U.S. GOVERNMENT PRINTING OFFICE

64–024CC WASHINGTON : 2000

THE STATUS OF DEPLOYMENT OF DATA SERVICES

HEARING

BEFORE THE

SUBCOMMITTEE ON TELECOMMUNICATIONS,

TRADE, AND CONSUMER PROTECTION

OF THE

COMMITTEE ON COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

APRIL 11, 2000

Serial No. 106–128

Printed for the use of the Committee on Commerce

(

COMMITTEE ON COMMERCE

TOM BLILEY, Virginia, Chairman

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

MICHAEL G. OXLEY, Ohio

MICHAEL BILIRAKIS, Florida

JOE BARTON, Texas

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

Vice Chairman

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

STEVE LARGENT, Oklahoma

RICHARD BURR, North Carolina

BRIAN P. BILBRAY, California

ED WHITFIELD, Kentucky

GREG GANSKE, Iowa

CHARLIE NORWOOD, Georgia

TOM A. COBURN, Oklahoma

RICK LAZIO, New York

BARBARA CUBIN, Wyoming

JAMES E. ROGAN, California

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

ED BRYANT, Tennessee

ROBERT L. EHRLICH, Jr., Maryland

JOHN D. DINGELL, Michigan

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RALPH M. HALL, Texas

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

RON KLINK, Pennsylvania

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

TOM SAWYER, Ohio

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

THOMAS M. BARRETT, Wisconsin

BILL LUTHER, Minnesota

LOIS CAPPS, California

JAMES E. DERDERIAN, Chief of Staff

JAMES D. BARNETTE, General Counsel

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON TELECOMMUNICATIONS, TRADE, AND CONSUMER PROTECTION

W.J. ‘‘BILLY’’ TAUZIN, Louisiana, Chairman

MICHAEL G. OXLEY, Ohio,

Vice Chairman

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

STEVE LARGENT, Oklahoma

BARBARA CUBIN, Wyoming

JAMES E. ROGAN, California

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

ROBERT L. EHRLICH, Jr., Maryland

TOM BLILEY, Virginia,

(Ex Officio)

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

BART GORDON, Tennessee

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

BILL LUTHER, Minnesota

RON KLINK, Pennsylvania

TOM SAWYER, Ohio

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

JOHN D. DINGELL, Michigan,

(Ex Officio)

(II)

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C O N T E N T S

Page

Testimony of:

Allely, Eric, Founder and Owner, Tekamah Corporation ............................. 31

Asnes, Anthony K., President, Pseudo Programs .......................................... 14

Campbell Ray A., III, Executive Director, Mass Corporation for Educational Telecommunications ....................................................................... 44

Harter, Peter F., Vice President, Global Public Policy and Standards,

Emusic.com .................................................................................................... 22

Kushner, David, Chairman, Diagnostic Imaging and Radiology, Children’s

National Medical Center .............................................................................. 48

Linkous, Jonathan D., Executive Director, American Telemedicine Association ............................................................................................................ 37

Vuckovich, Gene, Executive Director, Montana Rural Development Partnership ........................................................................................................... 40

(III)

(1)

THE STATUS OF DEPLOYMENT OF DATA

SERVICES

TUESDAY, APRIL 11, 2000

HOUSE OF REPRESENTATIVES, COMMITTEE ON COMMERCE, SUBCOMMITTEE ON TELECOMMUNICATIONS, TRADE, AND CONSUMER PROTECTION, Washington, DC.

The subcommittee met, pursuant to notice, at 10:10 a.m., in room

2123, Rayburn House Office Building, Hon. W.J. ‘‘Billy’’ Tauzin

(chairman) presiding.

Members present: Representatives Tauzin, Stearns, Gillmor,

Largent, Cubin, Shimkus, Fossella, Blunt, Markey, Gordon, Rush,

Eshoo, Luther, Sawyer, Green, McCarthy, and Dingell (ex officio).

Staff present: Mike O’Rielly, professional staff; Cliff Riccio, legislative analyst; and Andy Levin, minority counsel.

Mr. TAUZIN. The hearing will please come to order. Good morning and welcome.

Today we embark upon a series of hearings on the Internet infrastructure and its impact on how Americans will participate in the

new digital economy, both at work and at home. This is not the

fireworks hearing. This is not the clash of the carriers. We term

this hearing, the hearing on the need for speed. My staff pointed

out that when we were growing up, the theme was that speed kills,

and today we find out that the lack of speed may kill. So today we

embark upon a series of hearings to discover what is broadband

and what it means in our lives and what it could mean in our lives

if, in fact, everyone has access to it.

There is no denying the fact that the Internet has become an integral part of everyday life for nearly two thirds of all Americans.

We rely on it as a primary means of communications, as a convenient tool for doing business and as a rich source of content such as

news, music and other important information.

Since the passage of the 1996 Telecom Act, however we have

come to understand that the Internet uses an architecture that is,

in a large part, separate from the telephone network. The FCC has

determined that the Internet is operationally and technologically

distinct from plain old telephone or cable service, even though data

traffic can pass through some of these same infrastructures.

Most importantly, this new and distinct Internet architecture has

facilitated the emergence of new broadband capacity networks, the

likes of which we have never before witnessed. Broadband networks can carry much more voice, much more data traffic than narrow band systems can carry. They can also deliver such traffic at

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much faster speeds than narrow band lines. This essentially means

that digital convergence is a realistic possibility for some time in

the near future. It will soon be technologically possible for residences and businesses to receive telephone service, ISP services,

digital television service and streamed audio and visual content

over one line with no service disruptions or delays. That is pretty

exciting. Make no mistake about that.

However, before we get too carried away with all this, we in Congress have an obligation to ensure that all Americans will have access to these digitally converged high speed services via broadband

networks. Such access is crucial for many rural and underserved

areas of this country to develop in step with the thriving urban

hubs that are driving this Internet economy.

In 1995 when we were crafting the Telecommunications Act, we

all knew what that saying was, that speed kills. Today, it is clear

that with the lack of access, the high speed networks may, in fact,

kill, may destroy opportunity, may deny businesses and individuals

success and prosperity in their lives. If businesses and residences

don’t have high speed connections to the Internet backbone, they

are relegated to narrow band dirt road, and narrow band dirt roads

are so incompatible with the rest of the high speed infrastructure

that promises to significantly impede the flow of communications

across our Nation’s web-based infrastructures.

Let me explain. If certain regions of our country, are crawling at

narrow band dial up access, if they are crawling at this slow speed

while other areas of the country are utilizing high speed infrastructure, then everyone on the web will be forced at times to operate

at narrow band slower speed. If I am connected to you, I am at

high speed and you are at lower speed, I am at your speed. It is

that simple. And under this scenario, the Internet cannot materialize into the fluid nationwide communications network that all

of us are hoping it will be. Instead, ISP subscribers will continue

to encounter service disruptions and data transfer delays in every

instance where broadband-facilitated high speed traffic is thrust

upon narrow band slower speed infrastructure.

Last October in an article published by the Associated Press,

John Robbs, CEO of Nortel Networks, estimated that in 1998, 2.5

billion hours were wasted on line as people waited for Web pages

to download. But this worldwide wait is only customary in certain

parts of the country. Connections to the Internet backbone vary

significantly between Houma, Louisiana, and Houston, Texas,

Dodgeville and Detroit, Brockton and Boston, Wichita and Washington or Muleshoe and Miami.

Now in order to have speed, American consumers and small businesses must as well have connections to adequate broadband infrastructures. Otherwise, they will not be able to meaningfully participate in the converged digital economy.

As a result, I get worried when I see reports like the one interactive week on line released just this last February. I quote from

it. Contrary to many previous predictions, experts now believe that

there could be a global bandwidth shortage as the Internet continues to grow rapidly. Furthermore, increases in demand for bandwidth will outstrip increases in capacity by at least twice as much

in the coming years. And as more and more subscribers purchase

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DSL and cable modem access, public networks will come under increasing pressure. Some analysts say traffic could be 10 times the

current level in just a few years. Time and demand for bandwidth

could be up to 200 times today’s demand by 2005.

If these figures are accurate, then a fear that deployment of advanced services and broadband infrastructure may not extend to

many rural, western and underserved areas of this country, and

that are no less important, trust me when I tell you this, that are

no less important than any other part of this great country.

Just as proximity to railroad lines determined that communities

prospered in the 19th century, I hate to think that proximity to

POPs or Internet points of presence may ultimately determine

which communities prosper in the 21st century. Under such a scenario, I can tell you that it will take too long for adequate

broadband infrastructure to reach my own Louisiana’s third congressional district.

As a result, my district and others like it will not be in a position

to contribute to or to benefit from this new Internet economy.

And to prove it, Diane Press, Idaho, recently summed up what

many small communities now face, caught between cumbersome

Federal regulation and the hard facts of prudent business investment. Small town America is in danger of missing out on the economic benefits of modern telecommunications technologies. Echoing

those sentiments, Nicholas Stegrafonti of MIT has stated that the

absence of broadband and the absence of bandwidth would be more

isolating, the densest forest of the largest desert.

With all that having been said, today’s hearing is not about the

regulation of the Internet. Rather, it is about, first and foremost,

understanding just how beneficial broadband services are, can be

and should be to all consumers in America. It is also about determining what types of broad brand infrastructure are necessary to

deploy these advanced services to all Americans.

And finally, today’s hearing is being held to discuss how best to

avoid a digital divide rather than to be talk about how government

can close one, to avoid a digital divide so that broadband tools and

services are available to consumers across the country.

We have two panels of witnesses today. I want to welcome them

and look forward to their testimony. I think this first panel will

have some exciting and interesting demonstrations for us. We can

see the potential in the exciting aspects of broadband delivered digital services, and I am confident that they will enlighten us and

they will enlighten all Americans of this hearing today on how we

will use the Internet in the 21st century.

The Chair yields back and will recognize Mr. Dingell, the ranking minority member of the full Commerce Committee for his opening statement.

Mr. DINGELL. Mr. Chairman, thank you. I ask unanimous consent to be permitted to insert my statement into the record.

Mr. TAUZIN. Without objection.

Mr. DINGELL. So I will try and summarize. Mr. Chairman, I commend you for having this hearing. I believe it is an important one.

The issues are going to drive the debate over the telecommunications policy for many years to come. We will hear from witnesses

about the critical role of broadband technology in building the NaVerDate 11-MAY-2000 14:10 Oct 12, 2000 Jkt 066902 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 E:\HEARINGS\64024 pfrm02 PsN: 64024
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tion’s new economy, transforming our health care delivery systems,

reinventing the way children are educated. The benefits to the

American public are going to be staggering, and I am satisfied that

what we are doing today will be the tip of the iceberg.

The question is not how we will benefit but how quickly. Frankly, we are in somewhat of a regulatory mire. We need to know

what policies need to be adopted so that these new technologies can

be rolled out to the public in the most expeditious manner.

Four years ago, we passed the Telecommunications Act. It is the

most sweeping rewrite of telecommunications law since 1934. It

was quite an achievement. We are still, however, debating on what

we should do to make that legislation, in fact, realize the promise

we felt it was going to deliver. To be sure, it has benefited consumers and the economy, but like all legislation, it is not without

blemishes and all of our hopes have yet to be materialized. Like all

legislation, it simply reflected Congress’ best policy judgments

based on the facts that we knew at that particular time, but in this

information age, the facts change more rapidly than ever before,

and those who operate on Internet time find that 4 years is more

like an eternity.

With the benefit of 20/20 hindsight, perhaps the most glaring

oversight of the Telecom Act was its failure to create with certainty

a proper environment for the Internet, one that allows all companies the freedom to innovate and invest in new, more robust ways

to carry the vast potential of digital communications to every

American at home.

As a result, despite the explosive growth of the Internet, it is still

grinding along in low gear. We hear a great deal about the benefits

of the information superhighway, but the truth is that most Americans are relegated to the slow lane or even to back roads. Too

many consumers remain stuck in low speed dial-up service. They

await faster access at reasonable prices and quite frankly, the future growth of electronic commerce demands it.

Unfortunately the Telecom Act did little to create the proper environment for the deployment of broadband services. Worse, it created uncertainties with regard to how the different technologies are

treated under law and how they compete to provide services to consumers.

Do we treat one broadband technology as a cable service if it

happens to come over fiberoptic and coaxial wires or because it

originates with a cable company? Do we create another technology

like a telephone service simply because it travels over twisted wire

pairs or because it comes from a telephone company? What if the

Web pages are beamed on pizza-size dishes from a satellite orbiting

above earth? Even though the information service delivered to the

consumer is the same, each method of delivery falls under quite a

different regulatory scheme in current law, resulting in unfairness

to competitors and unfairness to consumers and indeed slows down

the delivery of the service which is needed.

This problem has to be resolved. The promise of electronic commerce has catapulted any dot com stock into the stratosphere, but

very few have yet to show a profit. The values are staggering, but

they are surviving on vapor. The new economy will either sink or

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swim, depending on the speed with which the broadband Internet

services reach the public.

In my view, all broadband technology should be treated the same

from a regulatory standpoint, regardless of the historical mission

of the company offering service, and I believe any different view is

irresponsible. It should not matter whether the service is offered by

a cable company, telephone provider or electric utility. Each should

be free to offer the service according to the same rules. If we remove this disparity and uncertainty that accompanies it, I am confident we will see competitive platforms flourish, and the consumer

will be the immediate beneficiary.

Mr. Chairman, I thank you for your kindness and for your holding this hearing. I look forward to the result. Thank you.

[The prepared statement of Hon. John D. Dingell follows:]

PREPARED STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF MICHIGAN

Thank you, Mr. Chairman, for recognizing me. The subject of today’s hearing is

an important one; in fact, these issues are likely to drive the debate over telecommunications policy for many years to come.

We will hear from witnesses about the critical role of broadband technology in

building the nation’s new economy, transforming our health care delivery systems,

and reinventing the way our children are educated. The benefits to the American

public will certainly be staggering, and I am sure the ones highlighted today are

just the tip of the iceberg.

The question, though, is not simply how we will benefit, but how quickly. What

policies will encourage these new technologies to reach the public in the most expeditious manner?

Four years ago Congress passed the most substantial rewrite of the nation’s telecommunications laws since 1934. That Act was quite an achievement. After debating for almost two decades whether to deregulate the telecommunications industry,

it was time to break down the barriers to competition once and for all.

To be sure, the Telecom Act has benefitted consumers and the economy greatly

since its enactment, but like all legislation, it is not without blemishes. Not all of

our hopes have yet materialized.

And like all legislation, the Telecom Act simply reflected Congress’s best policy

judgments based on facts we knew or anticipated at a specific moment in time. But

in the Information Age, these facts change more rapidly than ever before. And for

those who operate on ‘‘Internet time,’’ the last four years is more like an eternity.

With the benefit of 20/20 hindsight, perhaps the most glaring oversight of the

Telecom Act was its failure to create, with certainty, the proper environment for the

Internet—one that allows all companies the freedom to innovate and invest in new,

more robust ways to carry the vast potential of digital communications to every

American home.

As a result, even with its explosive growth the Internet is still, in many ways,

grinding along in low gear. While we hear a great deal about the benefits of the

‘‘Information Superhighway,’’ the truth is most Americans are relegated to the slow

lane.

Mr. TAUZIN. The Chair now recognizes the gentlelady from the

west, from Wyoming, Mrs. Cubin.

Mrs. CUBIN. Thank you, Mr. Chairman, for holding this important hearing, but also your commitment and concern to making

sure that rural areas are treated the same as urban areas in receiving this technology, also, for your recognition of the fact that

Federal regulation really could be a deterrent to deployment of

these services as well.

I have always been interested in finding out what broadband

Internet technologies are being or soon will be offered to consumers, especially in rural areas. Mr. Chairman, I know that you

realize that last year it was reported just 2 percent of U.S. houseVerDate 11-MAY-2000 14:10 Oct 12, 2000 Jkt 066902 PO 00000 Frm 00009 Fmt 6633 Sfmt 6602 E:\HEARINGS\64024 pfrm02 PsN: 64024
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holds have access to high speed Internet service, and even less

than that in rural areas. In Wyoming, if consumers have access to

the Internet at all, it has been provided mainly over the local telephone lines with narrow band capabilities. If anyone has ever tried

to open up a file or download a graphics program using 28 kilobits

per second, they soon find out that that is just not fast enough. Wyoming Internet users don’t want to get their information from a

squirt gun. They would like to get it from a fire hose, and time is

money and that is helpful to everyone.

Today several areas of the country are being served with a wide

variety of broadband services that deliver from 1.5 million bits per

second to 300 million bits per second. I think it is important that

the subcommittee holds these types of meetings to find out what

Federal policy changes, if any, are needed to help improved telecommunications services.

I hope that this forum will shed some light on the problems facing Americans, especially in rural areas that are trying to keep up

with the changing face of global economic, education and communication and determine what role the Federal Government should

play in finding solutions to our telecommunications needs. There is

no question that small towns across America that lack high speed

Internet access will find it harder to attract new jobs and to keep

up with the global marketplace.

Consider that in New Jersey, the average distance between a

customer and the phone company’s nearest switching facility that

connects them to the Internet is about 2.6 miles. In Wyoming, the

distance is twice that far and in some cases, it is 10 times that far,

and the cost to the telephone company of reaching a customer is

twice as high. Parts of Wyoming have as few as half a dozen households per square mile compared with the thousands in urban and

suburban areas. This discrepancy lessens the incentive to the

phone companies, both big and small, to invest in stringing new

lines in rural areas where the margin of profit is half of what it

is in urban areas.

One way in which I have been working to speed the deployment

of new telecommunications services in rural areas is by advocating

for the reduction of outdated regulations on companies that serve

many rural areas. This streamlining of regulatory burden on small

and mid-sized telecommunications providers will allow for greater

investment in telephone networks and in new services. It only

makes sense, I believe, to provide small and mid-size companies

the regulatory environment so that they can both lower prices in

response to competition and roll out new high speed data services.

For too long, outmoded rules have held small and mid-sized companies back from serving consumers in rural areas. Federal telecommunication regulations need to be brought into the competitive

realities of the 21st century. There is no reason why telecommunication companies that primarily serve rural areas should not have

the opportunity to deploy high speed services so we can enjoy the

same types of technological advances as people who live in Denver,

Chicago, New York and Los Angeles.

New technology has brought billions of dollars worth of revenue

to all corners of the globe, and I believe it will bring much needed

jobs and revenue into rural America as well. Here in Congress we

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have to look and have to work to ensure that the Federal regulatory environment is conducive to luring businesses into rural

areas of the country.

Mr. Chairman, thank you again. I appreciate your holding this

important hearing.

Mr. TAUZIN. And the Chair now recognizes the gentlelady from

California, Ms. Eshoo, for an opening statement.

Ms. ESHOO. Good morning, Mr. Chairman and thank you for

holding the hearing today on the status of the broadband and welcome to our panel. Peter Harter is here with Emusic, and I am

very proud that they call the 14th Congressional District their

home in Redwood City.

Mr. TAUZIN. If the gentlelady would yield, is it true he has

brought some Cajun music?

Ms. ESHOO. Yes, I understand that. So you will be highly entertained.

Mr. TAUZIN. I never hear that stuff.

Ms. ESHOO. Because of you we will. Today’s hearing addresses

one of the most exciting components of the technology revolution,

the development and the deployment of the delivery system used

to bring the information age into our homes and businesses. The

term broadband is used to describe this system in which sufficient

bandwidth is used to utilize large amounts of information, whether

it be voice, video, graphics or data. The explosive growth and economic success of the Internet is dependent upon the size of this

pipeline.

Mr. Chairman, we were here and helped to shape the Telecommunications Act in 1996. As you know, we intended that that

legislation deregulate a communications industry in which competition had been choked off by years of monopolistic practices. Since

the law was passed we have seen the telecommunications revolution occur with breathtaking speed, in my view. No sooner does one

technology seem to offer more speed and capability when along

comes another that offers more data and faster. I think the

Telecom Act has resulted in a larger menu of broadband delivery

options with an increase in competition and it has produced lower

prices for consumers across the country.

One of the best examples of this is seen in the development of

the development of the competitive local exchange carriers or

CLECs. These companies, companies like Covad and Rhythm Networks, are children of the Telecom Act. They provide DSL-based access to the Internet through local loops or their own high speed

fiber networks. Once these companies were permitted to offer their

services, what happened? Telephone companies that before had

only offered the more expensive T-1 lines began to rapidly expand

their DSL service, a service I think they could have offered much

earlier. The result increased broadband services at a cheaper price.

As we hear today about the outstanding services that are available on the Internet today, I think we need to keep in mind the

successes of these recent years. I think we also need to recognize

that more dramatic successes are just around the corner. I hope

Congress will be patient in permitting the brilliant and creative entrepreneurs, some of whom are here today before this committee,

to achieve those successes.

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So thank you again, Mr. Chairman, for holding this hearing. It

will be interesting and lively, and who knows, we may even dance

to the music. I yield back.

Mr. TAUZIN. The Chairman thanks the gentlelady, and speaking

of high speed movement, the Chair is now pleased to welcome the

chief deputy whip of the majority in this House, also an esteemed

member of our committee from Missouri.

Just to give you an idea how important that position is, just a

few short months ago the speaker of the House Denny Hastert held

the position of chief deputy whip. The gentleman from Missouri,

Mr. Blunt, is recognized.

Mr. BLUNT. I thank the gentleman for the introduction. I will tell

you, when the speaker knows more about your job than you do,

then you are in a tough situation, which I have been in for some

time but glad to be there. I am glad to be at this hearing also, and

in your theory of high speed movement I think I will let the hearing move on. I don’t know that I can say anything better than has

already been said. This is an important hearing, it is an important

topic. I look forward to a chance to see both the technology and to

hear what our witnesses have to say, and I thank the Chairman

for holding this hearing.

Mr. TAUZIN. I thank the gentleman. The Chair now yields to the

gentleman from Ohio, Mr. Sawyer, for an opening statement.

Mr. SAWYER. Thank you, Mr. Chairman. Thank you for your

leadership on this issue generally and for holding this hearing in

particular. I have a wonderful five-page opening statement. I know

it will move all of you. You may laugh, you may cry, but I urge

you to reference it in the record of this hearing, and I will not offer

it for you today.

Just let me say, in brief part though, that the future of

broadband is full of both promise and uncertainty as companies

and industries try to anticipate technological advances and cultural

and societal changes, market conditions, consumer preferences. The

work that we do here today to try to ensure that deployment is

timely, that industry competes fairly and that the service is provided to all sectors and geographical locations of the country for the

good of all concerned is important work, and I urge that we get on

with it. I yield back the balance of my time.

[The prepared statement of Hon. Tom Sawyer follows:]

PREPARED STATEMENT OF HON. TOM SAWYER, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF OHIO

Broadband access, along with the content and services it might enable, has the

potential to transform the Internet—both what it offers and how it is used. For example, a two-way high speed connection could be used for interactive applications

such as online classrooms, showrooms, or health clinics, where teacher and student

(or customer and salesperson, doctor and patient) can see and hear each other

through their computers. An ‘‘always on’’ connection could be used to monitor home

security, home automation, or even patient health remotely through the Web. The

high speed and high volume that broadband offers could also be used for bundled

service where, for example, cable television, video on demand, voice, data, and other

services are all offered over a single line. In truth, it is possible that many of the

applications that will best exploit the technological capabilities of broadband, while

also capturing the imagination of consumers, have yet to be developed.

Currently, the cost of residential broadband service ranges from about $40 and

upward per month, plus up to several hundred dollars for installation and equipment. On the other hand, a May 1999 survey conducted by ZDNET found that nearVerDate 11-MAY-2000 14:10 Oct 12, 2000 Jkt 066902 PO 00000 Frm 00012 Fmt 6633 Sfmt 6621 E:\HEARINGS\64024 pfrm02 PsN: 64024
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ly 80% of respondents were only willing to pay a monthly fee of $25 or less for

broadband service. According to research from Juniper Communications, broadband

users will number about 5.5 million through 2000, compared to 43.6 million dialup users, and by 2002, broadband penetration will be 11.7 million users or 19% of

online households.

The future of broadband is full of uncertainty, as competing companies and industries try to anticipate technological advances, market conditions, consumer preferences, and even cultural and societal trends. Congress should work to ensure that

broadband deployment is timely, that industry competes fairly, and that service is

provided to all sectors and geographical locations of American society.

Some analysts assert that legislation is necessary to ensure fair competition and

timely broadband deployment. Currently, the debate centers on two specific proposals. Those are: 1) compelling cable companies to provide ‘‘open access’’ to competing Internet Service Providers, and 2) easing certain legal restrictions and requirements, imposed by the Telecommunications Act of 1996, on incumbent telephone companies that provide high-speed data (broadband) access.

Compelling open access to cable broadband

Currently, customers using cable broadband must sign up with an Internet Service Providers (ISPs) affiliated or owned by their cable company. If customers want

to access another ISP, they must pay extra—one monthly fee to the cable company’s

service (which includes the cable ISP) and another to their ISP of choice. Some

members of Congress think we should enable cable broadband customers to subscribe to their ISP of choice without first going through their cable provider’s ISP.

At issue is whether cable networks should be required to share their lines with, and

give equal treatment to, rival ISPs who wish to sell their services to consumers.

Easing Restrictions and Requirements on Incumbent Telephone Companies

Another proposal, H.R. 2420 would case certain legal restrictions and requirements, imposed by the Telecommunications Act of 1996, on incumbent telephone

companies who provide broadband access.

Those supporting the lifting or modification of restrictions claim that action is

needed to promote the deployment of broadband services, particularly in rural and

under served areas. Rural communities argue that present regulations are overly

burdensome and discourage needed investment in broadband services. According to

proponents, unbundling and resale requirements, when applied to advanced services, provide a disincentive for incumbent local exchange carriers (ILECs) to upgrade their networks, while the Bell operating companies (BOCs) interLATA data

restrictions unnecessarily restrict the development of the broadband network.

ILECs, they state, are the only entities likely to provide these services in low volume rural and other under served areas. Therefore, proponents claim, until these

regulations are removed the development and the pace of deployment of broadband

technology and services, particularly in unserved areas, will be lacking.

Opponents claim that the lifting of restrictions and requirements will undermine

the incentives needed to ensure that the BOCs and the other ILECs will open up

their networks to competition. Present restrictions, opponents claim, were built into

the 1996 Telecommunications Act to help ensure that competition in telecommunications will develop. Modification of these regulations, critics claim, will remove the

incentives needed to open up the ‘‘monopoly’’ of local services. A major change in

existing regulations, opponents claim, would not only remove the incentives needed

to open up the local loop but would likely result in the financial ruin of providers

attempting to offer competition to incumbent local exchange carriers.

There are also concerns over the inability of regulators to distinguish between

provision of voice only and data services if BOC interLATA restrictions for data

services and ILEC unbundling and resale requirements for advanced services are

lifted.

I look forward to hearing from our witnesses today on the current application and

access to broadband services as well as their comments on what Congress can do

to improve these features of broadband in the future.

Mr. TAUZIN. The Chair now recognizes my friend from Florida,

Mr. Stearns.

Mr. STEARNS. Thank you, Mr. Chairman. I will make my statement part of the record. I just want to mention that according to

Forester research business to business, e-commerce will explode in

growth from $43 billion in 1998 to more than $1.3 trillion by the

year 2003. And this hearing, unfortunately, is bringing out the asVerDate 11-MAY-2000 14:10 Oct 12, 2000 Jkt 066902 PO 00000 Frm 00013 Fmt 6633 Sfmt 6602 E:\HEARINGS\64024 pfrm02 PsN: 64024
10

pects that this broadband deployment in the suburbs and small

towns or rural areas is not as good as it should be. The practical

effect is that rural and underserved users must suffer with Internet access that is far slower and unreliable than those that are

available to some of the densely populated areas.

The New West report captures the implications of being without

high speed Internet access in today’s business day and age, and

their report indicates, most of America’s small businesses have a

symbiotic relationship with a big business, with large business enterprises increasingly preferring to deal with their small and midsize business enterprises over high speed data lines because business transactions are faster, cheaper and more timely and with

fewer errors. If the small and mid-size business enterprise does not

have access to high speed transport, they cannot be players in the

new economy, and their large business customers will look elsewhere for suppliers who can.

So I think it is important to have this hearing, and I commend

you, Mr. Chairman, and look forward to the testimony of the witnesses.

Mr. TAUZIN. The gentleman from Minnesota, Mr. Luther.

Mr. LUTHER. Thank you, Mr. Chairman, and thank you for the

hearing today. I am looking forward to the testimony of the witnesses, and particularly I hope that they will address some of the

positive changes that we can see from broadband. The kinds of

things that I have in mind are probably similar to those of other

committee members, but dealing with obviously the so-called digital divide that we hear a lot about. Obviously the whole consumer

issue, what will help consumers, what gives them more choices,

what gives them better information, and finally, just what we can

look for in the future in terms of more positive contact quite frankly, whether it is educational services or whatever. I mean, I think

a lot of times we spend our time thinking about more video games

or whatever. What would interest me is how we can see broadband

working in the equation of providing more positive, delivering more

positive content to people in this country, and so I look forward to

the testimony. Thank you.

Mr. TAUZIN. The Chair thanks the gentleman. The gentlelady

from Missouri, Ms. McCarthy, for an opening statement.

Ms. MCCARTHY. Thank you, Mr. Chairman, and I thank the witnesses for being with us today. I agree with all that has been said

about the importance of this discussion as we reconcile the digital

divide in making sure that the public and private sector are working together to make sure this technology is available to as many

people as possible.

I don’t want to overlook the fact that as we work toward progress

being made and bringing entertainment products to the consumers

that we also consider the effect on the artists, particularly the recording artists, and what this may mean to them, what will be the

effect on the—will it create competition for content? What do we do

about copyright issues? What about work-for-hire matters? So I

would welcome any input you have on that today as we explore this

issue.

Thank you very much, Mr. Chairman, for having this hearing.

11

Mr. TAUZIN. The Chair now recognizes the gentleman from Chicago, Mr. Rush, for an opening statement.

Mr. RUSH. Thank you, Mr. Chairman. Mr. Chairman, I too am

very excited about this particular hearing. I look forward to the

testimony of the panelists here. I am very interested in what they

have to say about the future of broadband.

Consumers are now more sophisticated and are more demanding

in terms of requiring that the industry provide better and faster

Internet access. Hence, it is increasingly important that enhanced

Internet access and broadband deployment is available to Internet

users. The status quo simply does not cut it anymore. It is incumbent upon us, members of this committee and this Congress, to remove any regulatory impediments that may stifle broadband deployment.Broadband is the technology that will fuel the continued

growth of the Internet, and it is important that this technology is

available to all Americans.

I look forward to this hearing, Mr. Chairman, on the creative

uses of broadband technologies, especially as it relates to bridging

the digital divide, and I also look forward to hearing about what

is being done to deploy those technologies at a faster pace to all of

America and to America’s consumers, and I want to thank you, Mr.

Chairman. I yield back the balance of my time.

Mr. TAUZIN. Finally, the Chair now recognizes the gentleman

from Tennessee, Mr. Gordon, for an opening statement.

Mr. GORDON. Mr. Chairman, this is an important and timely

issue. I appreciate you having this. I hope you will have additional

hearings. I want to become better educated in this area. I am also

interested in Mrs. Cubin’s concerns about rural development and

look forward to hearing the witnesses today. Thank you.

Mr. TAUZIN. The Chair thanks the gentleman. Any further requests for opening statements?

[Additional statements submitted for the record follow:]

PREPARED STATEMENT OF HON. STEVE LARGENT, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF OKLAHOMA

Mr. Chairman, thank you for holding this morning’s oversight hearing on the current state of broadband deployment as it relates to applications that utilize

broadband networks, and the use of broadband networks to provide service to what

is traditionally thought of as underserved areas of America.

After this subcommittee’s recent consideration of the Rural Local Broadcast Signal Act, I now have an entirely new perspective as to what qualifies as an underserved area. I would hope for the purpose of this hearing, an underserved area is

just that—underserved.

On February 2, 1999 the FCC released its first report on the state of deployment

of advanced telecommunications services.

At that time, the commission concluded that broadband deployment appeared to

be ‘‘reasonable and timely’’ although the commission believed that it was difficult

to reach a firm judgement given the early stage of deployment.

On February 17th of this year, the FCC initiated its second notice of inquiry, as

required by Congress, to look into the current state of broadband deployment to

business and residential customers, and to different geographic areas and socio-economic groups. This report is scheduled to be released by the commission sometime

this September.

I believe the 1996 Telecommunications Act is working as intended. Since the passage of the act, we have seen an explosion in the number of new competitors in the

telecommunications market and a corresponding growth in e-commerce and the

internet economy.

Today, there are over 375 competitive local exchange carriers (CLECs) operating

in every state of the country. These CLECs have gone to the capital markets and

12

invested $30 billion in state-of-the-art technology to offer service in urban, suburban, and rural areas of the country.

Cable operators are investing billions of dollars to upgrade their facilities to offer

broadband services throughout the country.

The fixed and mobile wireless industry is currently developing the so-called ‘‘third

generation’’ wireless standard that will enable providers to offer an array of internet-related services to the home, business, and individual handsets.

The satellite industry is developing technologies to bring broadband services to

the home.

And the largest market participant providing broadband, the Bell Companies and

GTE, have announced plans to make highspeed DSL available to over 60 million

households by the end of this year.

As a result of this flurry of deployment, this subcommittee heard testimony from

Governor Gilmore last week that ‘‘the Nation’s internet-based economy grew by 68%

last year to produce over $507 billion in business revenues. The internet economy

has created 2.3 million jobs. The internet and the information technology sector now

accounts for more than half the capital investment in our economy.’’

Mr. Chairman, industry has responded quite favorably to the intent of the ’96 act.

It is important to remember that it took nearly 50 years after its invention before

conventional telephone technology became commonplace in America’s businesses

and homes. It would be a stretch to believe that the ’96 act is not fulfilling its promise because high speed internet is not linked to every computer in this country only

four years after the passage of the act.

It appears that the so-called ‘‘digital divide’’ has become the poster child of perceived problems with current telecommunications policy rather than a real telecommunications phenomenon. I have to question whether the ‘‘digital divide’’ is

being used by the administration and some in Congress as an excuse for governmental agencies to create a role for themselves within the telecommunications industry. It also appears that certain groups and companies are seizing this as an opportunity to undermine the section 271 requirements of the ’96 act.

In light of industry’s efforts to deploy broadband services throughout the country,

I’ll be interested in hearing from today’s witnesses as to what more industry needs

to do to encourage broadband deployment.

PREPARED STATEMENT OF HON. TOM BLILEY, CHAIRMAN, COMMITTEE ON COMMERCE

Thank you, Mr. Chairman. I appreciate you scheduling this hearing on this important topic.

Today’s hearing is an interesting twist from the traditional debate over the deployment of broadband services. The witnesses will discuss how they use or apply

broadband technologies to bring new services to the marketplace.

These types of companies and organizations provide a new perspective on the

issue, which expands beyond the simple deployment of broadband technologies.

However, I am interested to hear views on the important issues surrounding deployment as well. I am hopeful that at the end of the day we will have a broad,

balanced discussion of all issues from all the relevant parties on this subject.

I believe that if we are to have hearings on this subject that we need to hear from

the vast number of companies—from competitive providers to equipment manufacturers—that are flourishing from the explosion in the telecommunications and electronic commerce marketplaces. It is an exciting time to be in these industries.

Much of this success is due to the great work we did to establish the legal rulesof-the-road by enacting the Telecommunications Act of 1996.

I also hope to hear as well from the incumbent providers on how they are complying with their obligations—ones they agreed to—in the Telecom Act. Further, I

hope to hear how they are taking advantage of the marketplace to roll-out

broadband services. It seems that almost every day I am hearing about a new merger—I mean a new broadband service—from one of the Bell Companies. These folks

seem to be doing quite well in the marketplace notwithstanding any restrictions

they see as unnecessary.

Today’s witnesses will talk about how they use broadband technologies in their

product or service offerings. They are examples of the creative and innovative forces

making the potential of the Internet and electronic commerce a reality.

And some very creative people are using such technologies to bring products and

services to under-served populations. The Internet truly provides a digital opportunity for all Americans. Some people have argued that services and products will

only come to rural or urban centers if the federal government forces or mandates

13

that it occur. I think that today’s witnesses are only a small slice of the examples

of companies and organizations that are trying to solve any perceived deployment

disparity problem rather than look for a federal government program.

I thank the chair for his indulgence and yield back my time.

PREPARED STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF MASSACHUSETTS

Good Morning. I’d like to thank Chairman Tauzin for calling this hearing this

morning on broadband applications.

The broadband revolution that is taking place on the Internet today is breathtaking in its sweep and impressive in its rapid evolution. A few mere years after

passage of the Telecommunications Act of 1996, consumers are reaping the digital

dividend of communications competition. Without the competitive forces unleashed

by the Telecomm Act, we probably wouldn’t be having this hearing today.

The feature-rich, information-driven content that is everyday igniting the enthusiasm of our nation’s entrepreneurs and investors is riding upon a telecommunications infrastructure that is the envy of the world. Across the globe, country after

country is trying to emulate the dramatic steps that America has made in opening

up historic monopoly markets to marketplace competition, in building bandwidth,

and in bringing the benefits to all sectors of society.

The cable industry alone makes broadband capability available to 41 percent of

U.S. homes and has over a million subscribers today. The competitive local telephone companies have driven broadband deployment on the competing wire and currently invest roughly a Billion dollars per month on new telecommunications infrastructure around the nation. Bell Atlantic has proven it can meet the market-opening requirements of the Telecomm Act in New York and is setting the pace among

incumbents for long distance entry. In addition, wireless applications promise ever

more capacity and competition for businesses and residential consumers.

We are truly a long way from the debates in the late 80s and early 90s about

deployment of ‘‘fiber to the home’’ and the promise of ‘‘video dialtone’’ and ‘‘cabletelco.’’ The marketplace is responding.

That’s because the goal of telecommunications policy is not the deployment of a

particular technology or application, but rather the goal of telecommunications policy is competition—everywhere and for everyone. Competition will determine whether consumers prefer wireless services, DSL, cable modems or any other technology

and competition will pick winners and losers among applications.

Moreover, the competitive telecommunications industry is exerting tremendous effort to meet the bandwidth needs of the growing Internet content industry.

As much as this hearing is an exploration of exciting new applications for the

Internet, it is also a celebration of the handiwork of this Subcommittee. The fact

that the witness table today has independent content entrepreneurs and entities interested in making the new technology serve important societal needs is testimony

to the fact that hundreds of companies today might not even exist—or certain applications would still be relegated to mere speculation—if some of our policy decisions

had come out differently.

This is something we should all take stock of because in the end, our effort is not

just about the deployment of the latest flavor of digital technology be it ISDN,

ADSL, DSL, xDSL, or any other acronym: it’s about the future. And I think our

competitive future is a bright one if we remain true to our Subcommittee’s history

with these issues.

Thank you Mr. Chairman and I look forward to hearing from our witnesses this

morning.

PREPARED STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF TEXAS

Thank you Mr. Chairman. Mr. Chairman, the Internet is the fastest growing communications medium in this country. While I am very interested in hearing today’s

panel discussion on the access to and applications for broadband, I am disappointed

that we are not going to discuss the more substantive aspects of broadband like

competition and the deployment of competitive networks.

With internet traffic doubling every 90 days and data traffic increasing over voice

by roughly 30% a year, implementing a coordinated broadband strategy is essential.

Because of this tremendous growth in the Internet, Congress needs to ensure that

we balance the need for networks and backbones with the demand for faster service

14

and innovation. I believe it is imperative that we on the Subcommittee begin taking

a substantive look at roadblocks to full competitive broadband deployment.

Again, I do appreciate the panel members being here today and I look forward

to hearing from Mr. Linkous regarding his thoughts on the impact broadband will

have on telemedicine. I have a particular interest in subject because my home State

of Texas is emerging as a leader in the research and application of telemedicine.

Texas is one of only three States whose Medicaid program requires insurance companies to cover telemedicine services. And the results from this program have been

very promising. Having access to telemedicine using a broadband connection could

mean the difference between life and death in many of our rural communities.

Mr. Chairman, I appreciate the opportunity we have today to gain differing perspectives on the benefits of broadband. However, I hope this hearing will be the first

of many on this important issue and that the Subcommittee allocates time after the

Easter work period to continue the debate.

Thank you Mr. Chairman for beginning the dialogue on this important issue.

Mr. TAUZIN. The Chair is pleased to recognize our very esteemed

people. They consist of Mr. Anthony Asnes, president of Pseudo

Programs; Mr. Peter Harter, formerly introduced of Emusic.com;

and Dr. Eric Allely, founder and owner of Tekamah Corporation.

And we will see some exciting demonstrations I think about what

broadband can do and what consumers might just be able to just

enjoy if we have full deployment of broadband services across

America.

We will begin with Mr. Anthony Asnes of Pseudo Programs, and

gentleman, your demonstrations will not count against 5 minutes

of oral presentations. The way we work the committee is that if you

have written statements, they are part of our record, without objection and so ordered. The Chair will also make all members’ written

statements part of the record, without objection so ordered, so that

when we get to the time for the testimony, we will ask you to summarize in conversational tone with us the major points of your testimony within a 5 minute frame. However these demonstrations

will not count against that 5 minutes. We will begin with Mr. Anthony Asnes of Pseudo Programs.

Welcome, Mr. Asnes.

STATEMENTS OF ANTHONY K. ASNES, PRESIDENT, Pseudo

PROGRAMS; PETER F. HARTER, VICE PRESIDENT, GLOBAL

PUBLIC POLICY AND STANDARDS, EMUSIC.COM; AND ERIC

ALLELY, FOUNDER AND OWNER, TEKAMAH CORPORATION

Mr. ASNES. Thank you, Mr. Chairman. I will begin with testimony and then we will show you some of the demonstration as I

go through this. I would like to say good morning to the committee

and again, thank the chairman and the rest of the committee for

inviting me here today.

My name is Tony Asnes and I am the president of New York

City-based Pseudo Programs, Inc., the world’s largest original

Internet TV network. Today I will give you some background about

Pseudo, explain what Internet TV and streaming media are, and

describe the technology we and others use to deliver our programming throughout the world.

To understand Pseudo today, it is important to know about our

core funding mission, to harness the communications and interactive powers of the Internet to create a new medium. Pseudo was

founded in 1994 by Joshua Harris, who also founded Jupiter Communications, which is now one of the world’s largest and most reVerDate 11-MAY-2000 14:10 Oct 12, 2000 Jkt 066902 PO 00000 Frm 00018 Fmt 6633 Sfmt 6602 E:\HEARINGS\64024 pfrm02 PsN: 64024
15

spected research and consulting firms dedicated to the Internet

economy.

Pseudo began as a company that managed on-line chat communities on the Prodigy on-line service and later on the Worldwide

Web. In 1995, we added streaming media audio capabilities to

those chat communities and introduced Chat Radio. In 1997, Pseudo added streaming video capabilities to our Chat Radio communities and became one of the earliest enterprises to begin Web casting or transmitting video and audio via the Internet, and a pioneer

in the Internet TV business.

Today, Pseudo is positioned as a leader in what the vision consulting group predicts will be a multibillion dollar business by

2004. Our investors include Prospect Street Ventures, the Tribune

Company, Intel and Sycamore Ventures. We produce approximately

50 different Internet TV shows per week, organized into 10 Web

site channels. Pseudo’s shows cover topics from ranging from politics, space exploration, business, hip hop music, NFL football, computer games and entertainment.

Unlike traditional broadcast media, Pseudo’s net television shows

are fully interactive. Internet audiences tune into live video shows

from a chat room where they can interact not only with other audience members, but also with the hosts and performers who appear

on screen.

The Pseudo on-line experience combines live video, interactive

features like chat that makes the audience part of the show, editorial graphics and other features into a vibrant on line entertainment community.

Pseudo operates in a very similar fashion to traditional TV or cabled broadcasting. We shoot our programs on digital video, which

is then captured from our studio control room and sent to a bank

of encoders. These encoders convert analog video and audio signals

into a digital signal. Our software creates several signals for low

and broadband consumers. These signals are then streamed live

over the Internet and also archived and made available for on-demand viewing.

It is no secret that the Internet is becoming a way of life for more

and more people, but what you might find astonishing is that a

growing number of those Internet users now have the capability of

watching live video over the Internet, at school, in the office and

at home. Real networks reported yesterday that their streaming

video player software has been downloaded more than 100 million

times and that its user base grows by more than 200,000 users per

day. In addition, more than 100 million licensed copies of Microsoft

windows media player are in circulation around the world.

We are proud to be a broadband content creator. In the past few

months, Pseudo has delivered millions of viewers some truly exciting moments live or available on demand, and the really exciting

part is that our interactive features allow the audience and the

guests and host to talk back and forth.

In December, Pseudo’s Spacewatch channel captured the drama

of an anticipated video feed from the Mars Polar Lander and informed and entertained space fans of all ages with detailed video

explanations of the experiments, interviews with NASA engineers

and more. Our Pseudo politics channel, together with the hotline,

16

reported from the polling center for the South Carolina Republican

primary. We repeated the experience on Super Tuesday live from

our New York studios and guests included Congressman Gerald

Nadler and Congresswoman Carolyn Maloney, among others.

The audience not only watched and listened, they asked questions, took part in polls and engaged in a dialog with voters from

around the country.

Our music channels allow viewers to be truly engaged in sight,

sounds, people and cultures they might not otherwise experience

where they live. Because we can produce our programming in a

very cost effective manner, we can offer viewers programming and

access to communities that appeal to special, cultural or ethnic

groups that are often underserved by traditional media.

Viewers can watch our programs on either low band dial-up connections to the net or via different broadband delivery methods, but

the experience for the end user is dramatically different. Those

viewing via dial-up or low bandwidth connection must wait longer

for the streams to load, they will subject to more interruptions and

might receive blurry, distorted images and audio, but broadband

connectivity is another story.

About 6 percent of U.S. Internet users can afford and are lucky

to enough to live in areas where cable modem, digital subscriber

lines, satellite and other high speed access is available. Those with

broadband access see clear digital images delivered at much higher

speed and with much higher reliability than those with dial-up connections can, but right now, broadband is still primarily only within reach of the well-educated and well-to-do. They also tend to live

in urban areas. Most broadband subscribers earn at least $100,000

per year and are college educated. That is an imbalance I would

like to see corrected.

As a businessman, the success of our company depends on much

higher penetration of broadband access. We want to ensure that

broadband access is affordable, but just as important, we want

broadband to be available, period. And right now there are too

many geographic regions, both urban and rural, that don’t have access to those fat broadband pipes.

As a citizen I also want to see more rapid deployment of

broadband to as many people as possible. Unless businesses and

policymakers work together, a huge segment of the population will

not benefit from the educational, cultural and economic advantages

that broadband access offers and the digital divide that already exists in this country will be even more serious.

In conclusion, the latent consumer and business demand for

broadband services is tremendous, even greater than the recent

decades of demand for faster and more affordable computers. This

presents industry and our economy with a huge opportunity to fill

this demand, provided we can build the infrastructure and offer

content that truly realizes broadband capabilities. Policy-makers

and industry must work hand in hand to create a competitive environment that will spur innovation and facilitate the further development of broadband infrastructure. We must also work together

to ensure cost effective delivery of these services to as many consumers as possible.

Thank you.

17

[The prepared statement of Anthony K. Asnes follows:]

PREPARED STATEMENT OF ANTHONY K. ASNES, PRESIDENT, PSEUDO PROGRAMS, INC.

Good Morning. I would like to thank Chairman Tauzin and the rest of the members of the Committee for inviting me here today. My name is Tony Asnes and I

am the President of New York City-based Pseudo Programs, Inc., the world’s largest, original Internet TV network. You can find us on the Web at www.pseudo.com.

Today, I will give you some background about Pseudo, explain what Internet TV

and streaming media are and describe the technology we—and others—use to deliver our programming throughout the world. I will also tell you about some exciting

developments in our industry that can only be advanced with a rapid and robust

deployment of a broadband infrastructure. I hope you’ll see why we believe that the

unimpeded expansion of broadband in this country is critical, not only to our business, but to the future of our nation’s economic health and global leadership.

To understand Pseudo today, it is important to know about our core founding mission: to harness the communications and interactive powers of the Internet to create

a new medium. Pseudo was founded in 1994 by Joshua Harris, who also founded

Jupiter Communications—which is now one of the world’s largest and most respected research and consulting firms dedicated to the Internet Economy.

Pseudo began as a company that managed online chat communities on the Prodigy Online Service, and later, on the World Wide Web. We recognized the social and

communications power of chat, and created virtual ‘‘destinations’’ where consumers

could go to communicate with like-minded people on subject matters that were

under-served by traditional media, such as poetry, the arts, different kinds of music

and the culture of the Internet itself.

In 1995, we added streaming audio capabilities to these chat communities and introduced ‘‘Chat Radio.’’ The chat audience not only talked to one another, they could

also interact with the hosts and guests on the radio show and not just see written

replies, but actually hear them. In 1997, Pseudo added streaming video capabilities

to our chat radio communities and became one of the earliest enterprises to begin

Webcasting—or transmitting video and audio via the Internet—and a pioneer in the

Internet TV business.

Today, Pseudo is positioned as a leader in what The Vision Consulting Group predicts will be a $4.1 billion business by 2004. Our investors include Prospect Street

Ventures, The Tribune Company, Intel and Sycamore Ventures. We produce approximately 50 different Internet-TV shows per week, organized into ten Website

‘‘Channels.’’ Pseudo shows cover topics ranging from politics, space exploration and

business to Hip-Hop music, NFL football, computer games and entertainment.

These video programs are digitized into one’s and zeros, encoded—or formatted so

that Internet users can view them—and streamed out via the Internet to viewers

around the U.S. and the globe.

Pseudo Overview

Unlike traditional broadcast media, Pseudo’s Net-television shows are fully interactive. Internet audiences tune into live video shows from a chat room where they

can interact not only with other audience members, but also with the hosts and performers who appear onscreen. (See Figure 1)

The Pseudo online experience combines live video, interactive features like chat

that makes the audience part of the show, editorial, graphics, and other features

into a vibrant online entertainment community.

The result: Pseudo’s onscreen performers communicate directly with Internet audience members watching the show, and in turn, audience members can ask questions of the performers, vote in ‘‘quick polls’’ associated with each show, contribute

comments, play in live trivia games, and request songs (Figure 2). This dynamic,

two-way programming creates a powerful communications tool, builds a strong sense

of community and brings culture, news and entertainment to a worldwide audience.

Pseudo’s audience currently registers an average of ten to twelve million page views

and approximately 750,000 media stream views per month.

How Pseudo’s Technology Works:

Pseudo operates in a very similar fashion to traditional TV or cable broadcasting.

We shoot our programs on digital video, which is then captured from our studio control room and sent to a bank of encoders. These encoders convert analog video and

audio signals into a digital signal. Our software creates different kinds of digital signals: one for low bandwidth, and one for high bandwidth. These signals are then

streamed live over the Internet and also archived and made available for on demand

18

viewing. At high bandwidth, viewers can get amazing quality that approaches a

standard television signal.

It’s no secret that the Internet is becoming a way of life for more and more people:

more than 123 million U.S. consumers have access to the Internet, and 77 million

of them used the ’Net at least once in the month of February. But what you might

find astonishing is that a growing number of those Internet users now have the capability of watching live video over the Internet—at school, in the office and at

home. Real Networks reported yesterday that their streaming video player software

has been downloaded more than 100 million times, and that its user base grows by

more than 200,000 users per day. In addition, more than 100 million licensed copies

of Microsoft’s Window’s Media Player are in circulation around the world.

We’re proud to be a broadband content creator. In the past few months, Pseudo

has delivered millions of viewers some truly exciting moments—live or available on

demand. And the really exciting part is that our interactive features allow the audience and the guests and hosts to talk back and forth.

• In December, Pseudo’s Spacewatch Channel captured the drama of an anticipated video feed from the Mars Polar Lander and informed and entertained

space fans of all ages with detailed video explanations of the experiments, interviews with NASA engineers and more. • We’ve even jumped into the election, with our Pseudopolitics Channel. Together with The Hotline, we reported from the polling center for the South

Carolina Republican Primary, where we put our live audience in touch with

candidates, noted journalists and opinion-makers from both parties. We repeated the experience on Super Tuesday, live from our New York studios, and

the guests included Congressman Gerald Nadler and Congresswoman Carolyn

Maloney, among others. The audience not only watched and listened; they

asked questions, took part in polls and engaged in a dialogue with voters from

around the country.

• Our music channels, such as 88HIPHOP.COM and Streetsound.com, bring live

performers and interviews with some of the world’s best-known performers and

emerging artists to a global audience. We allow viewers to be truly engaged in

sights, sounds, people and cultures they might not otherwise experience where

they live. Because we can produce our programming in a very cost-effective

manner, we can offer viewers programming and access to communities that appeal to specific cultural or ethnic groups that are often under-served by traditional media

Future Innovations

At Pseudo, our mission is to harness all the communication power and interactivity of the Internet to create and define a whole new medium. To that end, our

research and development group is experimenting with some very exciting innovations that will put tools in the hands of our viewers to allow them to play producer.

We envision a day when consumers will be able to watch and interact with our programs anywhere or anytime, such as on hand-held or wireless devices like pagers.

We will invite consumers to contribute their own content. We will allow viewers to

pick from several different camera angles and watch several simultaneous streams.

The technology is available, but we will need a robust broadband infrastructure to

make it possible to deliver these innovations (Figure 3)

Lowband Versus Broadband

Viewers can watch our programs on either low-band dial-up connections to the

’Net or via different broadband delivery methods, but the experience for the enduser is dramatically different. Those viewing via a dial-up or low bandwidth connection must wait longer for the streams to load, they will be subject to more interruptions and might receive blurry, distorted images and audio.

But broadband connectivity is another story. About 6% of U.S. Internet users can

afford broadband service and are lucky enough to live in areas where cable modem,

digital subscriber lines, satellite or other high-speed access is available. Those with

broadband access see clear, digital images, delivered at much higher speed and with

much higher reliability than those with dial-up connections can. Those with

broadband access have a much richer experience and can really realize the full potential of the Internet. It probably won’t surprise you to learn that, while the average person goes on the Internet about 18 times in a month, those with broadband

log on between 30 and 40 times a month.

But right now, broadband is still primarily only within reach of the well educated

and well to do. They also tend to live in urban areas. Most broadband subscribers

earn at least $100,000 per year and are college educated. That’s an imbalance I

would like to see corrected.

19

As a businessman, the success of our company depends on much higher penetration of broadband access. We want to ensure that broadband access is affordable.

But just as important, we want broadband to be available, period. And right now,

there are too many geographic regions—both urban and rural, that don’t have access to those fat, broadband pipes.

As a media company, we generate revenues from advertising, and as broadband

access rises, our ability to build our audience and attract more advertisers will rise

with it. A broadband infrastructure is not only critical to our business, it is also critical to of keeping the U.S. economy competitive and growing.

As a citizen, I also want to see more rapid deployment of broadband, to as many

people as possible. Unless businesses and policy makers work together, a huge segment of the population will not benefit from the educational, cultural and economic

advantages that broadband access offers, and the digital divide that already exists

in this country will be even more serious.

The latent consumer and business demand for broadband services is tremendous,

even greater than recent demand for faster, more affordable computers. This presents industry with a huge economic opportunity to fulfill this demand, provided we

can build the infrastructure and offer content that truly realizes broadband capabilities.

Policy makers and industry must work hand-in-hand to create a competitive environment that will spur innovation and facilitate the further development of a

broadband infrastructure. We must also work together to ensure cost-effective delivery of these services to as many consumers as possible.

Thank you.

20

INSERT OFFSET FOLIO 1 HERE

21

Mr. TAUZIN. Thank you, Mr. Asnes.

Did you want to do your demonstration now?

Mr. ASNES. Sure. I will take you through a very quick walk

through the visuals here and cross my fingers that this works. As

we mentioned, we have 10 different channels. We will bring up as

an example, Spacewatch, which covers space and space exploration.

We do our programming live out of our studios in New York city,

as well as one live show from Space Center Houston, where we actually get the people at NASA to come across the street from the

Johnson Space Center and be a part of the live programming. It

is a chance to get to know more than just the astronauts, but the

actual men and women who work behind the scenes to put everything up in the air and keep it running.

What you are seeing on the screen is our player. The video is embedded within that player, and to the left and right of the player

are HTML areas that allow for either polling or pushing of editorial

or other static images. Down below is the chat environment. During the live programming, users come in and watch the programming while being present within a chat room, and a very bonding

opportunity to talk with each other and know that everybody is

watching the same thing as well as have the chance for the hosts

and guests of the programming, who are also looking at the chatters, respond to them and actually talk to them. It is a very powerful experience in the live format. The on-demand format is incredibly convenient and allows you to pick up the week’s new programming whenever you would like.

What we see this player evolving into is an opportunity to deliver

very factual brand messages as well as what we call contextual ecommerce opportunities for our sponsors and advertisers. As the

programming is being delivered, commercials will be embedded

within the programming like normal television commercials, and

additionally synchronized with those advertisements will be opportunities to purchase product.

This is really an interesting medium because it allows for the delivery of an entertainment experience that combines not only video

but communications, editorial, and allows our advertisers and

sponsors to complete the final objective, which is to sell their product.

Our music categories cover several different cultures. 88HIPHOP

is a very strong channel covering hip hop and urban culture. The

programming brings in the artists in a very collegial atmosphere.

It is much more down to earth than the kind of blow-dried presentation of traditional television and it has a lot of meaning and

credibility to the audience. This is the way we tackle the musical

genres to really bring the audiences much closer to the stars and

the guests who are very important to them.

Now, I guess, as a final comment you can see right now the

screen embedded within this player is tiny. You have really got to

be pulled up close to your computer and it works, and if you are

involved with the chatters, it is a compelling experience. The reason why that screen is so small is because of the broadband limitations. We could actually expand the size of that screen but the picture would pixilate and would not be as clear, and that is purely

a function of how much data we get through the pipe.

22

We really need to think about who our users are. Most of them

are 56K modem users, which allows us to get a video stream

through that has a very slow frame rate. Once you start encoding

80K and above, the video really starts to smooth out, and the

broader the connection for the end user, the larger that screen can

get and the more compelling the experience can get.

So that gives you a flavor of where we are. Again, when you pull

up close, it is an interesting experience. I think from the distance

that you are at now you can see some of the limitations that the

broadband environment faces us with. Thank you.

Mr. TAUZIN. Thank you very much, Tony. Now what we have

seen what video streaming begins to look like on the Internet and

what television itself will become on the Internet. We will now turn

to music, and Mr. Peter Harter, vice president of Global Public Policy Standards and representing Emusic.com will give us not only

a presentation, but a demonstration of what the music industry—

how it views the possibilities of broadband-delivered services.

Mr. Harter.

STATEMENT OF PETER F. HARTER

Mr. HARTER. Thank you, Mr. Chairman, and members of the

committee. It is a pleasure to be back as a witness before this committee. Last year I was here to speak about the Digital Millennium

Copyright Act, and I imagine many of the issues we talked about

there are still relevant as some of their members in their statements mentioned, and I will try and touch upon those. I am sure

we can get into those in the Q and A, but I have been invited here

to talk about downloadable music and the music industry’s view of

broadband, and I would like to make my comments brief. But Mr.

Chairman, I would like to formally ask to introduce my written

statement into the record.

Mr. TAUZIN. Without objection, that is so ordered.

Mr. HARTER. Thank you. Again, my name is Peter Harter, and

I serve as vice-president for Global Public Policy and Standards at

Emusic.com, a 2-year old company based in Redwood City, California, in the heart of Silicon Valley. Emusic has offices in New

York and Los Angeles, Nashville and Austin, the country’s centers

for music, and we also own 20 percent of a company in London

called Crunch, and we have an interest in expanding worldwide because music is a worldwide medium, art and business, and I will

get back to that point later. It is a fairly important point.

But I also serve as president of DiMA, the Digital Media Association, and while I am not here today on DiMA’s behalf formally, I

think it is important to note that this industry has grown very rapidly. DiMA started 2 years ago with just a handful of founding

companies, and notwithstanding the consolidation within the Internet, audio and video industry of companies buying other companies, mergers and so forth, which is another issue up here on the

Hill, it seems these days DiMA’s membership has grown from a

handful of companies to nearly 60 companies, and now we are expanding over to Europe.

We have many European companies that are over here in the

U.S. with operations. Audio Soft from Switzerland has offices in

San Francisco and Catewa from Italy has offices in, of all places,

23

Salt Lake City, Utah. Why they are there, with no disrespect to

Utah, I don’t know. I guess the technology sector there, but music

and Utah, well, maybe I should go to Salt Lake and find out for

myself.

So the music industry is a very interesting industry, blending

music and technology, blending southern California, Los Angeles,

with northern California high technology, blending music from

New York City with technology from the west coast, the different

cultures in the business of how to get music out, and we are all

trying to figure out how to get music out on broadband networks

because I think college kids, the biggest demographic consumers of

music, are people under age 25, and there is a large concern of piracy by high school and college kids on their broadband networks

on college campuses, but I do think we have to focus on getting

broadband access to the home so consumers can actually buy music

legally.

And I am proud to say Emusic is the leading retailer in the

world for legal, downloadable music. All the music on Emusic’s site

is there by license from the rights holders and we pay royalties for

the performance rights and publishing rights and we also make

money for the artist or rights holder. There is no illegal music on

Emusic, in contrast to some other sites on the Internet I won’t

mention by name unless of course I am asked.

I am also proud to say that in the short 2-year history of Emusic,

we have now sold over 1 million songs, legal songs in the popular

MPEG format. MP3 is an open standard. Emusic uses this open

standard because not of its sound quality or anything else, it is relatively free. We pay a small patent fee to the Fundhoffer Institute

in Thompson, which owns the IP rights to the format, but MP3 is

the most widely used, and any business trying to gain access to a

market, they are going to choose the method that consumers most

readily use, and MP3, to date, is the most readily used format and

that is what we will use, but there are better sound qualities out

there in technology that we are looking at, and so we can see the

world moving away from this well-known format of MP3 into other

platforms. It could be real networks. It could be Microsoft. It could

be AOL. It could be some other new startup. We just don’t know.

This industry moves very quickly. So MP3 today, maybe not MP3

tomorrow. We should not get hung up on formats.

Emusic’s catalogue has over 100,000 high quality MP3s for sale

from over 650 independent labels. Emusic has focused on bringing

independent label music to the masses because in the record industry, you have five major record labels that earn over 80 percent of

the revenue but only produce about 20 percent of the music. In contrast, the independents produce 80 percent of the music and garner

little more than 20 percent of the revenue, and we think the Internet distribution channel will rapidly accelerate the market share

revenue for independent labels.

It is often said the record industry is a $100 billion industry

trapped in a $40 billion suit. I think the inefficiencies of physical

distribution and the pricing schemes by the major labels which

they have to have because the cost of physical distribution will be

very interesting to see how the market plays out, because I think

there are people in Britain and France and southern Louisiana who

24

want to share culture, and you frankly can’t get a Cajun music star

to get on MTV with their music. It is just not going to reach the

same audience size as Brittany Spears.

Mr. Chairman, it is a problem. I don’t know if you can do anything about that.

Mr. TAUZIN. Did you know Brittany Spears is also from Louisiana?

Mr. HARTER. I didn’t know that. Well, maybe you should get her

some Cajun music. Anyway the point is, there are people all over

the planet who share culture and traditions, and the Internet can

obviously connect them in a very efficient and inexpensive rate,

and I think we are already seeing people share culture through

music and downloading songs for free or for, at my company, is

$.99 a track, $8.99 an album, very inexpensive, that we are going

to see people consuming more music. If you lower the prices and

make the experience more convenient than buying it through traditional channels, you will see the existing demand that I think there

is a lot of demand out there.

And Mr. Chairman, I am not going to go over time, but I wish

to conclude that we think broadband is very important for

downloading music, because as you will see in my demonstration

not having a direct broadband connection to the Internet here in

this hearing room, I have gone through some difficult gyrations to

get a demonstration, but if we had a broadband connection, I could

simply go out and download some music, but I will make do here

without the connection.

Mr. TAUZIN. You mean we don’t have access to broadband in this

room?

Mr. HARTER. Your router is down I was told this morning. But

on the issue of broadband, we do believe at Emusic that we need

more competition among satellite, wireless and land line providers

so there are competition on six points: competition on availability

of access; competition on price; competition on features; competition

on content choice—that is very important—competition for user

control over the access; and most importantly, competition.

So there is a quality of service, that broadband is a better quality

of getting access to communications than existing medium, and

with that I will conclude my remarks, Mr. Chairman.

[The prepared statement of Peter F. Harter follows:]

PREPARED STATEMENT OF PETER F. HARTER, VICE PRESIDENT, GLOBAL PUBLIC

POLICY AND STANDARDS, EMUSIC.COM, INC.

Mr. Chairman and members of the Committee. It is a pleasure to appear before

you to discuss the broadband revolution that is taking place today on the Internet.

My company, EMusic.com, Inc., is the world’s leader in online, Internet-based distribution of downloadable, digital electronic music. We are a key player in that

broadband revolution, and can report to you that the new commercial, educational

and recreational opportunities that broadband-based Internet content promises to

make available will transform America’s communications and economic system in

very profound ways, for the benefit of all Americans, and indeed the entire world.

Introduction

There has been much discussion of broadband as a form of Internet transport,

that is, a ‘‘faster pipe’’ to bring the Internet into the homes and offices of Americans

and throughout the world. But in reality, broadband is about far more than mere

transmission speed alone; it is about the new and exciting forms of rich, interactive

digital content that this high-speed transmission supports. Just as television replaced movie theater newsreels, and now 24-hour cable news channels have virVerDate 11-MAY-2000 14:10 Oct 12, 2000 Jkt 066902 PO 00000 Frm 00028 Fmt 6602 Sfmt 6621 E:\HEARINGS\64024 pfrm02 PsN: 64024
25

tually supplanted the once-dominant network news divisions, broadband will allow

not just faster content, but new forms of digital-based information. This feature-rich

content ( making the Internet an interactive experience instead of an adventure

through static World Wide Web pages ( is just beginning to appear. EMusic and the

digital music revolution are the vanguards of broadband content, but we are just

the start.

Ten years ago the telephone companies were all abuzz about ‘‘fiber to the home’’

and the promise of interactive television. Like many false starts on the way to the

Information Superhighway, that one turned out to be a clear dead-end. But now,

Digital Subscriber Line (DSL) services, cable modems and fixed wireless services (

as well as satellite-delivered, locally cached broadband packet-switched networks (

are bulldozing away the underbrush of these old pipe dreams to create a new type

of Internet. From the Bells to Covad, from Akami to Excite@Home and RoadRunner,

among others, firms are building a new Internet infrastructure that will provide a

platform for new Internet content. We in the content business are eagerly awaiting

the continued development of this new, broadband Internet, because our businesses

benefit directly from consumers’ having access to a broadband Internet connection

in all of America and throughout the world.

Since the explosive growth of the Internet began less than ten years ago, demand

for Internet content has increased dramatically. Americans spend on average more

than one hour online every day. More than 40 million Americans subscribe to an

Internet service provider, and it is predicted that this number will double by 2005.

Stephen King has published the first Internet novel, and the downloadable music

service industry is changing the recording industry forever. In my roles as President

of the Digital Media Association and member of the Board of The Progress and

Freedom Foundation, I have been happy to observe the very rapid growth of membership. In just a short two years, DiMA has grown from a handful of founding companies to more than 50 companies in the audio and video products and services industry. These companies know how important public policy is and are working diligently to educate policy makers about digital media issues.

About EMusic.com

Let me take a few moments to tell you about EMusic. Since it was founded in

January 1998, EMusic has established itself at the forefront of how new music will

be discovered, delivered and enjoyed in the next decade. In addition to having the

Internet’s largest catalog of downloadable MP3 music available for purchase,

EMusic operates one of the Web’s most popular families of music-oriented Web sites

( including RollingStone.com, EMusic.com, DownBeatJazz.com, and IUMA. The company is based in Redwood City, California, with regional offices in Chicago, Los Angeles, New York, Nashville and Austin.

EMusic.com is the Web’s leading site for sampling and purchasing music in the

MP3 format, which has become the standard in the digital distribution of music.

Through direct relationships with leading artists and exclusive licensing agreements

with over 650 independent record labels, EMusic.com offers music fans an expanding collection of more than 100,000 tracks for purchase ( individual tracks for 99

cents each or entire downloadable albums for $8.99. EMusic.com features top artists

in all popular musical genres, such as Alternative (Bush, Kid Rock, They Might Be

Giants, Frank Black), Punk (Blink-182, The Offspring, Pennywise), Jazz (Duke

Ellington, Dizzy Gillespie, Louis Armstrong, Concord Records), Blues (John Lee

Hooker, B.B. King, Buddy Guy), Hip Hop (Kool Keith, The Coup), Country (Willie

Nelson, Merle Haggard, Patsy Cline), Rock (Phish, Goo Goo Dolls, David Crosby),

World (Nusrat Fateh Ali Kahn, Lee ‘‘Scratch’’ Perry) and Vintage Pop (Liza

Minnelli, Eartha Kitt, Judy Garland).

To give you an idea of how fast the downloadable music industry is growing, the

company has now sold over 1 million songs in the popular MP3 format since its

launch. This total includes single-track sales as well as tracks included as part of

albums and special collections. In addition, we recently announced an exclusive deal

to sell all of Elvis Costello’s albums in MP3 format online.

I have brought a sample of EMusic services to demonstrate for the Committee

how Internet content can work.

Broadband Content Needs Broadband Networks

Consumers’ search for online music, film, video games, shopping and educational

services in many cases is far greater than the supply of network facilities that must

support it. As so often happens, demand has outrun technology. One reads in the

news that the traffic from college students downloading the 300 greatest songs of

all time has congested campus Internet servers. Many e-commerce shopping Web

sites ground to a halt over Christmas, unable to serve the millions of Americans

26

eager to do their shopping without braving the malls. Thus, though the services are

there for consumers, access remains limited. The Internet needs the communications industry to catch up.

More importantly, Internet content has become increasingly rich, consisting of

large data files that become interactive news, video and sound at the end user’s

computer. This richness of content requires large amounts of data to be transmitted

efficiently, which is achieved through compression and decompression technologies

(CODECs). MP3, for instance, a shorthand for MPEG-3, is a format initially developed for digital transmission of motion pictures. Because MP3 files can be either

audio or video or both, they are perfectly suited for the digital transmission of

music, and today are the dominant form in which digital music is stored, sold and

transported over the Internet. EMusic principally sells its music in MP3 file format,

but is in fact format agnostic, and will distribute content in whatever form is desired by consumers. We are also particularly conscious of the need to provide legal,

efficient mechanisms for the distribution of digital content that do not undermine

the interests of musicians and other content creators. While the term MP3 has often

been coupled to the concept of piracy, EMusic has proven the skeptics wrong by

fashioning a viable revenue model for the sale of licensed MP3 files on the Internet.

But whether a digital music file is encoded in MP3, RealPlayer, LiquidAudio or

any other CODEC format, it takes a huge amount of bandwidth to make

downloadable music work seamlessly. For instance, EMusic is now offering, as a free

cut, ‘‘Radio, Radio,’’ a song from one of Elvis Costello’s first albums in the 1970s.

In MP3 format, this three-minute cut is a full 2.3MB (that’s nearly the size of two

3.5’’ floppy disks). For those members of the Committee familiar with dial-up Internet services, even using the fastest 56 Kbps modem available (which provides an

effective throughput of only three to five kilobytes per second), this song would take

approximately 15 minutes to download. At ISDN speeds (144 Kbps), download time

is reduced to about three minutes. And at T-1 or ADSL speeds (1.55Mbps),

download time is something on the order of 30 seconds or less.

Without delving too far into the technical realm, the lesson is clear: feature-rich

Internet content requires bandwidth, bandwidth and more bandwidth. The ubiquitous availability of high-speed Internet connections will create a sea-change in the

distribution of digital information of all sorts. Not only will consumers be able to

get more and faster content, they will get higher-quality content. Soon the compression loss that is inherent in squeezing broadband content into the narrow, slow confines of dial-up connections will be a thing of the past. No longer will streaming

video look like a Keystone Cops silent film when delivered over a truly broadband

Internet.

Public Policy for Accelerating Broadband Deployment

The communications industry is striving to meet the needs of Internet content.

EMusic applauds the efforts of this industry to provide broadband capability to consumers. Cable modems and DSL technologies are leading the way, providing Internet connectivity at speeds 20 to 100 times faster than dial-up modems. These technologies make seamless, high-resolution Internet and data communication possible,

enabling Americans to access information and services as quickly from home as

from any office building. The continuing development and deployment of broadband

technology will truly build the Information Superhighway and give content providers like EMusic a path to every American home.

The Telecommunications Act of 1996 (‘‘1996 Act’’), fashioned by this Committee,

has created a competitive marketplace that has spurred the fastest rollout of innovative communications technologies in history. Just two years ago, almost no one

except corporate Internet users was able to get a high-speed Internet access service.

Today is vastly different. The robustly competitive telecommunications environment

forces prices down and increases carrier efficiencies. In addition, by unleashing competitive forces into the telecommunications arena, the 1996 Act has broad

broadband connectivity to consumers at an unprecedented rate. Cable modems, DSL

providers, and fixed wireless services connect millions of Americans to each other

and the world through the Internet.

The varying types of broadband services help to ensure that every American has

access to at least one choice of service and service provider, enhancing the ability

of content providers to reach as many consumers as possible. Equally as important,

this competitive environment has ensured that the prices for these services have

consistently decreased as their reach has widened. EMusic congratulates this Committee and the FCC for fostering this competitive environment for all technologies

and carriers, by leveling the playing field rather than picking technological winners.

We believe that public policy should encourage providers to deploy broadband services by reducing barriers for ‘‘last mile’’ interconnection and by ensuring that the

27

government maintains a hands off policy towards the Internet. We do not believe

that government can manage or structure the development of broadband networks

better than the competitive marketplace.

Addressing the ‘‘Digital Divide’’

Broadband access is limited, however, by the Digital Divide facing America today.

This divide lies not only in the fact that personal computer penetration is far lower

in minority and lower-income American homes and schools, but also that rural,

inner-city and low-income areas do not typically offer the population density or economics to make rapid entry possible in the near term. Although the Digital Divide

grows more narrow every day as the competitive broadband industry widens its footprint, it is clear that some governmental attention to this social problem is warranted, in order that we do not unwittingly create a two-tiered system of access to

digital information and the Internet. EMusic supports this Committee’s continued

efforts to monitor, analyze and remedy this inequity that to varying degrees remains

a divisive force within our society and threatens to disenfranchise many areas from

the economic and information revolution that the United States is experiencing.

But there is another divide that persists and, in many cases, lies along the same

boundaries: This divide creates different have-nots ( Americans living in areas that

have limited commercial presence. These persons include the rural doctor who must

travel miles to the nearest pharmacy, the woman living in an inner city abandoned

by the retail sector, and the elementary school situated 50 miles from the nearest

supply store. It is this divide that makes the Internet so necessary, for only the

Internet can reverse the abandonment of inner-city and rural citizens by the forces

of commerce. Just as the Sears Catalog empowered rural Americans in the late 19th

and early 20th centuries, a broadband Internet will empower both rural and inner

city Americans in the 21st century.

The Internet makes every library, doctor and music store immediately ubiquitous.

Its tremendous economies of scale and ability to operate in the realm of the virtual

allow it to reach every American in every sector simultaneously. The Internet server

has replaced the ‘‘bricks and mortar’’ storefront, and a well-constructed sales Web

site performs faster and more reliably than any staff. Without adding any urban infrastructure, without constructing another shopping mall, the Internet can become

the nation’s library, video rental store, and CD player. It can become the nation’s

equalizer, for it cannot detect the race or ethnicity of its users and has no means

to discriminate among cities, neighborhoods or customers.

To realize these benefits, the United States must ensure that the sophistication

and diversity of Internet content is supported by the nation’s telecommunications

network. This Committee can assist in this effort by exploring ways to encourage

all technologies and carriers to build faster, more efficient communications networks. It was the procompetitive but technology-blind 1996 Act that spawned the

broadband industry in the first instance. Through local network unbundling and

interconnection, as well as a consistent policy of forbearance in information services

regulation, Congress and the FCC have created rampant competition out of monopolies. With competition came the incentive, if not the necessity, to win customers by

providing faster, less expensive services. Innovation was the result.

EMusic is committed to working with this Committee, the FCC and other federal

and state government agencies to address the Digital Divide, to improve technological and informational literacy in our nation’s impoverished areas and to help

grow the Internet as a liberating force for rural and insular Americans. This is a

truly exciting time to be involved in the broadband Internet content business. If you

thought that the Web changed the world in 1995, just wait!

I again thank the Committee for its time and attention, and would be pleased to

answer any questions that the members have.

Mr. TAUZIN. Thank you, Peter, and if you would be kind enough

to do your demonstration. By way of explanation there were four

committees that crashed this morning 5 minutes before the hearing

so we are limited in the way we can demonstrate this, but I think

you have still done a good job of presenting it to us if you will do

that now.

Mr. HARTER. Yeah, sure thing. I am not going to bother going

through the settings again and take more of the committee’s time,

but basically what you see on the screens is Emusic’s Web site at

www.emusic.com, and what I will briefly do is take you from our

home page to what a consumer sees when they download music,

28

and I will play a brief sample of some music and that will be the

demonstration. You are seeing Emusic’s home page here. On the

left hand side become brassed by different genres. We have rock,

classical, electronic, hip hop, alternative, punk, country, new age,

reggae, sound tracks, inspirational, jazz, blues and within each

genre there are sub genres.

These are very general high-level separations, different categories of music, and since the Chairman is from New Orleans and

I am going to Jazz Fest, and my girlfriend, I figured I would see

what we had in our catalogue from country, folk, and well, there

is some Zydeco music and Cajun Zydeco music, I hope the Chairman likes that, listens to that, and we don’t have all that much

yet.

We just licensed two catalogues in New Orleans. One is the

Jewel Pollop catalogue, which is mostly rhythm and blues, and also

Black Top Records, I believe, from the Stan the Music Man, who

is an infamous figure down in New Orleans music scene. You can

download a whole album from Sunset Beaujolais, and I have stored

locally on my laptop here the 30-second samples. Before the consumer buys the music, they can sample as many songs as they

want to.

[Playing music]

Now do did you recognize anything from the catalog there?

Mr. TAUZIN. No.

Mr. HARTER. Anyway, the other things I can’t show because we

don’t have a full-time connection here is you can see on the right,

you can check off which songs you want to buy and then go through

a checkout counter which is similar to other e-commerce sites.

Mr. TAUZIN. Explain the buying process.

Mr. HARTER. Once you sample and figure out which songs you

want, we don’t make you buy the whole album. You can just pick

out the songs you want. So you don’t end up buying a CD and have

all this music you don’t really care to listen to. You just get the

songs you want and you check off which tracks you want by putting a checkmark there. So I want to buy the Accadian Two stuff

and then I would check songs above and then add to the cart, and

what is not going to work here, since we don’t have a connection,

we don’t have an interactive session with our service and user.

But basically what happens is the shopping cart will remember

which songs you checked off during the time you have browsed

through our site. You have a customer profile set up, you register

as a customer with your name and credit card and so forth, and

then we charge the amount of the songs and albums you bought

to your credit card and that is very quick. We have very good relations with the credit card companies, do it very cheaply at a good

rate and very quickly, so you don’t have to sit there and wait and

then songs are downloaded.

In terms of the speed of the songs the latest data I have and

other people’s data may differ is that in the MP3 format a 3-minute

song is about 2.3 megabits, and that is about the size of two floppy

disks. For those members of the committee that have normal dialup access using 56K modems, that song would take 15 minutes to

download.

29

If you are at an ISDN, it downloads about 3 minutes per song.

On T-1 or Radio Cell, speed is about 30 seconds or less. At our corporate network at Emusic, when we download a song it takes between 15 and 20 seconds, and some friends here in the audience

from various companies like John Ingel from Excite@Home, which

is down the street from me in Redwood City, he may brag that his

network is even faster. Redwood City is interesting. We have liquid

audio, Emusic and Excite@Home all within 4 blocks of one another,

but yet we don’t have a business deal with Excite@Home, John.

Anyway, any other questions about the Web site, Mr. Chairman?

Mr. TAUZIN. Anyone want to hear or see any other demonstration? We are limited, as you said, because we don’t have the

broadband connect, but the idea again is that the consumer can actually receive all this music, download it on demand, pay a price

so the artist is compensated, and the music is then stored in his

own computer?

Mr. HARTER. Right, and that is important because the computers

aren’t all that stable these days, and say a person doesn’t make a

backup copy of their hard disk, well they can download the music

and their hard disk will be the library and they can copy the music

under fair use to all their devices within their household, if the

computer crashes or stolen, all the music is gone, well, at Emusic,

because we have a customer profile—and we protect your privacy,

we don’t show it to anybody else—they can come back and say, hey,

I am so and so, here is my name and here is my credit card, I

bought this music, we will download to them, again, no charge but

because it is another copy, we will pay again to the rights holders

because the rights holder is whole new sale, but as a customer

service to our customers, we will provide that service.

So we are trying to make this easier, for simple for the customers. Over the 2-year period of our history at Emusic, we have

reduced the number of steps it takes for a person to click through

to a purchase, and we are still working on that. This is a very new

industry, but we are working very hard and we are the world’s

leader in retailing music on line.

Mr. TAUZIN. Any member want to see any more of this demonstration?

Mr. Stearns.

Mr. STEARNS. Just when you have it on your hard disk do you

put on a real audio player?

Mr. HARTER. What you can do is play it off your laptop. What

you just heard was on the hard disk here, and you can have these

speakers. Many people have their hard disk connected by wire to

their home stereo. Just as your home stereo has a cassette deck,

a CD player, this is another component to your stereo at home. As

hard as it may sound, people have home area networks where they

simply connect their laptop or desktop computer to their home

stereo.

Mr. TAUZIN. And under fair use, they can copy it on those systems, right?

Mr. HARTER. Or you can copy it to a portable device like a

Walkman. Under fair use, you can copy it in your home because

I only have one set of ears, so whether it is in my hard disk or my

home stereo or my portable device, I have paid for one song and

30

I listen to one song. Now where the problem is, digital copies are

very easily recopied, transmitted, a kid could e-mail to his thousand closest friends, and these are some of the more recent issues.

We thought the DMC would address all these, but we are applying

a law to these new technology distribution schemes.

The Computer Science Technology Board, the National Research

Council, has a great report out called the Digital Dilemma, where

they have studied issues about access to technology and what access does to copyright, and the gentleman who read the report, a

professor at MIT whose name escapes me right now, he said technology enables access to broadband and other things but technology

can also control access, and I think for consumers, we have to find

a balance between enabling access, we break the digital divide, get

access to rural areas as people have asked about this morning. We

also have to be careful that we don’t have too much technology to

slow down access to make access more expensive or too difficult,

otherwise consumers are not going to adopt this technology.

Walt Mossberg of the Wall Street Journal who writes a great column on personal technology, heavily criticized Sony products because security tools impeded consumer use of music in the Sony

music club, and his own words, Walt Mossberg’s word in the paper

and on CNBC Power Lunch, the Financial News Channel, he said

the security used by Sony and their music club treats consumers

like criminals.

So I think the music industry is still, as I said before, still learning how to get music out legally to consumers so it is easy and inexpensive, and they adopt it and you meet this pent-up demand for

music, but also protect the rights of the rights holder because

Emusic, we have relations with over 500 independent record labels.

If we are not selling the music legally and not returning the revenue to the them, then this channel distribution—well, what I

think we have proven is that in 2 years we are selling lots of music

legally, and I am not terribly worried about that, but piracy is not

an insignificant issue, and I think other companies in this industry

of Internet have to look at the issue more carefully than they are

right now.

Mr. TAUZIN. Thank you very much, Mr. Harter, and now we will

turn to our third——

Mr. GORDON. May I just say quickly, I want to acknowledge the

responsible approach to the copyright issue here. You can’t make

money if you don’t have a product and you don’t have a product if,

in your case, the copyright holders aren’t rewarded. The music is

going to run out, and you have been farsighted enough to understand that. I look forward to working with you and others that

want to handle this in a legal way to help us better understand the

technology and keep it legal and to get the bad guys off the street.

Thanks.

Mr. TAUZIN. Thank you, Mr. Harter. The Chair now recognizes

the third member of our panel, Dr. Eric Allely, founder and owner

of Tekamah Corporation. Dr. Allely, if you will give your testimony

and a demonstration, sir.

31

STATEMENT OF ERIC ALLELY

Dr. ALLELY. Good morning, Mr. Chairman, and members of the

subcommittee. I am Dr. Eric Allely, and I am the founder and chief

executive officer of the Tekamah Corporation, a software development company based up in Rockville, Maryland, and our primary

focus in life is training and education technologies. So that is what

I would like to focus on today is how I see the high speed Internet

servicing people in their training and education needs.

First of all, I am honored to have the opportunity to testify before this committee and I am also excited about your interests in

the technology, and I know that you have some difficult decisions

to make as we go forward, and I hope that my input can serve in

some small way.

I come to you today wearing several hats. In fact, I wear them

everyday. I am surgeon, I am a physician, a doctor as a physician

doctor, not a technical one. Although I shouldn’t probably tell that

to my patients about the technical part, but my interest from a

medical perspective is in propelling or pushing medical information

out, in other words, a knowledge transfer, and I will speak to that

in a moment.

I am also a lieutenant colonel in the army national guard, and

in that capacity I am interested in the idea of improving the readiness in our forces and in the mixture of those two positions will be

the basis of my presentation and you will see that in a moment.

I am also a scientist and I am very interested in the concepts and

the things that make people learn, what makes them learn faster,

what makes them retain information longer and what makes them

perform better under stress.

But foremost, of all these things, I am a teacher. I enjoy learning

things and then imparting that information to somebody else, and

I am very excited about the technologies that we have unfolding before us, particularly in the ability to reach more people, and so if

I urge the committee to do anything, I urge them to act on those

things that they have said today, and that is to make sure that everybody has access to this because whether it is Pseudo television

or Emusic or training and education, the Digital Divide is going to

be defined or eliminated by your actions.

A couple of things I like to preach about, one is that I see the

opportunity to raise everybody up a notch, and what I mean by

that is rather than, for example, in medicine, rather than focusing

on things like telemedicine, we focus on telemedicine extending the

reach of the physician, you know, being able to provide care at a

distance. This is very important stuff, and I am very much in support of it, but my emphasis, I think, is on something that is going

to have a much larger impact to the greater good, and that is to

project the information outward. In other words, other than trying

to reach people with my capabilities, I would rather teach people

what my capabilities are and raise everybody up.

I would like to see the general public be a little bit more like

medics. We all own a body. It would be nice to know something

more about it than we do. It would be nice to able to help other

people on the street when you see them injured. I would like to see

medics be a little bit more like physician assistants and nurse pracVerDate 11-MAY-2000 14:10 Oct 12, 2000 Jkt 066902 PO 00000 Frm 00035 Fmt 6602 Sfmt 6602 E:\HEARINGS\64024 pfrm02 PsN: 64024
32

titioners, and I would like to see nurse practitioners be a lot more

like physicians.

So rather than trying to hold on to what I know as a physician,

so that I can meter it out and charge for it, I would rather push

it outward and raise everybody up a notch, and I think that it applies not just in medicine, but in any industry. We find a lot of expertise and reliance on experts to do our jobs. The example I like

to make is the fact that my grandmother was probably more comfortable managing a temperature of 104 degrees in her children

than my wife is, and my wife has a medical background. To me this

is a little bit backwards, and part of it has to do with the fact that

we have kind of become accustomed to sort of handing over what

we know about things to an expert, so that when we have a problem with it, we run up and say, hey, can you help me with this,

and if the technology comes and only answers the question rather

than teaching me something about how to deal with it next time,

then I would argue that all it is is a crutch, all it is is something

that encourages me to remain naive in what may be a very important area of my life.

So that is a considerable difference. So that is my little piece on

raising people up a notch.

The second thing I would like to say is that we need to be flexible. We need to approach training in a little bit different way than

we have before. In the past, things were kind of homogenous. I

mean, from the Industrial Revolution, we needed lots of people that

did the same thing. So what we did was brought we them in and

trained them all the same way, we taught them the same thing at

the same time, and what we got is we got a production line taken

from the Industrial Revolution and turned into an education system.

And I would fight the tendency to keep that kind of a system and

instead try to develop a technology that is, rather than homogenous, one that is heterogenous, one that is flexible, on that responds to individual people’s needs, because what we are going to

find in this rapidly changing environment that we find ourselves

in in terms of the workforce is that at greater and greater speeds,

people are going to need to be better reeducated. There is going to

be greater need for just-in-time training.

The labor force is going to enter at the age of 20, and by the time

they are age 40, they may have had to change jobs several times,

not necessarily by their choice, but simply by the changing environment, and I would suggest it is going to be difficult to ask those

people to stop every 10-years and go back to school so they can reenter the workforce and instead what we need to do is develop a

system that teaches them what they need to know and let them

change with the workforce environment, and I would argue that

the distance learning kinds of technologies that would be available

only if broadband is accessible are the kinds of things that we can

use to make those changes.

So what I would like to do is—I also thank the chairman, by the

way, for allowing us to submit our written comments separately,

and what I would like to do is change to an example now, a simple

demonstration, one that I do from the desktop rather than on the

network, but one that can be done if the bandwidth were available

33

through the network, and I am going to attempt a technological—

let me get it working on one side of the room. There we go.

What I am about to show you is a mix, again, of military and

medical kinds of things. The scenario that I am going to pay is a

casualty scenario that we used to train, actually, to reorient physicians. It was developed in order to reorient physicians and nurses

to field medicine. You know, we are used to doing tertiary care

kind of things at Walter Reed or Bethesda Naval, and then all of

a sudden we are asked to go to someplace else in a much different

logistical situation.

So in order to help them prepare for that, we have developed

some of these scenarios, and I am going to hope that the audio

plays appropriately.

Now here we are playing video straight from the computer. It

would be streaming if we had the bandwidth. Essentially, we are

setting a scene, and what is going to happen is a number of casualties are going to come off of the vehicle, and the teaching point

here we are focusing on is the first step in caring for these individuals is to triage them. We all watch ER, and we all know what Dr.

Carter does, although some of us are more entertained by it than

others, but what we see, one of the first problems we have in medical care is knowing what to do for whom and in what order. So

what I am going to do here is I am going to go ahead and triage

these individuals.

This gentleman is an immediate category person. We need a little bit of information. I have to make what could potentially be a

life-saving decision based on a small amount of information which,

again, is part of what we are getting people to do. This gentleman

is a little more immediate than the other one, so I am going to

make him a little bit higher priority, and I am going to say I am

done there. Anyone talking that comfortably is delayed until proven otherwise. And finally, this gentleman has a little bit of combat

stress. We will treat him, but we will wait for a while.

Now what happens now that it naturally just went back and

spoke to the server, and it tells us a little bit about what we can

do. We can go in here, here is the most immediate guy, I am going

to examine him. I can take a look at his leg. It looked kind of gross.

I apologize for those who don’t like that kind of picture, but I can

go ahead and treat him. I can do all the kinds of things that I

would need to do, including in the military setting, I need to be

able to decontaminate him and finally I need to dispose of him.

I apologize for our terminology, but that is what we talk about,

and including talking about the prognosis, how far he is going to

have to go back, et cetera. And once I evacuate him, he leaves my

care and he is gone.

These are all things that I would normally be doing in a real environment, and I am going to go ahead and jump to an evaluation

and see how bad I am.

So now what has happened is based on my score—well, actually,

the device is scoring in the background. It is reminding me of what

was happening because if I had done this properly, I might have

taken 15, 20 minutes to get through this and I will skip over this,

and I assure you that I am a better field surgeon than this if when

really presented with a problem.

34

But you see, what I am now afforded is I am afforded a review

of each of these. In fact, I am now shown the seven core areas that

we would like you to be thinking about when you are doing triage.

I can jump between the casualties and change ways.

What I would like to talk about very briefly in the wrapping up

is the transference that I talked about before, raising everybody up.

I mean I believed in this before we made this program. Then we

made this program and I am ready to throw everything else out the

window, but to talk about raising people up a notch. This was designed for physicians and nurses. We saw so much value from it.

In fact, some of the other ancillary medical people came in and said

hey, that that looks like a great game, let me play it, that we set

up a study and we went out to Camp Pendleton and got a bunch

of enlisted Marines and we ran them through this training program alone, and then we took a bunch of independent duty corpsmen, which is the Navy’s version of a medic, and we ran both the

Marines and the Navy medics through a controlled side-by-side

study to see who would do better in managing field casualties.

Well, the marines, shall I say, did very poorly in the areas of applying treatment. We hadn’t taught them that. But when it came

to making triage decisions, they were statistically indistinguishable

from the Corpsmen and they did it only with this program, and

these were, God save us, United States enlisted Marines, who I

love dearly, but I will tell you, they are not highly schooled in medicine. They picked it all up from the program.

In fact, the then-commanding general of Camp Pendleton, after

seeing the results made the comment that he hoped that one of

these guys driving home on I5 in his little Ranger pick-up would

come across an accident and jump out and look at what the problem was and get on the cell phone and call 911 and say, you know,

I have got four guys here, one of them is immediate because he has

got a blocked air way, two guys delayed and the other guy can wait

a while, and was hoping this would all be recorded on 911 so that

when the dispatcher said, oh, are you a medical resident, he says

no, I am a gunnery sergeant at Camp Pendleton. He was praying

for that to happen.

The point is, I think, well made in that we can easily forget that

we have given a lot of our lives over to experts, and I would suggest to you, with the right technologies and with good access to

high speed Internet, we can reclaim some of that stuff and quickly

close not only the Digital Divide, but even some of the educational

divide that we already know exists in our fair country today.

And with that, sir, subject to your questions, I conclude my briefing.

[The prepared statement of Eric Allely follows:]

PREPARED STATEMENT OF ERIC ALLELY, FOUNDER AND CHIEF EXECUTIVE OFFICER,

TEKAMAH CORPORATION

INTRODUCTION

Good Morning, Mr. Chairman and members of the Subcommittee. I am Dr. Eric

Allely, Founder and Chief Executive Officer of Tekamah Corporation, a software engineering company based in Rockville, Maryland.

I am honored to have the opportunity to testify before this subcommittee today

and appreciate your interest in learning more about the potential benefits of

broadband—or high-speed Internet access—technologies.

35

I come to you today wearing several hats: I am a physician interested in pushing

medical information forward to patients and the general public; I am a Lieutenant

Colonel in the Army National Guard interested in improving the overall readiness

of our Services; I am a scientist interested in what makes people learn faster, retain

information longer and perform better under stress. But foremost, I am a teacher

and I’d like to share with you my vision of how broadband technologies will impact

training and education in the future.

First, we need to raise everyone up a notch.

RAISING EVERYONE UP A NOTCH

There has been a lot of work done in medicine to reach patients through telemedicine. A great deal more can be done and other panel members may speak to those

specific issues. While providing diagnostic and therapeutic services over a distance

may provide significant advancement in medical care, I suggest that Distance

Learning using broadband technologies will do far more for the common good by

transferring medical knowledge rather than simply extending the reach of the physician. While both may be needed, those methods that project capabilities are usually not as efficient as those that multiply capabilities. My vision for medicine is

that everyone would be raised up a notch. The general public would be more like

medics. Medics would be more like Physician Assistants (PA’s) and Nurse Practitioners, and PA’s would be more like Physicians. In my opinion, transfer of knowledge should be a key focus for the use of broadband technologies. Not just in medicine, but in all industries.

However, raising everyone up a notch is not the end of it. We need flexibility in

our training technologies.

FLEXIBLE TRAINING

Today’s work environment is changing so rapidly that it will not be enough to

simply provide continuing education. Continuing education, as we know it today assumes that a particular worker will remain within a single career track. Unfortunately, the type of work you are trained to do when you are twenty may be what

you will be doing when you are forty. In fact, the earlier job may no longer exist

due to changes in technology. With the work environment changing so rapidly, we

need to provide better methods for life long training so that workers can change

with their work environment. Workers cannot be expected to drop out of the work

force every ten years to be ‘‘re-educated’’. Instead, their continued education needs

to meet them where they are. Doing ‘‘just-in-time’’ training is a beginning, but we

will have to become much better at adaptive training techniques to meet the needs

of tomorrow’s work force. Workers in the continuous schoolhouse environment of the

future will be far from homogenous. Instead, they will come from a wide variety of

backgrounds and capabilities. They will not be well served by a single teaching

method but will require an engaging and effective learning environment that can

adapt to their individual needs and interests.

What do we need to implement such a flexible learning environment? One major

requirement will be the rapid movement of data between the training server and

the student

MOVING DATA RAPIDLY

Much of the information needed to manage an effective Distance Learning program can be passed between a training server and a student using current Internet

connections. However, the major difficulties come when we need to move high-density data such as video, audio, and high-resolution images or graphics. The Internet

connections most of us use today are not capable of moving high-density data between the training server and the student rapidly enough to produce a high quality

learning environment. Students rapidly loose interest with increasing download

times.

Streaming video and audio over the current connections have provided a step forward in making engaging materials. Unfortunately serving multiple students simultaneously can quickly cause information bottlenecks that slow or even stop the

training program. Even when the connection speeds are adequate to move video and

audio, the current streaming technologies make it difficult to rapidly change the

content being sent from the server to the student and therefore are limited when

it comes to computer adaptive training.

Add to this the demands of team training and network speed rapidly proves to

be the limiting factor. Broadband technologies will significantly change the quality

of training available using the Internet by providing the higher speed connections

we need to move high-density data rapidly between the server and the student.

36

Tekamah has been building toward the day of broadband Internet.

ABOUT TEKAMAH CORPORATION

The Tekamah Corporation opened its development lab in Rockville, Maryland in

January of 1995 and has been active in research and development of advanced

training technologies. We have done a significant amount of work on adaptive training technologies and realize that any particular piece of information may be used

in several ways, particularly when serving a variety of audiences.

To reduce the need to rebuild the same materials for each new computer technology, we have designed an extensible training language that supports a variety

of computer devices including computer flat screens, virtual reality display devices

and even instrumented mannequins. Each of these human-computer interface technologies has its own particular strengths and weaknesses with no single training

technology meeting all training needs.

By developing our training materials and algorithms to support a wide variety of

training methods, we are building the training library needed by tomorrow’s students. Distributing this library to those that need it when they need it will require

much higher bandwidth. The full benefits of our technology are currently limited to

use on local area networks and for those who have very high-speed Internet connections. The full impact cannot be felt until such high-speed access is widely available.

CONCLUSION

While I am proud that Tekamah is using the latest in Internet technologies in

our products and services, the technologies are not our principal focus. Training and

education are. I am here today as an advocate for everyone interested in learning;

whether it’s something required by his or her job, something that gets him or her

a better job, or something simply new and interesting. I believe that as access to

broadband Internet technologies expands, we will witness a watershed in Distance

Learning technologies that will radically change our ability to access information

and to learn.

I leave you with one thought: these technologies will create new opportunities for

those whose homes and businesses have the high-speed connections. I am not an

economist and cannot help you figure out how best to encourage the deployment of

broadband Internet. However, I am a teacher and will tell you that no matter how

cool the technology, for those without access to it, it may as well not exist.

I thank you again for the opportunity to appear before you this morning and look

forward to answering any questions you may have.

Mr. GILLMOR [presiding]. Thank you very much, Dr. Allely. My

thanks to all of the panel. We will now move to questions. The

gentlelady from Wyoming.

Mrs. CUBIN. I don’t have any questions.

Mr. GILLMOR. Any questions from the minority side? If not, I

want to thank all of you for your testimony and your demonstrations. Thank you. We will move to our second panel.

We will begin with our second panel and we do have the complete written statements of all the panelists. We would ask that the

panelists try to stay within the 5-minute limit, and then we will

get into questions after the panel is completed. And first is Mr.

John Linkous, who is the executive director of the American Telemedicine Association.

Mr. Linkous.

37

STATEMENTS OF JONATHAN D. LINKOUS, EXECUTIVE DIRECTOR, AMERICAN TELEMEDICINE ASSOCIATION; GENE

VUCKOVICH, EXECUTIVE DIRECTOR, MONTANA RURAL DEVELOPMENT PARTNERSHIP; RAY A. CAMPBELL III, EXECUTIVE DIRECTOR, MASS CORPORATION FOR EDUCATIONAL

TELECOMMUNICATIONS; AND DAVID KUSHNER, CHAIRMAN,

DIAGNOSTIC IMAGING AND RADIOLOGY, CHILDREN’S NATIONAL MEDICAL CENTER

Mr. LINKOUS. Thank you, Mr. Chairman. My name is John

Linkous, and I am the executive director of the American Telemedicine Association, and I provide these remarks today about

broadband deployment and telemedicine on behalf of the Association. ATA is a nonprofit membership-based organization based in

Washington, DC, established in 1993 and serves to promote telemedicine and resolve the barriers to its deployment. This morning

I will make my remarks brief, as my written remarks will be in the

record, and I thank you for that.

Telemedicine represents a marriage of advanced telecommunications technology and new approaches to improving medical and

health care at affordable rates. Be it through telehome care for

homebound frail patients, remote medical support for astronauts in

space, or the Nation’s military in the front lines of battle or access

to comprehensive data bases of health medical information for consumers over the Internet, telemedicine holds a promise of using

telecommunications in a direct way to improve the lives of all

Americans. It is not surprising that telemedicine is one of the fastest growing segments in health care.

Today, telemedicine encompasses a multimillion dollar industry,

including high speed networks, linking hospitals and clinics, remote patient monitoring systems that need health services.

The Federal Government alone is estimated to spend close to

$300 billion for telemedicine this year. Critical to the growth and

success of telemedicine is access to broadband networks. Deployment of telemedical links to rural and suburban medical centers require communication networks that are reliable and capable of

handling large amounts of data in a short time. In the very near

future, telemedicine will be used in practically every part of the

United States, and I would dare say that there are telemedicine

projects probably active in every district of every Congressman who

is represented here today.

I would like to share two examples of how access to broadband

technologies can make a substantial difference in providing patient

care. Teleradiology allows medical clinics in a rural or suburban

area to gain access to services of qualified radiologists by simply

digitizing an X-ray or an MRI scan, sending it to the radiologist at

some distant point. Two mid-size medical images with relevant patient data attached needing rendering for medical opinion can easily consist of anywhere from 5 to 15 megabits of data. If this was

transmitted over plain old telephone lines with a normal 56K

modem, this could take about 2 hours to transmit, maybe double

that if there are glitches in the line. For most emergency situations, that amount of time to wait is unacceptable. For other situations, that amount of time is, at best, inefficient.

38

Transmission of live video images from a quality that allows for

actual medical diagnoses of a patient’s condition also requires

broadband technology. Live video is required for such applications

as mental health consults, assisted surgery, emergency medicine

and even some pathology examinations. The standard frame rate

for a high quality video like you would see on television is 30

frames per second, although lesser quality may be employed with

the use of some image compression that is available today.

Transmission of video, typically requires bandwidth speeds of

anywhere from 128K to 1.5 megs, what is known as a T-1 line.

Rural areas of the country which do not have such bandwidth will

continue to lack access to many types of telemedicine service, and

indeed we are seeing that throughout the country today. Parts of

Louisiana, parts of Montana, parts of other parts of the country

that do not have access to broadband technology are not getting access to telemedicine as the more urban parts of country do have

today. The alternative for people in rural areas is either travel by

the patient and a patient’s family to the distance location or simply

doing without health care alone.

There are broadband issues with telemedicine, both in rural and

metropolitan areas, but both differ. Rural communities are limited

in the availability of high speed communication networks and

where available have problems with reliability and cost. The problem is lessened in metro areas in recent year as more areas come

on line with alternative bandwidth choices such as in the wireless

area with cellular and satellite as well as terrestrial applications

with cable, ADSL, DSL, other types of services that are related to

that.

Reliability with the Internet has been less of an issue and more

dependent as had mentioned earlier here in the testimony today as

to whether the user has to compete with a small finite pipe coming

into their work area versus a slow computer that makes

downloading information tedious.

A related issue is providing reliable and affordable communication networks to the home. As mentioned earlier in my testimony,

telehome care is one of the promising new applications of telemedicine and from a business perspective probably has the greatest

market potential of any application we have seen to date. While

much can be accomplished over voice grade telephone lines, some

applications into the home require a greater bandwidth. Deployment of high speed networks to the home via wire line, wireless or

cable should be a priority in the development of telecommunications-related policy by this subcommittee.

Finally, I should mention the program within the Federal Communications Commission that provides assistance to rural health

providers in obtaining access to broadband services. The rural

health program, which was established by Congress under the

Telecommunications Reform Act of 1996, provides improved

broadband access by rural health centers. Although well intentioned, this program has fallen far short of its potential, and my

association has been particularly critical of its implementation.

However, recent improvements by the Federal Communications

Commission in the program create hope that the program can still

be a major benefit to rural America.

39

Indeed money for grant fees is finally flowing 2 years after passage, and the potential impact of the program on rural health is

also finally growing. So we would encourage Congress to continue

this relatively small yet very significant program.

Thank you very much for the opportunity, and I will answer any

questions you may have.

[The prepared statement of Jonathan D. Linkous follows:]

PREPARED STATEMENT OF JONATHAN D. LINKOUS, EXECUTIVE DIRECTOR, AMERICAN

TELEMEDICINE ASSOCIATION

Mr. Chairman: My name is Jonathan D. Linkous. I am the executive director of

the American Telemedicine Association and provide these remarks today about

broadband deployment and telemedicine on behalf of the Association. ATA is a nonprofit membership-based organization, established in 1993, which serves to promote

telemedicine and resolve barriers to its deployment. The Association seeks to bring

together diverse groups from traditional medicine, Internet online firms, academic

medical centers, technology and telecommunications companies, e-health sites, medical societies, government and others in order to resolve barriers to the advancement

of telemedicine through the professional, ethical and equitable improvement in

health care delivery.

Telemedicine represents a marriage of advanced telecommunications technology

and new approaches to improving medical and health care at affordable rates. Be

it through telehomecare for homebound frail patients, remote medical support for

astronauts in space or the nation’s military on the front lines of battle, or access

to comprehensive databases of health and medical information for consumers over

the Internet, telemedicine holds the promise of using telecommunications in a direct

way to improve the lives of all Americans.

It is not surprising that telemedicine is one of the fastest growing segments in

healthcare. Today, telemedicine encompasses a multimillion-dollar industry including high-speed networks linking hospitals and clinics, remote patient monitoring

systems and e-health services available over the Internet. The federal government

alone will spend close to $300 million for telemedicine over the next year. Private

insurance reimbursements as well as applications in managed care settings are also

on the rise. Market reports consistently predict a healthy and steady increase of 15

to 30 percent per year in telemedicine investments over the next five years.

However, critical to the growth and success of telemedicine is access to broadband

networks. The deployment of telemedical links to rural and suburban medical centers require communications networks that are reliable and capable of handling

large amounts of data in a short time. In the very near future telemedicine will be

used in practically every part of the United States. In the Chairman’s home state

of Louisiana, telemedicine is already used in: the state’s correctional care facilities,

for a multi-specialty program at LSU, for telepsychiatry in Lake Charles, for ophthalmology exams for patients in rural communities out of St. Francis Medical Center in Monroe, and for home care in Baton Rouge. Each of these applications benefits from the availability of broadband technology.

I’d like to share two examples of how access to broadband technologies can make

a substantial difference in providing patient care:

Teleradiology allows medical clinics in a rural or suburban area to gain access to

the services of qualified radiologists. An X-ray or other radiological image is transmitted to the radiologist for an assessment. For almost all radiology services there

are several images to be viewed of the area in question taken from two or more angles. Two mid sized medical images sent at the quality needed for rendering a medical opinion can easily consist of 5 megs of data. If transmitted over plain old telephone lines with a normal 56 K modem this could take almost two hours to transmit. If there are glitches in the line affecting the initial transmission, it could require double that amount of time. For most emergency situations, that amount of

time to wait is unacceptable. For other situations that amount of time is, at best,

inefficient.

Transmission of live video images of a quality that allows for an actual medical

diagnosis of a patient’s condition requires broadband technology. Live video is required for such applications as mental health consults, assisted surgery, emergency

medicine and even some pathology examinations. The standard frame rate for high

quality video (like seen on television) is 30 frames per second although lesser quality may be employed with the use of image compression. Transmission of video typically requires bandwidth speeds of anywhere from 128 kps to 1.5 mbs. For most

40

telemedicine services this requires more than just plain old telephone service. Rural

areas of the country without such bandwidth will continue to lack access to many

types of telemedical services. The alternative is either travel by the patient and the

patient’s family to a distant location or simply doing without health care. Unfortunately, national health statistics show that all too often patients in remote areas

without adequate healthcare do not ever get the care they need in order to remain

healthy, productive citizens.

In March 1994 ATA testified before Congress about the need for rural access to

high-speed telecommunications infrastructure saying:

‘‘Installation of telemedicine equipment serving rural communities would be

fruitless without adequate transmission lines and facilities to carry the quality

of video and speed of transmission required for many medical consultations. A

principal goal of health care reform is providing greater access to health care

for all Americans. Without an adequate communications infrastructure, rural

America will lose the opportunities it now holds for using telemedicine to increase access to medical care.’’

There are broadband issues with video teleconferencing, both in rural and metropolitan areas—but both differ. Rural communities are limited in the availability of

high-speed communications networks and where available, have problems with reliability and cost, whereas metropolitan areas are less affected. This problem has

lessened in recent years as more areas come on line with alternate bandwidth

choices—wireless (cellular, satellite) as well as terrestrial (cable, ADSL). Our members have had problems in the past with various ISDN providers having different

‘‘clock speeds’’ for their proprietary ISDN systems, such that connecting between facilities was impossible or fraught with reliability concerns. This is less of a problem

now as ISDN development matures in this country. Reliability with the Internet has

been less of an issue and is more dependent on whether a user has to compete with

a small finite ‘‘pipe’’ coming into their work area, vs. slow computers that make

downloading information tedious. Again, this has become less of an issue as technology improves for both hardware as well as bandwidth availability.

A related issue is providing reliable and affordable communications network to

the home. As mentioned above, telehomecare is one of the most promising new applications of telemedicine. While much can be accomplished over voice grade telephone lines some applications require more than just plain old telephone service.

Deployment of high-speed networks to the home via wireline, wireless or cable

should be a priority in the development of telecommunications related public policy.

Finally, I should mention the program within the Federal Communications Commission that provides assistance to rural health providers in obtaining access to

broadband services. Congress established the program under the Telecommunications Reform Act of 1996 to provide improved broadband access by rural health

centers. Although well intentioned, this program has fallen far short of its potential

and ATA has been particularly critical of its implementation. However, recent improvements by the FCC in the program create hope that the program can still be

a major benefit to rural America. Indeed, money for grantees is finally flowing and

the potential impact of the program on rural health is growing. ATA encourages

Congress to continue this relatively small yet very significant program.

Thank you. I will be happy to answer any questions you may have.

Mr. GILLMOR. Thank you, Mr. Linkous.

And we will move to Gene Vuckovich, the executive director of

the Montana Rural Development Partnership.

STATEMENT OF GENE VUCKOVICH

Mr. VUCKOVICH. Thank you, Mr. Chairman, committee members.

For the record, I am Gene Vuckovich. I am the executive director

of the Montana Rural Development Partners. We are a partnership

of Federal, State, local and tribal governments and private development entities, both for profit and nonprofit, and our mission is to

improve and develop prosperous Montana rural communities

through the collaborative efforts and resources of all of our partners. I am deeply honored to be afforded the opportunity to testify

before you today as to the status of deployment of broadband technologies in Montana and the need for same.

41

With the passage of the Telecommunications Act of 1996, it was

anticipated that because of the increase in competition, broadband

technologies would be made available to rural areas of the country,

such as Montana, as well as to the urban areas. I am here to tell

you this has not happened. Most private companies have targeted

the urban centers for deployment of broadband technologies due to

the greater return on their investment. Again, it is the old formula

of density and distance.

Montana has been designated as one of the ‘‘disconnected dozen,’’

and through the perspective of the high-tech economy prism, Montana is closed to business. A pressing need exists in this country

to address the alarming Digital Divide that continues to grow between western and southern rural communities and the rest of the

Nation. According to a recent report, the current gap is expanding

between the rural poor and the rest of the Nation regarding computer use and on-line access. Organizations such as ours and others in many communities throughout the country are working to

provide the assistance needed to allow rural citizens to participate

in the new economy. However, all of the preparation in the world

will be of little avail if fundamental broadband deployment to rural

areas is not achieved.

Montana’s business market has to become more diverse as our

traditional extraction industries of coal, gas, mining, timber decline, and we are forced to compete on the world market. Farmers

and ranchers must be able to communicate with the world and

track market trends and future opportunities. More and more of

Montana’s businesses need and demand access to advanced telecommunication technologies to be successful in Montana. We have

individuals who want to move their businesses to Montana for the

quality of life offered there. We have lone eagles that can do business anywhere that has the telecommunications capabilities to operate their businesses.

Young people in rural parts of America like Montana need the

same access to educational materials as young Americans in urban

areas. Advanced telecommunications and the Internet are an efficient way to provide educational opportunities to Montana, and the

same is true with regard to provisions of health care and government services.

The important point that must be emphasized to this committee

is that our government policies must keep pace with the demand

of people everywhere for evolving telecommunications services. The

Internet and other telecommunications technologies is the great

equalizer for businesses and individuals who are geographically

isolated from major national and world markets. We do not need

another study or more regulatory hurdles thrown in in our way.

Areas need access to quality, affordable, advanced telecommunications from every potential resource, and we need them now.

And in closing, I want to thank you once again for the opportunity. I would be glad to answer any questions. I have one other

thing to say, Mr. Chairman, and that is, there is rural and then

there is rural. In Montana, we have the fourth largest State in the

union that if it were superimposed and started in New Hampshire,

it would go to Virginia, and we only have 890,000 people there and

many people in Montana consider us one community. We wouldn’t

42

even be large size city there. We have very long streets. We go from

east to west 500 miles and from north to south 275 miles.

Thank you.

[The prepared statement of Gene Vuckovich follows:]

PREPARED STATEMENT OF GENE VUCKOVICH, EXECUTIVE DIRECTOR, MONTANA RURAL

DEVELOPMENT PARTNERS

The Montana Rural Development Partners, Inc. (MT RDP) is part of a national

initiative to strengthen rural America by, coordinating among existing development

agencies; identifying intergovernmental projects; eliminating duplication of effort;

and removing impediments created by poorly designed regulations. This organization which was created in 1992 is one of thirty-seven State Rural Development

Councils throughout the United States. The Montana Rural Development Partners’

mission is to improve and develop prosperous rural Montana communities through

the collaborative efforts and resources of federal, state, local, and tribal governments

and private development entities, both profit and non-profit.

Due to the explosive growth of the new e-commerce economy, the Internet and the

high-speed data infrastructure that supports it have become essential to the economic goals of this organization. This year, the Montana Rural Development Partners is undertaking a variety of projects to increase the use and knowledge of Internet related resources, including the following. (1) Small Business/Marketing On

The Net: this project allows MT RDP to provide training through the use of a ten

laptop portable lab, for web site development, instruction in marketing on the Internet, and temporary web hosting to economic development agencies, small business

owners and the general public. (2) Montana Cities/Counties Online: this is a

challenge to provide support for web page development, training and hosting so that

all Montana cities and counties can be online. (3) Wow Van—Widening Our

World: this project coordinates the scheduling of training through the use of a hightech van that is put to use by trained University of Montana interns who travel the

state to provide on-site Internet training to individuals, teachers and businesses. It

is a goal of this partnership through these efforts and others like them to prevent

communities in Montana and other rural areas from being left behind by the data

revolution sweeping most of the country.

Government Policy: Organizations like the Montana Rural Development Partners push to educate and prepare our residents to participate in the new Internet

economy in hopes that, despite the shortcomings of the Telecommunications Act of

1996, rural America will some day have the broadband infrastructure sufficient to

fully participate in this new world. The enactment of the Telecommunications Act

of 1996 brought anticipation that increased competition among industry sectors

would allow broadband technologies to be made available in rural areas of the country, such as Montana, as well as in urban areas. This has not happened. Today, over

four years after passage of the 1996 Act, most competitors have targeted urban centers for the deployment of broadband technologies due to greater potential return

on investment. It is simple: greater densities in population coupled with shorter distances to transmit equals larger revenue and profit. However, many states in this

country are not densely populated and the distances that data or voice communications must travel are not short. Consequently, these profit-only motivated companies are not serving the vast majority of citizens in Montana or other rural areas

of the country.

Montana has been designated one of the ‘‘Disconnected Dozen’’. Through the perspective of the high-tech economy prism, Montana is ‘‘closed for business’’. A pressing need exists in this country to address the alarming ‘‘Digital Divide’’ that continues to grow between Western and Southern rural communities and the rest of

the nation. According to a July, 1999 NTIA report, ‘‘Falling Through The Net II’’,

the current gap is expanding between the rural poor and the rest of the nation regarding computer use and online access. Organizations like this one, and many communities throughout the country, are working to provide the assistance needed to

allow rural citizens the opportunity to participate in the new economy. However, all

the preparation in the world will be to no avail if fundamental broadband deployment to rural areas is not achieved.

Rural Economies: Montana’s business market has to become more diverse as

traditional extraction industries such as coal, gas, mining and timber decline and

we face new competition in the world market. Every day, more of Montana’s businesses require and demand access to advanced telecommunications technology. Even

our farmers and ranchers must be able to quickly communicate with the world to

track market trends and future opportunities. The Internet and advanced teleVerDate 11-MAY-2000 14:10 Oct 12, 2000 Jkt 066902 PO 00000 Frm 00046 Fmt 6602 Sfmt 6621 E:\HEARINGS\64024 pfrm02 PsN: 64024
43

communications technology is the great equalizer for rural businesses who are geographically isolated from national and world markets. Consequently, to a large extent, Montana’s ability to be economically competitive has become directly contingent on the establishment of a world class high-speed telecommunications infrastructure. Unfortunately, existing taxes and regulatory restrictions on for-profit telecommunications companies make it difficult for them to justify investment in Montana’s communications infrastructure.

The important point that must be emphasized to this Committee is that our governmental policies must keep pace with the demand of people everywhere for evolving telecommunications services. Young people in rural parts of America like Montana need the same access to educational materials as young Americans in urban

areas. Advanced telecommunications and the Internet are an efficient way to provide educational opportunities to Montana. The same is true with regard to the provision of health care and government services. We do not need another study or

more regulatory hurdles thrown in our way. Rural areas need access to

quality advanced telecommunications services from every potential provider now. Set forth below are some examples of the various sectors’ needs for advanced broadband services.

Distance Learning: The Jason Foundation for Education offers a nationally recognized curriculum focused on teaching science and math to students in grades 4

through 8. Montana schools are eager to use this curriculum, however, ubiquitous

distribution is problematic. Currently, satellite downlink and cable are serving most

of the schools in the program. Cable, however, cannot be used to bring real time

broadcasts to the classroom since regular programming is already scheduled. Consequently, programs are taped and played at other times. Expanding satellite reception requires a sizeable expenditure of capital, and the technology is not easy for

teachers to use. The ideal medium for distribution is interactive video over the

Internet. However, to bring the students quality visuals of Jason activities and experiments, classrooms must have access to additional bandwidth.

Cisco Academies: This project in high schools and colleges of technology provides viable career opportunities for Montana children who choose not to seek fouryear degrees. There is a high demand for router technicians throughout the country.

Cisco Academies’ produces the most nationally recognized certificates. Many of Montana high schools have enrollments of 50 or less, so installing a full academy is financially impossible. However, it is possible for remote schools to be linked to larger

institutions through the Internet and for students in both locations to be taught by

one instructor.

Internet based businesses: All businesses will need to be able to conduct transactions via the Internet in the foreseeable future, in order to remain competitive.

In Montana, over 50 percent of businesses employ less than five people and 96 percent employ less than fifty people. The customers of and suppliers to these small

businesses are much larger companies and are beginning to demand that their business transactions be handled electronically.

Tourism: Today, Montana’s largest economic sector, next to agriculture, is tourism. In 1999, revenues from the accommodations tax were $10.9 million. Out-ofstate visitors spent $1.6 billion in Montana, and total travelers (in state and out

of state) spent $2.0 billion. In 1996, the State Tourism Department began offering

vacation-planning information through its web page. In 1999, 1.3 million user sessions were logged (a user session is a contact that goes beyond the Home Page). Login times have gone from 3 minutes to 13 minutes and 48 seconds. We are getting

3,400 hits per day and 83 percent of our inquiries are not filled electronically. The

travel industry tells us that 50-60 percent of travelers get their information on line.

The new electronic distribution method now includes a reservation feature. As Internet-based services continue to provide more opportunities to local Montana businesses, and as they change to streaming video for information distribution, access

to small communities within Montana becomes increasingly important.

The Montana Grain Growers: This group realized a few years ago that Montana producers were not trained to market their products in an international market. And in fact, at least $100 million ‘‘was left on the table’’ in 1998 because of

missed marketing opportunities. To remedy this problem, the Grain Growers developed a training program to bring producers up to speed. This training often includes

real time presentations delivered to producers via satellite. Additional broadband

access in our rural agricultural communities would permit these training sessions

to be delivered via the Internet, into homes and businesses, rather than requiring

producers to travel long distances to centers with satellite downlinks.

Native American Economy: The state is currently assisting a new business

venture, which would bring jobs to Native Americans. This new venture converts

hard copy technical manuals to digitized formats, so repair and service information

44

can be accessed via the Internet and manuals can be updated quickly. Success of

the business will depend upon broadband capability within Montana and capacity

to end users throughout the United States.

Conclusion: The Internet exploded into our lives and our economy beginning primarily in 1997. Its growth and impact since then on the economies of the nation,

states and localities is almost immeasurable. The Telecommunications Act of 1996,

passed over four years ago, is now ancient history in Internet years. The law needs

to be updated to reflect the realities of what has occurred since its enactment, and

to ensure that all potential providers of broadband and/or builders of communications infrastructure be allowed to participate.

Mr. TAUZIN. The Chair is pleased now to welcome Mr. Ray

Campbell, executive director of Mass Corporation for Educational

Telecommunications of Cambridge, Massachusetts.

Mr. Campbell.

STATEMENT OF RAY A. CAMPBELL III

Mr. CAMPBELL. Thank you very much, Mr. Chairman. Mr. Chairman and members of the subcommittee, my name is Ray Campbell.

I am executive director of the Massachusetts Corporation for Educational Telecommunications. It is a public instrumentality of the

Commonwealth of Massachusetts, and we were chartered by the

legislature with a mission of providing distance learning and education services for the citizens and businesses of the Commonwealth.

What I would like to talk about today is a recent initiative we

have had in Massachusetts called the Massachusetts Community

Network, and it has been a novel approach to the Digital Divide

and to the broadband deployment question, and it is not something

that can be replicated everywhere, but I think it represents an interesting approach to these problems that the committee find useful as you go about your deliberations.

Government has been active in the telecommunications field

using a number of the different levers that government can bring

to bear on public policy questions. I mean, whether it is taxing or

regulating or subsidizing and things like that. The Massachusetts

Community Network is premised on using government in a different role, and that is, government as a market participant, as a

purchaser of services. We tried to leverage the government’s role as

a large player in the market and tried to address some public policies concern that we had with regard to Digital Divide issues.

Prior to the advent of the Massachusetts Community Network,

every city and town, every library, every public school in Massachusetts would go to market individually for Internet access services, and as a result, other than cities like Boston, most of these

purchasers were treated as small retail participants in the market

and they were charged accordingly. The range in prices for a T-1

connection to the Massachusetts ranges from $900 a month in Boston to as much as $2,500 in some of the rural areas of the State.

So we thought that if the State was to go to market and speak

with a single voice on behalf of all the municipal organizations in

the State, which collectively have some 4,000 facilities, that we

would be able to exercise enormous presence in the market and get

a very different reception from the vendor community.

So to test this proposition, my organizations, MCET, issued an

RFP seeking a private sector partner to provide data communications and Internet access services for any public sector facility anyVerDate 11-MAY-2000 14:10 Oct 12, 2000 Jkt 066902 PO 00000 Frm 00048 Fmt 6602 Sfmt 6602 E:\HEARINGS\64024 pfrm02 PsN: 64024
45

where the Commonwealth of Massachusetts. We decided that rather than having a State-owned-and-operated network, we would

rather rely on the expertise of a private sector partner due to the

changes in technology and the core competencies involved in running a network.

In response to the RFP that we issued, or in the RFP that we

issued, we only had two mandatory requirements. We insisted that

any vendor that we partnered with would have to serve any public

sector facility anywhere in the Commonwealth of Massachusetts,

no matter how remote, and the second requirement is that we insisted on a flat rate pricing structure so that regardless of location,

any organization would pay the same amount for a given amount

of bandwidth anywhere in the State.

We had a fiercely competitive selection process. I think there

were 23 vendors that participated, and at the end of the day, we

partnered with a competitive local exchange carrier called Digital

Broadband Communications, which is a Massachusetts-based company and also with a Tennessee-based company called Education

Networks of America, and the deal that we got is pretty astounding. These are very high quality vendors. We did a lot of due diligence about their capabilities and their performance and were very

satisfied in that regard, but the price point we were able to achieve

by aggregating our demand is pretty astonishing. Our price point

is $400 anywhere in Massachusetts for T-1 speed Internet access,

and as I said, that compares to the previous prices of 900 to $2,500.

So we were able to achieve remarkable cost savings and were able

to get that price point for everybody, including the most rural locations in Massachusetts. So in exchange for the franchise of the

whole State, there was very aggressive competition and it resulted

in a breakthrough price point.

I should mention that there are a couple of interesting things

about this network. No. 1, nobody has to use it. There is no requirement that public organizations join MC in a buy fee out. So

we have to earn everyone’s business, and we are very happy to do

that because we think it will result in better long-term service. In

addition, the cost of starting this network, there was a $9 million

appropriation from the State legislature to cover some one-time expenses and some startup costs, but the $400 per month is the fully

loaded cost of operating the network.

We have committed to the administration and the legislature

that we will never come back for any additional funding. So $400

covers all of my organization’s costs in providing the service as well

as all of the vendor costs we incur, and it includes a state-of-theart Cisco router with each installation. So $400 for T-1 speed Internet access and also including a router.

Another interesting thing about the deal we struck is that the

vendor is going to be using SDSL rather than ADSL technology

wherever they can because it has got some inherent cost advantages, but if there is any public facility that is too far from a central office or if there are line quality or other issues, they will be

provisioning standard T-1 circuits. So regardless of location, 1.54

megs of bandwidth, and it is up to the vendor to find the technology that will deliver on that requirement.

46

I think one of the things that is most important to mention about

the network is that because we have put this requirement in place

that the public sector needs statewide data communication services, our private partner is having to build out their infrastructure

in every single central office in Massachusetts. That was not in

their business plan.

Frankly, it is not in anybody’s business plan to serve the 100 to

150 smallest communities in Massachusetts, but because the State

came to market and said we insist that we find a partner that will

serve every single corner of the State in exchange for being able

to serve the more lucrative parts of the State, our partner has now

altered their investment strategy. They are building out every central office in Massachusetts with digital subscriber line technology.

Once that is in place to serve the public sector organizations that

we represent, it is available to serve residential and business customers in all of those communities. So by this summer when the

network is fully deployed, to my knowledge, Massachusetts will be

the only State in the country that has DSL technology available in

every single central office in the State, that is, in addition to other

providers that are serving the tier 1 and tier 2 markets in Massachusetts.

Another final interesting point that I would like to mention is

that our arrival on the scene with this Massachusetts Community

Network product offering has ignited just an explosion of competition by the providers that are already in the market. We have seen

across the board 50 percent price cuts offered to the city of Boston

by their existing carrier. The Commonwealth of Massachusetts,

where I used to work at the information technology division, which

does data communication services for most State agencies, has

similarly been approached and offered a unilateral 50 percent price

cut. We are seeing an incredible amount of competitive energy occurring in the market in response to our arrival.

So I know it is not a solution that can probably work in a State

that is 500 miles by 250 miles, but it is an interesting, and it is

a different way of thinking about the Digital Divide and the

broadband infrastructure deployment issues, and I hope it is useful

to the committee.

Thank you very much.

[The prepared statement of Ray A. Campbell III follows:]

PREPARED STATEMENT OF RAY A. CAMPBELL III, EXECUTIVE DIRECTOR,

MASSACHUSETTS CORPORATION FOR EDUCATIONAL TELECOMMUNICATIONS

Mr. Chairman and members of the Subcommittee, my name is Ray Campbell and

I am the Executive Director of the Massachusetts Corporation for Educational Telecommunications (‘‘MCET’’). MCET is a public instrumentality of the Commonwealth

of Massachusetts, chartered by the legislature in 1982 to use technology to improve

education, the business climate, and the lives of the citizens of Massachusetts.

Thank you for the opportunity to testify at this hearing on the status of deployment

of broadband technologies.

The Commonwealth of Massachusetts has been at the forefront of the information

revolution ever since Alexander Graham Bell invented the telephone, in Boston, in

1876. Massachusetts has also been at the forefront of the Internet revolution ever

since Cambridge-based BBN won the contract to build the original ARPA-Net in

1968. Over the years, Massachusetts has incubated and been home to an incredible

number and variety of businesses that have created many of the computer and communications tools that are fundamentally changing our economy and our society. We

are proud of this tradition and look forward to even greater successes in the future.

47

I would like to focus my comments on a recent, highly successful initiative in Massachusetts called the Massachusetts Community Network (‘‘MCN’’). With the leadership and support of Governor Paul Cellucci, Lt. Governor Jane Swift, and both

branches of the state legislature, MCN is a pioneering example of how government

can speed the deployment of broadband infrastructure without relying on the traditional mechanisms of government regulation or subsidies. Instead, MCN has capitalized on the government’s role as a major purchaser of data communications services

to spur private investment in the state’s telecommunications infrastructure. Once

completed this summer, MCN will result in state-of-the-art broadband infrastructure being available in every city and town in Massachusetts. To my knowledge, we

will be the only state in the nation able to make this claim.

Before the arrival of MCN, every city and town, school district, and public library

in Massachusetts went to market for Internet access services on their own or in

small groups. With the exception of Boston, and perhaps two or three other cities,

this resulted in these public organizations being treated by the market as small retail purchasers. As a consequence, the monthly cost of a T-1 speed (1.54 megabits

per second) Internet connection ranged from a low of $900 in Boston to as much

as $2500 in the more rural parts of the state. The central premise of the MCN initiative is that if MCET went to market on behalf of all these organizations, which

collectively have over 4,000 separate buildings, we would be by far the largest purchaser of data communications and Internet services in the state. We believed this

would allow us to radically alter the nature of the Internet service market for public-sector organizations in the Commonwealth. To test this theory, the legislature and the Cellucci Administration provided $9

million to MCET to cover MCN’s startup and other one-time costs. The early visions

of MCN were of a state owned and operated network, but the rapid pace of technological advances and the emergence of robust competition in the market for Internet

access convinced MCET that MCN should rely, to the maximum extent possible, on

the infrastructure and expertise of a private partner. In the fall of 1999 MCET, in

cooperation with the state’s Department of Education, issued an RFP seeking a private sector telecommunications firm that saw a strategic opportunity in partnering

with the Commonwealth in this endeavor.

The RFP purposely contained only two mandatory requirements. First, whoever

we chose as a partner would have to be able provide service to any public-sector

facility in the state, regardless of location. Second, we insisted on a flat-rate pricing

structure so that a given amount of bandwidth would cost the same for any public

organization in the state, regardless of location. These two requirements reflected

MCET’s determination that as a public instrumentality dedicated to serving all of

the people of Massachusetts it was unacceptable to deploy a solution that excluded

more remote parts of the Commonwealth from the benefits of MCN.

As a result of a fiercely competitive selection process, MCET has partnered with

a Massachusetts-based competitive local exchange carrier, Digital Broadband Communications, to provide statewide data transport services. Digital Broadband intends to use 1.54 mbps symmetric digital subscriber line technology wherever possible, because of its inherent cost advantages, but has committed to provisioning

standard T-1 circuits where distance or other limitations rule out SDSL. Regardless

of the last mile technology, MCN will deliver its services on a brand new, cutting

edge network that has been optimized for advanced applications including data,

video, and voice traffic. MCET has also partnered with a Tennessee-based company,

Education Networks of America, to offer additional network services such as filtering, caching, web hosting, e-mail, and the like. ENA’s experience operating Tennessee’s statewide K-12 network ensures that they have the expertise to provide unparalleled services at the scale of operations demanded by MCN.

The combined MCN service offering features state-of-the-art technology, commercial grade reliability, 7x24 network monitoring and help desk support, and a rich

set of bundled services. And the price point we have been able to achieve is nothing

short of revolutionary: high-speed (1.54 mbps SDSL or T-1), fully managed data

communications and Internet access for $400 per month, including a new router.

The same services at the same price anywhere in Massachusetts. In addition to closing the digital divide for Internet access, we project that MCN can save the public

sector, and hence the taxpayers, approximately $125 million over MCN’s first five

years.

There are two other important points to note about MCN. First, no public organization is required to use MCN. While it would have been easier if the legislature

had directed end users to subscribed to MCN, MCET prefers an environment in

which we have to earn our customers’ business each and every day. Second, MCET

has made a commitment to the Cellucci Administration and the legislature that

MCN will never require additional state funding. Instead, end user monthly charges

48

will cover all of the operating costs of the network. While state funds were essential

in getting MCN started, the $400 monthly price is the unsubsidized, fully-loaded

cost of ongoing operations. The combination of these two factors means that MCN

can, and in fact must, operate like a private business. We think this is in the best

interests of MCN’s customers and the taxpayers of Massachusetts.

Beyond direct cost savings, MCN also offers the promise of improving the efficiency, quality, and convenience of government services. Not only will MCN allow

more government organization to get online, but the fact that these facilities are on

the same homogeneous network will facilitate data sharing and electronic interoperations. Imagine a world where school districts are connected to each other and the

Department of Education across the same network, where local police stations are

connected to each other and the State Police across the same network, where public

health facilities are connected to each other and the Department of Public Health

across the same network, and so on, and so on. The possibilities for more responsive,

more cost effective government are staggering.

One final accomplishment of MCN is worth noting. In order to satisfy MCET’s requirement that MCN be able to serve any public facility in Massachusetts regardless of location, Digital Broadband will be deploying its broadband infrastructure

into every central office in the state. Once installed, this infrastructure will be available to serve residential and business customers in these towns. This will result in

the availability of broadband Internet access in communities that otherwise would

not have had access to such services for at least several years.

I hope the foregoing has given the Subcommittee a sense of the historic accomplishment Massachusetts has been able to achieve with the Massachusetts Community Network initiative without relying on the traditional mechanisms of government regulation or subsidies. By leveraging the public sector’s status as a major

purchaser of data communications services, MCN has allowed Massachusetts to attract private investment in the state’s telecommunications infrastructure. I thank

the Chairman and the members of this Subcommittee for the opportunity to testify

today on this important topic. If there is anything I can do in the future to be of

assistance as you weigh your options in this critical area, please feel free to call on

me. Thank you.

Mr. TAUZIN. Thank you very much, extremely interesting. And finally, Dr. David Kushner, chairman of the Diagnostic Imaging and

Radiology at Children’s National Medical Center here in Washington, DC.

STATEMENT OF DAVID C. KUSHNER

Mr. KUSHNER. Thank you, Mr. Chairman, for the opportunity to

present our testimony. Thanks to the committee and the members.

I would like to compliment all of you for your sophisticated understanding of these issues. It is quite difficult work, and I can understand there are some areas where fact and fiction clearly do not demarcate. I would like to thank the previous presenters who I endorse in their approach, and I would like to present a different

view of the Digital Divide, that of the urban underserved.

Children’s National Medical Center has been in Washington, DC.

Since 1870. For all of this time, we have served the people of the

Washington metropolitan region focusing on high quality pediatric

subspecialty health care with many primary care providers in the

city and in the surrounding suburbs. Our current challenge is to

present and to practice high quality cost effective health care that

gives children access that is appropriate to the American expectations.

We find and you know that the children in the inner city are

simply underserved in every category with regard to health care

and education. We are taking on the challenge of providing such

health care, and the real issue is access. Children’s Hospital has

invested significant infrastructure and physical buildings in the

inner city. We have four urban health centers. We have 250 speVerDate 11-MAY-2000 14:10 Oct 12, 2000 Jkt 066902 PO 00000 Frm 00052 Fmt 6602 Sfmt 6602 E:\HEARINGS\64024 pfrm02 PsN: 64024
49

cialty practitioners trying to provide health care to the underserved, but it is very difficult for a young child who is ill in a family where two parents are working to get access to health care. The

parents miss a day at work, the children miss days at school. The

impact on this family, on the economy of the District of Columbia

and on every city in America is tremendous. And so I would urge

you to consider the bandwidth issue as one of the issues that can

help us provide access to health care for those who do not have access currently.

If one were to take three taxi rides from your home to Children’s

Hospital and a day off from work, you would begin to understand

the cost and time and frustration and difficulty for each of these

families. So we have established the inner city connections with

partnership health care providers, with our own health centers. We

have telemedicine network deployed into these health centers and

the problems are many.

Current barriers are three, that is, reimbursement for technology, reimbursement for physician services and bandwidth. It is

very difficult for us to send the information across the city. We still

use trucks and courier services because the bandwidth electronically is insufficient as you have seen in this committee room. I

would like to try to persuade you that this issue is replicable in

every city in America, in fact, across the world.

In an odd way I present the opinion of the other 56 children’s

hospitals in this country who are trying to do the same thing.

It is not cost effective to have a physician sitting in every single

inner city location. It is cost effective to have telecommunications

serve as a foundation for early access, early triage and early entry

into the system to provide medical information to travel from the

central treating site out to the community, to deal with schools and

churches and community centers as places where health care can

happen.

One of our partnerships is a place called Brookland Manor,

which is a Washington, DC, housing area that has been rehabbed

and it has a smart home project in it, a telehealth center in it, and

we are the health care providers to it. The local residents, in fact,

are the telemedics who examine the patients and can communicate

with us via an indwelling T-1 line because there is no way to get

a less expensive form of communication going through.

It is not currently cost effective. I would implore you to consider

the bandwidth issue in this application as a way to lower the cost

and increase the access for health care to the urban underserved.

And so I live and practice in the Digital Divide as do 250 of my

colleagues at our hospital, as do the other children’s hospitals

across America. So on behalf of this group of physicians and health

care providers and institutions, I would ask you to consider making

it easier and less expensive for us to provide access to children.

Thank you.

[The prepared statement of David C. Kushner follows:]

PREPARED STATEMENT OF DAVID C. KUSHNER, MEDICAL DIRECTOR, PEDIATRIC

TELEMEDICINE PROGRAM, CHILDREN’S NATIONAL MEDICAL CENTER

Good Morning, Chairman Tauzin, and Members of the Committee. My name is

Dr. David Kushner, Medical Director of the Pediatric Telemedicine Program at Children’s National Medical Center. I am happy to have the opportunity to testify before

50

the Committee on the application of broadband technology in improving health care

access for poor and underserved communities.

According to the Children’s Defense Report is 1998,

Every 43 minutes a child was reported abused or neglected...

Every 6 hours a baby was born to a teenage mother... Every 7 hours a baby was born at low birth weight...

Every 3 days a baby died during the first year of life... These ‘‘moments’’ represent reality in the lives of many District of Columbia infants, children and adolescents, and are reflective of a growing trend in our region

and our nation. The region’s children face a long list of challenges that impact their

ability to receive quality health care so that they may lead healthy and productive

lives.

Despite dramatic advances in our knowledge of how to treat the medical conditions of our population, children of urban underserved communities encounter many

obstacles when attempting to access quality healthcare—including socioeconomic

isolation, maldistributed health services, lack of health insurance, and poverty.

Fragmented access, inconsistent quality, excess costs, loss of continuity, and ineffective continuing medical education characterize the deficiencies of our existing health

care system.

Since 1870, Children’s National Medical Center has provided comprehensive quality medical care and health services. Children’s is the only integrated healthcare

system in the Washington D.C. area dedicated exclusively to the care of infants,

children, adolescents and young adults, and ranks among the nation’s top pediatric

hospitals. In addition to our main campus, Children’s network of care includes four

inner-city pediatric health centers, six regional outpatient centers, several suburban

ambulatory surgical locations, and a hearing and speech center.

Children’s seeks to be preeminent in providing pediatric healthcare services that

enhance the health and well-being of children regionally, nationally, and internationally. We are creating solutions to pediatric healthcare problems. To meet the

unique healthcare needs of children, adolescents, and their families, CNMC will

excel in the core components of our mission—Care, Advocacy, Research, and

Education.

Currently, much of our community outreach and our efforts to improve healthcare

access occur through the four Community Pediatric Health Centers (CPHC) located

throughout the District. They are in Adams Morgan, Shaw, Anacostia on Good Hope

Road, and Hadley Hospital. Since the first opening in 1967, the CPHC have provided three generations of District of Columbia families with high quality primary,

specialty and preventive healthcare services.

After a decade of preliminary work, CNMC established a formal Pediatric Telemedicine Program in 1997 in an effort to provide leading edge technological support

for clinical care and research. CNMC has actively pursued telemedicine in an effort

to define opportunities where technology can be leveraged to improve patient care

and medical education. The telemedicine team is dedicated to planning, implementing, and analyzing telemedicine activities in order to improve access to primary

and specialty care, to increase convenience for patients and physicians, and to improve education for physicians, healthcare professionals, families and patients.

Meeting the healthcare challenges of our inner city children and families requires

a collaborative network of community partners working to improve access to the

health-related services for preventative care, education, treatment, and disease

management. These partnerships provide the foundation for a new technology-enabled delivery model, the Pediatric Community Health Network (PCHN). Our proposed approach will be a major step toward achieving our long-term goal of providing a means to improve pediatric health indicators at the local and national level.

The deployment of broadband communication and advances in technology will facilitate access to pediatric healthcare in underserved urban communities. Initially,

telemedicine technology will be integrated into current practices at partner sites

such as schools, community health resource centers, and a primary care clinics. The

pilot sites have been chosen for their location in an underserved community, and

have direct, regular contact with children lacking access to healthcare.

The Pediatric Community Health Network uses broadband technology to enable

children to have direct and immediate access to primary and specialty healthcare.

The network augments current systems by providing the means for effectively integrating health services at the point they are most needed. In addition, the underserved community are exposed to benefits of technology in an effort to bridge the

‘‘Digital Divide’’.

We envision a telehealth ‘‘suite’’ at each community site, linked by broadband

telecommunication to Children’s National Medical Center. The ‘‘suite’’ will include

PC-based technology capable of clinical care and distance learning (digital otoscopes,

51

scanners, and cameras). This technology will link the child (via store-and-forward

technology or synchronous video conferencing) to a pediatric healthcare provider and

educator.

This technology-enhanced model strives to achieve the following goals: 1) increase

access to pediatric primary and specialty healthcare for the child and family; 2) increase convenience of healthcare delivery by bringing the specialist and healthcare

professionals to the child and family; (2) decrease cost and time to primary and specialty care (lost school days, lost work days); (3) decrease delays in diagnosis by allowing earlier access to the specialist, reducing cost and time involved in diagnosis

and treatment; (4) improve communication and provide a means to support the continuum of care for the patient, family and healthcare provider(s); (5) improve

healthcare education by providing the patient and their family with better resources

from which educational healthcare material can be accessed and discussed; (6) improve quality and effectiveness of medical follow-up appointments.

By deploying this broadband technology in the urban setting, the impact on the

underserved community will be extensive. This technology and telemedicine program empowers families and communities to improve the health status of their most

valuable asset—the children.

Children’s telemedicine program for the underserved urban community sites is

the first initiative of its kind. Our goal is to build a sustainable model that will be

replicated across the country. However, significant barriers prevent us, and other

health care providers from deploying this technology solution in the underserved

community. The significant challenges we face are (1) funding for technology; (2) reimbursement for physician services; (3) bandwidth; and (4) licensure, legal questions

and others issues.

Children’s National Medical Center is dedicated to improving the health status of

our community. We can not do this alone. The advancement of new technologies coupled with a highly competitive and challenging healthcare environment requires innovative patient care. It is critical that telemedicine be permitted to enter the mainstream delivery system. We implore Members of Congress to: (1) conduct an aggressive review of reimbursement issues are barriers for urban health care; (2) develop

incentive programs for payors, including Medicaid that support telemedicine programs; and (3) support research and development initiatives for urban telemedicine

programs through annual appropriations process that advance the use of broadband

technologies in an urban setting.

Again, thank you for the opportunity to testify before your committee. I look forward to working with you and my colleagues to advance the use of broadband technologies to help build healthy communities.

Mr. TAUZIN. Thank you very much.

The Chair recognizes himself and members in order. Let me first

thank you all for contributing again to our understanding of how

bandwidth broadband itself can expand our capability of providing

service to citizens of our country in medicine, and we learned earlier in entertainment and other uses.

I wanted to put on the record a couple of quotes that I found extraordinarily interesting. There is a story just out dated Tuesday,

April 11, relative to the fact in San Diego, California, that a high

speed service provider in San Diego this week told several hundreds of its customers to stop running the music exchange software, Napster, or lose their cable modem accounts, and the reason

they did so is the fact that apparently by running it, running the

Napster, the music service on their cable modems, that they were

interfering with the capacity of the system to continue its e-mail

service, and this is a quote: This e-mail serves as a 72-hour notice

to reduce account activity to compliant usage levels and to remove

any servers. What is a compliant usage level? I mean, you get the

picture.

We have increasing evidence that the lack of bandwidth, the lack

of capacity in these systems is beginning to impact even the reception of music, and yet we are talking about increasing the use of

visual and video streaming in the Internet and the capacity to do

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telemedicine, serving consumers in their home without dragging

them all over the city when they need services. We are talking

about reaching out to rural areas of Americas with service which

they can’t even contemplate having today. You can see how we

have some real problems and why innovative solutions like Mr.

Campbell’s solution in Massachusetts, you have to think about

them all, what works to get it out there.

There is a quote from someone I think everybody will recognize,

John Chambers of Cisco Systems, who sells so much of the components of the Internet and broadband systems in America and

around the world. His quote, the next wave will be e-training, eeducation, e-convenience. We should talk about E medicine, says

Cisco’s CEO John Chambers, envisions a world in which companies

and universities will put courses on line, people will turn to the net

for streaming video, other forms of entertainment. These applications, in his quote, are bandwidth hogs that will make e-mail,

which is a major load on the Internet today, look like a rounding

area, Chambers says.

In short, if our Nation is to realize any of the benefits that you

gentlemen represent here today, the extraordinary advances in inefficiently serving people medically, the extraordinary capacity to

reach out and bring rural America into the heartbeat of our country economically, the capacity to touch parts of underserved urban

areas that are not going to be served we are told by some account

3 to 5 years from now will still be underserved in broadband, we

have got to do some real work quickly in ensuring that this Digital

Divide does not happen.

I wanted to ask you, Mr. Campbell, sort of this project you put

together in Massachusetts, you say it might not be replicable in a

State like Montana, many of our western States. How many States

in the Nation might you see this sort of a concept replicated if the

States became interested in it?

Mr. CAMPBELL. I think that it can be replicated probably just

about everywhere but not exactly. Massachusetts is not a geographically large State, so our provider believes it will be able to

provide 1.5 meg SDSL connections to about 65 to 75 percent of the

facilities in Massachusetts. So it will be provisioning T-1s to only

25 or 35 percent. Because of that relatively large proportion of

SDSL to T-1 it could offer us flat rate pricing. I think the general

model of banding together and aggregating demand and having

government come to the market, not as a regulator, not as a taxer,

not as a prescriber, but instead as a market participant——

Mr. TAUZIN. Facilitator.

Mr. CAMPBELL. Exactly. And leveraging its market presence and

demanding that the market respond to it, that I think you can replicate everywhere. Maybe you don’t get complete flat rate pricing.

Maybe it is a tiered-pricing structure. There is any one of a number

of varieties on the themes. So I don’t think what we have been able

to accomplish could be exactly duplicated in a much larger State,

but I think the concept of having the government come to market

as a market player instead of as a market maker, that is something you can do anywhere.

Mr. TAUZIN. Where are the bottlenecks in the system right now?

Identify them for us. You are all in this business of wanting to

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make sure that there are no bottlenecks, everybody gets access.

Where do you see the bottlenecks? I have got a quote from Nortel

and from other companies indicating that bottlenecks occur all over

the place. You can experience them in many places, not just in the

phone wire or the cable. You can get it, for example, where the

crossing points exist in the major hubs. There are real slowdowns

there. There are estimates, according to Solom Heddeya of

Infolibria, found that health sites manage their service. It is a

quote from him, but I think the greatest bottleneck is in the backbone itself and the crossing points between the major networks.

So are they correct that the bottlenecks exist not, just in the

rural parts of America, but even in the major backbones where

their crossing are inefficient and there are literally problems across

the spectrum of the infrastructure? Is that accurate? Are there bigger problems in the country, bigger problems in the urban centers?

Where are they? Who is now going to get this stuff?

Mr. VUCKOVICH. Mr. Chairman, I would just like to comment on

that, that I don’t know if the problems are with regard to the bottleneck is the points of presence and the backbone because we don’t

have any in Montana, and I think this is a real——

Mr. TAUZIN. Let us say that again. You have no point of presence

of Internet access in Montana? There are quite a number of States

that have problems.

Mr. VUCKOVICH. And that is correct, and I think that what it is

going to do in order to get points of presence, we are going to have

to aggregate the demand, and several States may have to go together to do that, to aggregate that demand so that it is feasible

to have a point of presence there. However, with the present legislation, that can’t be accomplished because of the LATA lines and

other things there.

Mr. TAUZIN. What is a LATA line?

Mr. VUCKOVICH. It is an imaginary line.

Mr. TAUZIN. Drawn by a court.

Mr. VUCKOVICH. I am not sure.

Mr. TAUZIN. By the court in the decision that split up AT&T. So

these old LATA lines are preventing the accumulation of market

demand that might connect you to a POP in Montana, that’s right?

Mr. VUCKOVICH. That is right.

Mr. TAUZIN. And that is true of a lot of western States and rural

States, is it not? And so the services we are talking about, you

might eventually get them in DC. You may eventually get

enough—they are tearing up streets like crazy in DC. You might

eventually get enough fiber and systems deployed so that with the

right kind of dollars you can serve this underserved community in

DC. How long will Montana have to wait?

Mr. VUCKOVICH. Mr. Chairman, that is a very good point, and

the longer we wait, the more we lose, and we can’t afford to lose

anymore. Businesses are leaving our State because there is not a

point of presence there, and it is virtually impossible to get them

back from wherever they have to go.

So I don’t know how to say this, but we are hurting in Montana

with regard to broadband deployment, and one of the few areas is

telecommunications that we can compete on an equal footing with

urban areas, but we have to have that and we don’t have it now,

54

and I think it is going to take a partnership of Federal, State, local,

and probably private industry to be able to provide this the same

way that we had to do to get our interstate highways built, to get

electrification to the rural areas and so on. I think we are going

to have to—this is a basic infrastructure for a State and we have

to have it.

Mr. TAUZIN. And you put your finger on it, and my friend from

Oklahoma, I want to recognize him in a second, but if I lived in

Oklahoma and I didn’t have access to the backbone, and I couldn’t

cross these LATA lines to get service, I might have high speed in

my little town among all the residents in that town, but we can’t

get to the main highways, we can’t get to the backbone because

there is none in our State, or so far away the only thing we can

get is an expensive T-1 line. That is where I am.

Mr. VUCKOVICH. We don’t care about the price of the service as

long as somebody provides it.

Mr. TAUZIN. The choices you face there, you may be left out of

a business network or to be in that business network, you have to

move, you have to move to an urban center somewhere where a

point of presence or connection is available to you, and that is the

dilemma of lack of service. It is not just the lost opportunity. It is

the fact that whole communities potentially could dry up if the people who live in those communities are limited to high speed conversations in the family because they can’t get outside and talk to

anybody else.

If they are a Ford parts supplier, GM parts supplier and they

can’t get in on that part supply network because they don’t have

high enough speed. Nobody wants to connect to them because it

drives them all down to the lowest denominator speed, and then

they have to go out.

And so that the point I think you make, and I keep trying to

make to my colleagues, is that if we don’t, as quickly as possible,

take away all the barriers to everyone building out and create some

new innovative facilitation of the deployment of these services to

parts of America that don’t now have them, then places like Montana will become deserted in e-commerce, in effect. They will become deserts of e-commerce, and places in Oklahoma and Louisiana and States that don’t necessarily have the capacity as perhaps Massachusetts had to put together such an innovative plan,

Mr. Campbell. We will be left in the dust and when this train

leaves it is leaving pretty fast.

My friend from Oklahoma, Mr. Largent.

Mr. LARGENT. Thank you, Mr. Chairman. Mr. Vuckovich, who is

the incumbent carrier in Montana? Is it U.S. West?

Mr. VUCKOVICH. U.S. West serves approximately, I would say, 60

percent of the residences and businesses in Montana.

Mr. LARGENT. And what has the experience been in Montana

with U.S. West? Are they trying to provide service to the rural

communities in Montana?

Mr. VUCKOVICH. I think, for the most part, they have been fairly

receptive to providing upgrades to their system. I know we have

probably the best digital switching of all of the U.S. West States.

We do have DSL in one community, and that is in the State capital

right now. That is the only community that has DSL.

55

As I stated in my testimony, we were under the assumption that

as was the FCC and everybody else with the passage of the Telecommunications Act, that competition would come in, and we

would get this broadband service. We have not seen that. We have

not seen any of the big carriers, the AT&Ts, the Sprints, the MCIs,

and we have not seen them come into the State. We wish they

would.

Mr. LARGENT. Mr. Vuckovich, are you familiar with Dr. John

Fitzpatrick?

Mr. VUCKOVICH. I am. He is now with Touch America.

Mr. LARGENT. Located in?

Mr. VUCKOVICH. Butte, Montana, 25 miles from where I live.

Mr. LARGENT. In his testimony in the Senate here is what he

says. For example, during the past 5 years U.S. West has offered

70 of its Montana rural exchanges for sale and has undertaken

similar initiatives in others States in its region. That doesn’t sound

like a real commitment of U.S. West to rural communities in Montana.

Mr. VUCKOVICH. I can’t answer for U.S. West or what——

Mr. LARGENT. I am just talking about——

Mr. VUCKOVICH. —John is saying. I know that U.S. West has put

up some exchanges for sale.

Mr. LARGENT. Let me just continue by saying that Dr.

Fitzpatrick’s testimony, he doesn’t view that as bad thing, but as

a good thing because he is saying that U.S. West is not committed

to the rural community in Montana in the first place, and that is

obvious in the fact that they are offering to sell 70 of their local

exchanges in rural communities in Montana. So U.S. West is bailing out on rural Montana. That is the bad news.

The good news is that there is a lot of private sector companies

that are coming in, competitive local exchange carriers that are

coming in and buying these and upgrading them. Let me give you

some examples because you mentioned that Montana doesn’t have

a point of presence. You mentioned that DSL is available in only

one city in the State of Montana. Here is what he says: Examples

of this commitment to rural customers include—these are the people who are coming in and buying the exchanges from U.S. West

that is bailing out on Montana—Blackfoot Telephone Cooperative

acquired nine exchanges totaling 7,000 access lines from U.S. West

in 1994. Since then Blackfoot has invested $17 million upgrading

switching equipment, installing fiberoptics and improving service

offerings.

Five years ago, areas that did not have access to 911, customcalling features, voice mail, ISDN, DSL or even simple dial-up access Internet have them today. Montana Advance Information Network created by the State’s small independent companies and cooperatives provide fiberoptic connectivity and transport throughout

Montana’s rural areas. VisioNet, Midrivers and range cooperatives

who use main networks provide interactive video services to around

90 rural sites in the State of Montana. Midrivers’ Telephone Cooperative, based in Circle, Montana, plans to deploy DSL services in

exchanges during 2000 including Circle, Jordan, Baker and

Ekalaka, Montana. These communities are located in some of the

most sparsely populated territory in the continental United States.

56

In contrast, U.S. West currently offers DSL in one Montana community, Helena, the State capital, and the Montana headquarters

for U.S. West.

My point is, and there are several other examples here, my point

is we just this year updated Glass-Steigel, a law that went into effect in 1934. In your testimony what you are asking for in your

conclusion, it says the Internet exploded into our lives and our

economy beginning primarily in 1997. Its growth and impact since

then on the economies of the Nation, States and localities is almost

immeasurable. The Telecommunications Act of 1996 passed over 4

years ago and is now ancient history in Internet years. The law

needs to be updated to reflect the reality of what has occurred since

its enactment and to ensure that all potential providers of

broadband and/or builders of communication infrastructure be allowed to participate.

Aren’t we being a little impatient? I mean, we just updated

Glass-Steigel that was enacted in 1934 this year, and now 4 years

after we enacted the telecommunications bill, you are saying we

need to update it, when, in fact, the private sector is already doing

what you are asking to be done. Isn’t patience called for here, Mr.

Vuckovich?

Mr. VUCKOVICH. Mr. Chairman, Representative Largent, I think

that the private sector is moving forward in this. I also think that

the Internet, 4 years since the passage of the Telecommunications

Act, is probably like 24 or 25 years of normal time because advances have been so rapid, and that is why I think we have to be

able to make adjustments and changes to this rapid change of information and technologies that are available, and even though it

is—the law is a great law, and I applaud it, and even though it is

only 4 years old I think it has to be upgraded because it is 4 years

of Internet.

And in that 4 years of Internet, the progress has been so tremendous that it is equivalent to probably 25 years or 24 years of

progress prior to the Internet. And so I think that we have to look

at whatever is viable out there and make adjustments to be able

to provide and do what the Act says it will do, and that is, provide

everybody in the country with access to these telecommunication

entities that are out there or the things that are out there.

Mr. LARGENT. Thank you, Mr. Vuckovich. I would like to ask

unanimous consent, if I can ask one more question, seeing that

there is not a long line here.

Mr. TAUZIN. I think we can probably accommodate you, Mr.

Largent.

Mr. LARGENT. I would like to ask Dr. Kushner. Dr. Kushner, you

are at Children’s Hospital here in DC.?

Dr. KUSHNER. Yes, sir.

Mr. LARGENT. Can you give us kind of a laymen’s definition of

Digital Divide?

Dr. KUSHNER. Yes, I can. I would have to do it at several levels

if you would permit me to just go on for a moment, I suppose. In

health care, the Digital Divide has to do with the distance learning

and the practice of medicine using digital technology. For instance,

it is very easy for us, or most urban hospitals to connect to suburban hospitals using these high width band lines because they exist.

57

We, in fact, have some T-1 lines and some T-3 lines or ATMs

that go out to other hospitals with which we are connected, ISDN

technology.

In the inner city, if we are interested in doing that same service,

and we are, because it is part of our mission, the carriers don’t provide the service so we rely on CLECs or other sorts of interesting

innovative solutions, and the time difference between the moment

we could establish such communications with health care systems

in the suburbs and those with which we still haven’t established

telecommunications in the inner city is shocking.

Looking at Pennsylvania Avenue or K street or M street, the

whole city is totally ripped up. There are switch hotels all over the

city. I have lectures from all of my friends in the telecom business

how wonderful it is in DC. And yet there are literally no high speed

lines going into ward 7 and 8, and there may be some other wards

in which there are none.

So in a technical sense, the Digital Divide portrays that way, and

when we try to deliver health care over it or distance learning or

just storage of medical records, there is a great discrepancy between what happens in certain parts of the city and other parts of

the city or the suburbs.

The same is true for the distribution of physicians. There are certain parts of Washington where there are many pediatricians for

a certain number of children and other wards like 7 and 8 in which

there are very few. In ward, I am forgetting the ward number

which is northwest, in ward 3 there is one pediatrician for 300 to

500 children, and in ward 7 and 8 there is 1 to 5,000 to 7,000 children. So the distribution of health care providers and the technology to provide health care access in other ways is really quite

striking.

From our standpoint, if there is a way to use the Digital Divide

as a way to address opportunity in general, that is how I view it.

These families are, in many ways, as isolated as families on a farm

in the middle of Minnesota or Montana. The paradox is shocking.

Three miles from where we are sitting, there are people who have

never had access to any of this Internet capacity in their health

care environment, in their schools, in their churches, their community centers, and as we reach into those communities trying to empower them, trying to teach, as the other gentleman said, trying to

teach the families how to take care of their own children, try to

give them access to all of the things we have access to, it is a tremendous difficulty.

So the barriers and bandwidth if you are using the technical definition, are clear, from my standpoint. You can just draw a map of

where the wires go and where they don’t go. It is very simple. From

the standpoint of opportunity, in every category these families are,

in a way, isolated. The education, access to the Internet in every

sense that the Chair on the committee has spoken to today, access

to health care, access to e-mail. It is an amazing difference just in

this little 3-mile area.

Mr. LARGENT. Just to kind of, in your estimation, what percent

of the people in this country do not have access to broadband technology?

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Dr. KUSHNER. Sir, I would have to defer for a knowledgeable answer to my friends on the technical side. I don’t think I could give

you that answer. In terms of physicians, the answer is probably

less than 1 percent of physicians have access to broadband technology. That would be my estimate. Mr. Linkous could probably

comment on that. I think even the doctors’ offices, because that is

my area of practice, are, in a way, very primitive compared to

where they should be to provide the home health care, to provide

the access to hospitals, to make sure we have faster triaging as the

other physician said.

It is really shocking. The disconnection between the level of

bandwidth provided to businesses and to really the e-commerce

side of America is very different than in the health care business

itself in any way.

Mr. LARGENT. Do you feel like it is the government’s responsibility to make sure that every American has access to broadband

technology?

Dr. KUSHNER. You are putting me on the spot. I think it is the

government’s responsibility to make sure the opportunity exists so

that the private and public sector can work together. I tend to be

kind of conservative in my views. I am not sure the government

needs to do it, but I do know it isn’t happening and I can testify

with great enthusiasm about that. We need to find out why it isn’t

happening and create the economic environment whereby if it is

appropriate, private individuals or private companies will give us

the bandwidth. I don’t need for the government to wire southeast

Washington. What I need is to have the bandwidth, and I don’t

really care how it gets there. It has to be cost effective. It has to

be technically reasonable. And it has got to do what I need it to

do. I don’t care who does it.

Mr. TAUZIN. Will my friend yield?

Mr. LARGENT. Yes.

Mr. TAUZIN. There is a Legg-Mason report that came out late

last year that indicates that 3 years from now, according to their

estimates, that fully one half of America would not have access to

broadband, except that one half of that half might have it with one

provider. So that a quarter of America would have none at all, a

quarter of America would have one provider, perhaps, and half of

America would have multiple providers. That is in a 3-year period,

according to the Legg-Mason study. And where that occurs also is

kind of interesting because they also indicated that it was going to

be in the inner cities, underserved areas within the cities and in

more rural parts of America, such as yours and mine and much of

the western States.

Mr. LARGENT. Dr. Kushner, what percent of the American population do not have access to MRIs?

Dr. KUSHNER. I am certainly not prepared with data to answer

that question, and I guess access is defined as how long does it

take you to get there. I think all of America can get there. It is a

matter of how quickly. Certainly in urban environments, depending

on where you live in the urban environment you can get it the next

day, but in Washington, DC, for instance there is a relatively limited number of MRIs and the urban underserved that we are talking about, specifically today, have to wait some time to get to them

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because they can’t figure out a way to get out to the suburbs nor

do they have the insurance to get the health care.

Mr. LARGENT. Yet you would acknowledge MRIs are a valuable

tool for physicians to use.

Dr. KUSHNER. Oh, absolutely.

Mr. LARGENT. Should it be the government’s responsibility to ensure that all Americans have access to MRIs?

Dr. KUSHNER. I think MRIs are a part of health care and the

government should be interested in it and should try to determine

the barriers to it, and if possible, legislation might be a way to

lower the barriers.

Mr. LARGENT. Thank you, Mr. Chairman.

Mr. TAUZIN. Mr. Vuckovich, I know you want to respond, too. I

want to let you do that.

Mr. VUCKOVICH. Just briefly, Mr. Chairman, thank you. I think

one of the concerns in Montana, as I say, 60 percent of our residents are served by U.S. West, but still a ruling from the FCC that

was recently made, it classifies U.S. West as a nonrural telephone

company, and they lose access to universal service charges or

funds, and in our area, they are serving rural people.

I mean, the whole State is rural. We are actually frontier, and

if they don’t have the—I think the only way you are going to get

broadband service is through universal service fees being part of

the equation.

Mr. TAUZIN. I would hope we don’t have to go there. It is sort

of like Dr. Kushner has pointed out, the first obligation, I think of

government, ought to be to remove the barriers that don’t allow

companies like U.S. West or other companies to provide broadband

services to you and get as much done in the marketplace as possible before we go around asking one consumer to subsidize another, as we have done in telephone service. It ought to be the last

resort, not first resort, but I want to make a point with you, Mr.

Vuckovich.

My friend from Oklahoma talked about some of the CLECs that

are offering high speed broadband in given rural areas in Montana.

That is not the problem, as I see it, as I think Montanans see it,

and I think folks in Louisiana and Oklahoma see it. The problem

is you can have all the broadband you want in your little town in

rural Louisiana or rural Montana, and you can speak at high speed

on the Internet with everybody in town, but if you don’t have the

connect to connect that town to a POP somewhere to the broadband

backbone, you are as isolated as anybody living in a desert oasis.

You might have a lot of water to drink in the oasis, but you just

can’t leave it because you can’t cross the desert.

And the problem that I see, and I hope we focus on, is the fact

that as long as we have government barriers to any provider providing the service to people in making those connects from the

small towns where broadband may be available inside the town,

from that town to the broadband pipe somewhere where a POP

does exist, until we remove those barriers and open it up to competition, we are going to be stuck with talking about subsidies and

innovative concepts of government facilitation as Mr. Campbell has

worked out in Massachusetts, or we are going to be debating arguments as to whether how much government owes a responsibility

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to connect people up who are not connected in the inner cities of

America.

So the concern I have is that we keep debating these old long distance and local issues that have a lot to do with telephones, designed in an old age where distance was relevant, and have nothing to do with the Internet where distance is totally irrelevant,

have nothing to do with satellite communications where distance is

irrelevant.

I ask any of you, you are on a cable line somewhere, you get

cable television, any of you? Do you pay more because you are at

the end of the line instead of at the front of the line? If you are

on the Internet do you pay more when you are talking to somebody

in Tokyo than when you are talking to somebody in Tibido? The answer is no.

Distance is irrelevant in these new systems, and yet we still find

ourselves absolutely just incapable of making decisions because we

are still fighting the old 1996 battles over who can make a long distance call and who can make a local call and who can carry it in

America, and it frustrates the dickens out of me because, again, let

me say it again, Mr. Vuckovich, and I think those of you who live

out west have this experience so much more than we do in rural

bayou country in Louisiana.

I can have all the high speed service I want in Tibido, but if I

can’t connect to the hub in New Orleans without an expensive T1 line and nobody is going to build a system for me to get it even

at $400 a month, how many families can afford that, Mr. Campbell? If I can’t get connected to the hub, I am dead when it comes

to broadband. I am isolated. I am gone in this new world, and yes,

it is moving at high rapid speed, and 4 years, you were right, Mr.

Vuckovich, 4 years in this system is like dozens and dozens of

years in the old communications system, and we need to start

thinking a little bit about who are we going to leave behind and

who is going to suffer from lack of pediatric care because we

haven’t figured out how to get telemedicine out to rural and inner

city places where there is a lack of physicians and a lack of care.

And it seems to me that the first place we ought to look is at

the government barriers. We ought to take them down. We ought

to take them down as soon as we can, and then if the market

doesn’t take care of somebody, then we talk about innovative plans

and government subsidies if that is required. That is a model I

think this committee ought to focus on. It is the reason we focused

that way in SHVA.

The first move was to give the satellite companies regulatory relief so they could carry local programming in the satellites, and recognizing they weren’t going to do it everywhere in America because

they couldn’t, we came with a second bill that provided government

loan guarantees to make sure rural America was not left out. That

ought to be the model here. We ought to take down the barriers

so that companies can deliver.

Mr. Kushner, you said it best. Who the heck cares who it is that

is delivering it to you if nobody is? I mean what is the difference

whether Bell or an AT&T or a CLEC or somebody is delivering me

service if nobody is? Shouldn’t we say in America everybody can,

come on in? And if companies are selling their exchanges, it may

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just be because we don’t let companies do business anymore in

Montana the way business is going to be done in the 21st century.

I mean I would be selling out, too, areas I couldn’t serve.

Mr. KUSHNER. Mr. Chairman, I wish I could vote for you right

now.

Mr. TAUZIN. Thank you. And the bottom line is, that if you live

in Louisiana, even if you are not alive in Louisiana, you can have

that privilege in many cases. The bottom line is that this is a subject that will not go away, and the sooner we address, it the sooner

we prevent this Digital Divide you talked about today.

I have got a sneaky suspicion, I was just telling staff about it,

I am a little cynical as I get older in government. That is a shame,

and it shouldn’t happen to us, but it is happening to me. My cynical thought is that this government kind of likes the idea that it

is helping to create a Digital Divide because government loves to

come in and solve those kind of problems, and my conservative

heart tells me the first thing we ought to do is prevent government

from creating a Digital Divide, so we don’t have to end up helping

government solve it with my tax dollars. We ought to let the market work in order to free our people.

Thank you very much. Hearing stands adjourned.

[Whereupon, at 12:30 p.m., the subcommittee was adjourned.]