- - Released: March 6, 1995 SPEECH BY REED E. HUNDT CHAIRMAN, FEDERAL COMMUNICATIONS COMMISSION ANNUAL LEGISLATIVE CONFERENCE NATIONAL ASSOCIATION OF COUNTIES WASHINGTON, D.C. MARCH 5, 1995 Thank you, Commissioner Warren, and thank you to NACo for inviting me to speak here this morning at your kickoff session. As far as anyone can remember, the Chairman of the FCC has never spoken to a NACo conference before. The honor is mine. You have a star-studded lineup and I'm delighted to be part of it. It is a terrific pleasure to speak with a group of people who share a responsibility to represent the public interest. You do a wonderful job for the people of our country. I'm honored to speak to you. I do wonder, however, just why you've come to Washington for your convention. And while you're here, I'm stunned at how many people you invite to speak to you. There's so much lecturing on your agenda I bet some of you are here to get extra credits for advanced degrees. At any rate, if I'm a little curious about why you've come to Washington in winter, at least I can tell you why I'm here. The Communications Act of 1934 requires that the FCC's headquarters be in Washington. There are efforts underway to reform that law. One change in the telecommunications legislation that I propose is to let the chairman move the headquarters wherever he wishes. A second change is that he doesn't have to tell the lobbyists where he's gone. . Before I got my current job I was what one publication called an "obscure antitrust lawyer" here in Washington. I moved here from Los Angeles. I came because they said the surf was better here. I was misinformed. Incidentally, a lobbyist told me once that you shouldn't come to Washington unless you're a skilled contortionist. What do you mean, I said? He said, well in Washington you have to learn how to get the federal government off your back at the same time that you have your hand in its pocket. Another reason to come to Washington is just to watch the scene. You might want to see what Speaker Gingrich's revolution looks like closeup. Real closeup, it's a lot of middle-aged guys staying up late talking to each other. The difference between this picture here in Washington as opposed to anywhere else on the planet is that in Washington instead of having drinks in their hand they hold microphones. In Washington, having "one too many" means voting against term limits. At any rate, the fact is, I grew up in Washington and I admit I think it's a beautiful place to raise a family. I am also greatly honored to have the job that one newspaper described this way: "top cop on the information highway." This description was from an article earlier this week that said "top cop on information highway has car stolen." It's true my car was stolen last weekend while I was in Europe at a meeting of the G-7 nations. This is a tough town. But it's not true that a reporter took the car to see if my radio push buttons were keyed into Howard Stern and Rush Limbaugh. And it is true that the police recovered the car just yesterday; as good as new...or at least as good as an 1987 Buick is likely to be at this stage in its life. Now some people say I got the "top cop on the information highway" job because I went to high school with the Vice President. That is just a coincidence. Others say I got the job because I went to law school with the President, and the First Lady, and the Secretary of Labor, and the Comptroller of the Currency, etc.... Those are just coincidences. What is true is that the Administration picked me in an exercise of searching analytical judgment: the President made me the chairman of the Federal Communications Commission because I have the same birthday as Alexander Graham Bell. By the way that birthday was Friday, March 3. Because my daughter Sara has the same birthday, we're still celebrating. She's six and she can't count as high as my age. I can't stay here long because we're having Bozo the Clown over later today for the party. Those of you who would rather join me than stay for the lectures can assemble at the tour bus outside. As I said, this time last weekend I was in Brussels at the first telecommunications summit meeting of the G-7 nations. Led by Vice President Gore and our Secretary of Commerce Ron Brown -- the best Vice President and Commerce Secretary in history, in my opinion -- the American delegation laid out the position that the Clinton administration has made a hallmark of our trade policy: we told the European nations that the United States will open its markets to their communications industries if and only if they, in return, open up their markets to us. We take this view because it's good for the world economy. And frankly it's good for our great communications businesses. We have the best communications sector in the world. In a way my job at the FCC consists of doing only a few things: getting government out of the way in many respects, and then watching our businesses build the communications, information and entertainment sector of the economy into one-sixth of our Gross Domestic Product by about 1998. Last but not least, of course, then I take the credit. The things we need to do at the FCC to have that happen are basically four in number. They all relate to the information highway and its five lanes: broadcast, cable, satellite, wire, and wireless. First, we need to set fair rules of real competition for new entrants, like telephone companies competing against cable companies in video and cable companies competing against telephone companies in local telephone. Second, we need to set fair rules of virtual competition so that markets behave as if they were competitive even when there are no competitors. An example is our price cap regulation that forces telephone companies to become more efficient and to charge less in real dollar terms even when they have no competition in local residential phone service. Another example is our regulation of cable rates where cable companies have no competition. Third, we need to join with the Departments of Commerce and State, under the leadership of the President and the Vice President, to open foreign markets and build what the Vice President calls a Global Information Infrastructure. Fourth, we need to focus on how to make sure the information highway is available to everyone in this country, not just those who are already well-off. This particularly means we have to figure out a way to build the information highway to every classroom and every library in every county in this country. These are terribly important goals because the communications sector is the most important part of our economy and arguably our society in the 21st century. It is important because of its impact on productivity gains. America regained its world lead in economic productivity after a decade of finishing behind the leaders. The comeback comes primarily from the spread and use of networked computers in business. Nearly half of American workers use a computer on the job. More than half of high-wage jobs require use of networked computers. This is an important fact for all communities to realize. The difference between having and not having modern communications in your community in the 21st century will be similar to the significance in the 19th century of having the railroad reach you or not. I am reminded here of the story of Aspen and Ashcroft, two towns in Colorado. I'm sure everyone here has heard of Aspen while many even in Colorado have never heard of Ashcroft, a town which was not very far from Aspen. The difference is that the railroad, when it was built, went through Aspen and not Ashcroft. The key to whether modern communications reaches you is going to be competition. Government isn't going to build the information highway to every house. Competition will do so. Governments, federal, state, and local, need to further that competition, not slow it. Ways to slow it -- let me be frank -- can include local taxation, zoning restrictions and burdensome franchise obligations. All of these are inhibitors on economic growth. They are well-motivated and well-reasoned. But they can potentially cost jobs and hurt growth. I believe communications businesses already complain to you about these issues. I predict there will be even greater pressure on local government to get out of the way of the burgeoning communications revolution than you already feel. We feel that pressure at the FCC. Let's talk about some of the issues here, as we did at the Federal-State-Local Telecom Summit that Vice President Gore chaired here in January. First, video dialtone. VDT is the name for phone companies' systems of offering competition to cable television by sending video programming over the telephone wires. The FCC is moving as fast as it can to approve VDT applications, in line with our goal of promoting competition in telecommunications as fast as we can. We are committed to barring cross- subsidized entry into the cable business by telephone companies that would overcharge telephone rate payers. That wouldn't be fair to the cable businesses or to telephone customers. So far, approved applications for VDT reach only about 2% of all homes. This VDT enterprise will develop slowly over the rest of the century. But already we hear that some phone companies might dig up the public rights-of-way -- or use poles in the rights-of-way -- to place new cable for VDT without compensating the local government. We haven't told any phone companies that they have any federal right to preempt local franchise agreements. We recognize there is an issue here. It is just developing. I want to hear from you about this and work with you to solve it early, before VDT really gets going. Second, Direct Broadcast Satellites. The DBS satellites at last are up and beaming down packages of cable programming. You might have seen the ads during the Super Bowl, if you didn't get tired of watching before then. Only about 500,000 dishes have been made so far -- as opposed to 65 million cable subscribers -- and the installation price takes the service out of the range of most Americans. Still this is a good start in competition for cable. We have to discuss with you a possible impediment to this new business: local zoning that would bar the installation of DBS or commercial VSAT dishes. The satellite industry presented us with a strong record supporting preemption of unreasonable local prohibitions on the dishes. I held up a ruling because your representatives in Washington very vigorously protested the blanket pre-emption that was proposed. Instead of just deciding this at the FCC, we brokered a settlement discussion between the two sides, led by Bob Peck of the FCC. Your representatives acknowledged the benefit of deploying these new technologies and the satellite representatives acknowledged the importance of local land use policies and the serious federalism concerns that any approach based on federal preemption would raise. The two sides are finding common ground. This is the way things are supposed to work: no top down directives but no blanket resistance to national goals. I ask you now to encourage your negotiators to wrap this up: it's time for a conclusion.. A similar issue may arise with Personal Communications Systems. Let me tell you what PCS is: it is advanced cellular telephony, but much, much more: it quite simply is the first installment in the phone system of the next century. We are in our third auction of PCS licenses. The auctions have raised over $8 billion for regional and national licenses that will produce 4 to 5 wireless phone competitors in each major market and lead to a drop in the rates for wireless phone service. The auctions have generated $80 for every household in the country. We are spinning gold from the air. Most important, we are jump-starting competition in wireless communications that will lead to as much as $50 billion in new investment and hundreds of thousands of new jobs. Prices are going to go through the floor. The number of subscribers will go through the ceiling: we will have 100 million wireless communications subscribers within a decade. Two- way wireless communications will be like the one-way devices familiar to you now. These are called, of course, radios. Most of you don't even know for sure how many radios you own...that's the way it will be when the two-way radios are a mature business. This huge development will add 1 one percent to the Gross Domestic Product -- a huge number. Jobs will be created in every community of the country. In this connection, it is crucial that local government find a way to tolerate the presence of the new equipment, relay stations and antennas, that this service requires. Please don't be like Ashcroft and watch the wireless lane of the information highway be built into Aspen instead. Everyone can be winners here. We already have a petition to pre-empt zoning for these antennas and Speaker Gingrich has said publicly that he would support such pre-emption in the interest of making PCS a reality. I believe that if you work with us in the spirit of promoting the new technology, as in the satellite antenna issue, we will find a way to resolve this also. Third, we continue to have cable regulation. My view is that the best policy for the industry and the country will be to have relatively low prices for basic cable -- an entry-level package of over the air signals retransmitted by cable. It would be ideal to have this price so low that penetration rates exceed 90%. Many industry leaders agree. This would help them have a bigger base to which they could sell interactive services. Correspondingly, consumers will benefit from choice among different packages of multichannel cable offerings. When these packages compete with each other and there is some reason to believe that the competition itself sets a fair price, we won't need to rate- regulate these packages. The burden of this policy will fall on local government charged with basic cable rate regulation. I encourage you to think about the goal of high penetration for a stripped down basic cable package and tell me how you think that policy could be achieved, if you think it is wise. Remember, cable is a lane of the information highway and we do want its entry level to be affordable to almost everyone. Fourth, I want to conclude by talking about something competition will not do without some public assistance. The information highway is at a crossroads. In one direction lies a society connected by the new audio-video-data technologies; in another direction lies a society further split, this time into information-haves and have-nots. With apologies to Morton Peck, that latter direction should be the road less traveled. Every day 45 million of our fellow Americans go to work in an industry in which only 12% of the workplaces have basic phone lines. In this day and age, in which every shipping clerk at Wal-Mart's is hooked up to a computer network and half of all workers use a computer at work, only 4% of the workplaces in that industry are networked. That industry is called education; those workplaces are called classrooms and the workers are schoolchildren and teachers. We need to network the classrooms to improve education and prepare our kids for the future. I think the schools and libraries can become the backbone of a unified, networked society in the 21st century. The key feature of the information highway is going to be networking. Whether the networks eventually turn out to be connected by phone wires or television cables or wireless waves, and whether the workstation looks more like a computer or a television, it will be networks that will weave homes, government, schools, hospital and businesses into a national community. Our schools are floundering as they plod along with 19th century chalk-and- blackboard technology. The communications revolution can change our faltering educational system forever and for the better. If our kids are to remain competitive when they venture into the world, if they are to be more productive, we need to hook up our schools now. A long time ago, I taught junior high school. Like all teachers and parents, I discovered that to teach successfully, you have to spark the child's desire and ability to communicate. Modern communications technology can provide that spark. I have seen it happen in classrooms in Harlem, Hawaii, Japan and Russia. Kids turned off to today's education get excited about tomorrow's -- they love communicating over the computer. They don't think they are learning the 3Rs when they exchange messages with another student, but they are. And at the same time they are learning to use the technology they will need in the workplace. Teachers can be incredibly more productive on a network. Studies show productivity increases of as much as 30%. Networked teachers can exchange lesson plans, get tips from their colleagues, or obtain access to the Library of Congress, the National Archives, and the great museums for teaching materials. In rural areas, you can teach subjects through distance learning that the consolidated school district can't provide teachers for. For students, I am not talking about teaching kids how to use a computer after school. I am talking about computer networks as an integral part of the school day, about teaching the 3Rs on the computer, getting kids enthusiastic about learning again and about preparing them for their futures. Classroom networks will eventually extend to the home and thereby fulfill what progressive educators say is their biggest unmet need: lengthening the learning day and involving the parents. Homework assignments will be available at home and perhaps parents and kids together will sit in front of the TV or computer trying to figure out how to solve an algebraic equation. Once we do network our schools, they will become community nodes on the information highway. I have already seen this at the Ralph Bunche school in Harlem. Parents who can't afford computers at home come to the school in the afternoon to carry on the lifelong education that they need to remain competitive in the marketplace, or just to browse through museum collections, film libraries, or shopping catalogues. And not just schools, but libraries can take on this role. I see this as a thousand points of light, to borrow a phrase. But where President Bush saw individuals as the points of light, I see the schools and libraries as the sparkling points, a thousand public hearths attracting community members to the light of the national information network. These community nodes can be the town squares of the future. These points of light can serve in rural areas, where the cost of networking may be high, just as in inner city areas, where individual citizens may not have the wherewithal to link up. Our common job, then, is to hook up the libraries and classrooms. Last year, President Clinton and Vice President Gore set a goal of connecting all the nation's schools and libraries to the information highway by the year 2000. We can do it. Is this exclusively a job for government? No, the private sector needs to develop the technology and do the work. But there is an important role for federal, state and local government. Just as the federal government initiated the Internet with small Defense Department funding, it is appropriate for the government to provide seed money to connect the classrooms. And local government needs to demand the money and figure out how best to spend it. How? There are many ideas. Vice President Gore has suggested using some of the revenues we bring in through our spectrum auctions to fund the federal contribution to networking the schools and libraries. Speaker Gingrich agrees that it is a national priority to give our school children access to the information highway. He has suggested that we might provide some form of tax credit to ensure that every kid is connected. There are many ways to skin this cat -- but now's the time to do it. I know that many of you are active in distance learning and other educational networking initiatives in your areas. Many of our rural states are way ahead of the urban areas. Many states are offering some kind of regulatory relief to their local phone companies in return for their hooking up the schools. Other potential network providers -- cable, wireless, satellite, broadcasters -- need to be able to share in whatever subsidy we provide, so that all lanes of the superhighway can compete and so that government does not dictate the network technology. My charge to you is to help us get this job demanded by the people and then done. I pledge to you that I will do everything I can to get the FCC to promote this moral imperative for our children and our communities. But our means are limited! You are central to meeting this goal. You can make technology a priority in school and library spending. And you can demand that Congress give you and the FCC the tolls to build the information highway to every classroom and library. If we don't provide classroom networks to all our kids, if we fail to prepare our kids for the job markets that will be most desirable, if we fail to prepare our country's future workforce for the world that is coming, what will we say? That we forgot? That we couldn't afford it? That we couldn't figure out the hard issues or make the hard decisions that were necessary for our children? We shared this vision with the Europeans in Brussels last week. We told them that our nation is going full tilt on the national information highway. But it will not be long before the Europeans and then the rest of the world catch on and catch up. And in the global economy, that will make it only more imperative that everyone in our nation, young and old, rich and poor, have the opportunity to roll down that highway. Please join me in a partnership to make that vision of the future, sparked by competition and innovation, a reality for everyone of our citizens and especially the children. Thank you.