Communications Revolution Program #7-94: "Monopoly Update on the Superhighway" KPFA Radio - August 16, 1994 Panelists: Anthony Pharr, Peggy Keegan and Mike Nelson Project Director and Host: Jude Thilman Executive Producer: Bari Scott Associate Producer: Carol Klinger Managing Editor: John Rieger Associate Editor: Claire Schoen Feature Producer: Gregg McVicar Introduction by Jude Thilman The Information Superhighway. Who's going to build it? Who's going to own it? Will we use it, or will it use us? I'm Jude Thilman and this is "The Communications Revolution." This month, for the first time in 60 years, communications legislation is being revamped to take into account the sweeping changes in technology. The new law, like the original Communications Act of 1934, is supposed to mandate access and equity for all residents of the U.S. But powerful forces are exerting pressure to define the law to suit their market interests. Who are these powerful forces, and who is standing up for the public interest? What is the public interest? We have a panel of experts to discuss all this. Here in the studios of KPFA in Berkeley is: Peggy Keegan, who is the Vice-President for Public Affairs with the California Cable Television Association. From Monitor Radio in Washington, D.C., we are joined by Mike Nelson, the Special Assistant for Information technology with the White House, and Senior Policy Advisor to Vice-President, Al Gore on telecommunications issues. Anthony Pharr, Attorney with the United Church of Christ, and Co-Chair of the NAACP's Task Force on telecommunications. We begin our look at the subject with this report from Producer Gregg McVicar: Feature by Gregg McVicar: (Voice 1) I'm going to show you just how you can keep your poodle fluffy, even though you have a very busy schedule. (Announcer) This poodle fluff offer won't last forever... (Child) Hi Dad. Whatcha' doin'? (Dad) Oh, I'm just flipping through to see what's on the "Vision." Not much.... (Child) Dad, remember you promised you'd help me with my History project? (Dad) Uh Huh. (Child) Well, I was wondering if I could use your work station to put it together? (Dad) I guess that would be okay. (Child) Okay, move over. (Dad) What's your report about? (Child) Well, I need to explain the role of competition in the information revolution... at the end of the 20th century. You know, in the "wired '90s"? Who owned the connections? The infra-structure? Who got to use it? What was the impact of mega-mergers? And how did the government fit into the picture? (Dad) Wow! That was 30 years ago. (Child) What did they call it back then? (Dad) Hmm... Infra-structure? Try the Information Superhighway. I remember my parents talking about it all of the time. (Child) That is such an idiotic name. [pause] Here it is. (Dad) Great. What did you find? (Child) Well, lots of video clips, newspaper stories, press releases about big corporations gobbling each other up.... Okay, this looks like a good place to start. Fall, 1993. Says here two of the largest, Bell Atlantic and TCI, announce the biggest merger in history. (Dad) Just touch here to start the video. [static] (Reporter) ...is it indeed, $33 billion dollars, is this the biggest deal in history? (Spokesperson #1) Uh, yes the value.... (Spokesperson #2) The company would have to buy assets of more than $60 billion dollars... (Reporter) A new conference that just ended, Bell Atlantic Chairman, Ray Smith, said the new company would serve as a model for other communications companies into the next century. (Smith) We think that this is the perfect information age marriage. It's right for our customers. It's right for the investors. It's right for the employees. It's right for the American public. [static] (Dad) For a while there it looked as though the telephone and cable industries would combine into huge information giants that could control everything. Right computer? (Computer) Viacom acquires Paramount, value $10 billion dollars. Motorola-IBM satellite partnership called off. AT&T acquires McCaw Cellular, merger stalled by Federal Court. Bell Atlantic acquires TCI, merger called off. (Child) Dad? So why did all those mergers fail? (Dad) Well, the corporations blamed government regulation. The truth is, the government was confused about its role. Should it deregulate and let the free market run wild? Or should it step in with anti-trust measures to prevent a few super-players from possibly stopping everyone else and squashing free speech. I seem to recall the Vice-President was pushing for a privately built system. One that would be open. One that everyone could use for receiving or publishing. What was his name computer? (Computer) Vice-President Albert Gore. (Child) Hmm. Nice haircut. [static] (Gore) Without provisions for open access, the companies that own the networks could have total control. They could use this control to ensure that their customers only have access to certain programming. We think this is the wrong approach. [static] (Child) I wonder how the government thought they could force the companies building the networks to build an open system. They could spend their money how they wanted, right? (Dad) Yes and no. The government was trying to figure out how to stimulate wide spread competition, but at the same time realized that the free market doesn't always work when it is completely free of government supervision. Like the cable TV companies in the olden days who used to control which cable networks would be allowed to survive. (Child) Well, let's see what John Malone, the Head of TCI Cable said. (Malone) We don't intend to set ourselves up as the gate keeper deciding that the New York Times is okay, but the Wall Street Journal shouldn't be on the platform. We see this as a world where we want to have very open access between our end customer -- the consumer and the business customer -- and the people who own the underlying information. [static] (Child) Gee, that's heartwarming. There's plenty of room for both of the big guys, the New York Times and the Wall Street Journal. But didn't they imagine ordinary people being able to publish too? Like, I'm doing right now. Computer, any other viewpoints from 1994? (Computer) American Civil Liberties Union President, Nadine Strossen: (Strossen) Yes, we have freedom of the press for everybody who can afford a printing press. Well, that is no longer an obstacle if we put pressure on our policy makers to be sure that this new technology develops in such a way that there will be universal, two-way, interactive service and that it's affordable for everybody. [static] (Child) Whew. I'm finding hundreds and hundreds of stories here about big partnerships between software and hardware companies. Millions of dollars in lobbying to shape the new telecommunications laws. [static] (Millison) On the one hand you have big players, big money, big government, trying to impose something and create an infra-structure for something better to emerge. Underneath that, at the same time, you have really a grass roots phenomenon that is connecting millions of people. It is a self-publishing phenomenon that -- the likes of which we have never seen before. [static] (Dad) Oh yeah. The Internet growth was explosive. Growing 10 maybe 20 percent each month. What was his name? (Child) Doug Millison, Editor and Chief of a totally cool magazine for multi-media developers called, Morph's Outpost on the Digital Frontier. Rad! (Dad) If he's right, then we should be able to find some examples of people who were doing business out there in cyberspace. Hmm. Here's some folks. Jeannie Novak of Los Angeles who founded Kaleidospace with her partner Pete Markiewicz. [static] (Novak) Kaleidospace is a site on the Internet using Mosaic software on World Wide Web, which promotes sales and helps place artists and their materials -- all independent artists (Markiewicz) We've had about ten thousand calls a week about half of them are international. They're coming into our bedroom in places like Somalia and Croatia and other places. We get a big wave from Japan, usually, between 11:00 and 1:00 in the morning. (Novak) On slip connections. (Markowitz) Yeah. They're so slow, but they all go for the surf videos. So it's quite funny, you know they're crazy. [static] (Millison) There is still plenty of room for the creative person, the new company, the mom and pop, the garage operation with the great idea, to come out now... [static] (Child) There's that "Morph guy" again. [static] (Millison) There has never been a better opportunity for small players to make a name for themselves. Five years from now, it won't be the same. It will all be big, brand name, monied, established players. [static] (Child) That's great computer, anything else? (Computer) Mitch Kapor, Chairman of the Electronic Frontier Foundation. (Kapor) I'd go so far as to say that there is a wonderful opportunity here, if not a moral imperative, to try to shift the center of gravity away from capitalism as an exercise simply in greed and profit making, and to re-understand it as a very useful social means of bringing about changes that benefit everybody's standard of living. The trick is one of really injecting some sense of responsibility and ethics that goes beyond the profit motive without taking away people's incentive. (Child) I think I'm almost done, Dad. I just need to publish my "pointer kit" on the "Net" for the other kids and pick out some old time folk music, like this... [rap music plays] ... pumping out 150 channels, 24 hours a day. You can flip through all of them and still there's nothing worth watching... (Child) Yeah, I think this is pretty interesting. (Dad) Better log off and do the credits. Would you like to do the honors? (Child) Okay. Let's see. This report was created by Gregg McVicar with help from Sierra McVicar for "The Communications Revolution." Hey, wait a minute, why should you get the top billing, this is my report. ****** Host Jude Thilman: A report from 30 years in the future and the '90s look just as confusing then as they do today. Peggy Keegan you're with the cable industry. The way you see things going, what's our information infra-structure going to look like in the year 2030? Peggy Keegan: Well, Jude, it's going to be a series of networks that are going to be available to consumers, homes, schools and businesses. And the providers of that network access is the discussion we're going to have today. Because we're going to see the providers be cable television companies, telephone companies and competitive access providers who will be able to inter-connect those markets together. Host: Tony Pharr, you're with the United Church of Christ and you work with the NAACP on these issues. Now recently your organization, this past spring, charged that early development plans of this infra-structure to install advanced communication networks, were aimed mainly for affluent, white areas and were by-passing poorer neighborhoods and minority populations. You called this "electronic red-lining." Do you agree with the optimistic prognostication that Peggy Keegan just offered? If current trends continue, what's it going to look like to you? Anthony (Tony) Pharr: Well, as you said, there has been evidence of electronic red-lining in a number of markets where advanced communication services have been proposed. I think it starts in the way these services have been test marketed in the affluent neighborhoods to begin with. One market research firm for the Bell Operating Companies coined a phrase, "The Technologically Advanced Family." These families, or these households represent only 16% of the American households and are viewed as those households most receptive to these new electronic services. So it is no surprise to us when few of the Bell Operating Companies deploy, or propose to deploy, video dial-tone services that were targeted towards more affluent neighborhoods. And most unfortunately, the bill that just recently was reported out of the Senate Commerce Committee fails to include any strong language that would prohibit red-lining. If this bill is enacted into law, I'm afraid that the kind of optimistic picture that was described by Peggy will not be realized. Host: Mike Nelson, you're with the White House's technology team. Now you work very closely with legislators in creating these laws that are going to shape this network. As you see things happening right now, do you agree with Peggy that we are going to have a series of open networks, or do you agree with Tony Pharr that the affluent are going to be the beneficiaries? Mike Nelson: I think we really believe that profit motive, government regulation, and the needs of the community will all drive this network into almost every home, office and school. We really need to build a national information infra-structure that does connect the entire country. We've managed to do that with plain old telephone service -- 94 - 95% of all Americans can afford telephone service. We need to do the same thing for advanced telecommunications services and I think the legislation moves us in that direction. It does that in several ways. Most important it does that by creating more competition in the marketplace. Since, in the future, cable companies will be able to provide phone service, phone companies will be able to provide cable service, you will see a lot more competition, a lot more choice for consumers, and that is going to drive prices down, make services more affordable, and they will be able to reach out into more neighborhoods more quickly. Host: Let me ask Peggy Keegan, in terms of cable.... Mike Nelson just mentioned the phone company, and universal access. That was a concept that was built into regulation of phone companies. Would you like to see that kind of government requirement put on the cable industry? PK: What we 're going to see, as Mike said it so well, is that kind of merger over into each other's businesses and it's really a function of technology. Cable television's investment in technology enables it to provide telephony service, so there's competition to the Regional Bell Operating Companies that, Tony indicated, could be in fact engaging in electronic red-lining. We're going to see access and as the state and federal governments work, open access, number portability. Seemingly arcane phrases here will become critical, so that consumers across the country will have choices in telephone service, the same as they have choice in video service. Host: So you say the state and local government's role to ensure access -- that means regulation. PK: Well, what we're going to see here is going to depend a great deal on what Mike and Tony will have to report on the Congress. Because, of course, you do have a key piece of legislation pending right now. TP: Can I just mention something? I just want to disagree with something that Mike said, in terms of, if we look back at telephone. Telephone's penetration, nationally, has been about 96% or so, but historically we have found big discrepancies when it comes to African Americans, Hispanics and low-income people, that the penetration rate for just plain old telephone service has been more like 75 - 80%. The numbers drop off significantly when you break down these numbers along lines of race and income. Host: So even that regulated service wasn't provided to everyone. Mike Nelson, you mentioned earlier that the combination of the profit motive, regulation and the needs of the community are going to shape telecommunications, this new interactive, two-way service. What seems most evident to the casual observer is that the profit motive is what's shaping it. There's an old adage that says, "If you want to understand something, follow the money." Now a specific study by one journalist noted that corporate spending from cable, phone and computer giants as well as intense lobbying have actually dwarfed defense industry interest groups spending and may even surpass the health-care lobby. Let me ask specifically about the FCC compromise to roll back the rates on cable from 18%, they compromised to 7%, Peggy Keegan. What kind of lobbying efforts and what kind of money from the cable industry produced that roll back? PK: Well, what you saw at the FCC was not at all a compromise, but in fact a very concerted effort by the FCC to take approximately 700 pages of regulations concerning basic cable rates and make that meaningful, both to consumers as well as to the companies. And the FCC has worked long and hard to make sure that the cable service bureau complies to those kinds of regulations. The role back that you are referring to specifically, remember that the legislation was required, concerns some very specific areas of cable television: basic cable television, additional outlets in the home, I can go on and on again reporting on the 700 pages of regulations that cable television companies. We applaud the FCC, actually because what happened was, in the first round of rate regulation, they turned around and said, "Wait a minute. These are not uniform across the board. We're dealing with a very dynamic industry that's moving quickly, in investment in technology, investment in programming, and cable television companies have worked long and hard to make sure and comply with those rate regulations." Both the FCC and the cable companies would be the first to say, that the early parts of that compliance was fairly taxing. Host: The way you present it, Peggy Keegan, it sounds like the cable industry is more regulated than any other. PK: Basic cable television rates are one of the more severely regulated industries right now, and it's going to be a real challenge for cable television companies to make sure that they continue to be players in that. One of your early leads in your report talked about the next five years as being pivotal. And it will be important for cable television, as well as other competitive access providers, to make sure that they have the big dollars to invest in technology. One thing's for sure, Jude, we're talking about great deals of money here. Fiber optic networks connecting, for example, the state of California, are no small investment. And it will be important that we make that available to as many people as possible. Host: Mike Nelson? MN: It's worth noting, though, the cable industry is going to see a lot more competition in the next couple of years from direct broadcast satellite, from the phone companies, and in the end a lot of that competition is going to replace a lot of the regulation that exists today. The prices are going to come down even faster than they have in the past couple of years due to regulation. Host: But I want to see how... I want you all to explain to our listeners, to myself, how competition is going to ensure the average consumer interest. Let's use another example. The Hollings Bill is the Communication Act of 1994. It includes parts of another bill, the Inouye Bill for Public Access. Originally, supposedly, up to 20% of capacity on these new information networks were to be reserved for non-profit, public access. That was compromised down to 5% ceiling or capacity. Where's the public interest in this? TP: Well if I can respond to this -- I think that to the, I would like to compliment Senator Inouye for even leading the initiative in the first place. As you say, it was originally proposed to be a 20% reservation of network capacity for non-profit institutions to ensure that, other than just the names that we presently see on the airwaves, will have the opportunity to get their messages across. Well that was reduced to 5% as you pointed out. The dilemma, however, is that once you've established the legal right to do that, you also have to ensure that those organizations are going to have the economic ability to do that as well as the technical know-how to do that. Otherwise it's just words on paper. Host: Provisionary resources, of course. TP: I think that Peggy could probably speak in terms of what has happened in the cable industry when public access was required for -- in some franchises -- for cable television providers. Very quickly after that happened, it was found that even though public access may... .