Return-Path: Date: Thu, 12 Mar 92 22:05:29 -0500 From: wls@psi.com (William Schrader) To: com-priv@psi.com Subject: Schrader's Oral Testimony Cc: wls@psi.com Mr. Boucher and Committee Members: My name is Bill Schrader. I am president of Performance Systems International. Thank you for inviting me to assist your efforts in examining the policies for managing and operating the NSFNet. As you will read in my testimony, I believe the following issues should be understood by the committee pertaining to actions of the NSF in operating the NSFNet backbone and preparing for the NREN: % A new public data internetwork industry flourishes, built on technology developed by DARPA. It enjoys a growth rate which may even exceed the personal computer industry for the duration of this decade. % In attempting to leverage its budget, the NSF used taxpayer funds ostensibly to stimulate network research and development. Actual technologies applied were of questionable quality, and did not promote innovative work by industry leaders. This is an inappropriate use of government money. % The government has privatized the ownership of a federal resource by modifying its contractor agreements without administrative due process. % This privatization was done in secret, and information was withheld for nearly a year. The privatization agreement was disclosed inadvertently to me by the contractor when attempting to explain the complex "infrastructure pool" concept, and subsequently disclosed publicly by me. % The privatization unnecessarily provided the contractor with an exclusive monopoly position to use federal resources paid for by taxpayer funds. % During the NSFNet backbone contract period from 1987 to 1992, the government allowed its contractor and subcontractor to build conflicts of interest into the fiscal, contractual, and operational aspects of the NSFNet backbone. The contractor and the subcontractor have interlocked directorates and many other co- mingled activities. % Further conflicts of interest serve the domestic and international interests of the contractor, and include influence and knowledge of the government oversight advisory board (FNCAC) and the technical standards setting body of this industry (the Internet Activities Board and Internet Engineering Task Force). % The NSF failed to properly oversee this $50 million contract, paying in full for service for 15 months while, to date, the network is still less than 50% operational. NSF actively shielded the contractor >from public or private scrutiny during this 15 month period of non- performance, and now prepares to unnecessarily extend the five year contract by an additional 18 months at the same full payment stream. The ANS, Merit, NSF, IBM, MCI partnership speaks consistently about improving our national competitive posture, but its actions speak more clearly. While it may not have been planned completely from the start, five years of consistent steps leave little doubt in my mind that ANS is now positioned as the NREN contractor with potential for monopoly control in this explosive market. I have tried to capture this complex situation in my written testimony. A midcourse correction cannot undo the errors of the past, but can better set the stage for the future. Among these critical steps are termination of the partnership's contract on schedule and cancellation of the proposed backbone rebid. NSF should act on its own proposal to fund connecting institutions directly. If the NSFNet experience is to be used to achieve the goals of NREN, then an open and competitive marketplace must be supported rather than hindered by government activity. A level playing field can only be built by changing current NSF's policies which favor one contractor. Thank you.