Background on Information Superhighway 1993-12-20 PART 1 of 2

[David Farber <farber () central cis upenn edu>]

                           THE WHITE HOUSE


                    Office of the Press Secretary
______________________________________________________________




                         BACKGROUND BRIEFING
                                  BY
                   SENIOR ADMINISTRATION OFFICIALS




                          December 20, 1993




                          The Briefing Room




3:17 P.M. EST




             SENIOR ADMINISTRATION OFFICIAL:  Good afternoon.  Vice
President Gore will deliver the luncheon address tomorrow afternoon
at the National Press Club to do one of two major speeches that he
will present on telecommunications policy and reform that the
administration will be pursuing in 1994 with both legislative and
administrative actions.


             In between the Vice President's speeches, Secretary Ron
Brown will deliver a speech also in early January regarding the
implications of telecommunications reform for the economy.  The
second speech the Vice President will deliver will be in California,
in Los Angeles, on January 11th at an all-day summit hosted by the
Television Academy of Arts and Sciences on the superhighway --
information superhighway.  I believe they put out a press release
about 10 days ago on that and are finalizing the agenda and the
participants.  But that will have representatives from all of the
information industry -- cable, television, telephone, movies, energy
industry, education community -- at which point the Vice President
will lay out the blueprint for the administration's proposed reform
of both those aspects of the Telecommunications Act of 1934 and the
modified final judgment from the AT&T divestiture judicial
restrictions on communications industry in the January speech,
followed by legislation at the beginning of the next session.


             Tomorrow afternoon, the Vice President will lay out
several principles that he thinks should guide the administration and
the Congress's reform of the telecommunications laws and the creation
of the marketplace of the future in information.  As part of that he
will also discuss some of the processes that we have been going
through in the administration both interagency and between the White
House and the Congress to communicate with and respond to the many
bills that have been introduced on the Hill regarding
telecommunications reform.


             With the confirmation of Reed Hundt now as the Chairman
of the FCC and the team in place at the Department of Commerce and
the Department of Justice, there are all the people in place to take
responsibilities for different aspects of the decisions that would
have to be made for a transition from the Telecommunications Act of
'34 and the system that both legislative and administrative changes
would set up.


             Let me introduce my colleague in just a moment to talk
about some of the process we've through as well as the implications.


             SENIOR ADMINISTRATION OFFICIAL:  What I thought I'd do
is just give you a sense of what's the desired end point, what is the
nature of the phase we're in now, and what's the nature of -- what
are in broad terms the kinds of issues that we have to deal with.

And I'll stay with the sort of -- the most fundamental information
industry kinds of questions.


             What the changes in technology to which the Vice
President's speeches and Secretary Brown's speeches will basically be
responsive to really mean is that for the first time since we've had
a telecommunications -- since telecommunications has been a central
part of the economy is that -- is the possibility for absolutely
pervasive competition in every single line of business of
telecommunications.  And therefore the desired end point is to move
to -- is to move to a point ultimately where any company can offer
any services through any network to any set of consumers.  That's the
desired end you'd like to reach to, and where all of the facets of
the industry are competitive.


             Obviously, the period that we're in at the moment is a
period -- and it'll probably be a long period -- of transition
between a telecommunications and an information environment that was
characterized really quite differently, when technologies were very
different and when there were lines of business, when particular
technologies offered particular lines of business and there was
really no merging between the two.  And the best way, I think, to
think of the issues that are going to be on the Hill next year and to
which the Vice President and Secretary Brown will be referring and
responding in the course of their speeches is the following:  There
are a whole set of problems which derive from what are the kinds of
services that a company can offer.  Can it offer local competitive
services -- i.e., in the local loop where telecommunications go to
the home?  Can a company offer long distance services?  Can a company
engage in manufacturing?  Can a company engage in what are called
"information services," which is the offer to the home or to a
business of particular information.


             So one area in which legislation is being considered and
upon which the Vice President will comment will be the loosening of
restrictions which affect what services a company can offer.


             Another whole area derives from the fact that because of
the history of telecommunications and the different history of
companies, companies with different kinds of history now offer
different kinds of services and are restricted in that way.  So a
cable company offers one kind of services, broadcast television
offers another kind, now convergent mostly with cable television,
telephone companies offer another kind.  And, again, another set of
legislation is increasingly -- moves in the direction of saying that
the past history matters less and less, and as long as there is
competition, companies can -- irrespective of their past history --
can offer competing services.  Both are responding to the basic fact
that the technology has changed fundamentally and that all of these
things are now convergent.


             The end result of all of that I stated in one way, which
is -- is the capability to offer any set of services to any consumer
through any network at any time.  Another way, though, of thinking
about that is the enormous changes and advantages as we begin -- as
that begins to be put in place nationally for our economy.  Not only
is it in itself -- do those changes involve an enormous amount of
investment, and therefore jobs, but they also increase radically the
flexibility of our economy, its capability to deal with change, the
capability to offer new and different services, the capability of
companies to work with each other so that you can see a merging out
of the information infrastructure an economy that functions in quite
significantly different ways.  And that's the end result, is a much
freer, much more competitive telecommunications and information
marketplace that, because it is that way, changes in quite
fundamental ways the nature of the economy.



             My colleague and I are available for questions if there
are any.


             Q    How does this affect the average person?  Is this
-- it sounds wonderful, but I'm not sure how it affects them and when
it will affect them.


             SENIOR ADMINISTRATION OFFICIAL:  I think that the first
way it affects them is going to be lower prices for
telecommunications and information services.  I think that the second
way that it will affect them will be the increased investment, the
increased number of jobs that the information industry change means.
The third way it's going to affect them is it's going to change the
very nature of their work.  I mean, just as an example, video
conferencing is on an almost vertical rise up within companies as the
price has come down.  You're going to see much more of that.  You're
going to see a very large number of people working in companies who
can now spend more of their time at home as telecommuting replaces
vehicle commuting.


             Now, timelines for those -- the first couple of changes
that I announced -- that I mentioned -- price changes, investment
changes, probably over the next very few years.  The longer changes
of lifestyle -- end of the century, seven years, eight years.


             Q    Would this be happening without what you're doing?
Because I've heard about this for quite a while.  What is the White
House doing with this legislation that wouldn't happen otherwise?


             SENIOR ADMINISTRATION OFFICIAL:  Regulation -- let me
make one point about laws and regulations and my colleague can make
another.  The technology that changes that are occurring are going to
change and the changes are going to occur irrespective of what
anybody does.  And to suggest that they wouldn't is a little bit like
pretending you're King Knute.  Technology has historically shown a
tendency to move much more rapidly than regulation.  And what this
does is catch regulation up with where technology is and give it --
and provide a capacity so it can change much more flexibly.


             Q    Except that how do you define competition?  This is
a tough thing to get your arms around because nobody knows yet where
the market's going or what the mergers are going to end up being.


             SENIOR ADMINISTRATION OFFICIAL:  That's right.


             Q    So you must have, in whatever proposals you have
that you're sending to the Hill some kind of definitions for what you
would consider competition.  Is it two companies, side by side?  Must
it be three?  And then, before you get to that competition, you must
also be thinking of some kind of regulations that protect the people
from a monopoly developing.


             SENIOR ADMINISTRATION OFFICIAL:  Let me make one point
on this, and then my colleague should speak.  My colleague made the
point that no one can predict the shape and appearance of markets
that are changing this rapidly and their shape and appearance in the
future.  But what we can do is try to build certain values into the
system.  And one of those values has got to be a competitive
environment and a competitive marketplace.


             And, therefore, what the regulatory system has to do as
it ushers us through a transition like this, is provide for checks
along the way so that one can ask the question, is there, in fact,
competition.


             SENIOR ADMINISTRATION OFFICIAL:  And we're not saying
that these models will be developed overnight or even be clear and
accepted by everybody when the proposals are introduced by the

administration in January and early February.  But already, on the
Hill, you see people who are providing models that, as in the
Dingell-Brooks bill, that for certain changes in the law, there have
to be reviews by the Justice Department and the FCC in their areas of
jurisdiction and in antitrust considerations regarding what is
competition.


             Now, the challenge is that the Telecommunications Act of
'34 dealt with a much different world.  We have now had the challenge
of coming up with models that define competition in the modern world
where you don't have competition that's based just on how many wires
go into your house, but what your access is to wireless technology.
The fact that we're going to be talking to our televisions and
watching our telephones means that we have to redefine what
competition means because we're going to be getting information from
every source imaginable.  And as one person put it, everything we do
now through wires in the ground we're going to do in the air; and
everything we do now in the air we're going to do through wires in
the ground.  So we have to rethink the models at the same time that
we're rethinking the technology.


             If I could go back quickly to the question about what
does this mean for the average American and how soon will it mean it,
we're already seeing a situation in which education is reversed in
the home.  Parents are learning computers from their children.
Parents are learning how to program their VCRs and their cell phones
from their children.  The technology revolution is occurring more
quickly than the education system can handle it or the regulatory
system.  And as a result, all of these changes that we read about
everyday in the paper are occurring -- they're running into the wall
of regulations and judicial restrictions, and they're all finding
little fish ladders around the dam so to speak.  We're got to start
dealing with how to open up the dam in a controlled way to let these
technologies flow in a way that still protects universal service,
competition, open access and privacy.


             Q    You talked about removing barriers between various
industries.  And right now the FCC licenses services for very
specific -- gives licenses for the airwaves for very specific
purposes like broadcast tv or cellular phones.  Could you ever
foresee, say, a television station being allowed to use maybe a
portion of its spectrum for another kind of service or cellular phone
system  -- using it for some other thing?


             SENIOR ADMINISTRATION OFFICIAL:  I could foresee it.  I
don't think that's something that we're going to have to deal with in
this initial proposal that deals with the legislative angle.  But let