastructure is also an important variable determining the future relationship between

public and private communication networks; however, its effect can work in two contradictory ways.

On the one hand, the longer it takes for ISDN and the

intelligent network to be implemented, the greater

the investment sunk in private systems. Moreover,

the more established communication departments

become within large corporations, the less willing

blBeth Schulti, “AT&T TO ht Telcos Offer Users Free ISDN,” CommunicationsWeek, Mar. 20, 1989, P. 2.

62A5 not~ by Michael Hurwicz: “primW Rate ISDN was designed to be used the same way as T1 circuits are currently used-to Cm muhipk data

and voice charnels between private branch exchanges (PBX) or centrat office switches and, less fr~uently, to serve as a single high-speed data channel

for applications requiring that kind of throughput. Although no single characteristic of ISDN makes it obviously superior to anything else around, the

technology offers anumberof increment~ improvements over other digital transmission technologies.” Michael Hurwicz, “Even Users Who See Promise

Are Still Troubled By Questions,” Computerworfd, Dec. 12, 1988, p. 69. For additional discussions of user skepticism of ISDN, see “ISDN: Another

Version of the Emperor’s New Clothes?” Data Communicatio~, December 1986, pp. 4560; “ISDN on Trial,” Daturnutwn, Feb. 1, 1987, pp. 51-56.

@T Travem Walt.rip, “ISDN and the Large Corporation,” Telephony, May 9, 1988, PP. 40~1.

64For Cxmple, it is e~at~ that, over the past 5 yews, PBX replacement has t~en place in the united States ~d EWOp tit a rue of over 60 percent.

See Lee, op. cit., footnote 20, p. 57.

fi!jw Kathl~n Killette, “Controversial Costs: Though Two Tariffs Have Been Filed, Analysts Agree ISDN Pricing Remtins obsc~e,”

CommunicatwnsWeek, CLOSEUP, Sept. 19, 1988, pp. C-8, C-9.
Chapter 12-Modernization and Technological Development in the US. Communication Infrastructure ● 337

Figure 12-4--Number of ISDN Users by Industry

Colleges & Univ

Communications

Financial Services

Aerospace

Medical

Fed Gov’t & Defense

State Government

Manufacturing

Telemarketing

Insurance

Other

0 1 2 3 4 6 6 7 8 9 10 I 1 1213

SOURCE: Cowri~ht 1988 by CMP publications, Inc.. 600 Communiw

Drive, ‘Manhasset, NY 11030. Reprinted from Commuicatior?sV16ek with permission.

they may be to give up such control at some point in

the future. As Tom Valovic has pointed out:

Having painfully learned the joys of autonomously operating a network, and in large measure

having succeeded in the task, it seems unlikely that

network managers will hand control of their network

operations back to the comforting but potentially

smothering embrace of AT&T and the BOCs [Bell

operating companies].@

On the other hand, time has also demonstrated some

of the hidden costs entailed in developing private

networks. Recently, for example, a number of

companies, facing cost overruns and a scarcity of

manpower and technical expertise, have decided to

give up their efforts to develop their own networks

and call for bids from telecommunication vendors.67

Given these uncertainties, it is difficult to predict

how much privatization will take place within the

communication infrastructure. However, it is clear

that, to the extent that businesses continue to

establish their own private communication networks

at their present rate, fewer societal resources will be

available to develop and modernize the publicly

shared network.68 Under such circumstances, a

spiraling effect might take place, whereby the lack

of investment in the public network would lead to

greater bypass and unbundling. Moreover, such a

two-tiered system might prove to be inefficient,

especially to the extent that new technologies, such

as fiber optics and common channel signaling could,

over the long run, allow for greater flexibility within

a single communication network.

Factor 3: The potential inefficiencies that

might result from a lack of national coordination and planning.

The divestiture of AT&T, accompanied by a

national policy of deregulation, has led to heightened competition among economic players in the

communication infrastructure, as well as to the

fragmentation and decentralization of the process by

which major communication decisions are made.

Some observers see these changes as being highly

favorable for the modernization and development of

the U.S. communication infrastructure.69 Pointing to

evidence such as AT&T’s recent decision to write

down $6.7 billion as part of its modernization

effort, 70 they argue that competition has fostered

innovation and hastened the deployment of new

technologies. For example, in his analysis comparing the rapid rate of innovation in the computer

industry with the slow rate in communication

industries, Kenneth Flamm makes such a case.71

And, in fact, as discussed in chapters 3 and 4, it was

just such a perspective that served as part of the

@V~ovic, op. cit., footnote 55, p. 45.

6TForadi~cuw10n, ~WJo~Fo@, “Menl]l Shifts Getrs: sollcl~ Network Bids,” Co~~~ca~On~~eek, OCI. 21, 1988, pp. 1, 55; Kelly Jackson, “Red

Ink Downs Net,” Commum”cutionsWeek, Nov. 21, 1988, pp. 1, 43; and John Foley, “Probicms Force {Jsers to Retrench,” Cornmunlca[ionsWeek, Nov.

7, 1988, Pp. 1,60.

6SFor exmple, it hm b=n estimated fiat, in 1988, ne~ly $17 billion was spent on private networks in the United States. which is more than the tot~

spent by all of the regional Bell holding companies on infrastructure development. Davidson, op. cit., footnote 41.

69S= Ger~d Fa~haber, Te/ecom~ni~ariOm in Tu~oi/ (cambridgc, MA: Balllnger ~bllshing company, 1987); and Robert W. Crandall,

*’Telecommunications Policy in the Reagan Era,” Re@arion, No. 3, 1988, pp. 28-33, for two very positive evaluations of the post-divestiture period.

See also, Kenneth Labich, “Was Breaking Up AT&T a Good Idea?” Fortune, Jan. 2.1989, pp. 82-87

mpeter coy, “Modernization Costs Give AT&T First Annual ~ss> “ The Washington Post, Jan. 27, 1989, p. B-1. As noted, “AT&T took a $6.7 billion

pretax charge in the fourth quarter of 1988 to cover costs of accelerating its transition to digital technology. The company is scrapping outdated analog

phone equipment and moving, retiring or laying off 16,000 employees.”

71F]mm, op. Cit., fmmote 26, pp. 13.61. However, Flamm notes that, paradoxically: “The old market structure might actuallY have both lncreas~

basic research and slowed imovation. And deregulation and increased competition might step up the pace of imovation yet reduce spending on basic

research.” Ibid., p. 59. Flamm’s argument would account for why, as already noted, the T] multiplexer was developed under the old Bell system, but

neither widely deployed nor perfected until after divestiture when, in a competitive envm.mrnent, start-up high technology firms such as NET began to

develop it.
338 ● Critical Connections: Communication for the Future

rationale for the divestiture of the Bell System in

1984.72

Others, however, bemoan the destructive aspects

of competition, pointing to the inefficiencies it

might create.73 They argue, moreover, that cooperation among government and industries, as has been

the case in Japan, can lead to the most productive and

efficient deployment of new communication technologies.74 The possible negative impacts of competition on research and development have been of

particular concern, even at the time of divestiture.75

However, to date, the evidence on R&D is still

inconclusive. 76 As is noted below, although the

funding for research and development at Bell Labs

and Bellcore has, in fact, increased since divestiture,

it is not clear that these funds are being employed

most efficiently, or that a commitment to joint

research will survive in the future when the interests

of the telephone companies diverge and/or the

competition among them becomes more intense.77

Others claim that competition will retard the

development of a national ISDN network. Instead, it

will foster the emergence of separate, and incompatible, islands of technology .78 As evidence, they cite

the difficulties entailed in establishing national

standards in a highly fragmented organizational

setting--difficulties that were noted and discussed

in chapter 11. They point, moreover, to the problems

involved in setting uniform prices for a basic set of

nationwide services. They also question whether—

under regulatory circumstances in which RBOCs are

constrained from providing services beyond their

own local access and transport areas (LATAs), and

in which there are no guarantees that interexchange

carriers will provide services equivalent to those

provided by the RBOCs—the United States will

ever be able to develop a truly national, communication infrastructure. As Rolf Wigand has pointed out:

It is not too difficult to imagine the immense

technical complications and fragmentations encountered by a customer trying to link ISDN services

across several widely dispersed locations nationally.

One might question if such conditions will then

require special hardware and software for protocol

conversion purposes, a condition that was by itself

one of the key driving forces to develop ISDN in the

first place. Have we then come full circle in this

development to digitize information and data moving in the national networks?79

Whereas the procompetitive strategy is most

highly favored among policymakers in the United

States, the planned approach is more common in

Europe and Japan (with the partial exception of

72KeMe~ ~ow ~ovide5 the Cimsic account of tie relationship between technological development and regulated monopolies. In his 1962 analysis,

he showed that, all other things being equal, monopolies have less incentive to renovate than firms that can gain some monopoly power through

technological advancement. See Kenneth J. Arrow, “Economic Welfare and the Allocation of Resources for Invention, ” National Bureau of Economic

Research, Special Conference Series, The Rate und Direction of Inventive Activity Ecoru)mi( and Social Factors (Princeton, NJ: Princeton University

Press, 1962). For a discussion that covers the recent theoretical literature, .sec Sanford V. Berg and John Tschirh~, “Technological Change Under

Regulation,” Natural Monopoly Regulation Principles and Practice (New York, NY: Cambridge LJniversity Press, 1988), ch. 10.

TsFor a gener~ Cfitlque we, for instance, Robefl Reich, Tales of a New America (New York, NY: Time Books, 1987). For a discussion focusing on

communication technology, see John C. McDonald, “Deregulation’s Impact on Technol~ )gy. “ IEEE Communications Magazine, January 1987.

74Mich=1 BOITUS, “J~ane~ Telecommunications: Reforms and Trade Implications, ” Cahjorrua Management Review, vol. XXVIII, No. 3, Spring

1988; see also Jill Hartley, “The Japanese Approach to the Development of New Resldenti II Comrnunlcation Services, “ in MarJoric Fcrguson (cd,), New

Communications Technologies and the Pubhc interest (London, England: Sage, 1986) ~h 11, and Carla Rapaport, “The World’s Most Valuable

Company,” Fortune, Oct. 10, 1988, pp. 92-104.

TSThe problems fiat competition might create for R&D was ah-cady a concern for some al the time of divestiture. See, fOr ex~ple, the testimonies

of William Nordhaus (written testimony, In U S v. AT&T, 198 1); and Nathan Rosenberg, “Some Implications of H.R. 5158 for Technologlca] Innovation

in the Telecommunication Industry,” testimony prepared f“or the House Committee on IX’rgy and Commerce, Subcommittee on Telccommumcations,

May 7, 1982.

76Berg and Tschirh~, op. cit., footnote 72; see also David C. Mowery, “Assessing Ihc Effects of Divestiture on Bell Telephone Laboratories,”

Technovision, No. 7, 1988, pp. 353-375. There have already been some moves to do more proprietary research. In the past year, both t-JS WEST and

Nynex Corp. have set up their own independent research centers.

TTSome of ~ese problems, for example, have already been evidenced m other sectors

78see, for exmp]e, Wigand, opt Cit,, footnote 24, See also Tom Vdovic, “lSDN in tie United States: An Asses~ent,” Tele~ommuni~aliom~, December

1987, p. 7. As Valovic points out: “When it comes to ISDN, the timing of divestiture couldn’t have been worse. As it turns out, ISDN was Just embryonic

enough during the years preceding the “D” world not to have been a major concern for those contemplating how to slice the huge pie that was AT&T

into manageable pieces. And yet, in retrospect, it appears that divestiture has had a serious Impact on the development of ISDN in the United States and

will continue to do so until the extreme fragmentation of our regulatory climate becomes resolved in some meaningful fashion. ”

7~ignd, op. cit., fOOtIIOte 241 p. 41
Chapter 12-Modernization and Technological Development in the U.S. Communication Infrastructure ● 339

Great Britain) .80 These opposing points of view are

clearly evident in the strategies that these countries

are pursuing to implement ISDN. In the United

States, ISDN is being introduced in a segmented

fashion and in response to market demand. In

Europe and Japan, ISDN implementation will be

more technology-driven. Some provision is being

made now to meet current demand for digital

integrated services, but complete ISDN services will

be held back until they can all be introduced

uniformly. 81

With our poor theoretical understanding of the

processes of innovation, it is impossible, at present,

to determine which of these approaches will prove to

be the “best” for modernizing the communication

infrastructure. Some of the advantages and disadvantages inherent in each approach can be illustrated

by comparing the evolution of the intelligent network in Europe and the United States. The United

States, having benefited from a highly competitive,

economic environment, has moved much more

quickly to develop new commercial products and

services for niche markets than have the European

countries. The Europeans, having designed their

networks from the top down, are moving much faster

than the United States to deploy the signaling system

7 (SS7) switches, which are required to distribute

and market these new communication and information services .82

While acknowledging the untidiness of the U.S.

approach, New York Public Service Commissioner,

Eli Noam, casts recent U.S. developments in a

positive light. As he has described the state of the

future communication infrastructure:

The future network is one of great institutional,

technical, and legal complexity. It will be an untidy

patchwork of dozens or even hundreds of players,

serving different geographical regions, customer

classes, software levels, and service types, with no

neat classification or compartmentalization possible . . . The major characteristic of the open network

environment is substantial lack of central control

with no single entity being in charge. . . To leave

this system to the vagaries of hundreds of uncoordinated and selfish actors seems to invite disaster. Can

it work? Perhaps this is not the right way to frame the

question. Can there be a stable alternative in

economies that otherwise favor a market mechanism, and that want to stay on the leading edge of

applications? 83

Responding to his own question, Noam answers

it in the affirmative. To create an alternative to

central coordination and control, however, will

require that government establish a system of open

networking by structuring the ways in which interconnection is defined, policed, priced, and harmonized. As Noam notes, rules such as these are

presently being negotiated and debated at the State

and national levels under the heading of ONA. How

well the United States telecommunication infrastructure adapts and deals with the chaos and

competition of the postdivestiture era may very well

depend, therefore, on the outcome of the ONA

process.

Factor 4: The proactive role played by foreign

governments in modernizing their communication systems.

Although a number of governments throughout

the world are moving to privatize and/or deregulate

sectors of their communication systems, many of

them have retained a role for themselves in building

and modernizing their communication infrastructures in support of their industrial policies or other

national objectives. 84 Inspired by the Nora-Mine

report, the Government of France, for example,

assumed the leadership in developing and managing

Minitel, supplying terminals free to all telephone

subscribers, organizing a billing system, and providing basic services. It has also played an aggressive

role in planning for and introducing a national ISDN

8~orone ~xmple of ~i~ EmOpean ~rsPctlve, s= E~opean pflli~ent, Session DoCumen[s, Document a 2-0242/88, “Report Drawn Up on Behalf

of the Committee on Economic and Monetary Affairs and Industrial Policy on the Need to overcome the Fragmentation in Telecommunications, ” Nov.

8, 1988.

81 For a discussion, seep. Slaa, [S~N ~S DeSign problem (~iden: The Hague, Ruud Philipsen, April 1988).

gzpeter ~on, “Europe’s Intelligent Networks: A Glimmering StML” Telephun3, Au.g 22, 1988, pp. 32, 36, 37. Just as some of the problems of a

market-driven approach are coming to light in the United States, so the problems of a technology-driven approach are beginning to appear in a number

of European countries. For one discussion of such problems in France, see Mark Hunter, “France’ sGrand Computer Plan in Shambles: Consumers ReJect

Domestic Machines Despite $200 Million Purchase for National Schools,” The Washington Pos[, Mar. 19, 1989, p. H-8.

8SE11 M. Noam, “me Future of tie Pllblic Network: From the Stm to the Ma~ix,” Te/e~o~unicatio~, March 1988, pp. 58,60, 65,90. See Zlk30, “The

Public Telecommunications Network: A Concept in Transition,” Journal of Communication. vol. 37, No. 1, Winter 1987, pp. 30-47.

gqFor a dlsc~sion, see Wigand, op. Cit., footnote 24, pp. 48.
340 ● Critical Connections: Communication for the Future

by 1990.85 Similarly, the German Government,

through the Deutsche Bundespost, has invested

heavily in a network digitization program, which

will lead to the availability of total ISDN by 1993.86

Moreover, through the European Community, the

countries of Europe have agreed to cooperate to

build a “translational broadband backbone,” and to

conduct joint research and development in advanced

communication technologies through both the Research for Advanced Communications in Europe

(RACE) program (which focuses on telecommunication), and the European Strategic Programme for

Research and Development in Information Technology (ESPRIT) (which focuses on information technologies). 87 In addition, through the Commercial

Action Committee of the Conference of European

Postal and Telecommunications Administrations

(CEPT), the Europeans are planning to develop a

pan-European-managed data network.88

The Government of Japan has also retained

“strategic policy control over the process of

change”89 in telecommunication and the structure of

the telecommunication infrastructure. It has been

especially active in promoting new technologies,

making a commitment to invest over $120 billion

before 1995 for the development of a digital

broadband infrastructure, the Information Network

System (INS), and to provide $150 billion through

the Technopolis Program for model programs and

pilot projects targeted to both business and residential users.

Such national efforts are not confined to the

advanced industrialized countries. The governments

of Singapore and Brazil, for instance, view their

communication infrastructures as springboards that

will allow their countries to pass over the industrial

phase of development and leap directly into the

information age.90 Given this perspective, it is not

surprising that capital investment in Singapore,

measured as a percentage of communication sales, is

twice that of AT&T Long Lines and the seven

RBOCs combined.9]

A comparison of U.S. expenditures on communication with similar expenditures made in other

countries can be seen in tables 12-2 and 12-3. As

table 12-2 shows, based on the total amount of

expenditures, the United States ranks at the top of the

list. However, as evident from table 12-3, when a

comparison is made based on the growth of total

expenditures, the United States does not appear

among the top 10 spending nations.

Factor 5: The fractionated decisionmaking

process in the United States.

The national commitment and direction noted

above is in sharp contrast to the situation in the

United States, where the government has not exerted

strong leadership in determining and planning for

the Nation’s future communication needs. Commenting on the U.S. approach to ISDN, Eli Noam

observes, for example, that:

. . . virtually no public discussion of the ISDN

concept and its investment needs has taken place.

Instead decisions in favor of ISDN have been made

outside of public view by engineering bureaucracies

in government and equipment firms.92

Part of this lack of government leadership stems

from the widespread belief among policymakers that

the competitive marketplace is a more dynamic and

appropriate force for innovation and change than the

political arena. Equally important in explaining the

lack of a comprehensive set of national communicaS5’’The ISDN b~,” Communication International, June 1987, pp. 30, 32.

~’htegaung ISDN,*’ Comum”catiom International, September 1988, PP. ~v 46.

S7ESpR1T is ~ $5.6 bllliOn R&D Pro=m. ~~ording t. fie EurOpean &onomic Committee’s 1987 repo~, 108 of the program’s first 227 research

projects (referred to as Esprit 1) have been successfully completed, and have generated results of industrial significance. In phase 2, 155 new projects

will be undertaken. ESPRIT is supported by nearly all of the large European communication, computer, and information technology suppliers, as well

as by most large European research institutes.

ssFor a descriptlo~, x Denls Gilhooly, “The CEPT MDNS Project—Work in prOgresS,” Telecommunications, April 1988, pp. 47-54.

89 Michael B-s and Jo~ zy~an, “me New Media, Tel~ornrnunications, and Development: The Choices for tie (_Jnit~ Smtes and Japan,” BRIE

Working Paper #7 (originally prepared for a symposium organized by the Japanese Ministry of Finance and the Japan Center for International Finance,

August 1984), p. 22.

9CIS=, for exmp]e, Debbie Shimman, “Asia Moves kto tie Information Age,” Telecommunicatwns, January 1989, pp. 55-57; see also ~wmd ‘.

Nickoloff and Randolf Yeh, “Maintaining International Transmission Circuits Through a National Center,” Telecommunications, December 1988, pp.

52,57,58.

glwi]lim H, David~n, “Telecommunication Policy in Global Perspective,” unpublished paper, @t. 14, 1987.

92s=, fm ~discw~ion, Nom, opt cit., fw~ote 83. se ~so ~~ony M, Ru&owski, “Toward a Nation~ Information Fabric: Organizing for SucCeSS,”

Telecommunications, September 1987, p. 8.
Chapter 12--Modernization and Technological Development in the U.S. Communication Infrastructure ● 341

tion policy goals and strategies is the fact that, as

detailed and discussed in chapter 13, the political

decisionmaking structure is extremely fractionated,

giving rise to a number of jurisdictional disputes.

Because these conflicts allow, and even encourage,

stakeholders to play agencies and jurisdictions off

against one another, they serve to discourage attempts at cooperation and coordination. Moreover,

by creating numerous uncertainties with respect to

the outcomes of the policy process, they tend to

exacerbate the problems that government and industry face in planning for the future.

STRATEGIES AND OPTIONS

To encourage the modernization and development

of the U.S. communication infrastructure, Congress

could pursue three basic strategies. It could:

●

●

●

follow the lead of many foreign countries and

become more directly involved in developing,

planning, financing, and coordinating the development of the communication infrastructure;

provide indirect incentives to encourage longterm investment and development; and/or

remove regulatory barriers that presently serve

to discourage modernization as a consequence

of furthering some other goal.

A discussion of these strategies, and individual

options for achieving them, follows. A summary

appears in figure 12-5.

Strategy I: Direct government involvement in

the development, planning, financing, and

coordination of the communication infrastructure.

As discussed in chapter 4, policymakers in the

United States, in contrast with their counterparts in

many other countries, have traditionally been reluctant to intervene in economic affairs. Instead, they

have preferred that economic decisions be made

through the processes and mechanisms of the

marketplace. In recent years, this general predisposition against government involvement has been

strongly reinforced by the prevailing mood of the

country in favor of deregulation. In such an environment, an exceptionally strong case would have to be

made before adopting a strategy that goes against

this trend.

There are, however, a number of arguments

favoring a more direct Federal role in the realm of

communication. Just as a Federal interest in national

defense, economic development, and equity served

to justify a Federal role in the development of

highways and rural electrification, so too might

communication networks be federally promoted as

the highways of an information age. And just as the

Federal Government provided over $109 billion for

highway construction during the 20-year period

from 1956 to 1976,93 so it could be argued that,

today, government should make a comparable commitment to the development of a communication

infrastructure. While arguments of this sort have not

received much support in the Federal arena, they

have been given a more favorable reception at the

State level. For example, economic development

issues are now being factored more and more into the

decisions made by State regulators.94

Policy options that Congress might adopt to

execute such a strategy include the following:

Option A: Create a new legislative mandate for

promoting the Nation’s communication infrastructure that both updates the Nation’s

communication policy goals and clearly designates responsibility for implementing them.

Goals are statements of values that serve to guide

decisionmakers. They signal a commitment, identify

aspirations, clarify objectives, and integrate diverse

elements through the establishment of a common

bond. Thus, one step that Congress might take to

promote the modernization of the Nation’s communication infrastructure would be to declare modernization as a national goal, and both delegate the

responsibility and provide the organizational resources and authority required for it to be effectively

carried out. To be specific enough, and to be

sufficiently emphatic in setting such a goal, Congress would probably need to revisit and revise the

1934 Communications Act.

9W,S. Dcpmrnent of Transportation, Federal Highway Administration, America on rhe Move: The Story cfthe Federal Hig~ay program and the

Federal-State Relatwnship, 1977.

gdR~endy, for ex~ple, tie New York State Public Service Commission undertook an investigation to determine whether New York State and New

York City me in danger of losing a competitive advantage due to the failure of the area to foster ISDN. For a discussion, see John Foley, “N.Y. Probes

ISDN,” ComrnunicatwnsWeek, Sept. 26, 1988, p. 1.
342 ● Critical Connections: Communication for the Future

Table 12-2—Top 20 Countries: Comparison of Total Expenditures for Communication, 1987-1988

1988 1987

expenditures expenditures Total Total Percent Percent

Country (U.s.$ooo,ooo) (U.s.$ooo,ooo) increase decrease increase decrease

United States . . . . . . . . . . . . . . . . 24,451.8 24,549.2 97.4 0.4

Japan . . . . . . . . . . . . . . . . . . . . . . . 13,761.5 12,178.3 1,583.1 13.0

West Germany . . . . . . . . . . . . . . . 10,175.5 8,712.1 1,463.4 16.8

France . . . . . . . . . . . . . . . . . . . . . . 6,219.8 5,714.4 505.4 8.8

Italy . . . . . . . . . . . . . . . . . . . . . . . . . 4,331.1 3,837.0 494.1 12.9

United Kingdom . . . . . . . . . . . . . . 3,547.4 3,322.0 225.4 6.8

Spain . . . . . . . . . . . . . . . . . . . . . . . 3,148.2 2,341.0 807.2 34.5

Canada . . . . . . . . . . . . . . . . . . . . . 2,746.6 2,443.6 303.0 12.4

Switzerland . . . . . . . . . . . . . . . . . . 1,859.3 1,623.2 236.1 14.5

Korea . . . . . . . . . . . . . . . . . . . . . . 1,836.8 1,525.8 311.0 20.4

Sweden . . . . . . . . . . . . . . . . . . . . . 1,288.2 1,326.7 38.6 2.9

Brazil . . . . . . . . . . . . . . . . . . . . . . . 1,263.3 1,050.4 212.9 20.3

Australia . . . . . . . . . . . . . . . . . . . . 1,090.0 1,108.8 18.8 1.7

Austria . . . . . . . . . . . . . . . . . . . . . . 1,048.1 913.6 134.5 14.7

Taiwan . . . . . . . . . . . . . . . . . . . . . . 902.5 702.7 199.8 28.4

Netherlands . . . . . . . . . . . . . . . . . 769.7 695.5 74.1 10.7

South Africa . . . . . . . . . . . . . . . . . 738.4 965.0 226.6 23.5

Norway . . . . . . . . . . . . . . . . . . . . . 706.2 621.7 84.5 13.6

Belgium . . . . . . . . . . . . . . . . . . . . . 626.8 575.8 51.0 8.9

India . . . . . . . . . . . . . . . . . . . . . . . . 608.8 598.8 10.0 1.7

NOTE: Totals may not add due to rounding.

SOURCE: Reprinted with permission from Telephony, Feb. 22,1988, P.42.

Table 12-3--Top 1O Growth Budgets for Communication, 1987-88

1988 expenditures 1987 expenditures Total Percent

Country (U.s.$ooo,ooo) (U.s.$ooo,ooo) increase increase

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,761.5 12,178.3 1,563.1 13.0

West Germany . . . . . . . . . . . . . . . . . . . . . 10,175.5 8,712.1 1,463.4 16.8

Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,148.2 2,341.0 807.2 34.5

France . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,219.8 5,714.4 505.4 8.8

Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,331.1 3,837.0 494.1 12.9

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,836.8 1,525.8 311.0 20.4

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . 2,746.6 2,443.6 303.0 12.4

Switzerland . . . . . . . . . . . . . . . . . . . . . . 1,859.3 1,623.2 236.1 14.5

United Kingdom . . . . . . . . . . . . . . . . . . . . 3,547.4 3,322.0 225.4 6.8

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,263.3 1,050.4 212.9 20.3

NOTE: Totals may not add due to rounding.

SOURCE: Reprinted with permission from Telephorry, Feb. 22,1988, p.43.

Many countries throughout the world have al- also the highly contentious and politicized nature of

ready made this kind of national commitment to most communication issues.

developing a modern communication infrastructure.

However, in the United States, establishing national At the present time, however, reaching a new

goals on this order-especially in the realm of legislative consensus may not be as difficult as it has

communication policy—has been much more rare.95 been in the past. The situation is very fluid; past

The reluctance to set such goals reflects not only the alliances are in a state of flux, technology is rapidly

pragmatic style of American politics in general, but advancing, and the nature of the future communicagsAswehave~n,bmicU.S. commumcationWlicywmfirstestablishedattieConstitutional Conventionwhenthedelegatesagreed toincludewitiin

the Constitution three clauses that provided for freedom of the press, the protection of intellectual property, and the establishment of postal roads. It took

almost 150 years, however, for the legislature to debate and establish additional, national communication goals, first in 1912 and 1927 with the passage

of the Radio Acts, and subsequently in 1934, with the passage of the Communications .@. Although Congress did re-evaluate communication goals

again from 1976 to 1980, these efforts to revise the 1934 Communications Act failed for a lack of consensus. For a discussion, see Eric C. Krasnow,

Lawrence D. Langley, and Herbert Terry, The Pofitics ofllroudcasf Regulatwn (New York, NY: St. Martin’s Press, 1982).
Chapter 12--Modernization and Technological Development in the U.S. Communication Infrastructure ● 343

r--’-

——— ––--l

8

iE

o
344 ● Critical Connections: Communication for the Future

tion infrastructure is still quite uncertain. This

situation may provide Congress with a window of

opportunity. Requiring some resolution of the issues, many stakeholders agree that “something”

must be done. Moreover, not knowing what the

future entails and how their interests might fare in

relationship to it, stakeholders may be much more

willing to cooperate in updating and redefining the

goals and rules of operation of the communication

infrastructure. As John Rawls observes in A Theory

of Justice, it is often easier for people to agree among

themselves on rules of the game when the situation

is uncertain-that is, when they do not know

whether, as participants, they will start out from a

position of advantage or disadvantage.96

Option B: Increase government funding for research

and development in the area of communication

and information technologies.

As described in chapter 4, the United States has a

long tradition of funding scientific and technical

research and development. Although the amount of

funding has tended to fluctuate in accordance with

perceived science crises, such as Sputnik, policymakers have generally been in agreement about

the need for such support. 97 Most recently, there has

been a decline in the amount of money the Federal

Government allocates to R&D that is not defenserelated. However, concerns about the ability of the

United States to compete effectively in the global,

high-technology marketplace have led to proposals

calling for greater funding. Reflecting these concerns, over 200 R&D bills were introduced in

Congress in the past 2 years, 12 of which were

related to communication and information technologies.

One problem in providing government funding

for R&D is determining what constitutes an appropriate amount of funding and how such a sum might

be deployed effectively. This problem stems, in

large measure, from our limited understanding of the

relationships between R&D and innovation. Compounding this is the fact that, as economists Richard

Nelson and Nathan Rosenberg have pointed out,

choices about the type and amount of R&D support

can only be determined on a case-by-case basis.98

In evaluating proposals to increase government

funding of R&D, one key question is whether

communication technology merits greater support

than other technologies.% Recognizing the need to

make such choices, a government panel (led by the

presidents of the National Academy of Sciences, the

National Academy of Engineering, and the Institute

of Medicine) urged in a recently released report,

“Federal Science and Technology,” that the White

House and Congress be much more systematic about

setting priorities for Federal spending on science and

technology. 100 

In the case of communication technologies, the

argument could be made—as it has been in Europe

and Japan—that they are unique, insofar as they

constitute part of a nation’s underlying economic

and social infrastructure. In the United States,

semiconductor technology has received R&D support on the grounds that this technology is critical to

maintaining both a sound defense and a competitive

national economy. 101 In fact, to support the superMJohn Rawls, A Theory of Justice (Cambridge, MA: Belknap pres$, i~l).

gTAspointed out in ch, 4, the role of gover~ent in supporting R&D has been based on the assumptions that: 1) new knowledge is anecess~ condition

for economic growth; 2) new knowledge originates in ba,,ic research; 3) the supply of knowledge is unlimited, and is not subject to diminishing returns;

4) the government should support basic research in support of national security, the economy, for reasons of health, etc.; and 5) industry lacks the

economic incentive to conduct the socially optimum amount of research. Willlam LeIss, “Industry, Technology and the Political Agenda in Canada: The

Case of Government Support for R&D,” ,Science and Public Policy, vol. 15, No. 1, pp. 57-65 For a discussion, see also Roger G. Nell and Linda Cohen,

“Economics, Politics and Government Research and Development,” Working Papers in Ekonom ics, E-87-55, The Hoover Institute/Stanford University,

Stanford, CA, December 1987.

98For gener~ d15cw5ion5 by Ro=n~rg of tie problems entailed in techn~logica] ch~ngc and innovation, se Na~an Rosenberg, perspectives on

Technology (London, England: Cambridge University Press, 1976) and lnsidt~ the Bluck Bc)x-– Technology and Economics (Cambridge, IvIA: Cambridge

University Press, 1982). See also, Richard Nelson, testimony, Communicotlons and Computers in the 21st Century, hearings betore the Technology

Policy Task Force of the House Committee on Science, Space, and Technology, June 2$, 1987 (Washington, DC: U.S. Governmen[ Printing Office,

1987).

99NelSon m~es this point in his testimony. Ibid.

1OOA$ tie report notes: “In a period of limited resources, there is an even greater premium on making the best-informed budget allocations possible,”

As cited in Colleen Cotdes, “Panel of Top Scientists Urges White House and Congress To SC( Research Priorities Before Deciding on Funds,” The

Chronicle of Higher Education, Jan. 4, 1989, pp. Al, A22.

IOIA Siml]m ca5e ha5 b~n made fbr superconductivl[y Sec the Repo~ of the {~ommittee to Advise the President on High Temperature

Superconductivity, High Temperature Superconductivity: Perseverance and Cooperation on the Road to Commercialization, The White House Science

Council, January 1989.
Chapter 12--Modernization and Technological Development in the U.S. Communication Infrastructure ● 345

conductor industry, the Department of Defense

(DoD) has recently decided to undertake research on

high definition television (HDTV), as described

below. Advanced computer technology has also

been suggested as an area requiring government

support. 102 Concerned about the state of the U.S.

economy, the National Research Council recently

noted, for example, that:

The U.S. position in this [the superconductor]

field is threatened from without by external competition and from within by underappreciation of the

need for basic research.103

In considering the amount of R&D funding, it is

also necessary to address the question of how such

government monies are to be employed. Public

support for a government role in R&D has tended to

decline as government programs have increasingly

moved away from programs targeted to basic

research towards programs in support of applied

research. 104 However, in recent years, a number of

economists have pointed out that, in terms of

meeting the challenge of competition, it is perhaps

in the area of applied research that the greatest

efforts need to be made.105 In this regard, a number

of people have specifically cited telecommunication

research as an area requiring a greater market

perspective, given its long tradition of focusing on

basic research.106

Alternative ways of using government R&D

funding are discussed further in the options that

follow. However, it should be noted that, as Roger

Nell and Linda Cohen have emphasized, the political context in which R&D decisions are generally

made and implemented is not particularly well-

-suited to making funding choices based on what has

generally been considered to be the soundest criteria

for supporting R&D. As they point out:

. . . most programs are not clearly a waste of money,

especially in early exploratory research. The problems arise because mid-project managerial decisions

are directed from matters of economic efficiency by

a host of political factors: impatience to show

commercial progress, distributive politics, the inability to commit to long term, stable programs, and

a mismatch between the types of industries that are

most likely to underinvest in research and those that

are most attractive politically to subsidize.107

Option C: Establish government- affiliated institutional arrangements to foster the research,

development, and deployment of communication

and information technologies.

Today, the governments of Europe and Japan are

focusing their national research efforts on commercial development in high-technology areas such as

electronics, biotechnology, material research, and

informatics. In the area of HDTV, for example, the

European Community is establishing a special

company to foster the worldwide use of the Eureka

HDTV standard, which has been developed by its

leading electronic firms, including Philips, France’s

Thomson SA, West Germany’s Bosch BMbh, and

Finland’s Nokia.108

In contrast to these countries, where there is

general agreement that R&D should be conducted in

support of general economic development, most

industrial-related R&D in the United States is

executed on behalf of Federal agencies, the most

prominent being the (DoD).l09 Most recently, for

example, DoD has decided to fund the development

of an advanced high resolution video display, not

only as a means of providing high-quality display

technology for military purposes, but also as a way

of fostering the revival of U.S. television manufacIOZ~*~feW~pmmentWmtS in the HDTV plctWe,l’~ro~caSting, vol. 115, Noa 26, De( ,26, 1988, pp. 32.33; and’’Thc U.S. ‘s Semiconductor Battle

Plan,” ibid., p. 33.

l~As ci~ in, ~tch Bets, “Feder~ Panel: Aim High in R& D,” Compurerwor/d, NOV 28, 1988, p. 95.

lo4~d, ~ Roger NO1l and Linda Cohen have ~inted out, politlc~ Supp~ is not necess~ily equated with those projects hat would benefit IIIOSt f~lTl

government intervention in support of R&D. For a discussion, see Nell and Cohen, op. clt,, footnote 97.

105For me discussion, ~ Na~m Rosen~rg and W. ~wmd ste~mueller, “can Americans ~~n to B~ome Better ~itators?” CEPR Publication

No. 117, Center for Economic Policy Research, Stanford University, Stanford, CA, January 1988.

lo6For one discussion, see Michael Sckage, “Bell Labs Is Imng on Genius But Short m the Marketplace,” The Washington Post, Mar. 1, 1987. For

another account of post-divestiture research at Bell Labs, see Denis Gilhooly, “A Mission From AT&T,” Telecommunications, February 1988, pp. 26,

30,33.

lmNolI and Cohen, op. Cit., footnote 97.

108For adjscussionof ~ation~ HDTV s~ategies, sw Hugh Cmer ~n~ue, “ch~sing the TV of tie Fut~e,” Technology Review, VC)l. 92, No. 3, April

1989, pp. 30-40; and Alan G. Stoddard and Mark D. Dibner, “Europe’s HDTV: Timing Out Japan,” Technology Review, April 1989, pp. 3940.

1@Lxmrd L. Lederman et al., “Research Policies and Strategies of Five Industrial Nat Ions, and Implications for the United States,” Science and

. Technology Studies, vol. 4, No. 1, p. 25.
346 ● Critical Connections: Communication for the Future

turing and semiconductor industries.110 NASA has

also been conducting R&D on HDTV, but on a much

smaller scale than that proposed by DoD.111 

Today, there are over 15,000 individual organizations in the United States associated with government labs. Given their number and variety, it is

difficult to generalize about the pros and cons of this

kind of government-affiliated research. However, as

illustrated in box 12-B, 112 there are both benefits and

costs associated with conducting research in government-affiliated research organizations. Any government decision to fund research in communication

and information technologies would need to take

these into account.

Option D: Establish an agency within government

with the responsibility for directing and coordinating the development of communication and

information technologies.

Given the divestiture of AT&T and the decentralized and fractionated nature of the U.S. communication policymaking process, it is not surprising that,

in the United States today, there is no central,

organizational focal point for conducting R&D in

communication and information technologies.113

Commenting on the lagging state of R&D in the

United States, many of those involved in technology

development and innovation processes have recently argued that if sufficient research is to take

place, there needs to be an organizational focal

point, and advocate, for it within government.

Testifying in 1987 before the Technology Policy

Task Force, Professor Lewis Branscomb of the John

F. Kennedy School of Government, Harvard University, noted, for example, that:

The Department of Commerce as currently constituted and as constituted in most of its history has no

particular stomach for a more active role of this kind,

notwithstanding the large number of scientific and

technical agencies in the Department. Their missions

are very neatly circumscribed and don’t constitute in

any sense an open-ended obligation to try to

negotiate partnerships with the private sector that

come to grips with these technology issues.114 

One recent step to try to rectify this situation has

been to enhance the role of technology development

within the Department of Commerce by reconstituting the National Bureau of Standards (now the

National Institute of Standards and Technology),

providing it with more responsibilities in this

area.

115 Another suggested alternative is to reconstitute the Office of Science and Technology Policy

within the Office of the White House, connecting it

in some formal way with the Council of Economic

Advisors to give it the prominence and authority it

would require.l16 

While such alternatives would address some of

the more general problems of R&D in the United

States, they would in no way assure that communication and information technologies would be targeted

for R&D. In fact, such organizational arrangements

would serve to enhance the competition among

technologies for funds—a situation, it should be

emphasized, that would be welcomed by most

science policy experts. Thus, to promote R&D in

communication technologies, per se, might require

expanding the role of technology development

within the Federal Communications Commission

(FCC). 11 7

Option E: Facilitate the evolution and deployment of

new communication technologies by promoting

the establishment of interindustry and industry/

user @-urns. —-.

1 l%velw Rich~ds, “pen~gOn Aims To Revive U.S. TV Industry,” The Washington Post, Dec. [9, 1988, p. 1.

11 IBro~c@ting, Jan. 2, 1989, pp. 94. ~~.

112BW Bozeman and Michael ~ow. “U.S. R&D Laboratories and Their Environments: Public and Market Influence,” final report to the National

Science Foundation, Science Resource Studies, Mar. 1, 1988.

113~S lack of a ~wrdlnated R&D effo~ was noted, and its impact analyzed, even bet~re divestiture. For such a discussion, see Glen O. Robinson,

“Communications for the Future: An Overview of the Policy Agenda,” Cowntuucutions for Tomorrow. Policy Perspectives for the 1980s (New York,

NY: Praeger, 1977), ch. 14. At that time, Robinson concluded that the lack of coordinabon in R&D planning and investment did not constitute a serious

problem.

114~wis BraMcomb, Cements, Comunlcatwm a~CoW~ers in tfi zlstcen~ry, He~ing ~fore the Technology Poiicy Task Force Of the HOUSe

Committee on Science, Space, and Technology, June 25, 1987 (Washington, DC. [J.S, Government Printing Office, 1987), p. 65.

115These ~h~ges, ~ ~el] ~ the ~hangc. in name, were provided in Publlc Law 100-$ I ~. Subpti A.

l16Nelson, op. cit., foomote 98, p. 69

1 Ii’The of fjceofp]ans ~dpollcy, ~hl~h would be expec(~ to undet-&&e such ana]ys]s, ha oflen ken forced by budgetq constraints into mOre rOUtlne

agency affairs, to the neglect of long-range policy analysis and planning. Increased congresslonat funding, provided specifically for this task, might

improve the situation. For a discussion, wc Robinson, op. cit., footnote 113, p. 381.
Chapter 12--Modernization and Technological Development in the U.S. Communication Infrastructure ● 347

Another mechanism for promoting and coordinating the development of R&D in the area of

information and communication technologies would

be to facilitate the establishment of interindustry,

industry/university, and industry/user forums to

conduct such activities. An approach that calls for

cooperation among such groups could be aimed not

only at reducing the total costs of conducting R&D,

but also at improving the R&D process by more

closely integrating its science, research, and developmental aspects. Such an approach has become

increasingly popular in recent years among both

innovation experts and stakeholder groups, especially in high-technology areas where the costs of

R&D are exceptionally high. For example, the

consortium approach was recommended by the

Committee to Advise the President on High Temperature Superconductivity .118 And, most recently,

the American Electronics Association has proposed

a government-industry consortium for the development of HDTV: 119

One major law that has sought to foster such

cooperative research agreements is the StevensonWydler Technology Act of 1980,120 which authorizes the provision of Federal seed money for a period

of 3 years to help establish research joint ventures

between industry and universities and other nonprofit institutions. As amended by the Federal

Technology Transfer Act of 1986,121 this act establishes an Office of Productivity, Technology, and

Innovation within the Department of Commerce

with responsibility, among other things, for identifying technological needs, problems, and opportunities; encouraging and assisting the creation of

centers and other joint initiatives; encouraging

technology transfer; stimulating innovation and

promoting investment in technology-related industries; and publishing the results of studies and

experiments. In accordance with that act, an Office

of Industry Technology has been established within

the Department of Commerce. 122

This cooperative approach has been facilitated,

moreover, by the enactment of the 1984 National

Cooperative Research Act.123 This act reduced the

Box 12-B--Summary of Market and

Government Influence

Increased governmental influence implies:

. More basic research

● More cooperative research

● More bureaucratization

● Fast release of new knowledge

● More technology transfer to the commercial

sector

● Heavy emphasis on technology transfer to the

government

. Moderate to high levels of applied research

● Increased focus on scientific effectiveness

● Heavy dependence on government funding

● Stability for enhanced R&D productivity

● More outmoded research equipment

● Tendency to be policy and technology v.

market driven research organizations (exception is the Public Market Laboratories)

● Greater and more numerous barriers to R&D

productivity

● Generally larger research organization

● General shortage in scientific personnel

● Higher levels of interorganizational complexit y

● Knowledge outputs are variable and mixed

including both proprietary and nonproprietary

products

Increased market influence implies:

● Almost total focus on applied research

. Lower levels of cooperative research

. Slower release time for new knowledge

. General concentration in engineering and the

traditional sciences

● Less interdisciplinary research

● Except for Public Market and Quasi-Public/

Multi-Market laboratories, a generally smaller

12&D environment niche

SOURCt Barry Bozaxxm and Michael Crow, U S R&D Labora[ones

and rhelr Envv-onmenls Pub[lc and Market Injluence, Final

K.port to the National Sc]ence Foundation, Science Resource

S[udles, Mar. 1, 1988, p. 18.

——.————

118SW High Te~era~re Superconductivity, op. cit., footnote 101.

119’’$I.35 Billion Sought for HDTV Consortium,” The Washington Post, May 10, 1989, p F-1.

IW%blic Law 96-480.

lzl~blic Law %-480, 94 Stiit. 2311, 15 U.S.C. 3701.

12215 U.S.C. 3704 (c).

lzs~blic Law 98-462.98 Stat 1815. 15 U.S.C. 4301.
348 ● Critical Connections: Communication for the Future

risk that companies face in entering such agreements

with respect to antitrust liability.

Industry participants have generally favored the

consortium approach, arguing that the cost of R&D

is too high for anyone company to handle on its own.

However, a number of people in the industry believe

that Congress should focus its policies on a broad

segment of the U.S. economy and not just on one

technology. As the Electronics Industry Association

has pointed out with respect to HDTV:

HDTV is not the answer to all of America’s

problems in competitiveness . . . There is a danger

connected with equating the competitiveness of a

nation with that of a single industry. While a single

industry may be symbolic of general, national

problems of competitiveness, certain policies designed to promote the revival of such symbolic

industries may be prejudicial to the solution of the

wider problem of competitiveness.124

Option F: Promote and facilitate the dissemination

of R&D information.

Another problem associated with R&D in the

United States is that of technology transfer and the

dissemination of R&D information.125 Some efforts

have been made to foster the dissemination of

research information from Federal laboratories.126

But the government has “no coherent, centrally

organized, or systematically designed approach to

deal with disseminating information created by the

basic research community.’’127 Therefore, one option that Congress might adopt to foster the modernization of the communication infrastructure is to

promote and facilitate the dissemination of R&D

information in this area. In this regard, a number of

computer scientists and government officials have

urged Congress to create a “data superhighway,” and

legislation to this effect has recently been introduced

into Congress.128

Although relevant to the issue of modernization,

this option will not be discussed in detail here, since

it is the subject of a subsequent OTA study.129

Strategy 2: Provide indirect incentives for

modernizing and developing the communication infrastructure.

A second strategy that might be employed to

encourage modernization of the communication

infrastructure is that of providing indirect financial

incentives to the private sector. Such incentives

might take the form of tax credits or changes in

allowable depreciation rates, for example. As discussed in chapter 4, in the past, such incentives were

not required because the regulatory structure itself

served to generate financing for R&D and capital

expenses with what was, in effect, a user tax.130

Today, however, such monies are no longer as

readily available. While it appears that competition

among providers for the business of large users has

served as an effective incentive for investment in

modernization, 131 it is questionable whether there

will be enough incentive to bring about the modernization of the public communication infrastructure

within a “suitable” timeframe. Public utility commissions (PUCs) have been reluctant to allow their

local exchange carriers (LECs) to employ “excess”

profits for modernization purposes, preferring instead to pass them back to ratepayers in the form of

lower rates or rebates.132

If Congress wishes to implement this strategy, a

number of options could be considered.

Option A: Provide tax credits for R&D or capital

expenditures for modernization.

124AS ~lt~ in c’~tlon Memos Offer HDTV Choices,” Broadcasting, Feb. 6.1989, P fT.

lzsFor a gener~ discussion, see Tora K. Bikson, Barbara E. Quint, and I.Aand L. Johnson, “Scientific and Technical Information Transfer: Issues and

Options, March 1984,” The National Science Foundation, #N-213 l-NSF.

lzbs~, for exmple, the Feder~ Technology Transfer Act of 1986, Public Law 99-50~. @t. 20, 1986.

lzTBi~n, Quint, md Johnson, op. cit., footnote 125.

128s.2918, tie Nation~ High-perfomance Computer T~chnOIOgy Act of 1988, w~ in~oduced by senator Albert Gore in October 1988. SW dso JOhII

Markoff, “A Supercomputer in Every Pot: Network is Plamed for Broader Access,” The New York Times, Dec. 29, 1988, p. 1, and Business Section,

p. 4.

129For a discussion, see OTA project proposat, “Information Technology and Research,” m progress.

ls~or a discussion, see Loretta Anania and Richard Jay Solomon, “Capital Formation and Broadband Plaming: Can We Get There From Here?”

Telecommunications, November 1987, pp. 26,28.

131~e rWent exmple of tie Comwtltive incentive for moderfi~ation is AT&T’s d~islon to t~e a “$6.7 bi]lion pre-tax ch~ge in the foti quarter

because exploding demand for high tech long-distance service is forcing it to speed up modernization of its phone network.” Janet Guyon, “AT&T to

Take a $6.7 Billion Charge in Period,” The Wall Street Journul, Dec. 2, 1988, p. A-3.

1szFor one recent discu~ion of this issue, sce Glen Abel, “Southwestern Bell upgrade, ” ComrnunicatwnsWeek, Jan. 9, 1989, p. 6.
Chapter 12-Modernization and Technological Development in the U.S. Communication Infrastructure ● 349

While the overall effect of the Tax Reform Act of

1986 was to significantly reduce the taxes owed by

local exchange telephone companies—and hence

their revenue requirements and rates—the repeal of

the 10-percent regular investment tax credit has

dampened the incentives of telephone companies to

modernize the network. The regular investment tax

credit had encouraged investments because it permitted telephone companies to retain a portion of the

tax savings that it created. Thus, this tax credit

benefited the telephone companies, their shareholders, and ratepayers, whose rates declined in the face

of lower revenue requirements.

To encourage modernization, Congress could

reinstate the investment tax credit for telephone

companies, and it could be specifically targeted to

new plant and equipment that serves to modernize

the public network. A broader credit could also

apply to any R&D that is directly related to such

plant and equipment, although experience suggests

it is not an easy task to allocate such costs. Such a tax

would benefit telephone companies, ratepayers, and

equipment suppliers. However, general ratepayers

might actually end up paying more if the tax revenue

foregone had to be made up through an increase in

general tax rates.

Option B. Establish user taxes and channel revenue

for modernization purposes.

The construction of the public infrastructure has

often been financed by imposing special taxes on

users and potential users of that infrastructure. For

example, the construction and maintenance of public

roads and highways have traditionally been financed

in part from specifically earmarked gasoline taxes as

well as from user-fee tolls.133 A similar Airport and

Airway Trust Fund—accumulated from taxes on

airline tickets and airplane fuel—is available to fund

the infrastructure needs of the air travel industry.l34

In like fashion, an option for generating additional

capital for modernizing the Nation’s communication

infrastructure might be to impose user taxes that

would be earmarked for infrastructure development.

It should be noted that there is already a special

Federal communication tax imposed on telephone

bills, which has historically ranged from 10 to 20

percent. However, the revenue collected to date (an

estimated $2.5 billion in 1988)135 has not been

earmarked for telephone or other infrastructure

development, but has been treated as undesignated

revenues. There are also a number of miscellaneous

State and local taxes, which totaled an estimated

$2.5 billion in 1988.136 In the future, these monies

might be targeted to infrastructure development.

Assuming a genuine need for financial incentives

and support, using revenues from user taxes to

provide them would be preferable to using general

purpose funds on the grounds of both equity and

efficiency. As Alice Rivlin, former Director of the

Congressional Budget Office, has noted:

User charges represent a way of recapturing from

the actual beneficiaries some of the costs to the

general public. Levying user charges promotes

economic efficiency because users pay, directly or

indirectly, for the services they receive. Proper

incentives are provided, since heavier use imposes

greater costs on the user, and at the same time,

generates revenues to expand facilities.137

There are, however, a number of general problems

associated with providing financing from earmarked

sources of funds. Once established, such a fund can

take on a life of its own. Since revenue is obtained

from earmarked taxes, such funds can circumvent

the normal budgetary process. As a result, it is often

difficult to evaluate spending decisions in the light

of other social values. Moreover, in these circumstances, the allocation of funds may be inflexible in

the face of changing societal needs.

User taxes to support the modernization of the

communication infrastructure may be unpopular,

insofar as users have communication needs that are

lqqFor a disc~sion, w U.S. Congress, C)ffice of Technology Assessment, Change~ in the Future Use and Characteristics of the Automobile

Transportation System, vol. II, (Springlleld, VA: National Technical Information Service, 1979), pp. 253-261.

134u.s. Congress, ~fice of T~hnolo~ Assessment, Airport System Development, OTA-ST1-23 1 (Springtleld, VA: National Technic~ ~form~ion

Service, 1984), p. 139.

135A 3-pement F~r~ excise m has been imposed on telephone usage for more than 50 years (26 U.S.C. 4251). Approximately $2.61 billion wm

collected through tie Federal excise tax in 1988, and 1990 revenues are estimated at $2.95 billion. Staff, Joint Committee on Taxation, Schedule of

Present Federat Excise Taxes (as of January 1989), p. 21.

136Da~ Provided by u-s. AdviWV Commlsslon on ~tergovermenta] Relations, M~ch 1989. Interestingly, some of these taxes me e~~ked for

specific purposes unrelated to communication, such as a special New York City surcharge designated for the use of the transit authority.

lsTStatement of Alice M. Rivlin, Dirator, Congressional Budget Office, before LJ.S. Congress, Senate Committee on Public Works, Feb. 7, 1978,

p. 8.
350 ● Critical Connections: Communication for the Future

distinct from one another. Many residential consumers are strongly opposed to paying higher rates to

finance modernization on behalf of other communication users.138 In addition, shifting tax revenue

from the general pool of tax revenue to support

communication-related activities may increase the

problems of the budgetary deficit, if the services that

the general tax on telephone service previously

supported are still considered to be essential. Furthermore, given the decentralized and pluralistic

nature of the U.S. communication infrastructure, the

political and administrative problems associated

with collecting and allocating user taxes for the

purposes of modernization would be extremely

difficult to resolve.

Option C: Alter depreciation rates to encourage

modernization.

Capital expenses are recovered over time according to depreciation schedules designed to reflect

how fast capital assets are expended. The higher the

rate of depreciation, the faster that capital is recovered, and the more quickly revenues are made

available for additional investments. For regulated

telephone companies, depreciation expenses constitute the primary internal means of generating funds

for capital replacement. 139

Given this relationship between depreciation rates

and capital expenditures, one way in which Congress might seek to encourage investment in the

modernization of the public communication infrastructure would be to increase the rates at which

regulated companies could depreciate their equipment. Reconsideration of depreciation policy is most

likely to be called for at times when the pace of

technological change is accelerating rapidly. This

would appear to be the case now, as the useful

lifetimes of many communication technologies become shorter and shorter.

Depreciation rates for regulated telephone service

providers are established by both the FCC and the

State PUCs, with the former setting depreciation

rates for capital expended on interstate communication, and the latter setting rates for intrastate

communication services. Beginning in 1980, the

FCC adopted a number of changes with respect to

determining depreciation rates that were designed to

take into account advances in technology. Disagreements still exist, however, as to which rates are

appropriate, with many telephone companies arguing that higher depreciation rates are required if

modernization is to proceed apace. Many States

have also taken issue with Federal depreciation

policies, but from an opposite perspective. Focusing

on the costs of local service, they have been much

less inclined to adjust their depreciation rates for the

sake of modernization.*@ And the Supreme Court

has supported the States’ rights to an independent

position, ruling-–in the case of Louisiana Public

Service Commission v. Federal Communications

Commission--that in the 1934 Communications

Act, Congress did not want to preempt the States on

depreciation issues generally.l41 Thus, if depreciation policy were to serve as an important component

of a Federal strategy to modernize the Nation’s

communication infrastructure, Congress would need

to specifically authorize the FCC to preempt State

action in this area. 142

Strategy 3: Create a regulatory environment

that is more conducive to the modernization

of the communication infrastructure.

Government regulatory policies can have a major

impact on corporate planning and decisionmaking.

Thus, one strategy that Congress might follow

would be to configure the regulatory environment to

create greater incentives for business to invest in

modernizing the communication infrastructure. At —.

lsfJ’rhe public ‘S relucbnce to pay a user tax to finance a broad communication policy goal was, for example, clearly an important factor in Congess’s

decision not to follow the Carnegie Commission’s recommendation to fund public television through an excise tax on television sets. For a discussion,

see Stephen White, “Our Public Television Experiment,” Current, Oct. 20, 1988, pp. 7, ]()- 11. For a discussion of public broadcasting’s failure to achieve

the vision of its founders, see Harry M. Shooshan 111 and Louise Arnheim, “~blic Broadcasting,” Ben[on Foundation Project on Communications and

Information Policy Optwns (Washington, DC: Benton Foundation, 1989).

lsg~cordingto Nousaine, Brant, and M~ay: “For a typical Bell operating company, depreciation often supplies 75’% of the funds forcaPit~ spending

and accounts for almost 25% of total expenses, excluding taxes. ” Op. cit., footnote 32, p 52

l~h fact, political press~e to keep local telephone rates low has led to substantial undcrdepreciation in the past; thus, the book v~ue of telephone

company investments far exceeds current market value, The most widely cited estimate of this excess is on the order of $25 billion, See Alfred E, Kahn

and William B. Shew, “Current Issues in Telecommunications Regulation: Pricing,” Yale Journal on Regulation, vol. 4, No. 2, Spring 1987, pp. 191,

222,243-246.

ldlFor a discussion, see Roger M. Witten and Thomas F. Connell, “The Lmuisiana PSC Declwon: Where the Federal-State Balance of powr Stands,”

Telernarics, vol. 3, No. 7, July 1986.

Idzsuch authorization wo~d, of course, be subject to constitutional review.
Chapter 12--Modernization and Technological Development in the U.S. Communication Infrastructure . 351

present, there are three basic policy approaches

being considered in this regard--one that would

alter the permitted rate-of-return that regulated

companies can earn; one that would allow for more

flexible pricing policies; and one that would expand

the lines of business that companies can enter.

To pursue this strategy, Congress has a number of

options.

Option A: Alter allowable rates of return.

The option of adopting alternatives to rate-ofreturn regulation has already been discussed in

considerable detail in chapter 9, which focuses on

access issues. The discussion here describes only

how this option relates to the issue of modernization.

Proponents of alternatives to rate-of-return regulation argue that it stifles modernization by discouraging investments in R&D and productivityenhancing technologies. In their view, regulated

companies will be unlikely to invest in upgrading or

modernizing their networks because they cannot

fully recover the outlays they incur. 143 It is argued

that an alternative arrangement, such as a system of

price caps, would allow communication providers to

recoup these costs, thereby encouraging them to

make investments in the network. In making this

argument, it has been noted, for example, that the

RBOCs commit only 1.4 percent of their total

operating revenues to R&D-about 40 percent of the

amount committed by other industry groups in the

United States.l44 Moreover, since the price of

services could be capped at some negotiated and

agreed-upon level, such a system would buffer local

ratepayers from higher prices and the risks entailed

in modernization.145 In addition, because providers

alone would bear the cost of failure, they would have

a strong incentive to think through their investment

decisions very carefully.146

Some opponents challenge the basic assumption

underlying this option. They contend that rate-ofreturn regulation has not discouraged modernization

in the past, nor is it likely to do so in the future. As

Mark Cooper, Director of Research for the Consumer Federation of America, has argued:

This stellar performance was driven by a rate of

growth in total factor productivity-the best measure of an industry performance-that was almost 3

times greater than the average for all nonresidential

businesses. Pure technological progress—measured

by what economists call the residual-appears to be

higher too by about one-third. The manufacturing

part of the industry, where technological progress

takes place, has exhibited a much higher rate of

investment in research and development than other

manufacturing industries. At the same time, the

industry has been making capital expenditures at a

much faster rate than the Standards and Poor 400,

while it earned a rate of return that was about a point

and a half below that of the Standard and Poor

400.147

Others, while commending the goals of modernization, do not believe that the price-cap proposals as

presently devised go far enough to protect the

customer against excessive rates, or the telephone

companies’ competitors from cross-subsidies and

predatory pricing. For example, testifying on S.2044

(a bill requiring further FCC review of its price-cap

proceeding), 148 before the Subcommittee on Communications of the Senate Commerce, Science, and

Transportation Committee, Gail Garfield Schwartz,

Deputy Chairman, New York State Public Service

Commission, challenged FCC’s reliance on an

indexed cap incorporating a productivity adjustment

based on historical performance (2.5 percent).149 As

she points out:

No historical productivity factor can guarantee

fair treatment for ratepayers, because any factor

based on historic performance is likely to diverge

ldsFor this ar~ent, see Robert T Blau, “The Politics of Productivity: Reshaping Telecommunications Policy in the 1990s,” Telematics, vol. 5, No.

10, October 1988, pp. 1-7.

laarbld.; s= alm R. l+arris, “The Implications of Divestiture and Regulatory Policies for Research, Development and Innovation in the U.S.

Telecommunication Industry,” Berkeley, CA, 1987.

l’$SFor this ~Went, see bland L. Johnson, “price Caps in Telecommunications Regulatory Reform,” N-2894-MF/RC (Washington, DC: The Rmd

Corp., January 1989). See also Peter Huber, op. cit., footnote 50.

l’Wbid.

lqTMark N. COOpr, “Re@atory Reform in Tel~ommunications: A Solution in Search of a Problem,” Telemutics, vol. 4, No. 11, November 1987,

pp. 1-7.

148CC Docket 87-313.

ldgTestim~y of Gail G~leld Schwartz, Deputy chairman, New York State Public Service Commission, before the Subconlmkx on

Communications, House Committee on Commerce, Science, and Transportation, on S.2044, Legislation to Require Further Review by the FCC of its

So-Called Price Cap Proceeding (CC Docket 87-313), Aug. 2, 1988, p. 2.
352 ● Critical Connections: Communication for the Future

from actual future performance. Thus, it is especially

ironic that the FCC defends so strongly as a

consumer benefit a factor reflecting historical experience under rate-of-return regulation, which admittedly discourages efficiency. If the inefficiencies of

the former regime were as great as claimed, surely

the theoretically more efficient regime of price caps

should result in a higher-than-historic productivity

increase. 150

Opponents of alternative regulatory approaches

also point to the negative effects that such methods

might have on modernization. They note that,

although telephone companies would continue to

have incentives to modernize their competitive

services, price-cap regulations might encourage

them to allow the deterioration of facilities that serve

captive customers. Any new system, they argue,

should require that telephone companies meet strict

quality-of-service standards and establish the procedures necessary for enforcing such standards.

As noted in chapter 9, the FCC approved a revised

price-cap plan for AT&T on March 16, 1989.

Consideration is presently being given to extending

such a plan to the RBOCs, although opposition to

such an extension would be much greater in this case

because competition is much weaker at the level of

the local exchange. Responding to FCC price-cap

initiatives, Edward J. Markey, Chairman of the

House Telecommunications Subcommittee-with

the co-sponsorship of 13 other subcommittee members-introduced the Telephone Rate Verification

Act, which would require the FCC to submit reports

to Congress comparing the current rate-of-return

regulations with price caps, based on data supplied

by AT&T.

Option B: Allow regulated companies to price their

products strategically in order to discourage

bypass of the public network.

If the public communication infrastructure is to be

maintained and modernized, providers of communication services will need to operate at a sufficient

level of scale and scope to make investments in their

networks worthwhile, To assure such economies,

providers will need to find ways to keep big-volume

users, such as large businesses, from migrating to

other networks. However, regulated providers have

been limited in their ability to do so. While their

unregulated competitors can discriminate among

users in their offerings of communication services,

regulated telephone companies cannot unless they

have secured a special waiver from State or Federal

regulators.

One way for Congress to encourage modernization, therefore, is to allow regulated providers more

leeway in pricing and designing their services for

large-volume users. AT&T recently gained some

flexibility in this regard when the FCC tentatively

approved Tariff 15 and the extension of Tariff 12.151

Tariff 15, for example, permits AT&T to provide

volume discounts, whereas Tariff 12 allows AT&T

to customize and package a service offering to meet

an individual user’s needs. AT&T’s competitors

have strongly contested these decisions on tariffs,

charging that the tariffs encourage anticompetitive

behavior. Chiding the FCC for not having tried hard

enough to promote competition, MCI Communications Corp. Chairman, William McGowan, stated

that:

Unfortunately, those pro-competitive decisions

came a relatively long time ago, and it’s probably fair

to ask the FCC: What have you done for competition

lately? The answer is: Not a whole heck of a lot. with

the Tariff 15 decision . . . the FCC seems intent upon

undoing what little pro-competitive record it has.152

Some opponents are concerned, moreover, that FCC

approval of these tariffs will create a precedent that

will be used by RBOCs to justify similar treatment,

even though they face much less competition than

AT&T.153

The FCC has recently been considering these

charges, although the tariffs were not suspended in

the interim. In March 1989, the Commission ruled

on Tariff 12, calling for revisions that would

increase the availability of the offering. To date,

FCC has not acted on Tariff 15.

Option C: Extend the lines of business that regulated

telephone companies can enter.

lsOIbid.

151 For a discussion, ~ Ka~een Killette, “AT&T Seeks to Assuage Critics in Custom Network Controversy,” CornmunicationsWcek, Feb. 29, 1988,

p, 10; Kathleen Killette, “tndustry Group Asks FCC to Scrutinize AT&T Tariff,” ComrnunicarionsWeek, Feb. 8, 1988, pp. 38-39; and Kathleen Killette,

“Market Limbo: How Imw Can You Go,” CommunicationsWeek, CLOSEUP, Aug. 15, 1988, pp. C-10, C-11.

lszwl]lim McGowan, “It’s Like Deja Vu All Over Again,” Te/emarics, vol. 5, No. 11, November 1988, p. 17.

ISgTom Valovlc, “~tic~ User Issues: ISDN, T1 Networking, and Tariff 12,” Teiecommunicutwns, May 1988, P. 8.
Chapter 12--Modernization and Technological Development in the U.S. Communication Infrastructure ● 353

Just as economies of scale can serve to promote

modernization and investment in the communication infrastructure, so too can the presence of

economies of scope. However, whereas economies

of scale depend on the volume of demand, those of

scope derive from the complementarities that exist

among different business activities. Thus, another

way of fostering modernization might be to extend

the lines of business that regulated telephone companies can enter.

At present, regulated telephone companies are

prohibited under the Modified Final Judgment (MFJ)

from engaging in three activities—manufacturing,

certain aspects of information services and interexchange services, and nontelecommunication businesses.

l54 RBOCs are also limited in their activities

by the 1984 Cable Communications Act, which

precludes their involvement in the provision of

video services.

Viewing these restrictions as impediments to the

development and enhancement of the U.S. communication infrastructure, policy makers in a number of

different Federal Government arenas have begun to

call for their relaxation or elimination. For example,

the FCC, in its 1986 Computer Inquiry III, took the

position that RBOCs should be allowed to offer

enhanced services without structurally separate subsidiaries as long as they developed acceptable plans

for opening their network architectures.155 In November 1988, the FCC, after having received extensive stakeholder comments, tentatively approved the

RBOCs’ basic model for an open network, contingent on a number of modifications.156 More recently,

FCC has opened an inquiry into whether telephone

companies should be permitted to operate cable

television systems.157

Similarly, the Department of Justice (DOJ), filing

the first triennial report and recommendations on

MFJ in February 1987,158 called for a number of

changes in MFJ line-of-business restrictions. In the

case of interexchange services, DOJ recommended,

for example, that RBOCs continue to be prohibited

from providing interexchange services within their

own regions, but be allowed to provide them outside

of their local exchange monopolies. With respect to

information services, DOJ recommended that

RBOCs be allowed to provide information services,

subject to FCC rules designed to protect competition

and promote efficiency and innovation. In the case

of telecommunication equipment, it recommended

that all restrictions on manufacturing be removed. 159

DOJ based much of its case on the analysis done by

Peter Huber in the report accompanying the recommendations, The Geodesic Network: 1987 Report on

Competition in the Telephone Industry, which argued that new technology was leading to a network

where control would be dispersed around the periphery, rather than concentrated at the center. Although

acknowledging that a local exchange bottleneck still

existed, DOJ claimed that, given ONA and the Joint

Cost Rules, RBOCs would be deterred from using

this bottleneck in an anticompetitive fashion.l60

Arguing along similar lines, the National Telecommunications and Information Administration

(NTIA) has also expressed strong support for

removing the line-of-business restrictions. The

154~e &fFJ ~low~ for ~~ve~S f~o~ ~e= ~eS~ictionS, but left the ~~tion~e for ~ern somewhat unclear. AS one observer has described it, the lack

of “coherent or consistent policy for deciding which lines of business were permissible meant that line of business waivers became a decisional

quagmire.” See Roger No1l and Bruce M, Owen, “UnitedStates v. AT&T: An Interim Assessment,” Discussion Paper No. 139, presented to the Workshop

on Applied Macroeconomics, Industrial Organization, and Regulation, Stanford University, Stanford, CA.

155HCW D. ~v~e, C“rheU=r’s Stale in CEI and ONA,” Te/e~~’cs, vol. 3, No. 11, November 1986, pp. 3-7; see iiko Rokrt M. Frieden, “ComPuter

III: Does FCC Theory Match Market Reality?” Telematics, vol. 3, No. 11, November 1986, pp. 7-14; A.M. Rutkowski, “Open Network Architectures:

An Introduction,” Telecommunications, January 1987, pp. 30-40.

156~ its quest for revisions, FCC required the RB~s t. m~e ~1 ONA.relat~ offerings available under Federal tariffs, and asked them tO Wy tO

develop more uniform plans. Kathleen Killette, “FCC Gives Bells Partial ONA Nod,” CommurzkationsWeek, Nov. 21, 1988, p. 1; see also Charles

Mason, “FCC’s ONA Vote Gets Generally Favorable Reviews,” Telephony, Nov. 28, 1988, pp. 16-17.

157FCC Docket 87.266. ~ ~ doing, the Commission sugges~d mat he computer III provisions might ~SO serve M a regu]ato~ framework under

which the telephone companies could provide video services. For a discussion, see Melinda Gipson, “FCC Proposes Allowing Telcos To Provide Cable,”

Cablevision, vol. 12, No. 49, Aug. 1, 1988, pp. 12, 16.

158u.s0 Dep~menl of Jwtice, “ReP~ and R~ornrnendations of he u-s+ Justice Department concerning the Line of Business Restrictions hIlpOSCd

on the Bell Operating Companies by the Modified Final Judgment,” U.S. v. Western Electric Co. inc. and American Telephone & Telegraph, No.

82-0192, (D. D.C.), Feb. 2, 1987. For a discussion, see A.M. Rutkowski, “The Geodesic Network: Impact of the Huber Report,” Telecommun ications,

May 1987, pp. 92,95-97, 103.

159~id.

ltOSW, for exmp]e, Respome of the United States ~ Co~nts on i~ Report and Recommendations Comerning tk Line-of-Business Restrictions

Imposed on the Bell Operating Companies by the Modificatwn of the Final Judgment, Apr. 27, 1987.

89-148 0- 90 - 9 QL 3
354 ● Critical Connections: Communication for the Future

agency has taken a favorable position, for example,

with respect to permitting the telephone companies

to provide information services161 and offer video

dial tone,l62 as well as to enter the interexchange

market. 163 So adamant was NTIA, in fact, that when

U.S. District Court Judge Harold Greene was

unreceptive to these proposals, NTIA went so far as

to petition the FCC to assert its jurisdiction and, on

its own, deregulate the RBOCs.

Within Congress, the impact of the line-ofbusiness restrictions on the development and modernization of the U.S. communication infrastructure

has also been of concern. As early as 1985, for

example, Congressmen Swift and Tauke introduced

a bill in Congress that would have rescinded the

curbs on RBOCs.l64 More recently, 205 representatives cosponsored House Congressional Resolution

339, which—noting that it is “essential to stimulate

and encourage the use of information technology by

the American people’’--calls for congressional action to lift the restrictions against the manufacturing

of telephone equipment and the provision of information services by RBOCs, subject to regulatory

safeguards.

These proposals to alter MFJ have generated an

intense public policy debate, with the advocates of

change focusing on the need for modernizing and

developing the communication infrastructure, and

the opponents concentrating on the potential for

anticompetitive effects. In the case of manufacturing, RBOCs have argued that, if the manufacturing

restriction is interpreted narrowly so as to preclude

them from software design and development, the

development and deployment of the intelligent

network will be retarded. Opposing this point of

view, AT&T brought the issue before Judge Greene,

charging that RBOCs’ activities in this area would

be anticompetitive.l65 RBOCs have also argued that

they could speed up the introduction of fiber to the

home if they were permitted to become involved in

video services. Not surprisingly, the cable companies have protested against what they perceive to be

unfair competition.l66

U.S. District Judge Harold H. Greene, who is

responsible for administering the consent decree that

led to the divestiture of the Bell System, has been

against relaxing MFJ restrictions. Although, in the

light of the first triennial review, Judge Greene

permitted RBOCs to provide low-level gateway

services, he was adamant in his refusal to let them

create or manipulate the information they carry over

their networks. 167 Nor has the Judge been willing to

change the prohibitions on manufacturing, going so

far as to forbid RBOCs from engaging in any form

of equipment design and development.168 Justifying

his position, Judge Greene has noted that the consent

decree requires that the restrictions on RBOCs be

maintained until they can no longer use their

bottlenecks for anticompetitive purposes. At present, this precondition has not yet been met. As Judge

Greene has pointed out, in 1987, 99.9 percent of all

long-distance traffic had to travel through local

bottlenecks to get to local consumers, with only

one-tenth of one percent able to bypass the regional

companies. 169

Judge Greene has promised to vigorously resist

attacks on his authority to enforce the terms of MFJ,

and has taken issue with Dennis Patrick, FCC

Chairman, for allegedly “exhorting” RBOCs not to

comply with the court’s orders.170 Thus, barring any

action on the part of Congress to change the terms of

MFJ or to transfer the authority for its administration

Ibl$w U.S. ~p~rnent of Commerce, National Telecommunications and Information Administration, NTiA Telecom 2000: Charting the CoIusefor

a New Century, NTIA Special Publication 88-21 (Washington, DC: U.S. Government Printing Office, October 1988), p. 214.

16ZSW U.S. Depmment of Commerce, National Telecommunications and information Administration, “Video Program Distribution and Cable

Television: Current Poiicy Issues and Recommendations,” NTIA Report 88-233, July 1988.

‘

63 fbid., p. 248.

l~~s bill was reintroduced in 1986 and 1987.

1656*AT&T co~ents on he Report and Recommendations of the U.S. Justice Department,” MM. 13, 1987.

l~sissue is &scuWd ~ considerable detail in ch. 9.

167~ m~~g this Concewion, Judge Grmne t~k into account the ~~ents having to do wifi modernization and tie development of information

services. He believed it was necessary for RBOCS to develop gateway services in order to stimulate the U.S. market for information services.

168Judge GMne f=~ that tie removaI of the manufactwing prohibition would 1ead to an indus~ “dominat~ by a sm~l number of muscle bound

giants, possibly dominated by foreign conglomerates.” Tim Race, “Judgment Day: Few New Freedoms for the B~s,” Co~unicatiowWeek, Sept. 14,

1987, p. 1.

I@Judge Harold H. fJ~~e, “Day for complete ~re~ation Has Not Y“t ~ved,” Te/e~tics, VO]. s, No. 10, GctOber 1988, p. 17.

ITO@mleS M-, “Greene Fights Back in Ruling on R& D,” Telephony, Dec. 7, 1987.
Chapter 12--Modernization and Technological Development in the U.S. Communication Infrastructure ● 355

from the first circuit court to some other Federal

agency,

171 the Judge’s evaluation of the situation is

likely to prevail.

Many others, among them a number of the

RBOCs’ potential competitors, agree with Judge

Greene’s basic assessment.

172 Some think that

modifying MFJ is inappropriate because it represents a negotiated settlement based on interindustry

compromises,

173 while others think that it is too soon

to make alterations in it.174 From the perspective of

many, RBOCs not only continue to maintain control

over bottleneck facilities, but they also have the

ability and the incentive to engage in anticompetitive behavior through cross-subsidization and/or

discrimination. 175 In fact, in the view of some,

relaxing MFJ restrictions will increase the opportunity and incentive of the telephone companies to

cross-subsidize. Moreover, many minimize the competitive impact that private branch exchanges,

shared tenant networks, digital termination systems,

and cellular radio services have had, or will have, on

the local exchange. And some note that the role of

the local exchange, and hence RBOCs’ monopoly

powers, may be even greater in the future when they

have converted to fiber and introduced common

channel signaling and ISDN.

Challenging the notion that the FCC will find it

easier to monitor the operations of the telephone

companies in the future, given the possibility of

comparing their cost allocations and tariffs, a

number of people have suggested that, with deregulation, the FCC’s job of protecting the public interest

will become more, not less, difficult. Others take

issue with the idea that MFJ imposes significant

costs in terms of lost economies. As one economist

has pointed out, the potential for economies of scale

and scope are the greatest in precisely those areas

where, if integration were to occur, it would be most

difficult to identify anticompetitive behavior. Thus,

the costs to consumers due to a lack of integration

will probably be offset by the benefits they gain

through enhanced competition.176

Because DOJ’s recommendations assumed that

the ONA process would be successfully carried out,

stakeholders’ reactions to RBOCs’ initial ONA

filings are also indicative of how they might assess

the line-of-business restrictions at some later date.

As CBEMA and many others pointed out in their

statements to the Court, if and when ONA is

effectively implemented to assure equal access,

many of those who are presently opposed to altering

the MFJ might look at the proposed changes in a

much more favorable light.177 However, in general,

it can be said that RBOCs’ initial filings did not allay

the fears of most of those who have been opposed to

relaxing the line-of-business restrictions.178 One

report, for example, which was commissioned on

behalf of a number of companies—including

ADAPSO, CBEMA, and Telenet Communications

Corp.+ ailed the proposals inconsistent, inadequate, and unresponsive to industry needs.179

Among their complaints was that RBOCs did not go

171 S.2565, ~ bill in~~uced in ConHess by Senator Robe~ Dole in 1986, was one such attempt. If passed, it Wou]d have transferred the authority fOr

administering the MFJ from the Court to the FCC.

17ZSW, for examples of these comments, “AT&T Comments on the Report and Recommendations of the United States,” Mar. 13, 1987; affidavit of

Nina W. Cornell, United States of America v. Western Electric Corn., Inc., and American Telephone & Telegraph, May 22, 1987; Kenneth Baseman

and Stephen Silberman, “The Economics of Bell Operating Company Diversification in the Post-Divestiture Telecommunications Industry,” ICF

Incorporated, September 1986; “Comments of Computer and Business Equipment Manufacturers Association,” United States of America v. Western

Electric Co., inc., and American Telephone & Telegraph Co., Mar. 13, 1987; and “MCI’s Reply in Opposition to Motions and Recommendations to

Modify the Judgment’s Line of Business Restrictions,” United States of America v. Western Electric Company, Inc & American Telephone and

Telegraph Co., May 22, 1987.

173AT&T h= ~~, for exmple, that DoJ’s r~ommendations compromise the agreements Made at tie time of divestiture. Steve CO1l, *’Still NO

Answer on American’s Phones,” The Washington Post, June 28, 1987, p. H-1.

1740pposing any proposals to lift the restrictions on the regional companies, Gene Kimmelman, legislative director of the Consumer Federation of

America, has said, for example: “ . . . the American public is still very suspicious of what happmxi [with the breakup of AT&T] in the fwst place and

would prefer to let things stabilize, rather than go through a second revolution in our telephone system in five years.” Ibid.

175sW Cements cit~ above, footnote 172.

tTbSW Cornell, op. cit., footnote 172.

177As CBE~ and many others pointed out in their statements to the (’o~, if, and when, ONA is eff~tively implemented SCI as to assure ~ud aC@SS,

many of those who are presently opposed to altering the Modified Final Judgment might look at the proposed changes in a much more favorable light.

See CBEMA comments, op. cit., footnote 172.

178Fora discussion of tie resPnW, we Anne.Mmie Roussel, “Bel]s’ ONA fioposa]s ~med unacceptable,” Co~nicationsWeek, May 23, 1988,

p. 42.

17%itileld Associates, Inc., C’Open Network Architecture: A Promise Not Realized,” prepared for ADAPSO, CBEMA, CompuServe Inc., Dun &

Bradstreet, Independent Data Communications Manufacturers Association, Inc., and Telenet Communications Corp., Apr. 4, 1988.
356 ● Critical Connections: Communication for the Future

far enough in unbundling their services and opening

up their networks.180 The gap between the expectations and the outcome of this first effort to develop

an ONA can be explained in part by the fact that the

level of unbundling required from an antitrust

perspective-and thus that would satisfy the court—

is different from that called for by the FCC under

Computer Inquiry III.

Not surprisingly, RBOCs have been the strongest

advocates of altering MFJ. Their eagerness to enter

into the lines of business that have hitherto been

closed to them is clearly evidenced not only in their

testimony to Congress and the court, but also by

their active involvement in the ONA process, their

more than 160 successful court appeals for waivers,

and their growing interest in establishing joint

ventures with foreign countries. 181

While responding to the anticompetitive arguments made by their opponents, the RBOCs have

focused much of their appeal on the issue of

modernization, and on the requirement that the

United States have a communication infrastructure

that will allow it to compete successfully in the

international arena. As John Clendenin, Chairman,

BellSouth, has characterized the problem:

. . . my concern is how slowly that evolution takes

place, and how much deep damage we do to this

nation if it’s not quick enough. We’ve heard the

restrictions are causing our nation’s high tech

strength to atrophy-and here we’ve seen disturbing

corroborating evidence.

This is not a special-interest concern, unless you

consider America a special interest. This is a

profound, broad-based concern for all American

interests, large and small, telecommunications and

otherwise. 182

Such an infrastructure, RBOCs argue, can only be

brought about if they are allowed to contribute their

full measure to its development. With respect to

manufacturing, they note that, if they were allowed

to become more involved in this area, they would be

better able to provide timely and higher quality

products and services to their customers, and that the

economy would benefit from greater investment in

the research and development of advanced technology.

183 Comparing the development of information

services in the United States to that of other

countries, RBOCs attribute the relatively slow rate

of growth in the United States to the restrictions of

MFJ. As NyNEX has described it:

It has resulted in some services being offered in an

inefficient way and others not being offered at all,

even though the technology to provide them, and

demand for them, exist.l84

Responding to the concerns of Judge Greene and

others about competition, RBOCs point to how far

they have gone in making equal access a reality with

respect to interexchange services, CEI (Comparably

Efficient Interconnection), and ONA. 185 In addition,

they note that-given divestiture and the emergence

of seven highly competitive operating companies—

benchmark regulation and the Joint Cost Rules have

become more feasible, thereby reducing the likelihood of cross-subsidies and discrimination. Moreover, they point out that RBOCs have a greater

incentive than ever before to assure high quality,

nondiscriminatory service; the more their networks

are used, the more revenues they will enjoy.186

In sorting out the complicated issues raised by

MFJ, it is important to consider three basic questions: 187

1.

2.

Has the change in the U.S. telecommunication

infrastructure since divestiture been sufficient

to warrant the relaxation of RBOC restrictions?

What costs, if any—in terms of modernizing

and developing the communication infrastructure—are entailed in making antitrust policy

the linchpin of U.S. communication policy?

la%id.

ISIFor a discussion, see Denis GiIhooly, “Unleashing the Baby Bells,” Telecomrnunicamwz.r, February 1988, pp. 48,57,58,60,62.

lszjo~ L. Clendenin, “The Paralysis of MFJ Antdysls,” CommunicationsWeek, Jan. 16, 1989, p. 15.

183sW,forexmple, **Comments of Nynex Corporation on the Departmenlof Justice’s Report Concerning the Line of Business Restrictions Containd

in the Modified Final Judgment,” United States of America v. Western Electric Co., Im , and American Telephone & Telegraph Co., Mar. 13, 1987.

ls41bid.

lssFor one ~ply t. tie Cnticims of the ONA process, see Shooshan and Jackson, Im., ONA: Keeping the Promise, commissioned by BelI Ad~tic,

my 31, 1988.

IUSIX, for ex~ple, Nynex comments, op. cit., footnote 183.

lsTFor a discussion, see Robert Pepper and Stuart N. Brotman, “Restricted Monopohes or Regulated Competitors? The Case of the Bell Operating

Companies,” Journal of Comrnunicatwn, vol. 37, No. 1, Winter 1987, pp. 64-72.
Chapter 12--Modernization and Technological Development in the U.S. Communication Infrastructure ● 357

3. What conditions, if any, might be imposed on

RBOCs to limit the negative antitrust impacts

of their extending their lines of business?

Any analysis of these issues is complicated by the

fact that the answers to these questions may very

well differ with respect to each area of business

restrictions. Moreover, these questions will most

likely need to be asked again and again. As Roger

Nell has described the problem:

Neither the pricing issue nor the structural issue

has ever been or is likely ever to be resolved. The

telecommunications system is not, and never was,

broke; instead, its underlying technical and economic characteristics create an enduring policy

dilemma. One can use the regulation of prices and

structure for either of two ends: to encourage

maximum feasible competition, or to promote an

integrated monopoly. What is infeasible is a “neutral” formulaic policy regarding prices and structure

that will assure the right mix of monopoly and

competition. The current policy agenda is one part of

the continuing futile search for better regulatory

instruments, and one part rear guard actions by

people who lost the last time around and who are

not—and probably cannot be--convinced that the

trend towards deregulated competition is the best

policy.188

188N011, op. Cit., f~ote 1.
Chapter 13

Jurisdictional Issues in the

Formulation and Implementation of

National Communication Policy

.
CONTENTS

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . w . . , . ● ● . . . ● . . . . . . - . . . . ● . - ‘, “ “ “ “ ‘ “ “ “ “ “ . . . . v ,. 361

THE PROBLEM . . . . . . . . . . . .. .+ +. .+ .. .. +. ... ... +...... ....”.”..-s”””””””””””. 361

STRATEGIES AND POLICY OPTIONS............ +. .. .. O. -. .. .. ..~. O.. ..O”’”. 366

Figure

Figure Page

13-1. Congressional Strategies and Options to Address Jurisdictional Issues in

Communication Policymaking .. .. .. ... ... .. O..+.. .+ .. .+ .. .. .. ..+0S9+”-’”. S 368
Chapter 13

Jurisdictional Issues in the

Formulation and Implementation of

National Communication Policy

INTRODUCTION

Rapid technological advances in the realm of

communication, coupled with the unraveling of a

traditional regulatory framework in the United

States, have given rise to a highly uncertain communication policy environment that is endowed with

both promise and problems. Occurring at a time

when the role of information has become greatly

enhanced, these developments will have a major

impact on the lives of everyone. Each individual has

an exceedingly high stake in the outcome of current

communication policy debates. An exceptionally

equitable, efficient, and effective policymaking

process will be required to find appropriate solutions

to the complex and thorny policy dilemmas that

society faces, and to reconcile inevitable conflicts

among competing-even if equally meritorious—

interests. At the very least, the allocation of authority

and the rules of the game will need to be clear and

perceived to be legitimate.

THE PROBLEM

The lack of a coherent and coordinated national

process for making communication policy is likely

to severely hinder efforts to develop and execute an

appropriate strategy for dealing with the myriad of

communication policy issues that will emerge as the

United States takes its place in an increasingly

global information economy. Because of the important role of federalism and the separation of powers

in the U.S. political system, the American policy

process has always been somewhat disorderly.1

However, as discussed here and in chapter 4, the

untidiness of the policy process has been particularly

noteworthy in the area of communication-inducing

two Presidential policy boards to recommend the

creation of a central agency to formulate overall

communication policy.2 OTA findings also suggest

that these problems are likely to be exacerbated in

the future, given a number of factors. These include:

Factor 1: A shift in communication decisionmaking from the political arena to the

marketplace.

As detailed in chapter 4, there has been an overall

shift in communication decisionmaking from the

political arena to the marketplace during the past

decade. The divestiture of the Bell Telephone

System, the emergence of large users, the liberalization of many of the regulatory restrictions historically imposed on the mass media industry, and the

deregulation of the cable industry are all part of this

change. 3

As noted in chapter 12, this shift to the private

sector has had a number of positive benefits,

especially when measured in economic terms. However, at the same time, it has created a vacuum in the

policymaking process with respect to societal decisions about communication that are not easily made

by summing up individual preferences or deferring

to market power. There are a number of instances in

IFor ~ ~Went ~~ySiS of the in~tltutlon~ b~iers t. effective govermen: in the United States, see John E. Chubb and Paul E. Peterson (eds.), C~~

the Government Govern? (Washington, DC: The Brookings Institution, 1988).

2Com~cation policy ~mds established by president T~an and president Johnson both reached the s~e conclusion: adequate and effective

communication policymaking required much greater organizational focus and coordination. Although the Office of Telecommunications Policy (OTP)

was established in the Executive Office of the President (EOP) in 1970, in response to the Rostow Task Force’s recommendations, it was abolished almost

8 years later as pat of a plan to reduce the size of EOP. With the authority for communication now dispersed among a number of Federal agencies, it

is not surprising that many observers of today’s communication policy scene echo the concerns of these earlier commissions. See, for example, U.S.

Department of Commerce, National Telecommunications and Information Administration, NTIA Telecom 2(XM Charring the Course for a New Century

(Washington, DC: U.S. Government Printing Office, 1988).

qFor a discussion, see Eli NOZIIII,“The Public Telecommunications Network: A Concept m Transition,” Journal of ComfnuW”catlon, vO1. ST, No. 1,

Winter 1987, pp. 30-47; see also Eli Noarn, “The Future of the Public Network: From the Star to the Matrix,” Telecommunications, March 1988, pp.

58,60,65, and90; and Roger Nell, ’’Telecommunications Regulation in the 1990s,” Publication No. 140, Center For Economic Policy Research, Stanford

University, Stanford, CA, August 1988.

-361-
362 ● Critical Connections: Communication for the Future

which private choices, as registered in the marketplace, may not lead to an optimal social outcome—

whether it be with respect to the security/

survivability, interoperability, or modernization of

the communication infrastructure, or access to it. In

fact, as the cases of standards-setting and open

network architecture (ONA) would suggest, it may

be precisely because of the enhanced role of the

marketplace that the Federal Government is called

on in the future to play an even more active role in

establishing and reconciling communication policy.

Factor 2: Intensification of jurisdictional conflicts among traditional decisionmaking

authorities.

Where power and authority are widely dispersed,

as they are in the U.S. communication system,

effective policymaking and implementation require

that goals be clearly understood and agreed upon.

Moreover, key decisionmaking roles will need to be

clearly defined and generally well accepted. Otherwise, jurisdictional disputes will emerge, paralyzing

the entire decisionmaking process. In chapter 8,

OTA identified a number of reasons these prerequisites for effective policymaking are likely to be

lacking in the future. These include:

The failure of either Congress or the executive

branch to reconsider and reestablish U.S.

communication policy to take into account the

major technological, structural, and regulatory

changes now taking place in society.

The problems entailed in national goal-setting

have already been referred to above. How the failure

to set communication goals might precipitate jurisdictional disputes that paralyze decisionmaking is

clearly evident, for example, in the dispute between

U.S. District Court Judge Harold Greene and the

Federal Communications Commission (FCC) concerning line-of-business restrictions (discussed in

ch. 12). As Judge Greene has noted on a number of

occasions, it is in the absence of a congressionally

mandated alternative that the Frost district court has

taken to establishing the Nation’s communication

policy. 4

The continued convergence of communication,

information, and video technologies.

In the United States, decisionmaking and regulatory authority has generally been distributed on a

technology-by-technology basis. 5 In the past—

whether in congressional committees or executive

branch agencies, or between Federal, State, and local

entities-there has generally been a clear line of

demarcation between those responsible for telephony and those responsible for mass media. With

the convergence of communication, information,

and video technologies, however, the boundaries

among jurisdictions are becoming increasingly

blurred, giving rise to a growing number of interagency and intergovernmental disputes.

One potential area of dispute, for example, is that

of video distribution. If telephone companies were

permitted to distribute video services, along with

cable companies and broadcast networks, the cable

companies could be subject to municipal franchise

agreements, telephone companies could be regulated at the State level, and the networks could be

regulated at the national level. To the extent that

policy goals vary according to jurisdiction, as they

appear to now, it may be increasingly difficult to

establish a coherent national policy for video.

A growing divergence of interests between the

States and the Federal Government.

The Communications Act of 1934 is somewhat

ambiguous in allocating responsibility for communication policy between the States and the Federal

Government.6 According to the act, FCC has the

authority to regulate the interstate portion of the

telecommunication industry, as well as the intrastate

portion to the extent that it significantly affects

FCC’s intrastate policy. The States are assigned

4S=, for in~~ce, Linda M. Buckley, “Judge Greene Blasts DOJ for Lax MFJ Enforccmen~* “Telephony, June 1, 1987, p. 12; see also Charles Mason,

“Greene Fights Back in Ruling on R& D,” Telephony, Dec. 7, 1987, p. 3; and Kathleen Killette, “Judge Greene Chides DOJ,” CommunicationsWeek,

Aug. 15, 1988, p. 38.

sFor a hist~ of his development, see hhid & Sola Pool, Technologies of Freedom (Cambridge, MA: The Belknap Press of HmNd Unive@

PI12SS, 1983).

6For a disc~sion, see Nell, Op. Cit., fOOtflOte 3, PP. 5-7.
Chapter 13--Jurisdictional Issues in the Formulation and Implementation of National Communication Policy ● 363

responsibility for regulating everything else.7 Because it is difficult to separate the telephone network

into interstate and intrastate pieces, the potential for

jurisdictional issues to emerge between the States

and the Federal Government has always been

inherent in the overall institutional structure.8 As

described by Roger Nell:

,.. a practical limit to the FCC’s jurisdiction undoubtedly exists, but its location is uncertain, and

subject to swings in the reigning political philosophy

of the DOJ [Department of Justice], the FCC, and the

federal courts. Indeed, the jurisdictional boundary

between state and federal regulation is arbitrary,

uncertain, and subject to random changes. As a

result, federal-state conflicts are not only inevitable,

but perpetual, for a loss by one side today does not

assure a loss tomorrow on a similar issue.9

Where jurisdictional issues emerged in the past,

the Courts, until quite recently, have generally ruled

in favor of the Federal Government. 10 So long as the

States and the Federal Government were in basic

agreement, about both underlying communication

policy goals and the most appropriate mechanisms

for achieving them, the division of responsibility

proved to be manageable if, at times, quite cumbersome.

With deregulation and divestiture, however, there

has been a growing divergence of interests between

the States and the Federal Government as well as

among the States themselves. In the absence of a

strong Federal role, the States have found themselves in a position to have far greater influence on

telecommunication policy than ever before. Moreover, faced with varying kinds of problems and

circumstances, they have moved in several different

directions. l 1 For example, Nebraska has approved a

bill that would further decrease the public service

commission’s control over rates. Vermont has approved a form of “social contract” that will keep

local rates down while allowing substantial freedom

for the local telephone company in the more

competitive services. Florida works with “equal

access exchange areas” rather than local access and

transport areas (LATAs), and allows banded rates

for carriers. Illinois has moved aggressively to

eliminate almost all forms of cross-subsidies and to

transfer access costs to end-users. And California

has instituted a comprehensive Lifeline program for

low-income subscribers, and is developing some

innovative approaches for dealing with transactions

between Pacific Telesis and its affiliates.

This divergence among State policies, while

allowing the States to serve as laboratories (much as —

T~blic utility ~@ation began at the State level 80 years ago. New York, Wisconsin, Illinois, and New Jersey were among the first States push~

by an odd alliance of progressive politicians and industry interests to establish independent regulatory bodies. Politicians defended these agencies as

necessiuy to prevent the new “home-intruding” natural monopolies—such as telephones, electricity, and water service-from abusing the “public

interest.” Public utility commissions (PUCS; in some States called public service commissions, commerce commissions, corporation commissions, or

public utility boards) evolved to focus on intrastate telephone service, while the Federal Communications Commission (FCC) regulated interstate

telephone, telegraph, and mail service. Paul Teske, “State Regulation of Telecommunications,” OTA contractor report, July 6, 1987.

8As Nell hti ~~t~ out: “The difficulty creat~ by the~ j~sdiction~ sep~ations is that they pres~e tie existence of distinct federal ~d State

services. But the telecommunications network is an integrated system. Very little of it is used exclusively to provide strictly intrastate services. As a result

the FCC and state regulators often find themselves regulating the same thing. In all network industries jurisdictional separations are artificial and arbitra~

to some degree, but these distinctions make the least sense in telecommunications.” Op. CN., footnote 3, p. 6.

ghid., p. 7.

l-e of the f~st ~wmption caws ~ose from the FCC’s Carterfone decision in 1%8. Since then, as noted by Andrew D. Lipman: “The FCC

subsequently proceeded to preempt state regulation of DTS [digital terrninatiop sy$tems], enhanced services, mobile radio, SMATV [satellite master

antema television], satellite antennas, certain aspects of inside wrong, broadcast subcarners and physically intrastate WATS [wide area telephone

service] when used to originator terminate interstate calls. The FCC has been particularly prone to pre-empt in cases in which states have erected barriers

that preclude new entrants from providing federally approved communication services, or when the FCC finds that state regulation would impair or

prevent the provision of interstate services m contravention of national policies favoring development of nationwide communications services.” Andrew

D. Lipman, “Sparks Continue to Fly Over Pre-emption Issue,” Telephony, Aug. 4, 1986. In 1986, however, the tide in favor of the FCC appeared to be

stemmed when the Supreme Court’s lkuisiana Public Service Comnuksion v. FCC (54 U.S.L W. 4505) decision prevented FCC pre-emption of intrastate

depreciation practices. For a discussion, see Joseph R. Fogerty and H. Russell Frisby Jr., “Supreme Court Decision Upends State-Federal Regulatory

Balance,” Telephony, July 14, 1986, pp. 102, 106, 110-111.

1 l~stitution~ ~swnslbi]l~ also v~es ~eatly across States. pucs hold quasi-judici~ ~wer, and their decisions me subj~t to judicial review. h

some States, such as Virginia, the PUC assumes almost all regulatory functions, including insurance, banking, corporate charters, and professional

licensing. In other States, like New Mexico, the PUC performs far more limited regulatory functions, in only a few instances. The original enabling

statutes were passed in a period of transition from competition to consolidation, and they generally empowered PUCS to establish franchises and to

balance ratepayer interests versus company finances. Universat service is generally not an explicit goal, although it has evolved into an important

objtxtive. No deregulatory, efficiency, or economic-development goals are typically speclfled m these laws.
364 ● Critical Connections: Communication for the Future

James Madison had originally envisioned), has also

made it difficult for FCC to implement its deregulatory policy agenda and to move forward in developing ONA. A number of States have taken steps to

shield their local exchange companies from competition, and many have strongly opposed the idea of

adopting alternatives to rate-of-return regulation.12

Characterizing the different State perspectives with

respect to deregulation, Roger Nell has pointed out,

for example, that:

One group regards the entire federally-inspired

move towards competition as a major mistake, and

yearns for the reestablishment of vertically integrated monopoly with a federal-state regulatory

partnership. This group tends to be motivated

primarily by a desire to protect universally available,

low price basic local service, and to believe that this

characteristic of telephone service is precarious.

Another group of state regulators adheres more

closely to the FCC-NTIA [National Telecommunications and Information Administration] view. They

tend to foresee a future in which most of what

remains of regulation is confined to local service,

and in which the dominant regulatory role is held by

the states.

A third, small group of state regulators seeks to

extend the logic of the antitrust decree to its ultimate

implication at the state level: to permit competition

everywhere, with the hope of eventually deregulating the BOCs [regional Bell operating companies] in

order to eliminate the perverse incentives of regulated monopoly .13

There is little reason to expect that Federal and

State interests will be more closely aligned in the

future. Divestiture, plus inflationary pressure on

local rates in the 4 years prior to AT&T’s breakup,

changed the level of interest and importance for

State telecommunication regulation. And it appears

that the States plan to remain quite firm in protecting

their interests throughout the ONA process, especially with respect to pricing.14 Five States—

California, Florida, Maine, Minnesota, and New

York—have already adopted their own ONA plans,

parts of which are in conflict with FCC-approved

plans. The States, moreover, are likely to be quite

successful in exerting their influence because, although FCC has been guiding the ONA process,

most ONA services will be provided in the States’

jurisdictions. 15 AS peter Ciccone, Vice presidentFinance and Controller, New York Telephone, has

laid out the dilemma facing policymakers:

Is the FCC going to dictate that if one jurisdiction

is offering BSEs [basic service elements] and they’re

technically feasible, that all should offer them,

despite what states want; is the FCC going to dictate

that they be deployed?l6

Also steering the States in diverse directions is the

fact that many State officials are now beginning to

recognize the economic development potential of

telecommunication. While different costs and facilities have not yet proven to be major factors in

business-location decisions, some large users feel

that they are increasingly important. 17 As noted by

T. Travers Waltrip, of the Travelers Insurance Co.,

for example:

Every time we build a new site, which means

we’re hiring people in an area, increasingly one of

our highest concerns is the telecommunication

facility feeding the property. Dropping down on our

lzFor ~ di~cu~~lon, ~ Roger G Nell ~d Bmce M. Owen, “U~”ted States v. ~&T: An ~terim Assessment,” Discussion paper No. 139, Workshop

on Applied Macroeconomics, Industrial Organization, and Regulation, Stanford University, June 1987. As Nell and Owen have noted: “Most states do

not beat around the bush; they simply outlaw intraLATA competition. As of January 1987, only fourteen of the fifty-one states (including D. C.) allowed

facilities-based intraLATA competition, and of these, three effectively prohibit competition by Imposing a ‘block or pay’ rule, and several others restrict

the extent of permissible competition or simply have failed to license any competitors.” Ibid.. p. 18.

13 NOI], op. cit., foomote 3$ PP. 5-6.

ldS~Eli M. Nom, “~plementlng ONA: Federal-state p~mership Needed to Connect Network of Networks, Co~unicationsWeek, May 2, 1988,

p. 15, and Eli M. Noam, “IKSEs? BSA? Federal-State Teamwork is Key to Juggling ONA Issues,” Cornmum”cation.sWeek, May 9, 1988, pp. 17, 48; and

Eli M. Noarn, “States, Feds in New Battle,” CommunkationsWeek, May 2, 1988, p. 12. For other views of State regulators, see Robert Entman, State

Telecommunications Regulatwn: Developing Consensus and Iihminating Conjlicrs, Report of an Aspen Institute Conference, July 30-Aug. 3, 1988.

See also previous discussion of price caps in chs. 9 and 12.

ls~cord~gto Ger~d Brock, Chief of the FCC’s Common Ctier Bureau, for ex~ple, “[T]he Commission recognizes that some BSES [basic SWVlCt3

elements] would be basic services tariffed at the state level, and has acknowledged the states’ authority over the rates, terms, and conditions of intrastate

basic-service offerings used in ONA. The commission, of course, does not set rates for BSES that are in the states’ jurisdiction.” As cited in Entman,

op. cit., footnote 14, p. 31, from a statement before the Senate Subcommittee on Communications, July 14, 1988.

ISAS cited in Entman, op. cit., footnote 14, p. 30.

17’reske, op. cit., footnote 7J P. 3.
Chapter 13--Jurisdictional Issues in the Formulation and Implementation of National Communication Policy ● 365

list of priorities are such things as salary levels and

real estate prices.18

Increasingly, States are taking these concerns into

account. In an effort to meet the needs of large users,

the State of Nebraska, for example, passed legislation in 1987 that provides for radical price deregulation of all services, including local service. Although

Nebraska is a low-population State with no particular tradition of innovation in telecommunication, its

political leaders decided that Nebraska had to take

some dramatic action if it was to attract hightechnology, telecommunication-dependent firms as

called for in its economic development plan. As

former Governor John Kerry explained:

If you live in a rural isolated state like Nebraska,

you absolutely need to be connected to the rest of the

country. And there is technology coming along that

can connect us much more closely. But to get it, we

have to move away from arguing, “What should the

price of the product be?” and into, “What should the

product be?”l9

Concerned about the loss of jobs and businesses

to neighboring areas, New York State has also

focused on the economic development aspects of

communication policy. Recently, for example, the

New York Public Service Commission has taken

under consideration the question of whether or not

New York City will be in danger of losing a

competitive edge if it fails to push for an integrated

services digital network (ISDN).20

If State regulators continue to view communication policy in this light, it will be increasingly

difficult to construct a national policy that mutually

satisfies all of their needs.

Factor 3: Increasing linkages among communication policies and other socioeconomic

policies.

Because communication is both an end in itself

and a means to accomplish other societal ends,

communication policy has, to some extent, always

been linked to a number of socioeconomic policies.

However, in all realms of human endeavor, the

strategic role that communication and information

will play in the future is likely to be greater than ever

before (see chs. 5 through 8). Therefore, it is likely

that communication policy will become more and

more connected to policies in other areas.

The relationship between communication and

economic development has already been mentioned.

A similar convergence is also occurring between

communication and trade policy. Acknowledging

the special role that communication and communication technologies now play in economic growth

and development, the 1988 Trade Bill, for example,

singles out the telecommunication sector for special

attention. OTA’s analysis identifies other policy

areas that may also be affected in the future. For

example, how communication opportunities are

realized and distributed in the political realm will

depend as much on policies for campaign financing

and national security as on communication policy

per se (see ch. 6). Similarly, if individuals and

businesses are to reap the potential benefits of new

technologies, significant changes in U.S. education

and information policy may be required (see chs. 5

and 8).

Factor 4: Increased interdependence of national and international communication

policies.

As economies become linked across national

boundaries, so do the communication systems that

undergird them. And communication policymaking

in one country becomes increasingly dependent on

the policies adopted in others. Resolving intergovernmental differences will require much greater

participation in international decisionmaking fora.

Thus, as the U.S. economy becomes more integrated

with other national economies, communication policymakers will increasingly have to factor in a much

greater number and variety of international variables

when making domestic policy decisions.

International events, for example, impelled FCC

to take greater initiative in prodding the U.S. high

definition television (HDTV) standards-setting

process. Similarly, the growing international acceptance of open systems interconnection (OSI) stanlgAs cit~ in MMk N~el, “The Changing Mission of Telecommunications Regulators at the State kvel,” Aspen Institute Conference, Au@st 1986,

p. 5.

19T,R. Reid, “phom Deregulation, Phase 2,” ?% Washington Post, May 27, 1986, p. A-1.

ZOSW John Foley, “New York probes ISDN,” Comrnum’cationsWeek, Sept. 26, 1988, p 1.
366 . Critical Connections: Communication for the Future

dards was one of the reasons the Department of

Defense renounced the Transmission Control Protocol/Internet Protocol (TCP/IP) in favor of OSI.21

This growing interdependence of national communication policies was, of course, most strikingly

illustrated at the recent World Administrative Telephone and Telegraph Conference (WATTC) meeting in Melbourne, Australia, where arriving at an

international consensus required all governments to

make significant compromises.22

These kinds of interdependencies compound the

problems of communication policymaking in the

United States. Although all agencies now have to be

more cognizant of international developments, the

fragmented nature of the agencies means that no one

agency is equipped to fully present a coherent and

clear-cut U.S. communication policy perspective.

Under these circumstances, it is not surprising that

jurisdictional disputes abound among decisionmakers. 

23 

. Cementing on this problem, NTIA Telecom

2000 notes, for example:

The Secretaries of Commerce and State and U.S.

Trade Representative are legally required to coordinate their efforts with other agencies, but there is no

specified mechanism to ensure that this will occur.

Unfortunately, accomplishing such coordination is

difficult when faced with disputes among agencies,

competing demands for high-level attention, time

pressures, and often inadequate resources.24

Because of the growing importance of telecommunication to trade, FCC recently raised again the

prospect of becoming more involved in trade policy

issues. Its proposal, however, was not well received

by agencies such as the U.S. Trade Representative

and the Department of State, which traditionally

have authority in this area.25

Factor 5: Emergence of large users as key

players in communication decisionmaking.

Also contributing to the confused state of communication decisionmaking in the United States is the

emergence of large users as key players. Eager to

employ new technologies strategically, a number of

them have been unwilling to await decisions in the

public policy arena. Acting outside of the formal

public policymaking process, they have taken steps

to create and structure their own private communication infrastructures.

For example, in the area of standards, large users

are becoming particularly effective in defining their

own communication environments and in sidestepping the traditional policymaking process, as seen in

the development and establishment of the Manufacturing Automation Protocol (MAP) and Technical

and Office Protocol (TOP). It is understandable that

users are taking more and more initiative in this area,

given the slow pace of the formal standards-setting

process. For instance, the establishment of the X.25

standard for packet-switching—reputed to be one of

the most rapidly adopted standards-took approximately 4 years. Nevertheless, the actions of large

users in the area of standards can have significant

public policy implications, and thus can compound

the problems of developing a consistent and coherent national communication policy.

STRATEGIES AND

POLICY OPTIONS

Organizational arrangements are not neutral; they

define power relationships determining who will

zlM~w~d.s, “~fense Interests and United States Policy for Telecommunications,” OTA contractor report, June 30, 1988.

22Fordiscussims of~s ~mting, se Albe~ H~prin, “wATTC.88 offers a Grand Qportunity,” co~m”catio~week, Sept. 12, 1988. p. 16; HS

Gilhooly, ’’U.S. ‘Isolated’ at World Conference,’ ’CommunicationsWeek, Dec. 5, 1988. p. 17; G. Russell Pipe, “WATTC Agrees on New Telecom Rules,”

Telecommunications, January 1989, pp. 119-21; and R.E. Butler, “The Why and Whereto of WA’fTC-88: The Benefits of Global Agreement,”

international Computer Law Advisor, vol. 3, No. 2, November 1988, pp. 8-11.

23N~A ~~]~ attention to this issue in 1983 when it submitted a study on tie subje,ct to the Senate Subcommitt= on CommUIllCatiOns. For a

discussion, see B.W. Rein et al., “lrnplementation of a U.S. ‘Free Entry’ Initiative for Transatlantic Satellite Facilities: Problems, Pitfalls, and

Possibilities,” George Washington Journal of International Law and Econorrdcs, vol. 18, No. 459, 1985, pp. 523-524.

24NTIA , op. cit., footnote 2, p. 179.

~Foradjs~usslon, ~~~ew D. Liprnan, “The FCC J~ps ~toForeignTrade Debate,’’~e@hony, Apr. lb, 1$38’7, pp. 62-63. The relationship among

these agencies is governed by Executive Order 12045, but as Henry Gellerhas noted, the order”is so vaguely worded that it simply does not settle conflicts

or provide guidance of issues of coordination.” Henry Gelier, “The Federal Structure for Telecommunications Policy,” paper no. 8, The Benton

Foundation, Policy Options Project, Washington, D. C., 1989.
Chapter 13--Jurisdictional Issues in the Formulation and Implementation of National Communication Policy ● 367

control what, and for what ends.26 Thus, strategies

designed to address jurisdictional issues and problems of policy coordination generally require organizational change. Because organizations are inherently political, their creation or restructuring can

serve to express national commitment, influence

program direction, and order priorities.27 More often

than not, an organization’s specific structure and the

form it takes will reflect the political climate in

which it emerges, rather than the current principles

of public administration.28

To address the problems identified above, Congress can pursue any of four basic strategies. It

could:

1.

2.

3.

4.

take the lead in establishing communication

policy priorities and in allocating organizational responsibilities accordingly;

establish an ongoing organizational mechanism, outside of Congress, to resolve policy

inconsistencies and jurisdictional disputes;

provide an interagency and/or interjurisdictional mechanism for coordinating communication policy and resolving jurisdictional issues; and

establish an institutional basis for facilitating

coordination and cooperation among government agencies, industry providers, and communication users.

These strategies, and potential options for pursuing

them, are discussed below and summarized in figure

13-1.

Strategy 1: Take the lead in establishing

communication policy priorities and in allocating organizational responsibilities accordingly.

Option A: Reassess and redefine national communication policy goals, revising the Communications Act of 1934 where appropriate.

This option has already been discussed in chapter

12 in conjunction with the issue of modernization. It

should be emphasized here, however, that many

jurisdictional issues stem from the fact that the

Communications Act of 1934 has not been updated

to take account of a greatly changed technological

and socioeconomic environment.

Because the structure of organizations reflects

their basic goals, any significant rewriting of the

Communications Act will also entail considerable

organizational change. In particular, if Congress

decides to press for a national communication

policy, it will need to rethink and perhaps restructure

the roles and relationships between the States and

the Federal Government with respect to establishing

and implementing communication policy. Government agencies will also be affected, since the choice

of lead organizations will be governed by the

priorities placed on different goals. Changes of such

magnitude are likely to be strongly resisted by

present stakeholders if steps are not taken to build a

broad, national consensus in support of new policy

goals, and if roles and responsibilities appear to be

unfairly and/or inappropriately allocated.

Option B: Establish a national commission to

evaluate the changed communication environment and recommend to Congress appropriate policy changes and steps that need to

be taken to implement them.

Another way that Congress might try to reconcile

competing communication policy goals and issues

would be to establish a national commission to

evaluate changes in the communication environ26For ~ discussion, SW HW~ld Seidman, politics, Position, ad power: The Dy~”~s of }~edt~rai Organization (New York, NY: oxford University

Press, 3rd cd., 1980), p. 15; see also Dwight Waldo, The Administrative State (New York, NY: The Ronald Press, 1948), chs. 10 and 11.

zT~id. s= ~so H~ey C. Mansfield, “Reorganizing the Federal Executive Branch: Tht’ Limits of Institutionalization,” LUW tZnd CO?2W?WOWV

Problems, vol. 35, Summer 1970, p. 462.

28Her~~ Slmm, Donald W. Smithburg, and ViCtOr A. Thompson, “How Government Organizations Originate,” Public Administration (New York,

NY: Alfred A. Knopf, 1950).

As identified by Ira Sharkansky, there are four intellectual roots that, in this country, provide a public administration rationale. They are:”1 ) the desire

to maintain political accountability in public administration; 2) the desire to maintain the traditional equilibrium among the three constitutional branches

of government by preserving the separation of powers and checks and balances; 3) the desire to insure that professional and technical skills are brought

to bear on relevant matters of policy formulation and implementation; and 4) the desire to maximize the efficient use of resources by means of a

hierarchical form of organization.” See Ira Sharkansky, “Administrative Organization and Control Units: Structures and Their Intellectual Roots,” in

Public Adrninistratwn: Policy-Making in Government Agencies (Chicago, IL: Rand McNally College Publishing Co., 3rd cd.), ch. 4.
368 ● Critical Connections: Communication for the Future

Figure 13-1-Congressional Strategies and Options to Address Jurisdictional Issues in

Communication Policymaking

Option C

Establish a new

executive agency to

address

communication

issues.

I

I

1

Option D

Establish an agency

within the Executive

Office Of the President

to develop a

comprehensive

communication policy

and to coordinate the

activities of existing

communication

agencies.

4

E

Option A

C)eslgnate the FCC as

the lead organization

responsible for

coordinating

communication policy.

Option B I I ;: II IU. .-,

Designate an existing

executive branch l=

agency, such as the

NTIA, as the lead

agency to coordinate

communication policy.

I

Option A

Reassess and

redefine national

communication policy

goals, revising the

Communications Act

of 1934 where

appropriate.

I

Option A

-

h

Encourage or support and resolvin

Option C the establishment of jurisdictiona l

Establish a

government

advisory bodies to

corporation to perform provide input to

essential executive agencies

communication and the FCC on

specific

1 r services for the k&kqfy w

communication W; “ ‘“ ‘ ‘

public. issues

Mcil{%:in

I

Option B

Provide for alternative

means of dipute

resolution in FCC

proceedings,

7

Option C

Establish a Joint

Communication

Committee within

7

Congress.

Option B

Establish a national

commission to

evaluate the changed

communication

environment and

recommend to

Congress appropriate

policy changes and

steps to implement

them,

Option A

Establish an

Interagency

coordinating body

with representatives

from all the agencies

that have

responsibility for

communication policy.

I

Option B

Establish an ongoing

Federal/State agency,

along the lines of the

Federal/State Boards,

to coordinate and

resolve Federal/State

interjurisdictional

communication policy

issues.

SOURCE: Offios of Technology Assessment, 1990.
Chapter 13-Jurisdictional Issues in the Formulation and Implementation of National Communication Policy ● 369

ment and recommend appropriate policy and organizational changes. In the past, national commissions

have been especially useful in focusing the Nation’s

attention on issues of great magnitude that are likely

to have a broad impact on everyone, such as those

the United States is currently facing in the area of

communication. 29 Because national commissions

are generally established to deal with a specific set

of problems and have a limited tenure, the risk of

generating an enduring, eventually unnecessary,

government bureaucracy is small. Moreover, because they are temporary and unique in nature,

commissions can often attract the assistance of

outstanding individuals with broad experience who

would not be available on a long-term basis. By

heightening the public’s awareness of a problem,

and by engaging the public to debate its solution,

commissions can also serve an important legitimating function that can be particularly useful in times

of major change.30

Establishing a national commission to focus on a

national communication policy might be particularly appropriate today, given the size and scope of

the technological and socioeconomic changes taking

place, the new communication players entering the

scene, and the changing roles of traditional players.

However, setting up such a commission means that

valuable time is lost in the continued study of the

problem.31 Concerned about the ability of the United

States to compete, some would argue that, as a

society, we don’t have this time to lose. Commissions have also been known to diffuse public energy

and concern, as many have been purposely designed

to do.32

Option C: Establish a Joint Communication

Committee within Congress.

Congress has often been criticized for its inability

to deal with long-term, global issues.33 The Commission on Operation of the Senate, for example,

found that “the legislative process as it presently

operates appears to be organized primarily for

incremental decisionmaking rather than addressing

major problems in a comprehensive manner.”34 To

some extent, therefore, the organizational structure

of Congress, as it presently exists, may inhibit its

ability to treat communication policy as a broadbased, societal issue.

One step Congress might take is to establish a

joint committee within Congress to address communication policy from the broadest possible perspective. Provision might be made, for example, to

assure the participation of representatives from other

committees whose past interest and involvement

have been only tangential to communication policy,

but whose present concerns are becoming more and

more linked. At present, Congress has four joint

committees-Economic, Taxation, Printing, and the

Library. These committees have no legislative

jurisdiction; they are established primarily for purposes of study and coordination.

The major functions of a joint communication

committee might be to:

coordinate the formulation of congressional

communication policy;

maintain a professional staff with broad expertise in, and a broad view of, communication

policy;

monitor technological and market changes in

domestic and international communication;

and

coordinate the participation of other congressional committees,

Such a joint committee might not only provide for

coordination within Congress; to the extent that

agency and stakeholder representatives direct their

lobbying activities toward the joint committee, it

would also serve as a point of coordination for many

other groups.

zgFor one disc~sion Ofthe role of commissions, see Frank Popper, The President’s Commission, Twentieth Century Fund. APtil Iwo.

s~or a disc~sion, scz Seidman, op. cit., footnote 26, PP. 23-25.

31NnA rn~es this case, for example. See NTIA, op. cit., footnote 2, p. 177.

%id.

s3For a discmsion, ~ E~est Gellhom, “The con~ess,” ch. 13, Glen (). Robinson (cd,), comm~ica~’onsfor Tomorrow: policy perspectiVesfOr

the Z980S (New York, NY: Praeger, 1978),

34u.sc c~nms~, Senate committee on Government Qerations, su~ommittee on National policy Machine~, “C)fganizing for National SwtitY,”

vol. 3, Staff Report and Recommendations, 1961, p. 7,
370 ● Critical Connections: Communication for the Future

Although establishing a joint communication

committee should not be difficult in theory, in

accordance with the rules of Congress, its creation

would likely be strongly resisted in practice. A

number of committees in both the House and Senate

are concerned with communication issues, representing a broad range of expertise. Their members

would be bound to oppose any efforts that might

circumscribe their power or authority. Although

they do not have the same resources to resist such a

reorganization, many stakeholders would also be

against it. They have already established their ties

and built their alliances within the existing committee and subcommittee structure.

Strategy 2: Establish an ongoing organizational mechanism, outside of Congress, to

resolve policy inconsistencies and jurisdictional disputes.

To the extent that the current changes constitute

part of a continuum that is likely to extend considerably into the future, it is unlikely that a one-time

adjustment will suffice, even with major revisions to

the Communications Act.35 Instead, what may be

required to handle these changes is the designation

of a permanent, ongoing organization to resolve

communication policy conflicts and jurisdictional

disputes. Such an organization might take any of a

number of forms, depending on what emphasis is

preferred in a national communication policy.

In considering these options, it should be remembered, however, that organizational change is not a

panacea and cannot substitute for policy agreement.

As Seidman has noted:

The quest for coordination is in many respects the

twentieth century equivalent of the medieval search

for the philosopher’s stone. If only we can find the

right formula for coordination, we can reconcile the

irreconcilable, harmonize compelling and wholly

divergent interests, overcome irrationalities in our

government structure, and make hard policy choices

to which no one will dissent.36

Because of the connection between organizational structure and policy orientation, stakeholder

preferences concerning where the organizational

responsibility for coordinating communication policy should lie are often colored more by their policy

preferences than their views about public administration. As described by one authority on public

administration policy:

As a rule, however, reorganization proposals have

as their objective the furtherance of some public

policy. Indeed, reorganization appears to be a basic

political process through which individuals and

groups gain power and influence over others in order

to achieve the social and political change they

consider desirable.37

A recent example of this phenomenon is the Dole

Bill, which would have transferred the responsibility

for administering the Modified Final Judgment

(MFJ) from the district court to the FCC. Although

the merits of the bill were argued on the basis of

organizational criteria, lobbying on the bill correlated highly with stakeholders’ attitudes towards

liberalizing MFJ. Those in favor of liberalization

supported the Dole Bill, and those opposed argued

that the court should retain responsibility for MFJ.38

Option A: Congress could designate the FCC as

the lead organization responsible for coordinating communication policy.

Established by the Communications Act of 1934,

FCC was designed, in part, to implement the act “by

centralizing authority heretofore granted by law to

several agencies.”39 However, the mushrooming of

other agencies and authorities to deal with burgeoning communication and communication-related issues has seriously challenged FCC’s role in this

regard. 40

35For a discussion of me difficulties entailed in applying short-term solutions to long-term problems, see Seidman, OP. cit.. footnote 26.

3%id., p. 205.

sTRon~d Moe, “Ex~utive Branch Reorganization: An OverVieW,” Library of Congress, Congressional Research Service, 1978, p. 6.

38u.s0 Consess, Senate Comlttm on Commerce, Science, and Transportation, Federal Telecommunications policy Act of 1986! hefigs> 99M

Cong., 2d. sess., on S. 2565 (Washington, DC: U.S. Government Printing Office, 1986)

3947 us-c. 151.

~ordiscussiorts of some of the problems recently faced by the FCC, see Kathleen Killette, “Patrick: The Steadfast Believer In FCC’s Ability to Guide

Telecom,’’CommunicationsWeek, Nov. 16, 1987, pp. 8, 21; Sam Dixon, ‘*Observers Disagree on FCC’s Success Rate in D.C. Circuit,” Telernatics, April

1988, vol. 5, No. 4, pp. 14; Kathleen Killette, “House Grills FCC on Regulation Plans,” CommunicationsWeek, Nov. 16, 1987, p. 8.
Chapter 13--Jurisdictional Issues in the Formulation and Implementation of National Communication Policy ● 371

Created as an independent agency, FCC is organizationally linked and ultimately responsible to the

legislative branch rather than to the executive.41

And, since it is the job of the legislature to make

policy (in theory at least), it can reasonably be

argued that FCC should be assigned the task of

reconciling national communication policy objectives and jurisdictional disputes on a day-to-day

basis. This legislative connection might also serve to

assure that, when developing communication policy, a broad range of interests is taken into account.

Because compromise is inherent in the congressional environment, the legislative perspective is

often eclectic and inclusive of many minority points

of view.

This tendency to be all-embracing, however, is

both a strength and a weakness of the FCC option.

As seen in the Reagan Administration’s pursuit of its

deregulatory agenda, the congressional focus on

winning political favor and fashioning political

compromises can serve to put the brakes on any

major policy departure.42

Some might also take issue with the option of

transferring considerable policymaking authority to

FCC on grounds of democratic theory, which

requires that policy organizations be held directly

accountable to the public for their actions.43 Although shifting this authority to FCC would certainly not shield the policymaking process from

public influence, it might change the nature and

process of the debate about policy issues. As Glen

Robinson has noted in this regard:

In the FCC, as in Congress, results depend on

organized, sustained and concentrated efforts by

interested persons. Not surprisingly, this gives

private industry groups a decided advantage vis-avis less organized groups purporting to represent the

interests of the general public.44

Furthermore, as in the case of the Dole Bill, any

proposal to focus policy coordination within FCC is

likely to be strongly resisted by those who-by

virtue of their own positions within the administrative bureaucracy or because of their own policy

preferences—would stand to lose.45 This option

would certainly be opposed by NTIA which, as

noted below, sees itself as a more appropriate locale

for policy coordination. In its 1988, NTIA Telecom

2000, NTIA argued, in fact, that the executive

branch should, at the very least:

. . . have the ability to disapprove FCC action, at

least in matters of overriding national security,

foreign policy, international trade, or economic

Policy.46

In addition, others who have been highly critical of

FCC’s recent performance would also oppose any

extension of its present responsibilities.47

If FCC were assigned an enhanced role in

developing and coordinating national communication policy, it would clearly need much greater

resources.

48 Also, the composition of FCC staff

dlAltho@I inde~ndent regulatory agencies have traditionally performed a combination of legislative, administrative, and judicial f~ction~and,

in fact, this was one of the original justifications for their existence----they are, in theory, regarded as “arms of the Congress.” For a generat discussion

of independent regulatory agencies, see U.S. Congress, Senate Comrnmittee on Governmental Affairs, Srudy on Federal Regulation, vol. V, Regufato~

Orgunizacwn, prepared Pursuant to S. Res. 71, (Washington, DC: U.S. Government Printing Office, December 1977).

42As Glen RobinWn h= ~int~ out, ~is tendency of Congress to ~ conse~ative is considered by some to ~ a knefit. AS he notes: “For landbound

conservatives . . . Congress’ incapacities are more a virtue than a vice; they discourage facile legislative solutions to social and economic

problem s-solutions that often prove short-sighted and ultimately mischievous.” Robinson (cd.), op. cit., footnote 33, p. 358.

dsFor this point of view, see Robert G. Dixon, Jr., “The Independent Commissions and Political Responsibility,” Admim”strative LAW Review, vol.

25, No. 1, Winter 1975, pp. 1-16.

44Robinson (cd.), op. cit., footnote 33, pp. 356-357.

d5For Cx-pie, tire ~m Considerable Opposition, ~s~lally from the Departments of (’ommerce and State, to the r~ent propos~ to allthorize the

FCC to take on more responsibility for dealing with international issues.

~N’r’IA, op. cit., footnote 2, P. 20.

Q7sM, for imunce, Henry Geller, op. cit., foomote 25, p. 15. AS Geller notes.“ “The FCC’s failure to develop objective, effective policies has been

well documented. The agency delayed cellular radio service for a decade, and still has no objective policy to deal with broadcast license renewal. In regard

to the comparative renewal of broadcast Iicences, the FCC’s policies are ‘mush’ and much criticized by the courts. The FCC issued a notice on

comparative renewalsin 1981, a further notice in 1982, and a still further notice in 1988.” See also Henty Geller, “Communications Law—A Half Century

Later, ’’Federal Commuru”carions Law Journal, vol. 37, 1985, p. 73.

46For a discuslon of lfiit~ reW~es, we Glen (). Robinson, “me Federat Communications Commission,” Robinson (~.), Op. cit., fOOttlOte 33,

pp. 382-388. It should also be noted that the FCC’s limited resources for regulating the entire Bell System were one of the rationales for divestiture.
372 ● Critical Connection: Communication for the Future

would probably need to be expanded. As Seidman

has pointed out, government agencies are social

institutions that take on characteristics, or even

personalities, of their own:

Each profession seems to mold and shape the

decisionmaking process so that issues will be

presented and resolved in accordance with its

professional standards.49

Designed primarily to perform traditional regulatory

functions, FCC has been dominated professionally

by lawyers, and more recently by economists. To

deal with the broad communication issues of the

future, FCC would need to greatly enhance the scope

of its expertise.

Option B: Designate an existing executive

branch agency, such as NTIA, as the lead

agency to coordinate communication policy.

NTIA, housed within the Department of Commerce, is also a likely candidate for coordinating

national communication policy. In 1978, Executive

Order 12046 established NTIA to “provide for the

coordination of the telecommunication activities of

the Executive Branch.”50 NTIA has, itself, proposed

this option in its report, NTIA Telecom 2000.

According to NTIA:

The Executive branch should have the authority to

establish policy, while the FCC should remain the

agency for implementation of policy [emphasis in

the original].

It should be noted that, if this proposal were adopted,

the executive branch and legislative agencies would,

in effect, be reversing their traditional roles.

Arguing in favor of this option, NTIA points out

that the current organizational structure suffers from

an outlook that:

often tends to be reactive and skewed toward

achieving short-term objectives;

focuses too much on the status quo; and

is too concerned with balancing particularist

interests, rather than with long-range policy

planning.51

According to NTIA, the present, fragmented decisionmaking process encourages stakeholders to

shop around for the policy forum in which they are

likely to receive the most sympathetic hearing.52

If authority for establishing and coordinating

communication policy were to be transferred from

FCC to the executive branch, many of these problems, NTIA contends, would be minimized.53 An

executive branch agency, it is argued, can be more

proactive than an independent agency. Moreover, it

can more successfully bring together a crossdisciplinary depth of skills and command greater

acceptance and respect within both the government

and the private sector than can FCC, which is

circumscribed in this respect by its narrowly conceived regulatory (and increasingly deregulatory)

role.54

The idea of transferring authority from the independent agencies to the executive branch as a means

of enhancing policy coordination is by no means a

new one, having been the primary recommendation

of a number of Presidential commissions created to

analyze the organization of government.55 One of

the most recent was the Ash Council, established by

President Nixon in 1969. It criticized the independent regulatory commissions for being neither reqgsei~an, op. cit., foomote 26 P. 156.

5047 u-s-c. 151.

51NTIA, op, cit., foomote 2, p. 165.

%id.

531bid., pp. 167-172.

S41bid., p. 167.

55For exmple, in its ~P~ t. tie ConWess, the Brownlow Commission, establish~ under president Roosevelt, r~omrnended that 100 independent

agencies, administrations, boards, and commissions be integrated into 12 executive departments. The report was particularly critical of the independent

regulatory agencies, characterizing them as the “headless fourth branch of Government.” The First Hoover Commission, set up after the Second World

War, made similar recommendations, arguing that the executive branch ought to be reorganized to create an integrated, hierarchical structure with the

President as an active manager. So too did the J.M, Landis Report on RegulutoryAgencies to the Preskieti E/ecr, U.S. Senate, 1960. SW, for a discussion,

“The Federal Executive Establishment: Evolution and Trends,” Library of Congress, Congressional Research Service, prepared for the Senate Committee

on Governmental Affairs, May 1980. See also Ronald C. Moe, “The Two Hoover Commissions in Retrospect,” Library of Congress, Congressional

Research Service, Nov. 4, 1981.
Chapter 13--Jurisdictional Issues in the Formulation and Implementation of National Communication Policy ● 373

sponsive to the public interest nor coordinated with

national policy.56 In its conclusions, the Ash Council

contended that the executive branch was too fragmented to effectively coordinate public policy .57

Arguing against establishing interagency coordinating committees to solve the problems of policy

coordination-on the grounds that they would serve

only to add another layer of decisionmaking--the

Ash Council recommended that the government

move away from the rather narrow, constituencyoriented traditional departments towards broader,

functional departments, integrating a number of

independent agencies in the process. It is important

to note, however, that in prescribing the integration

of a number of independent agencies, the Ash

Council made an exception of FCC. It argued that

FCC should remain independent, given the sensitive

role that it has played with respect to the mass

media. 58

Although many scholars and administrators have

taken issue with the concept of the independent

regulatory commission, a number have strongly

defended it.59 Most early advocates of independent

regulatory commissions focused on the role of such

agencies as administrative expert, separate and

untarnished by the political process. This rationale,

however, was not long in vogue, becoming overtime

a major source of criticism of independent regulatory agencies. More recently, the argument has been

made that, instead of being protected from abuse and

invidious influences, the commission form helps to

assure that different views will be taken into account

at the highest agency level.6o Moreover, it is claimed

that, although the need to compromise at this level

may delay the decisionmaking process, the benefits

may be greater than the costs. As Robinson has noted

in this regard:

Differences among agency members do not exist

in a vacuum; they reflect basic conflicts among

different groups and interests involved in a particular

problem. Such conflicts cannot be resolved simply

by administrative fiat and attempts to do so are likely

only to shift political pressures to Congress (most

often congressional committees) or the executive

(“White House staff’) where they may be equally

effective, but less visible to the public.61

Just as NTIA opposes delegating the authority for

coordinating U.S. communication policy to FCC, so

it can be anticipated that FCC would strongly oppose

any transfer of its authority to the executive branch.

Members of congressional committees responsible

for FCC oversight, who in the past have assiduously

protected their prerogatives in this regard, are also

likely to oppose such a measure.62 In fact, as

Robinson has pointed out, given the historical litany

of complaints against independent regulatory commissions, their continued longevity in the face of

such criticism attests to the strength of congressional

and stakeholder opposition to any change.63

Stating the case for Congress and FCC, there are

a number of arguments that might be made against

such an option. For example, there is the recommendation of the Ash Council that, given FCC’s special

role, it be exempt from integration into the executive

branch. According to the Council’s report, in an area

as sensitive as communication, a single administrator would be in an “exceptionally vulnerable position which, because of its appearances, could impair

public trust,” whereas a “collegial form increases the

S6”A New Re@a~~ Fr~ework: Report on Selected Independent RegulatoV Agencies,” The President’s Advisory Council on Executive

Organization, 1971. For a discussion, see Moe, op. cit., footnote31; see also Harvey Mansfield, “Reorganizing the Federal Executive Branch: The Limits

of Institutionalization,” Law and Conrempormy Problems, vol. 35, Summer 1970, pp. 460-495.

57MW, op. cit., fOO~Ote 31! p. 33.

ss~e ~sident’s Advisory Council on Executive Organization, op. cit., foomote 56, pp. 31~6.

59s=, for exmple, ~~s J~fe, “me Effective Limits of tie Adminis~ative process: A Reevaluation,” Harvard Law Review, vol. 67, May 1954, pp.

1105-1 135; Henry J. Friendly, “A Look at the Federal Administrative Agencies,” Columbia Law Review, vol. 60, April 1960, pp. 429446; and Glen

O. Robinson, “Reorganizing the Independent Regulatory Agencies,” Virginia L.uw Review, vol. 57, September 1971, pp. 947-995.

Wbid., p. 961.

blIbid., p. 962.

62As Mw h=wint~ out: ‘tCongess is not well orgaiz~ t. deal ~~ abs~actprinciples, such M a~fied ex~utive branch. The committee St.lUCtUR?

is more appropriate for dealing with specific problem areas and with distinct units within the executive branch . . .

Given its constitutional power to establish units in the executive branch, and given its institutional tendency to seek influence in the making of agency

policy, Congress increasingly has been inclined to create agencies which have a high degree of independence from Presidential supervision.” Op. cit.,

footnote 37, p. 12.

mRobiUn (cd,), Op. cit., fOOtnOte 33.
374 ● Critical Connections: Communication for the Future

probability that internal checks and balances will be

effective” against otherwise improper influences or

biases. 64

A number of NTIA’s claims about the benefits of

reorganization might also be questioned. In NTIA

Telecom 2000, for example, the assumption is made

that an executive branch agency can play a more

holistic role than FCC in developing and coordinating communication policy, being less susceptible to

the pressures and influences of narrow interest

groups. However, challenging the Ash Council’s

premise that the President’s broad national constituency would protect an executive branch agency

against narrow industry pressures and influences,

Robinson has noted:

As a priori theory, the idea has appeal. Unfortunately, however, it does not have a very solid anchor

in reality insofar as it assumes that executive

departments operate majestically above the interests

of particular industries or clientele concerns—an

assumption which cannot survive the most cursory

scan of executive agencies. In fact the phenomenon

of interest group representation is very much a part

of the basic character of the political process in this

country. 65

Equally questionable is the NTIA assumption

about the limited resources and expertise available

to FCC. This assumption discounts the fact that

Congress could very well enhance FCC’s mandate

and provide it with additional resources, as it would

have to do if it designated policymaking and

coordinating authority to an executive branch

agency. The corollary to this assumption—that

FCC’s authority is likely to be circumscribed further

in the future, given continued deregulation—is also

specious, insofar as support for further deregulation

is clearly not a given. This is well illustrated by the

recent efforts of a number of congressmen to codify

the Fairness Doctrine, and by the recent congressional and State debates over price caps and rate-ofreturn regulation.

Just as FCC resources and staff would need to be

upgraded in order for the agency to play a greater

national policymaking or coordinating role, so too

would those of NTIA. There is little evidence to

suggest that, since the coordinating and policy

planning functions of the now defunct Office of

Telecommunications Policy (OTP) were transferred

to NTIA in 1977, progress has been made in

developing a coherent and consistent national communication policy. In fact, one could strongly argue

the opposite case, given the radical differences in

policy perspectives exhibited by different government agencies, as in the case, for example, of the

line-of-business restrictions. Nor has NTIA been

particularly successful in performing the former

OTP task of coordinating the U.S. communication

policy position for presentation in international

policy fora.

The possibility of NTIA gaining future support to

effectively play an enhanced policy role may,

moreover, be seriously in doubt. It has recently been

proposed, for example, that NTIA be further integrated into the Department of Commerce as part of

the Technology Administration, under a new secretary. 66 Were this organizational change to take place,

it would be even more difficult for NTIA to reconcile

national goals, since it is more likely that commercial criteria would prevail.67

Option C: Establish a new executive agency to

address communication issues.

Over time, organizations develop a “mystique” of

their own that affects how the public, other agencies,

and Congress relate to them, 68 Moreover, once

established, the character of an organization is

extremely difficult to change, often requiring-as

mentioned above with respect to both FCC and

NTIA—nonorganizational measures that expand an

agency’s constituency, the complete reconfiguration

of administration systems, and a different mix of

@Ash co~cil Report, p. 41, as cited in Robinson, op. cit., footnote 59, p. 963.

651bid., p. 956.

%e legislation that authorized this restructuring was passed in the IOOth Congress, shortly before its adjournment. Under the proposed

reorganization, the National Institute of Standards and Technology (previously the National Bureau of Standards), the National Technical Information

Services, and the Office of Productivity, Technology, and Innovation would be combmed with NTIA to form the Technology Administration.

“Comrneree’s Restructuring Plan,” Broadcasting, Nov. 14, 1988.

hTIt sho~d be noted, in this reg~d, that the Dep~ment of Commerce was deliberately established to advocate business intaests.

68 Sei~an, op. cit., foomote 26, P. 25.
Chapter 13-Jurisdictional Issues in the Formulation and Implementation of National Communication Policy ● 375

professional skills.69 Keeping these factors in mind,

it could be argued that-given the numerous problems experienced with the previous organization

arrangements for dealing with communication policy, and the growing national importance of communication issues-the time is right to create an

executive agency specifically designed to deal with

communication policy.

In taking such a step, however, caution is required. As Seidman has admonished:

The first organization decision is crucial. The

course of institutional development may be set

irrevocably by the initial choice of administrative

agency and by the way in which the program is

designed. Unless these choices are made with full

awareness of environmental and cultural influences,

the program may fail or its goals may be seriously

distorted.70

Depending on the degree of prominence that

Congress wants to attach to such a mission, an

agency might be structured as an independent

executive agency (like the Environmental Protection

Agency or the Small Business Administration) or as

a Cabinet-level department.71 Cabinet-level departments represent the traditional form of executive

branch agency that existed up until 1860. Typically,

they were directed by a single administrator, who

formed part of the President’s Cabinet. Today, there

are 14 departments at this level.

Executive agencies residing outside the departmental structure were rare until the turn of the 20th

century, becoming increasingly prominent after the

First World War. Their growth parallels, in a sense,

the growing complexity of society. Many independent agencies were established in response to the

lobbying pressure of a particular constituency.

Examples are the Departments of Agriculture,

Labor, and Education (which later became Cabinetlevel agencies). Others, such as the Environmental

Protection Agency, were created, in part, as a

symbolic gesture to give prominence to a particular

national concern.72

Since both kinds of agencies can constitute major

institutional entities-wielding considerable operational authority and having at their disposal sizable

financial and staff resources—the most important

factor that distinguishes them from one another is

their approximation to the President, and hence their

national prominence and relationship to the administration’s overall policy program. Separating them,

but to a lesser extent, is the fact that tenure is less

assured in the case of independent executive branch

agencies. In making a choice between these two

organizational approaches, therefore, the two most

important questions that need to be asked are: 1)

How fundamental are the communication-related

changes that are taking place within society, and 2)

how permanent are they? To the extent that these

changes are believed to be enduring, and in order to

link together a whole range of societal issues, they

might best be treated at the Cabinet level where

conflicts can be resolved by the President.73 On the

other hand, if these changes, and the issues to which

they give rise, are limited in time and can be treated

in a more isolated fashion, an independent agency

might be a more appropriate choice.

As noted above, the virtues of the executivebranch form of organization have long been touted

by a number of scholars and commissions on

governmental organization. Among the advantages

typically cited are: enhanced policy coordination,

greater efficiencies in division of responsibility and

the execution of tasks, greater accountability, and

greater ability to attract high-quality personnel.

Regardless of the merits of this option, establishing an executive department is far from simple.

Historically, Congress has not been eager to create

‘Ibid,

TO~id., p. 25. S= also Simon et al., op. cit., footnote 28.

71A CharaCteriZatiOROf tie Federal ex~utive establishment appears in Title 5 of the United States Code in sections 101-105. f% Harold Seidm~ has

pointed out, there are no general Federal laws that define the particular form or organizational structure of Federal agencies. Rather, each agency is defined

by the powers enumerated in its enabling actor set forth by executive order. Seidman, op. cit., footnote 26, p. 246. For a description of the wide-ranging

variety of executive branch agencies, see also CRS, op. cit., footnote 55.

TzFor a discu~ion, see Seidtnan, op. cit., foomote 26, pp. 233-234, and CRS, op. cit., foomote 55, pP. 29-31.

TsTheBureau of the Budget re~~esdep~ment~ states for’’ those agencies which: 1) administer a wide range of programs directed tow~d a common

P-of n~on~ im~ance; and 2) are concerned with @icies ~d programs requiring frequent and positive presidential direction and representation

at the highest levels of Government.”
376 ● Critical Connections: Communication for the Future

new departments, often requiring an agency to serve

a period of apprenticeship before being promoted to

the status of an executive department. For example,

although a bill to create a Department of Transportation was introduced in Congress as early as 1890, it

took 60 years for such a department to be established. 74

The reluctance of Congress to establish new

agencies is not surprising, given the close interrelationships between the executive and legislative

branches. Any major changes in the executive

branch are likely to have considerable impacts on the

distribution of power and responsibility in Congress.

Thus, Congress has the ultimate say with respect to

any significant organizational changes.

The States also might look askance at the creation

of a Department of Communication. As early as

1789, they were concerned that the growth of the

executive branch would take place at the expense of

their own authority and policymaking prerogatives.

For this reason, the States opposed the establishment

of both the Department of the Interior in 1849 and

the Department of Education in 1970.75 Given this

history, and the number and intensity of recent

disagreements between the Federal and State Governments about communication policy, the States

might very well be averse to setting up an executive

agency for communication.

A number of other stakeholders are likely to be

ambivalent about creating anew agency to deal with

communication policy issues. Although many may

be frustrated by the lack of consistency and coherence in the present situation, they have learned how

to operate effectively within it. The establishment of

a new agency would be fraught with uncertainty.

Since Federal agencies have often served to promote

certain constituencies, many would oppose or favor

an executive-branch agency depending on whether

they perceive it to enhance or detract from their

particular interests.

Option D: Establish. an agency within the

Executive Office of the President (EOP) to

develop a comprehensive communication

policy and coordinate the activities of existing communication agencies.

While the option of creating an independent

executive agency would provide the President with

considerable control over communication policy

through the powers of appointment, the President’s

influence would be even greater if the responsibility

and authority for developing and coordinating communication policy were located right at the center, in

the White House office within EOP.

EOP was established in 1939 as the principal

management arm of the President, which would

serve to enhance the President’s ability to develop

comprehensive national policies. Originally housed

within it were the White House office, the Bureau of

the Budget, and the National Resources Planning

Board. 76 Over the years, not only has EOP grown

both in terms of personnel and responsibilities; in

addition, the White House office has become the key

agency within it.77

Given the growing importance of the White

House office and its close relationship to the

President, how one views the option of creating a

communication agency to be part of it will depend,

to a considerable degree, on one’s views about the

appropriate roles of, and relationships between,

Congress and the executive. It might be noted that,

had this option been available at the time of

President Andrew Jackson, he would most likely

have favored it, being an outspoken advocate of a

strong executive. His views on this subject can still

serve to illustrate the major rationale for centralizing

74seihan, op. cit., footnote 26, P. 246”

TsIbid., p. 16.

T~S, op. cit., fOOtnOte 55$ P. ‘“

TT~id. ~ fact, EOp time ~ prominent mat many, even ~ong those who had advocated i~ expansion, were ~coming concernd about an

“institutionalized” presidency.

The growth in the size of the agencies and personnel within EOP also helps to explain the shift in importance towards the White House office staff.

As Seidman has noted, their usefulness to the President as a general staff decreased in inverse relationship to their size. Seidman, op. cit., foomote 26,

p. 252.

For a recent description of its development up through the Reagan Administration, see Samuel Kernell, “The Evolution of the White House Staff,”

Chubb and Peterson (eds.), op. cit., foomote 1, pp. 185-237.
Chapter 13--Jurisdictional Issues in the Formulation and Implementation of National Communication Policy ● 377

the responsibility for communication policy under

the direct purview of the President. As he saw it:

[It is the President’s] especial duty to protect the

liberties and rights of the people and the integrity of

the Constitution against the Senate, or the House of

Representatives, or both together.78

Seidman adds:

As the elected representative of all American

people, the president alone has the power and

responsibility to balance the national interest against

the strong centrifugal forces in the Congress for the

special interests of subject matter or region.79

It was, in fact, this same argument that served as

the Nixon Administration’s primary rationale for

creating OTP within the White House office in 1970.

In his message to Congress, President Nixon made

it clear that OTP would be a presidential advocate,

proposing and arguing for the specific policy preferences of the executive branch.8o And, decidedly, this

was the major role that OTP played during its 8-year

existence.81 It was highly political, did little longrange planning, and was unsuccessful at coordinating national communication policy .82 Under these

circumstances, it is not surprising that OTP was

never a particularly popular agency.

Because of its controversial nature, OTP’s history

illustrates many of the potential problems and

advantages that can be associated with this kind of

organizational arrangement. In addition, because

OTP serves as a precedent, it is possible, to some

extent, to look at the way key stakeholders regarded

it and surmise what their attitudes might be to such

an institutional option today.

Although located at the center, OTP actually

suffered from a lack of power and authority. It

enjoyed few resources of its own. While it derived

power and influence from the presidency, it was

never quite clear to stakeholders when the agency

was, in fact, operating on the President’s behalf and

with the President’s authority .83 Furthermore, having no operational powers, it was totally dependent

on other agencies to implement its policies and

programs.

84

Given its inherent organizational weaknesses, the

first—and most important-task that OTP faced was

to gain legitimacy for its role. This problem was

compounded by the fact that few of the traditional

government, industry, or political actors had favored

the establishment of OTP to begin with. Many felt

that it was not legitimate for the White House office

to play the role of presidential advocate. And the cast

of mind and style of operation85 of the first OTP

Director, Dr. Clay T. Whitehead, did little to assuage

their fears. Whitehead strongly believed in the

agency’s advocacy role. As he described it:

[No one] who’s realistic about how government

works would expect that an agency could exist in the

executive branch, answerable directly to the President, that would not be political in some sense.86

Reflecting Whitehead’s view of his role, most of

OTP’s policy decisions were arrived at not through

study or analysis, but rather, as Whitehead has

Tg@oted in Clinton Rossiter, The Arnericun Presidency (The New American Library, Inc.. 1956), p. 92, from Seidman, op. cit., footnote 26.

TgSeitin, op. cit., foomote 26, P. 72.

tlOSW ~~ident Ni~on’~ me~~age to congre~~ in U.S. Congress, Howe committ~ on Government @erations, Reorgam”zation plan No. 2 CJf ]970,

pp. 34.

81 For ~ di5cu5si~, ~J~es ~ller, “me ~esldent’S Advocate: OTp and Broadcmt Issues,” Journal of Broadcasting, No. 3, Summer 1982, pp.

625-639; and James Miller, “Policy Planning and Technocratic Power: The Significance of OTP,” Journal of Communication, vol. 32, No. 1, Winter

1982, pp. 53-60. As part of his reorganization plan, which called for a reduction in the size of government, President Carter disbanded OTP upm coming

into office in 1978, and transferred the majority of its responsibilities to NTIA.

szIbid.

sg~ller, op. cit., foomote 81, p. 632.

84~id.

85Refl=@ ~ whitehe~d’5 hi@ly Politlclzed, per50n~ style, Richard Wiley, former chairman of the FCC, r~ounts how Whitehead stated publicly

that: “Broadcastershada duty to avoid ‘ideological plugola’ intheirnewscasts andtocorrect situations where so-calIedprofessionals . . . dispertseelitist

gossip in the guise of news analysis.” Richard E. Wiley, “ ‘Political’ Influence at the FCC,” Symposium: The Independence of Independent Agencies,

Duke Law Journal, April/June 1988, Nos. 2 & 3.

MAS cl~ in Mi]~er, op. cit., foomote 81, p. 635.
378 ● Critical Connections: Communication for the Future

himself described it, through brainstorming sessions

of the agency’s director and its chief counsel.87

Congress, in particular, was worried about the role

of OTP.88 Never enthusiastic about the agency,

Congress’s attitude towards and relationships with

OTP only deteriorated over time. Representative

Herbert Macdonald, Chairman of the House Subcommittee on Communications, was particularly

hostile, characterizing the agency in 1971 as” ‘headline grabbers’ who use ‘dramatic proposals and

catch phrases’ to win favor with one group and scare

others, thereby ‘perpetuating a cruel hoax on the

public by suggesting that difficult problems have

simple solutions. ’ “89 Reflecting its suspicion and

hostility, Congress, in 1975, made significant cuts in

OTP’s budget. And Senators Weicker and Ribicoff

introduced legislation to abolish OTP entirely.90

The history of OTP suggests that an agency such

as this, located so close to the President, may find it

extremely difficult to simultaneously play the roles

of both advocate and coordinator. Moreover, it

illustrates-perhaps all too painfully-the public

administration axiom that to resolve policy conflicts

it is not enough to simply create a new organizational arrangement. Finally, the experience of OTP

reinforces the notion that the success of any organization will depend, to a significant degree, on the

factors and circumstances that led to its creation, and

by the particular organizational personality that it

projects to the public at the outset.

It is unclear whether a new agency, such as OTP,

would be more successful in gaining political

support and serving as the primary agency responsible for developing and coordinating communication

policy today. Even if it were to play less of an

advocacy role, it would still face the problem of

having extremely limited resources. To the extent

that additional resources were made available to

provide the agency with some operational authority,

it could be argued that it would be too large and

cumbersome to operate effectively as part of the

White House staff or even EOP.91 One might also

question whether it would be wise to locate the

expertise for establishing communication policy

within an agency that is subject to the change of

administrations and the subsequent replacement of

key personnel. Seidman notes:

The President ought to have the capability to adapt

the Executive Office to his perceived needs, but he

should not be permitted in the process to ignore the

needs of future presidents, the Congress, and the

people.92

Strategy 3: Provide an interagency and/or

interjurisdictional mechanism for coordinating communication policy and resolving

jurisdictional issues.

Strategy 2, as described above, would suggest that

effective coordination of conflicting communication

goals and interests can best be achieved within the

organizational context of a single agency. Some

public administration scholars would strongly support such a proposition. James D. Mooney, for

example, has defined coordination as no less than

“the determining principle of organization, the form

which contains all other principles, the beginning

and the end of all organized effort."93 However,

others would contend that no ongoing, single

organization or agency can address the breadth of

problems, or their rapidly changing natures, that the

United States faces today-specially as they appear

in the realm of communication. To address such

problems, it is argued, we need to establish interagency and interjurisdictional mechanisms for coordination. Two options available to Congress for such

coordinating mechanisms are discussed below.

Wbid.

t181t ~hO~d ~ ~o~, in ~i~ ~egad, that conge~~ has never allowed the president to have a free hand in organizing the EOP. AS Seidrnan has pointed

out: “Most department heads now have authority to organize and reorganize their agencies without formal congressional approval, but the President lacks

comparable power.” Seidman, op. cit., footnote 26, p. 248.

89Miller, op. cit., footnote 81, P. 635”

‘%bid., pp. 633-634.

glForr~st chi~m~ m~es this Cme, for ex~ple, in “The Ex~utive Branch,” Robin~n (cd.), op, cit., footnote 33, ch. 11,

gz~i~m, ~. cit., footnote 26, p. 252.

93 James D. Mooney, “The Principles of @gaNzation, “in Luther Gulick and L. Urwick, Papers on the Sctence of Adndnisfration (New York, NY:

Institute of Public Administration, 1937), p. 93.
Chapter 13--Jurisdictional Issues in the Formulation and implementation of National Communication Policy .379

Option A: Establish an interagency coordinating body with representatives from all agencies that have responsibility for communication policy.

Just as the American belief in the value of

“expertise” led to the creation of independent

regulatory agencies set apart from politics, so it gave

rise to agencies that were separate and distinct from

one another. The idea was that “single-mindedness”

would “quickly develop a professionalism of

spirit-an attitude that perhaps more than rules

affords assurance of informed and balanced judgements." 94

However, as the role of government expanded and

the kinds of issues and problems with which

government had to deal became more and more

interconnected, it became increasingly apparent that

the traditional organizational criterion of efficiency

had to be balanced against the need for coordination.

No agency had at its disposal all of the tools and

expertise necessary to deal with major social and

economic problems in a comprehensive and coordinated fashion.95

One way of trying to balance the dual requirements of coordination and efficiency-although

never popular or very successful—was to create

interagency coordinating committees. Characterizing this form of arrangement, Seidman says:

Interagency committees are the crabgrass in the

garden of government institutions. Nobody wants

them, but everyone has them. Committees seem to

thrive on scorn and ridicule, and multiply so rapidly

that attempts to weed them out appear futile.%

But, as Seidman is quick to add: “The harshest

critics have yet been unable to devise satisfactory

substitutes. ’*7

Today, two intergovernmental agencies are concerned with communication and communicationrelated issues: The Senior Interagency Group on

International Communication and Information Policy,98 which was established by the National Security Council in 1984, and the Economic Policy

Council, which, although it does not directly focus

on communication issues, provides an interagency

forum for addressing them.99

Given the growing importance of communication,

and hence the need for greater agency coordination,

it is likely that proposals will continue to be made to

create interagency mechanisms for coordination.

Before adopting any such measures, however, it is

wise to consider the extent to which, and the reasons,

such organizational forms have so often failed to

meet their creators’ objectives.l00

Some of the problems associated with interagency

coordinating committees are that they tend to:

. bury problems rather than resolve them;

. make it difficult to get tasks accomplished

because too many people with only a peripheral

interest become involved;

. dilute interest in, and commitment to, addressing a problem; and

. lead to outcomes that are based more on the

distribution of power within a committee than

%J~es Landis, The Adndnistrative Process, (New Haven, CT: Yale University press, 1938).

9sL10~d N. ~der ~d David R. JOhnsOn, “Re@~On and the pOliti~~ ~ocess,” The ~afe ~~our~/, vol. 84, No. 7, June 1975, pp. 1403-1409.

xsel~an, ~. cit., foomote 26, P. 207.

97~1de,~.211; ~no~d~ve, the Ash Council ~on~l~d~~at such agencies only ~~eto add anaddition~ layer of b~eaucracy. s= ~SO AIMI Schick,

“The Coordinating Option,” in Peter Szanton, Federal Reorganizurwn: Wh.uzHave We Leurned? (Chatham, NJ: Chatham House Publishers, Inc., 198 1),

ch. 5.

98com@~ of 16 agencies, tie ~teragency Group is not a s~nding body; rather, it m~ts when issues ~~. The mfi pu~s of tisflOUp iS tO

“examine proposed international telecommunications and information policy alternatives from a full range of perspectives.” It is chaired by the head

of NTIA and the Undersecretary of State for Security Assistance, Science, and Technology. NTIA, op. cit., foomote 2, p. 173.

99~eSident Reaganxtup the fionomic policy Comcil in 1985 ~ a rne~s for working out interagency economic policy issues. A Cabinet-level body,

it is comprised of the Secretaries of the Treasury, Commerce, State, Energy, Agriculture, and Labor; the Director of the Office of Management and

Budget; the U.S. Trade Representative; and the Chairman of the Council of Economic Advisors. The Vice President and the Chief of State are ex-officio

members, and the heads of nonmember departments maybe invited to attend when issues germane to their activities are under discussion. Ibid.

l~t is int=sting t. note, in ~s regwd, that even thou@ the problems of interagency committ~s ~ well known, such COIIlfllittWS COZlthNle tO &

established. President Carter, for example, plamed to reduce the number of these committees as part of his reorganization efforts. Instead, however,

during one 12-month period, he established seven such committees by exeeutive order, Schick, op. cit., footnote 97, pp. 95-96.
380 ● Critical Connections: Communication for the Future

on policy considerations.l01

Turning again to the work of Harold Seidman, it

is evident that many of the problems that interagency

committees have experienced have been due not so

much to the particular organizational form they take,

but rather to the fact that expectations of what

interagency committees can reasonably accomplish

have generally been much too high.102 Although

called on to coordinate, these committees all too

often are actually expected to develop a policy

consensus-a task much more easily said than done.

For, if the chairman of an interagency committee

actually had power to bring about a consensus, he or

she would enjoy more authority than the President,

himself.103 On the contrary, chairmen of interagency

committees often have very little authority. When

these committees are established, it is generally well

understood and agreed upon in advance that the

power relationships among the members will remain

the same.l04

Given this tendency to delegate responsibility

without equivalent authority, it would appear that

interagency committees are likely to be most successful when they are assigned realistic tasks. In

addition, these tasks should be related to some

overall shared goal--one that is agreed upon at the

outset and which, over time, can sustain an organizational commitment. Alan Schick has noted that:

Interagency committees cannot succeed as organizational orphans. When nobody has a vested interest

in the group’s work and nobody is responsible for

following through on its decisions, a committee will

languish even if its formal status remains intact.105

From the point of view of existing stakeholders,

any proposed new interagency coordination can be

expected to generate some strong opposition. As

Seidman has noted, efforts at coordination are not

designed to make friends. For “coordination is rarely

neutral,” and always “advances some interests at the

expense of others.”106 Thus, any proposal to enhance

coordination is likely to be judged less on its merits

than on how it might redistribute power among

existing players.

While Congress has been willing to grant the

executive branch considerable leeway in establishing interagency coordinating committees, it too is

likely to judge such a proposal on the basis of how

it might affect the distribution of power within the

legislature. In the past, Congress has been most

inclined towards those standing committees that

operate similarly to independent agencies, and the

most opposed to those that are closely associated

with the executive branch and might tend to become

“superagencies.’’ 107

Given the limitations of interagency coordinating

committees, this analysis would suggest that while

such committees might contribute to addressing the

existing problem of coordinating communication

policies, they could do little to resolve this problem

on their own. At present, there is neither agreement

on overall communication policy goals, nor agreement among agencies as to which group should take

the lead in developing such a consensus.

Option B: Establish an ongoing Federal/State

agency, along the lines of the Federal/State

Boards, to coordinate and resolve Federal/

State interjurisdictional communication policy issues.

Although a critical and enduring facet of American government, the concept of federalism has

evolved over time and in response to changing

events and circumstances.l08 The colonial period

and the experience of the Revolutionary War gave

rise to the notion of a “dual federalism,” which

presupposed that the Federal and State Governments

lol~id., p. 95; and Cutler and Johnson, op. cit., foomote 95.

l~seitian, ~. cit., footnote 26, P. 216.

lmIbid.

IWIbid., pp. 213-216.

losschick, op. cit., footnote 97, p. 97.

l~sei~an, op. cit., foomote 26, p. 205.

l%id., p. 222.

l~For~ ~a~erdiffemnt ~r~pctive~ on ~efican feder~i~, ~,forex~ple, Michael D. Reagan, The New Federalism (New York, NY: Oxford

University Ress, 1972); I.ra Sharkansky, The Maligned States: Policy Accomplishments, Problems, and Opportunities (New York, NY: McGraw Hill

Book Company, 1972); and David B. Walker, Towards a Functioning Federalism (Cambridge, MA: Winthrop Publishers, Inc., 1981).
Chapter 13--Jurisdictional Issues in the Formulation and Implementation of National Communication Policy ● 381

operate in their own spheres, independently of one

another, with each deriving its authority from the

people. 109 In the post-World War I and World War

II periods, a growing Federal involvement in more

and more economic and social activities gave rise to

the notion of a “creative” or more integrated

federalism. Comparing the latter to the former of

these two forms, Grodzins notes, for example:

American federalism is not like a layer cake, with

each level of government having its own autonomous sphere of decision making; rather, it is like a

marble cake, in that decisions regarding a particular

function are made at all levels of government and

that all levels typically cooperate in implementing

public policies.l10

It should be noted, however, that if creative

federalism is to work in practice, either:

●

●

the States and the Federal Government will

need to be in basic agreement about policy

goals, or

the Federal Government will need to have some

form of leverage (such as Federal funding) over

the State Governments that allows it to impose

its point of view.

At present, neither of these conditions exists with

respect to communication policy. As noted above, in

a number of instances the States have been emphatically opposed to the direction Federal communication policy has taken. Moreover, given the Supreme

Court’s decision in the case of Louisiana v. FCC, it

would appear that the ease with which the Federal

Government has been able to preempt State communication policy in the past will, in the future, be quite

severely checked. Under these circumstances, it may

be necessary to create an ongoing organizational

entity to help resolve Federal/State, and State/State

communication policy issues.

One model that might be followed in setting up

such a organization is that of the Federal/State

boards, presently in use by FCC and State public

utility commissions. These boards consist of three

FCC commissioners and four State commissioners

nominated by the National Association of Regulatory Utility Commissioners (NARUC).lll They

meet to consider divisive State-Federal issues in

much the same way that collective bargaining

representatives attempt to negotiate an acceptable

contract. When a compromise has been reached,

both groups attempt to convince their respective

groups to support that compromise. At present there

are three joint boards dealing with issues related to

pricing of telephone services.112

According to most participants, the joint board

process has been quite useful.113 Given the anticipated growth and increased intensity of jursidictional issues, Congress may want to take steps to

extend and enhance these institutional arrangements. At present, boards meet on an ad hoc basis at

the initiative of FCC. One way in which Congress

might strengthen their role, therefore, is to provide

the necessary staff and financial resources to allow

them to operate on a continual basis. In addition,

Congress might authorize the States, as well as FCC,

to set the agenda for discussion. Were a joint

Federal/State board to exist on a standing basis,

Congress might also refer issues to it for an

appropriate airing.

Although States might very well favor such an

option, having consistently called for a greater State

role in Federal communication policymaking,l14 it is

likely that FCC would not. In recent public state109ReagM, op. cit., footnote 108, ch. 1“

llOMo~n Gr~inS, “me Federal System,” president’s Commission on Nation~ Goals, Goals for A~rica~ (Englewood Cliffs, NJ: Prentice-Hall,

1960), as cited in Reagan, op. cit., footnote 108, p. 6.

11 l~ejo~t ~wd Process was ~~ifi~ by C’on~ess in 1971, after~e process had ~n used successf~ly by the States and the FCC to resolve a thorny

issue in 1970. It is a slight modification of the State joint boards introduced by the Interstate Commerce Commission, which attempted to resolve interstate

disputes by convening meetings attended by an equal number of representatives from each of the multiple States affected by a matter. Public Law 92-131,

codified at 47 U.S.C. 410 (c). For a discussion, see 1971 U.S. Congress and Adm”w”strafive News, pp. 1513-1514. See also, 49 U.S.C. 10341-1-0344

and accompanying historical references.

llzperson~ Comuicatim ~~ Ron Choua, st~f mem~r of tie Michigan State Utility Commission and senior jotit board staff member, Feb. 16,

1989. NARUC has been sufficiently pleased with the process that it has made about 19 requests for issues to be discussed by joint boards in the last 10

years. Ibid.

]13R1chad sch~~, C’Tw~.Tier Re@ation and Joint Boards in American Telecommunications,” unpublished manuScript~ J~Y 1987.

l14Mark Rockwell, “$~tes Swk More FCC Input, But pa~ck stands Ground,” c~~nicutio~week, NOV. T, 1988, pp. 6, 61.
382 ● Critical Connections: Communication for the Future

ments, the FCC Chairman has admonished States for

standing in the way of Federal communication

policy. 115 Moreover, under present rules, FCC cannot move forward on any issue so long as it is being

considered by a joint board. Thus, if States could put

items on the agenda, they might use this authority to

block distasteful policies. On the other hand, if only

FCC can establish the agenda, the boards are not

likely to delve into fundamental or high-priority

issues.

Strategy 4: Establish an institutional basis for

facilitating coordination and cooperation

among government agencies, industry providers, and communication users.

Option A: Encourage or support the establishment of advisory bodies to provide input to

executive agencies and the FCC on specific

communication issues.

Federal agencies have often set up advisory

boards as a way of channeling public input into the

administrative process. However, one problem that

has typically emerged with these groups is that, over

time, many have become somewhat rigid in their

makeup. Thus, instead of fostering a broad public

input into the policymaking process, some advisory

groups have actually served to limit participation

and the scope of the policy debate. Moreover,

because many of these advisory bodies have appeared at times to have a life of their own, they have

often been criticized for not being accountable to the

public and being removed from the political process.

In recognition of these problems, Congress passed

the Federal Advisory Committee Act in 1972 as an

appendix to Title 5 of the U.S. Code.ll6 This act

required that administrative advisory committees be

held more accountable to Congress, that meetings be

open, and that membership be more representative

of a broader range of views.

As noted above, a number of advisory committees

have already been established to address communication issues, such as the ISDN User Forum in the

National Institute for Standards and Technology

(NIST) and the Advisory Committee on Advanced

TV setup by FCC. FCC has also instigated the ONA

process, requiring that regional Bell holding companies develop their ONA plans with the participation

of user groups. To further encourage this kind of

public input, Congress might promote the development of additional groups to address issues such as

telecommunication competitiveness, security and

survivability, and the delivery of broadband services

to the home. Moreover, to assure that a broad range

of considerations are taken into account, it might

formalize the existence of such groups under the

Federal Advisory Committee Act.

Option B: Provide for alternative means of

dispute resolution in FCC proceedings.

Some Federal agencies, especially those involved

in environmental regulation and labor issues, have

been experimenting successfully with new means of

dispute resolution as alternatives to the traditional

agency procedures for resolving conflicts.117 Alternative means of dispute resolution (ADR) include

negotiated rulemaking, mediation, arbitration, and

minitrial.118

Negotiated rulemaking, in which an agency convenes a meeting of all interested parties to discuss a

specific issue and reach a mutual resolution, has

been proposed as an alternative to the traditional

regulatory procedure of agency rulemaking, often

followed by court challenge.119 In 1981, the 96th

115~id.

l16pllb]ic Law 92AG3, 86 Stat. 770, codified at 5 USC, app. 2.

117sW Henry H. Perntt, Jr., “Analysis of Four Negotiated Rulemaking Efforts,” Final Report prepared for the Administrative Conference of the United

States, Nov. 15, 1985; Charles Pou, Jr., “Federal Agency Usc of ‘ADR’: The Experience to Date,” Center for Public Resources, 1987, reprinted in

Administrative Conference of the U. S., Sourcebook: Federal Agency Use of Ahernarive Means of Dispute Resolution (office of the Chairman, 1987),

pp. 101-11 1; Philip J. Harter, “Dispute Resolution and Administrative Law: The History, Needs, and Future of a Complex Relationship,” Villanova Law

Review, vol. 29, No. 6, 1983, pp. 1393-1419.

llsFor a review of Mew t~hniques ~d ex~ples of Ftier~ use, see Administrative Conference of the U. S., Op. cit., foomote 11’7.

119s= phillp J. H~er, “Negotiating Re@ations: A me for M~~~,” T& Georgetown Law Journal, VO1. T 1, No, ], (lctober Iggz; Note, “Rethinking

Regulation: Negotiation As An Alternative to Traditional Rulemaking,” vol. 94, Harvard Law Review, 1981, p. 1871; Lawrence Susskind and Connie

Ozawa, “Mediated Negotiation in the Public Sector,” American Behavioral Scientist, vol. 27, No. 2, Nov./Dee. 1983, pp. 255-279; and John T Dunlop,

“The Negotiations Alternative in Dispute Resolution,” Villanova Luw Review, vol. 29, No. 6, 1983, pp. 1421-1448.
Chapter 13-Jurisdictional Issues in the Formulation and Implementation of National Communication Policy ● 383

Congress considered legislation to permit contacts

between agency officials and interested parties, in

effect allowing agencies and affected parties to

develop regulations in private negotiations.120 In

1982, the Administrative Conference of the United

States adopted recommendations outlining when

negotiated rulemaking should be used and what

procedures should be followed.121 In the 97th, 98th,

99th, and 100th Congresses, legislation was again

introduced to establish a process to facilitate the

formation of negotiated rulemaking procedures

within Federal agencies. In the 100th Congress, the

Negotiated Rulemaking Act (S.1504) passed the

Senate, but not the House.122 It is expected that a

similar bill will be reintroduced in the 101st

Congress.

FCC appears to be willing to experiment with

alternative means of dispute resolution. In 1986,

FCC used a mediator/facilitator in the RKO Settlement Process.123 In this case, FCC’s “goal of a

mediated comprehensive settlement of litigation

relating to all the RKO properties is clearly not

achievable.”l24 In most instances, parties reached a

point at which they were unwilling to negotiate

further. Stuart Brotman argues that negotiated rulemaking would facilitate policy resolution at FCC,

especially for issues such as must-carry. As he sees

it:

Negotiated rulemaking can and should utilize the

“good offices” of the FCC to encourage political

consensus from the outside. This allows the Commission to focus its efforts on seeking further public

comment and improving the substance of a consensus rather than on developing policies likely to be

challenged through subsequent litigation. Moreover,

interested parties working together as collaborators

rather than as adversaries are more likely to generate

useful information that can be utilized in the

rulemaking record that the FCC compiles.125

Those who favor alternative means of dispute

resolution view them as means for minimizing court

involvement, reducing the time required to reach

settlement, and providing parties to disputes with an

opportunity to somewhat informally reach a consensus or compromise solution. Some are skeptical

about the process.126 Others raise issues about the

democratic accountability of alternative means of

dispute resolution, including how to: provide for

public participation; ensure due-process protections;

and protect confidentiality and privacy. *27

Option C: Establish a government corporation

to perform essential communication services

for the public.

While quite foreign to the free-market advocacy

style of the American political economy, organizational arrangements that promote collaboration

among government, industry, and user interests are

quite common in other parts of the world. In Britain,

for example, prior to privatization, users were

formally represented by the Post Office Users’

National Council, established by law in 1969.128

Since privatization, the Secretary of State has

appointed advisory committees in England, Wales,

Scotland, and Northern Ireland to provide for

articulation of consumer interests to the Office of

Telecommunications (Oftel). There are also advilmWOsenatorsin~oduce.d bills: senator Roth introduced S. 1609 and Senator Levin introduced S. 1360. Laura B. Weiss, “Refomn PhM Wotdd AIIow

Developing Federal Rules in Private Negotiations,” Congresswnal Quarterly Weekty Report, vol. 39, No. 37, Sept. 12, 1981, p. 1758.

121 A~~lS@atjw Cotierence of tie United States, ~oc~ues for Negotiating ~oposed Reg~ations, R~ommendation No. 82-4, 1 Cn 305.82-4,

Jtdy 15, 1982.

lz~ongresslonal Record, Senate, vol. 133, No. 118, July 17, 1987.

1211J~esC. McKinley, Fi~Report of the MedlatorfFacl/ltatorln th.e RKO Settlemeti process (Repofito tie Feder~ communications Commission,

Feb. 3, 1987).

1241bid., p. 3.

125St~N. Brotrn~,’’Comm~cations pollcym~ing attheFeder~ Communications commission: p~t~actices,Future Direction, ’’The hnenberg

Washington Program in Communication Policy Studies, December 1987, p. 75.

126MwWeri~ ~ll~u~r, “me Unspoken Resistance to Alternative Dispute Resolution, “ Negotiation Journal, January 1987, pp. 29-35.

lzTHwold H. Bmff, *~ Constitution~iW of ~bl~ation in Federal progr~s,” (drfi repo~ to the Administrative Conference), Apr. 26, 1987, reprinted

in Administrative Conference of the U. S., op. cit., footnote 117, pp. 961- 1041; and Note, “Protecting Confidentiality in Mediation, Harvard L.uw Review,

1984, VO1. 98, No, 2, pp. 441-459.

128’f’he post Offiu Wm obliga~d t. consult fie Coucil, but not r~uired to follow i~ requests. For a discussion, see Kevin Morgan, “Breaching the

Monopoly: Telecommunications and the State in Britain,” University of Sussex, Working Papers, Series on Government-Industry Relations, No. 7,

January 1987, pp. 34.
384 ● Critical Connections: Communication for the Future

sory committees for small-business users and for the

disabled and pensioners.129 In Japan, collaboration,

an integral feature of its industrial policy, extends

even further. Generally, the Ministry of International

Trade and Industry (MITI) issues “administrative

guidance” to alert large corporations of its plans.

Industry, which often employs ex-MITI officials to

facilitate its liaison with MITI, usually complies

with this guidance.130 MITI also coordinates with

industry through advisory committees and publicand private-sector forums.131 Large telecommunication users and suppliers lobby the Japanese Government through Keidanren, the Federation of Economic Organizations, and the Communications Industry Association of Japan (CIAJ).132

In the United States, on the other hand, such

collaboration has been much more limited. Here, the

most typical kind of cooperative arrangement between government and the private sector has taken

the form of the government corporation. 133 Although

there are precedents for this kind of government

involvement in the performance of economic activities as far back as 1781 with the establishment of the

First Bank of the United States, its popularity has

ebbed and flowed, becoming more popular during

periods of crisis and emergency. 134 For example, a

number of government corporations were established to deal with the problems arising during the

Depression and during the First and Second World

Wars, including the Reconstruction Finance Corp.,

Commodity Credit Corp., and Tennessee Valley

Authority. 135

As in the case of independent regulatory agencies,

support for government corporations originally

came from those who were suspicious of politics and

politicians. Such organizational arrangements were

viewed with special favor by those “who wanted

government to be ‘run in a more business-like

manner.’" 136 Over time, however, the rapid growth

and increased autonomy of government corporations

began to raise concerns among government administrators 137 and political scientists, who feared that

they were no longer accountable to either Congress

or the President.138

Two government corporations have been established in the realm of communication-the Communications Satellite Corp. (COMSAT) and the Corp.

for Public Broadcasting (CPB). COMSAT was, in

fact, somewhat atypical, insofar as it was a private

for-profit corporation sponsored by the Federal

Government. Established by the Communications

Satellite Act of 1962, COMSAT was intended to be

a carriers’ carrier for the telecommunication industry. While it was designed to take its place in the

private sector, COMSAT benefited from certain

lZ9Jo~ King, “me British Tel~om Experience-Transformation of a Public Corporation to a Public Limited Company,” lnremationd Journal c!!

Technology Management, vol. 1. No. 1/2, 1986, p. 82.

lqOJill Hanley, “The Japanese Approach to the Development of New Residential Communication Services,” Marjorie Ferguson (cd.), New

Communicatwn Technologies and the Public [nterest (London, England: Sage, 1986), p. 168.

lslJill Hills, l~o~~n Technology and [ndusrrial Policy (Lmdon: Croom Helm, 1984), PP. 251-252.

132K= K~ba, “@fing Japan’S Telecomm~i~ation Mmket,” Jour~f Of co~unicalion, VO1. 38, No. 1, Winter 1%8, p. 99; and Jill Hills,

Deregulating Telecom (Westport, ~: Quorum Books, 1986), p. 141.

lqqFor a discwsion, see Ron~d C. Moe, Library of Congress, Congressional Research service, “Administering Public Functions at the Margin of

Government: The Case of Federal Corporations,” HD 2755, Dec. 1, 1983. See also Ira Sharkansky, Whither the State? Politics and Public Enterprise

in Three Countries (Chatham, NJ: Chatham House, 1979); and National Academy of Public Administration, Report on Government Corporations

(Washington, DC: National Academy of Public Administration, 1981). There is no formal definition of what constitutes a government corporation. The

organizational structure of each is defined in its enabling legislation and, hence, these corporations have taken a variety of forms. Concerned that

government corporations were becoming unaccountable, and that their growth was getting out of hand, Congress, in 1945, passed the Government

Corporation Control Act, which established budgeting and auditing standards. The act provided, moreover, that no corporation be created or acquired

by any agency or corporation of the Federal Government without the specific authorization of Congress.

13QMoc, op. cit., footnote 133, pp. 6-7.

lqs~id.

ls%id., p. 9.

lsTTheBrowlow Comission, whilerecognizingthev~ue of ~sform oforganization~ ~angement, r~ommendedthat they be inco~rated within

existing Federal agencies.

13ssee, forexmple, Harold Seidman, “Government-Sponsored Enterprises in the United States,” Bruce Smith (cd.), T& NW Pofiticaf Economy: T~

Public Use of the Private Sector (London, England: Macmillan Co., 1975).
Chapter 13--Jurisdictional Issues in the Formulation and Implementation of National Communication Policy ● 385

advantages that this government arrangement

stowed on it.139

CPB was established in accordance with

provisions of the Public Broadcasting Act

bethe

of

1967. 140 Its purpose was to serve as a financial

sponsor and catalyst for “public television,” fostering programming for “general enrichment” and

educational purposes.141 The government corporation was selected as the ideal organizational form

because it was thought that this kind of arrangement

would shield CPB from government and political

pressure. Although CPB has been quite effective in

generating high-quality programming, it has not

been completely successful in deflecting political

pressure (as the earlier discussion inch. 9 concerning the financing of public broadcasting clearly

illustrates). 142

As the United States begins to adjust to the many

technological, economic, and social changes taking

place in the realm of communication, there may be

a role for government corporations in certain areas.

For example, just as CPB was established to provide

programming that might not be developed in the

marketplace, so a government corporation might be

established to provide certain kinds of information

services, gateways, and navigational tools. Similarly, just as stabilization corporations were established during the Depression to help farmers and

consumers survive the structural changes that were

taking place in the economy, so government corporations might be set up today to help small businesses or rural areas, for example, move into the

information age. The benefits and costs of adopting

this kind of approach have perhaps best been

summarized by the National Academy of Public

Administration, which was asked by the Office of

Management and Budget to examine the utility of

government corporations. In its report, it concluded:

Created for an appropriate purpose, organized and

managed soundly, operating responsibly within the

policies laid down by Congress and the Administration, they (government corporations) are valuable

tools of modern government. However, the inappropriate use of the corporate device together with a lack

of consistency in exempting such corporations from

financial, personnel and other types of controls has

led to a host of problems, as has the failure to use the

corporate form in situations where it would contribute to the improved management of programs. 143

1S9MOC, op. cit., footnote 133, p. 22; for a discussion, see alSO Lloyd Musolf, Uncle Sam’s Private, Projitseeking Corporations (~xington. MA:

Lexington Books, 1983.)

l~or a di~cmsion, ~ Robert K. Ave~ and Robefi pepper, “AII Institutional History of Public Broadcasting,” ~ownaf of co~~icarion, VO1. 30~

No. 3, Summer 1980, pp. 126-138.

141MW, op. cit., fOOmOte 133, PP. 82-83.

142See also ibid.

143Nati~~ ~~emy of ~blic Adrnifistration, RepO~ on GOver~~ Corporafi’ens, vol. 1 (Washington, ~: Natk.mal ibidt?my C)f Public

Administration, 1981), p. 3.
Appendixes
Appendix A

Workshop Participants

Tracking Technology Workshop

Kan Chen Joseph Martino

University of Michigan University of Dayton

Joseph W. Duncan Abbe Mowshowitz

The Dun& Bradstreet Corp. The City College, CUNY

David S. Evans Howard Rheingold

Fordham University Journalist

John D. Kasarda Langdon Winner

University of North Carolina, Chapel Hill Rensselaer Polytechnic Institute

Characterizing the U.S. Communication System Workshop

Christopher Burns Vincent Mosco

Christopher Burns, Inc. Carleton University

Donal A. Carbaugh Daniel T. Schiller

University of Massachusetts, Amherst University of California, Los Angeles

Deborah Estrin Deborah G. Tumey

University of Southern California Citibank, N.A.

-389-
Appendix B

Reviewers and Contributors

Chadwick Alger

Ohio State University

Ron Alridge

Electronic Media

Fritz E. Attaway

Motion Picture Association of

America, Inc.

Pat Aufderheide

United Church of Christ

Colin Bennett

University of Victoria

Sanford V. Berg

University of Florida

Richard K. Blake

Siemens Communication Systems,

Inc.

Marjory Blumenthal

NAS Computer Science &

Technology Board

Steven A. Bookshester

National Association of Broadcasters

Walter W. Borton

Park Communications, Inc.

Nolan Bowie

Temple University

Sandra Braman

Rutgers University

Stuart N. Brotman

Consultant

Dennis J. Brownlee

Advance, Inc.

Cynthia Brumfield

National Cable Television

Association

Ellen Burton

US WEST, Inc.

John Carey

Greystone Communications

Carl F. Cargill

Digital Equipment Corp.

Lisa Carlson

Metasystems Design Group Inc.

James B. Carpenter

Southwestern Bell Telephone

James I. Cash, Jr.

Harvard University

Joseph Chaisson

Consultant

Bill Chandler

Consultant

Gary Chapman

Computer Professionals for Social

Responsibility

Peggy Charren

Action for Children’s Television

Daryl Chubin

Office of Technology Assessment

John Clement

NAS/COSEPUP

Joseph F. Coates

J.F. Coates, Inc.

Vary Coates

Office of Technology Assessment

Lawrence P. Cole

GTE Service Corp.

Kathleen Criner

American Newspaper Publishers

Association

Terry Curtis

California State University, Chico

Bowman Cutter

Coopers & Lybrand

Larry Darby

Consultant

Brenda Dervin

Ohio State University

Wilson Dizard

Center for Strategic and International

Studies

Herbert S. Dordick

Temple University

Aliza Duby

South African Broadcasting Corp.

-390-

Donald Dulchinos

National Cable Television

Association

Barry J. Eckhart

Northern Telecom, Inc.

Steve Effros

CATA

Martin Elton

Columbia University

J. D, Eveland

Technology Applications Research

Richard A. Fazzone

GE Information Services

Louis Feldner

Consultant

Robert E. Fischer

The Mitre Corp.

Susan C. Frary

MCI Communications Corp.

Warren B. French, Jr.

Shenandoah Telephone Co.

Oscar H. Gandy, Jr.

Annenberg School of Communications

Henry Geller

Duke University

L.J. Gitten

AT&T Network Systems

Sandra B. Grear

Presbyterian Church (U. S. A.)

David B. Hack

Congressional Research Service

Anne Hagemann

Consultant

Timothy Haight

Communications Week

Mr. Edwin Hall

MCI

Linda Harris

U.S. Department of Health& Human

Services

E. Fletcher Haselton

Teknekron Infoswitch Corp.
Appendix B--Reviewers and Contributors ● 391

Robert K. Heldman

US West Communications

Carol Henderson

The American Library Association

John T. Herndon

Florida Public Service Commission

Harrison Hickman

Hickman-Maslin Research, Inc.

Jill Hills

The City University, London

C. Lincoln Hoewing

Bell Atlantic Network Services Inc.

Glen H. Hoptman

National Demonstration Laboratory

for Interactive Educational

Technologies

Richard Horton

British Embassy

Robert W. Hubbard

Hubbard Broadcasting, Inc.

David Hughs

Chariot Communications

Charles L. Jackson

NERA

Robert Jacobson

Consultant

Jennifer Jarrett

J.F. Coates, Inc.

Leland Johnson

The RAND Corp.

Nicholas Johnson

The New Tech Times

Nancy Karen

NYNEX

Steven Katz

People for the American Way

Richard B. Kielbowicz

University of Washington

George Kohl

Communication Workers of America

Melvin Kranzberg

Georgia Institute of Technology

Allen W. Kratz

presbyterian Church (U. S. A.)

Robert Kraut

Bell Communications Research

Todd LaPorte

University of California, Berkeley

Stephanie G. Larson

The George Washington University

Alfred Lee

NTIA

Stanford L. Levin

Southern Illinois University at

Edwardsville

Jenny Levine

MCI Communications Corp.

Judith Lichtenberg

University of Maryland

Robert E. Lloyd

Bell Atlantic Network Services, Inc.

Jarol B. Manheim

The George Washington University

Mary Jo Manning

Wilkes, Artis, Hedrick & Lane

Calvin K. Manshio

Illinois Commerce Commission

Joseph P. Martino

University of Dayton

Gary T. Marx

MIT

Elliot Maxwell

Pacific Telesis Group

Martin McCue

United States Telephone Association

Bruce W. McConnell

Office of Management& Budget

Doreen McGirr

U.S. Department of State

Paul A. Miller

Virginia Citizens Consumer Council

Robert A. Miller

GTE Communications

George Minot

Applied Information Technologies

Research Center

Newton N. Minow

The Annenberg Washington Program

John T. Morgan

Communication Workers of America

Kevin Morgan

University of Sussex

Mitchell L. Moss

New York University

Daryl Nail

Florida Public Service Commission

Dorothy Nelkin

Cornell University

W. Russell Neuman

MIT Research Program on

Communications Policy

Jack M. Nines

University of Southern California

Roger G. Nell

Stanford University

Bill Norris

Office of Technology Assessment

P. Michael Nugent

Electronic Data Systems Corp.

Timothy Nulty

The World Bank

Bruce M. Owen

Economists Inc.

Preston Padden

INTV

Michael D. Pelcovits

MCI Communications Corp.

Joseph N. Pelton

University of Colorado

David Peyton

ADAPSO

Gary L. Pinkham

Ericsson Network System

G. Russell Pipe

Translational Data Reporting

Service, Inc.

Douglas Pitt

University of Stratclyde, Scotland

Larry Povich

FCC

Ward L. Quaal

The Ward L. Quaal Co.
392 ● Critical Connections: Communication for the Future

George Quester

University of Maryland

Gordon T. Ray

NEC America, Inc.

Harold C. Relyea

Congressional Research Service

Steve Renten

Pacific Bell

Ronald Rice

Rutgers University

Henry M. Rivera

Dow, Lohnes & Albertson

Marsha Ryan

Ohio Consumer Association

Jeanne M. Schaaf

Telenet Communications Corp.

Gail Garfield Schwartz

New York State Public Service

Commission

Lee L. Selwyn

Economics and Technology, Inc.

Sanford Sherizen

Data Security Systems, Inc.

Harry M. Shooshan III

NERA

Larry Siegel

IBM Corp.

Mark Sievers

US Sprint Communications Co.

Samuel A. Simon

Issue Dynamics, Inc.

Casimir Skrzypczak

NYNEX

Cathy Slesinger

NYNEX

Catherine Sloan

Comptel

Gerald W. Smith

The University of Utah

Paul Smith

Wiley, Rein & Fielding

Robert L. Smith, Jr.

Videotex Industry Association

Oliver Smoot

CBEMA

Paul Starr

Princeton University

Christopher H. Sterling

The George Washington University

Robert E. Stoffels

Harcourt Brace Jovanovich

Publications

Camille Stonehill

State Telephone Regulation Report

Theresa Sullivan

University of Texas

Mark G. Swank

U.S. Videotel

Joel Swerdlow

The Annenberg Washington program

Jacques Tamisier

Ambassade de France aux Etats-Unis

Paul E. Teske

Consultant

Elizabeth Thoman

Media & Values

Jane Uebelhoer

ACORN

Armando Valdez

Stanford University

Thomas S. Valovic

Telecommunications

Richard Victor

Harvard University

Philip M. Walker

Telenet Communications Corp.

Thomas V. Wasilewski

NTIA

Steve Weatherford

University of California, Santa Barbara

Frank Webster

Oxford Polytechnic

Sandra G. Weis

Prodigy Services Co.

Robert M. Wienski

Siemens Public Switching Systems,

Inc.

Rolf Wigand

Arizona State University

Brian Winston

Pennsylvania State University

Joan Winston

Office of Technology Assessment

Patricia M. Worthy

Public Service Commission of the

District of Columbia

Susan Yezzi

NYNEX

Edward Zajac

University of Arizona

Elia Zureik

Queen’s University
Appendix C

List of Contractor Reports

Copies of the following contractor reports completed in support of this assessment will be available in spring 1990

from the National Technical Information Service, 5285 Port Royal Road, Springfield, VA 22161, (703) 487-4650. The

views expressed in these reports are those of the contractors and not necessarily those of OTA, the Technology Assessment

Board, or U.S. Congress.

1.

2.

3.

4.

5.

60

7.

8.

9.

10.

11.

12.

13.

Raymond U. Akwule, George Mason University,

“Review of the Communications Policies and

Practices in Nigeria, ” July 1987.

Stuart N. Brotman, “Integration in Key Communications Industries: Business and Policy Considerations,” June 1988.

Christopher Burns, Christopher Burns, Inc.,

‘‘Communications Systems in the United States,”

December 1986.

Donal Carbaugh, University of Massachusetts

(Amherst), “Communications Systems: Exploring the Role of Information Technologies, ’ December 1986.

Kan Chen, University of Michigan, “Anticipating

Changes in Communications Technologies: A

System Scientist’s Methodology,” December

1986.

Daniel J. Czitrom, Mount Holyoke College,

“Goals of the U.S. Communication System: An

Historical Perspective,” September 1987.

Brenda Dervin, Ohio State University, “Categorization of Communication Users, ’ September

1987.

Joseph W. Duncan, The Dun & Bradstreet Corp.,

“Forecasting Telecommunications Technology, ”

December 1986.

Martin Edmonds, University of Lancaster, “Defense Interests and United States Policy for Telecommunications, ” June 1988.

Deborah Estrin, University of Southern California,

“Communications Systems for an Information

Age: A Technical Perspective,” December 1986.

David S. Evans, Fordham University and CERA

Economic Consultants, Inc., “Economic Aspects

of Technological Change in the Communications

Industries, ” December 1986.

J.D. Eveland, Technology Applications Research,

“Stakeholder Relationships in the Communications System, ” October 1987.

Heather E. Hudson, University of San Francisco,

“Communication Policies and Practices: India,”

July 1987.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

Richard B. Kielbowicz, University of Washington,

“The Role of Communication in Building Communities and Markets: An Historical Overview, ’

November 1987.

Richard B. Kielbowicz, University of Washington,

“Societal Values That Have Guided the U.S.

Communication System: A Short History,” August 1988.

Vincent Mosco, Carleton University, “The Communications System From a Regulatory Perspective,’ December 1986.

Abbe Mowshowitz, Technology Impact Research

Inc., “Communication and Comparative Advantage in the Business Arena: Operations and Technological Development” July 1988.

Greta S. Nettleton, “Review of the Communications Policies and Practices of Brazil, ” July 1987.

Howard Rheingold, “New Tools for Thought:

Mind-Extending Technologies and Virtual Communities,” December 1986.

Nathan Rosenberg, Stanford University, “Reflections on the Future of the Telecommunications

Industry, “ December 1986.

Daniel T. Schiller, University of California (Los

Angeles), “The U.S. Communications Industry in

Transition,” December 1986.

Jennifer Daryl Slack, “Historical Review of the

Concept of Communication Needs With Respect

to Technology, “ November 1987.

Gerald Sussman, Emerson College, ‘Communication Systems for an Information Age: Singapore,”

July 1987.

Lucja Swiatkowski, “Communications in Poland, ” July 1987.

Paul E. Teske, “State Regulation of Telecommunications,” July 1987.

Deborah G, Tumey, Citibank, N. A., “Financial

Institutions’ Communications Systems, ” December 1986.

Langdon Winner, Rensselaer Polytechnic Institute, ‘‘Information Regimes and Political Vision, ’

December 1986.

-393-
Appendix D

List of Acronyms

ADR

ANI

ANSI

AP

AT&T

ATTC

ATS

B-ISDN

Bellcore

BOC

BSA

BSE

C-SPAN

C3I

CAD/CAM

CATV

CBEMA

CD-ROM

CCITT

CEI

CEPT

CERT

CIAJ

CO-LANs

COMSAT

CPB

CPE

CLASS

DARPA

DBS

DCA

DoD

DOJ

DS

ECMA

ECSA

EDI

EOP

EOSAT

ESPRIT

ETSI

—alternative means of dispute resolution

—automatic number identification

—American National Standards Institute

—Associated Press

—American Telephone & Telegraph Co.

—Advanced Television Test Center

—Advanced Television Services

—broadband integrated services digital network

—Bell Communications Research Inc.

—regional Bell operating company

—basic service arrangement

—basic service element

—Cable Satellite Public Affairs Network

-Command, Control and Communications

and Intelligence

 -computer-aided design/manufacturing

--community antenna television

—Computer Business Equipment Manufacturers Association

-compact disk--read only memory

—International Telegraph and Telephone

Consultative Committee

-comparably efficient interconnection

-Conference of European Postal and Telecommunications Administrations

-Computer Emergency Response Team

—Communications Industry Association of

Japan

—central office local area networks

—Communications Satellite Corp.

—Corporation for Public Broadcasting

-customer premises equipment

-customer local area signaling service

—Defence Advanced Research Project

--direct broadcast satellite

—Defense Communications Agency

—Department of Defense

—Department of Justice

-directory services

—European Computer Manufacturing Association

—Exchange Carriers Standards Association

-electronic data interexchange

—Executive Office of the President

—Earth Observation Satellite Co.

—European Strategic Programme for Research and Development in Information

Technology

—European Telecommunications Standards

Institute

FCC

FDDI

FRC

GATT

GOSIP

HBO

HDTV

IBN

IEC

HLC

INS

ISDN

ISO

JTC1

LAN

LATA

LEC

LPTV

MAP

Mbps

MFJ

MIDI

MITI

MMDS

N-ISDN

NARUC

NASA

NCIC

NCS

NCTA

NETS

NIST

NOAA

NRC

NSA

NSF

NS/EP

NSDD-13

NSTAC

NTIA

Oftel

—Federal Communications Commission

—fiber distributed data interface

—Federal Radio Commission

—general agreement on tariffs and trade

-Government Open Systems Interconnection Profile

—Home Box Office

—high definition television

—integrated broadband network

—International Electrotechnical Commission

—Information Industry Liaison Committee

—information network system

—integrated services digital network

—International Standards Organization

—Joint Technical Committee 1

—local area network

—local access and transport area

—local exchange carrier

—lowpower television

—manufacturing automation protocol

—megabits per second

—Modified Final Judgment

—musical instrument digital interface

—Ministry of International Trade and Industry

—multichannel multipoint distribution system

—narrowband integrated services digital network

—National Association of Regulatory Utility

Commissioners

—National Aeronautics and Space Administration

—National Crime Information Center

—National Communications System

—National Cable Television Association

—Nationwide Emergency Telecommunications Service

—National Institute for Standards and Technology

—National Oceanic and Atmospheric Administration

—National Research Council

—National Security Agency

—National Science Foundation

—National Security/Emergency Preparedness

—National Security Decision Directive-13

—National Security Telecommunications

Advisory Committee

—National Telecommunications and Information Administration

-Office of Telecommunications

-394-
Appendix B--List of Acronyms . 395

ONA

OTP

OSI

0SS

PBX

P c

PPV

Puc

RACE

REA

RBOC

RFD

RHC

SDNS

SNA

-open network architecture

-Office of Telecommunications Policy

-open systems interconnection

-operating support systems

—private branch exchange

—personal computer

—pay-per-view

—postal, telegraph, and telephone authority

—public utility commission

—Research for Advanced Communications

in Europe

—Rural Electrification Administration

—regional Bell operating company

—rural free delivery

—regional Bell holding company

—Secure Data Network Systems

—system network architecture

SONET

SS7

SWIFT’

TCP/IP

TECS

TOP

UHF

VCR

VHF

VISN

VT

WATTC

—synchronous optical network

—signaling system 7

—Society for Worldwide Interbank Financial Telecommunications

—transport control protocol/internet protocol

—Treasury Enforcement Communications

System

—technical and office protocol

—ultra high frequency

—videocassette recorder

—very high frequency

—Vision Interfaith Satellite Network

—virtual terminal

—World Administrative Telephone and Telegraph Conference