Giving the Telecosm

Giving the Telecosm

by / December 31, 1998
William E. Kennard was nominated by President Clinton in August 1997 to chair the Federal Communications Commission. Sworn in Nov. 7, 1997, his term expires June 30, 2001. Kennard, a Los Angeles native and Phi Beta Kappa Stanford grad, received his law degree from Yale in 1981, was a practicing attorney in a broad range of communications issues, and served 3 1/2 years as general counsel to the FCC before his confirmation. Just a year into his term and poised at the edge of the millennium, Kennard has not only already made his mark as the first African American to head the independent government agency, but is overseeing the most historic changes ever in the telecommunications cosmos, following the big bang of the 1996 Telecommunications Act, now being implemented by the FCC, with policies affecting interstate and international radio, television, wire, satellite and cable, and now, the Internet. Now, at the outset of the Information Revolution, communications and information industries represent the fastest growing sectors of the economy, and involved more than $800 billion in 1997. And on the state and local level, battles continue to rage in the wake of the 1996 Telecommunications Act, with those billions of dollars at stake.

As various technologies converge, there are some that have gone so far as to call for the abolition of the FCC. Kennard rejects that notion, citing the need for FCC regulation to assure equality of access as a fundamental right of all Americans. And in the race for bandwidth, Kennard offers his vision for what could lie ahead in the very near future, if the telecom giants are willing to abandon some of their gold and join the FCC to give the telecosm a brave new whirl.

Q: Until 1996, the telecosm has been governed largely by laws half a century old and telephone industry rules dating back to 1887. The Telecommunications Act of 1996 is perhaps the most important piece of economic legislation of the 20th century. Describe this historic legislation and some of its ramifications from your vantage point in the middle of it all.

A: When Congress passed the Telecommunications Act of 1996, we all thought we were setting the stage for competition in the local market for plain old telephone service over the old public switched telephone network. The principle debate about the telecom act was about how to promote competition on the analog telephone network -- local and long distance. Cable, long-distance and local telephone companies all said that they were going to enter each other's businesses. Entry turned out to be harder and more costly than expected.

But the rise of the Internet has changed business plans again. Companies can now compete to sell high-speed Internet access. At the same time, all communications products are becoming digital bits. Whether audio, video, voice or Internet data, they are all computer codes -- ones and zeros. This brings down the cost of competition. Internet and digital technology have the potential to renew the promise of the telecom act. Circuit switches are giving way to packet switches. Instead of keeping an entire circuit open and dedicated to a single conversation for the length of the phone call, packet switching breaks the spoken words into tiny data packets that are disassembled, then transmitted separately over the most efficient routes possible and then reassembled at the other end of the call in microseconds. The same technique can be used to handle other types of traffic, such as data, image, and even video.

It is an amazing technological advance that greatly expands the capacity and functionality of the network. It's no coincidence that while the market for voice services is growing at around 5 percent annually, the packet-switched data business is growing at an annual clip of 300 percent. Amazing.

Q: What does this mean for the average American sitting at home? With all the hype, today's Internet is often much too slow for maximum productivity. Should the public be excited about the potential for an explosion in data transmission and expansion of bandwidth capacity?

A: You bet they should. When we can harness this new technology and put it to work in living rooms across the country, we will open up exciting new horizons for the American people -- new horizons for entertainment, information, and communications services for all Americans. It means that the same high-speed Internet access that many Americans enjoy in the workplace will be available at home. It means that the same copper wire that allows families to connect over the phone will permit them not just to talk to each other, but to see each other as well. So instead of gathering around a telephone to sing happy birthday to a relative on the other side of the country, the family will gather around a computer and see their relatives in realtime video coast to coast. The technology is here. We just need to get it to America's homes.

It will mean having the ability to download a feature-length movie in a matter of minutes, and then watch it when you want to, rather than having to consult the TV guide or worry about late fees at the video rental store. The technology is here. We just need to get it to America's homes.

It means that we'll be able to hop from Web page to Web page on the Net as quickly as we can change channels on the television with the remote. People will no longer have to take a break from their home computer while they wait for it to download data. This is what home computer users call the World Wide Wait on the World Wide Web. The technology is here. We just need to get it to America's homes.

It also means opening a whole new world of electronic commerce -- doing business over the Internet. Expanding bandwidth to the home will make shopping from home easier than shopping from a catalogue, with even glossier photos. This type of home shopping is just the tip of the iceberg when it comes to e-commerce. The technology is here. We just need to get it to America's homes.

A recent edition of Business Week had a column on e-commerce that's entitled "You Ain't Seen Nothin' Yet." That title hits the nail on the head. This year, revenues from e-commerce are expected to be around $20 billion. That number is expected to grow to $350 billion in four years. E-commerce is so much more efficient. It can cut retailing costs by up to 10 percent. That means more jobs and billions of dollars added to the nation's economic output.

Q: So if the technology is here, why aren't Americans seeing these benefits in their homes?

A: The problem is bandwidth to the home. Imagine trying to fill a backyard swimming pool with a garden hose. There's plenty of water in the city reservoir to fill the pool, and there are huge water mains that can deliver the water down your street. But when you get to the final link in the chain -- the garden hose -- suddenly the water starts flowing a lot slower, because the hose is too small compared to the amount of water you are trying to pump through it to fill the swimming pool. The hose -- the pipe -- is just too small. It's the same way with high-speed data transmission. The Internet backbone is a network of networks that has plenty of capacity to pump data all over the country very quickly. But when it reaches that last mile, the copper phone line that runs into your house is a lot like that garden hose. It can't handle the amount of data that needs to be pumped through it to fill up your computer screen quickly.

Q: The World Wide Wait is well known and felt. Limited bandwidth is a major stop to excitement about the Internet ...

A: But all that is changing. Last year, the pundits were saying that all the bandwidth in the world wouldn't help if the major entertainment companies didn't change their perceptions of the Web. Well, guess what? Entertainment companies are converging on the Internet and buying the Web directories that we rely on to surf the Net. They see the Web as another distribution channel for their entertainment programming. That's why, NBC and Disney [recently] bought Internet portals.

We recognize that convergence is upon us, and so the FCC is working hard to promote deployment of high-speed transmission across all the media. Cable companies are using their cable lines and high-speed cable modems to deliver data to the home at lightning speed. The FCC has adopted new rules so that soon Americans won't have to rent their cable modems from the local cable operator, but will be able to buy a standard cable modem from a number of sources, just like you buy a computer modem or a telephone. We also are seeing changes in wireless technologies.

We just issued the first set of high-capacity wireless licenses for local multipoint distribution services, or LMDS. We will auction more spectrum in the future that can be used for these types of fixed services, such as our upcoming 39GHz auction. And [soon] wireless cable operators will be able to offer high-speed data. And broadcast television, for the first time, will be able to use its huge amounts of bandwidth for one-way digital transmission, including data and Internet access, as well as stunning high resolution video and CD-quality audio.

Now we are confronting another issue with serious implications for broadband delivery over cable and broadcast: must-carry for broadcasters' second digital channel over cable. And phone companies and others are investing in ways to transform the copper phone line to work similar wonders for the American consumer. Many companies are chomping at the bit to provide their services to residential customers.

At the FCC, our job is to fire the starting gun and let the race begin. We should not micromanage the race. We simply need to make sure that the race is fair and open to all who want to compete, because competition always beats regulation as the way to bring consumers more services, better quality, and the lowest prices.

So our job is to ensure that these bandwidth technologies that can improve the lives of American consumers are deployed in a pro-competitive manner. I believe that this is what Congress intended the FCC to do.

Q: By your term's end in 2001 and beyond, what new ideas will converging technologies spawn? What are your thoughts on such rapid change?

A: Trying to predict the future in the telecom world is always dangerous. By 2002 there may be advances in technology that we can't even imagine now. But I can tell you what I hope to accomplish at the FCC in the next few years. One thing I am sure of is that the future of the FCC and the telecom industry will be driven by competition, digitization and convergence. The FCC's immediate job is to foster and encourage the transition of the communications industry from a regulated to a competitive environment and clear the way for enormous technical innovation. A decade ago, few would have predicted the influence that Bill Gates and Microsoft would have on the communications marketplace. It's certainly a fast-changing landscape.

Consider the debate on the Telecommunications Act of 1996 that took place at a time when the Internet was only just beginning to emerge as a phenomenon in telecommunications. Most anyone who connected to a commercial online service did so at a mere 9,600 bits per second. Building Web pages for a living seemed a risky proposition.

Q: And now, in the wake of the 1996 telecom act, the FCC is in a historic new era, and ironically "growing larger to get smaller." How is this transition going; what lies ahead; what is the ideal scene for the shape and role of the FCC?

A: When I became chairman, I said my tenure would be guided by the three Cs -- competition, community and common sense. My vision of the FCC in the future is one in which there is competition in all segments of the telecom marketplace, the telecom infrastructure serves to create a national and global community in which information is easily shared, and regulation, where necessary, is governed by common sense and is applied only when needed and is constantly refined to address changing conditions. In a fully realized competitive future, I also see a changed FCC. The commission can be smarter and leaner. Where we can be smaller, we should be, but we should not reduce size if it means undermining enforcement of rules necessary to protect competition, consumers and the public interest. As competition begins to develop, we can eliminate rules that become unnecessary. But the FCC must still referee the competitive marketplace. There are some areas, such as public safety, equal opportunity and consumer protection issues, that cannot always be left to marketplace forces. In these areas government regulation is and will continue to be appropriate.

Q: How do you respond to those who go so far as to say common law should rule telecommunications and the FCC could be abolished?

A: It shouldn't be a surprise that government can play a role in eliminating the digital divide. After all, the Information Revolution was started by public leadership and investment. Government scientists invented the Internet, which was the catalyst for Silicon Valley and other high tech corridors around the country. ...

Can we really tolerate leaving our poorest communities behind, stranding poor kids in our most distressed inner city and rural areas in a technological desert? In this era of retrenchment in affirmative action, where the number of African Americans and Hispanics at the University of California at Berkeley and the University of Texas is the lowest in decades, can we really tolerate going down a path where the information haves become have-mores, while the information have-nots become have-nones? We can't do that. We must continue to help open the doors of opportunity...

Q: Such opportunities can be created in part by fair competition. Specifically, what is your vision of how a competitive environment will be achieved?

A: I see the FCC as having six key responsibilities as we move to a competitive environment:

1. Eliminate or mitigate bottlenecks and maintain a competitive market structure. The key to a "pro-competitive, deregulatory" communications policy is competition rather than monopoly. We must act to remove bottlenecks where the exercise of market power permits them to appear, and we must maintain a competitive market structure. This means establishing interconnection standards for telecommunications technologies where warranted, overseeing compatibility standards, and establishing the obligations, where necessary, of firms to extend services to others.

2. Deregulating communications services when consumers can choose the best combination of price, service and quality for their needs. This means writing fair rules of competition, eliminating and discarding regulations no longer necessary and finding sensible ways to regulate noncompetitive services that remain -- and having the wisdom to distinguish between the two.

3. Protecting consumers. As we move toward a competitive marketplace and encourage wider entry, we need to acknowledge that not all competitors are scrupulous, and not all means of garnering competitive advantages are fair to consumers, especially those consumers who are used to obtaining telecommunications services from regulated monopolists.

4. Promoting efficient use of the electromagnetic spectrum. Assuring that the spectrum is used efficiently and flexibly, and that those licensed to use it can do so free of unwarranted interference. Promoting efficient use does not, however, mean micromanaging that use. Experience has shown us that broad flexibility for licensees enhances efficient use of the spectrum and permits licensees and the marketplace to develop the products that consumers want.

5. Strengthening the community. Our communications laws have never reflected only economic efficiency. They have always embraced more: that communications services should be widespread, tie our communities together and help us build a stronger, more prosperous, and safer world with greater opportunity for all and opportunities for a wide range of voices to be expressed publicly. We must ensure that communications embodies the American values in the law: universal service to promote ubiquitous phone service and economic opportunity for all Americans, including rural areas, classrooms and rural health centers; access for people with disabilities; spectrum for public safety needs; elimination of market-entry barriers for small business and new entrants; and diversity of ownership and employment.

6. Advancing our guiding principles worldwide. Even when it established the FCC in 1934, Congress recognized that we needed worldwide communications services. The communications industry is truly global today. As the world leader in communications services and innovation, the U.S. sets the standard for promoting open and competitive markets.

Q: Looking at the changes going on that have led to a smaller, more connected world, what do you see as vital to keep in mind as we move forward into a new era?

A: Without a doubt, the main thing we must always keep in mind in formulating telecom policy is to ensure that everyone has an equal opportunity to participate in the exciting new telecom world that we'll see in the 21st century. We must never become a nation of information haves and have-nots, and the decisions being made in the next months at the FCC and on Capitol Hill will determine whether our country and world are separated by a digital divide or not. We can't let that happen.

Victor Rivero is a writer based in Boston and Burlington, Vt. Email