roundtable: The Role of Government and the New Information Era
roundtable: The Role of Government and the New Information Era
The Role of Government and the New Information Era
W. Curtiss Priest (BMSLIB@mitvma.mit.edu)
Mon, 05 Jun 95 11:29:52 EDT
Message-Id: <9506051532.AA13443@a.cni.org>
Date: Mon, 05 Jun 95 11:29:52 EDT
From: "W. Curtiss Priest" <BMSLIB@mitvma.mit.edu>
Subject: The Role of Government and the New Information Era
To: Telecommunications Policy Roundtable <ROUNDTABLE@CNI.ORG>
The Role of Government in the New Information Era
Article 1: Kill the FCC? That would scuttle competition
Article 2: Revolution on the airwaves: stay tuned
June 5, 1995
CITS Observations on attached articles:
W. Curtiss Priest
It is always a pleasure to see Robert Kuttner or Mary McGrory
turn their attention to an area of important public policy!
To have both turn their attention to the matter of the role of
the FCC in the new information era, on the same day, is a treat.
Both Kuttner and McGrory reinforce several points that CITS has
made in recent days regarding the fantasy that people at the
Progress and Freedom Foundation hold regarding shutting down the FCC.
Kuttner makes a powerful argument the killing the FCC would "scuttle
competition." We made similar arguments when we referred to the
problems of "economies of scale and scope" in recent observations.
Kuttner also reinforces points we have made about the problems of
too many consumer choices or abuses as he carefully documents
the FCC's response to "slamming" -- abuses in how long distance
carriers have pushed consumers into switching service.
Kuttner concludes by saying "Regulatory agencies do not exist because
some pointy-head though them up. They were created in response
to real anticompetitive abuses."
McGrory addresses issues of "public goods" and the role of the FCC
to be the defender of public needs, particuarly in education and
election campaigns.
"But Hundt believes the airwaves belong to everyone, and they should
be used to profit everyone."
CITS observes this about public auctions. Consumer interests cannot
participate in these auctions. Therefore, the auctions become a
cost component to commercial interests. Once the auction is over, the
winner must recoup the costs of buying spectrum by charging these
costs back to the user. This is fine if the user is a business. We
get "allocative efficiency" when scarce resources (spectrum) are
priced and the highest bidder gets access to them.
The problem arises when we look at what happens to the public's
interests become lost in the process because the public needs for, say,
educational access to spectrum cannot be easily monetized and,
therefore, cannot be expected to express itself in enough dollars
to gain access.
Thus CITS fully backs proposals that would take auction funds and
place them to building information infrastructure for public goods
such as education, libraries, and community communication servers.
The allocation of these funds is not a "tax" but simply a redress
for a "taking" that the auctions have performed. The airwaves
do belong to everyone and to return them to those who could not
economically participate in the auctions is an act of fairness
and justice.
Finally, CITS is perplexed about the silence from the Clinton/Gore
administration on these public interest issues.
We note that there have been too many "cheerleaders" for the
industry sector vis a vis telecommunications. We did not elect
Gore or Clinton to root for industry. Indeed, it is either
profits or private vision that bolster commercial enterprise, not a
slap on the back from the Vice President.
As we noted last Thursday, Dole made a important stand for human
values versus the entertainment industry. This is the kind of
leadership that is presidential caliber.
The democratic party has been faulted in recent years for losing
purpose. We suggest that it is not too late for the democratic
party to regain its prominence. But it should do so on issues that
strike a chord with the people. A clear statement from the
administration, not just addressing the telecommunications bills, but
addressing the people, that openly supports Reed Hundt's role as
champion of the peoples' interests would go a long way in providing
a message to the people about the need for government IN THE RIGHT
ARENAS.
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THE BOSTON GLOBE y MONDAY,JUNE 5 1995, p. 11
Kill the FCC? That would scuttle competition
ROBERT KUTTNER
As the conservative revolution
spins onward, its slogan might
well be: "Can you top this?" If
some tax cuts are good, more
must be better. If some deregulation is tonic,
total deregulation would be ideal. If you like
shaking government up, you'll love shutting
government down.
The latest example is a report from the
Progress and Freedom Foundation, a think
tank associated with House Speaker Newt
Gingrich, proposing to abolish the Federal
Communications Commission. The stated
goal is to energize competition.
The report, "The Telecom Revolution: An
American Opportunity," would flatly elimi-
nate most of the FCC's responsibilities - al-
locating broadcast frequencies, regulating
phone companies, limiting anticompetitive
practices and responding to consumer com-
plaints. It would scrap the very concept of
"public airwaves" and auction off the radio
spectrum to private industry once and for
all. It would even scrap the practice of re-
serving portions of the broadcast spectrum
for specified uses, such as television, radio,
shortwave, cellular, and so on, trusting mar-
kets to carve up the spectrum accordingly.
The Progress and Freedom Foundation
thinks shutting down the FCC would save
consumers hundreds of billions of dollars.
But the result could be just the opposite.
Today's media industries are a complex
blend of fierce competition and monopoly
power. As cable companies, phone compan-
ies, broadcasters, entertainment conglomer-
ates,satellite operators and Internet purvey-
ors all converge into one mega-industry,
there remain huge areas of monopoly power
that can strangle fledgling competitors if not
policed by regulators.
For example, 99 percent of local phone
service "loops" are still controlled by the lo-
cal telephone monopoly. Except in the most
dense downtowns, rival
local phone companies
can't reach customers
without piggybacking on
the wires or switches of
the dominant phone mo-
nopoly.
Local phone competi-
****************
Monopoly power
can strande
competitors.
**************
tors are beginning to make inroads - but
only thanks to the vigilance of regulators.
Without regulation, the dominant local
phone company would be free to charge com-
petitors prohibitive access fees, and competi-
tion would never materialize.
This is exactly what occurred in long-dis-
tance service before the FCC and the Justice
Department stepped in to clear a path for
MCI and other long-distance competitors.
When MCI entered the field, AT&T pursued
anticompetitive strategies that left MCI with
inferior connections, extra digits to dial, ex-
orbitant fees and other tricks that made it
hard to attract customers.
The FCC has stimulated competition by
restricting anticompetitive practices and
limiting what dominant phone companies can
charge so they neither gouge consumers nor
strangle rivals. The foundation report ob-
serves that long-distance competition is
flourishing - but it neglects to credit regula-
tion.
Similar anticompetitive abuses occurred
in the cable industry after the Reagan ad-
ministration deregulated it in 1984. Cable
companies took advantage of their monopoly
status to gouge consum-
ers. In 1992, Congress
overrode President
Bush's veto and re-regu-
lated basic cable service.
Last year the Clinton
FCC ordered rate reduc-
tions that saved consum-
ers $3 billion.
The FCC also polices consumer ripoffs.
For a time long-distance companies stole
customers from each other by sending con-
sumers deceptive premiums. When you
signed the form to collect the gift, you un-
knowingly switched long-distance carriers.
This is known in the trade as "slamming."
After receiving more than 4,000 complaints,
the FCC recently issued antislamming regu-
lations, prohibiting deceptive switching of a
customer's long-distance company.
The FCC has policed similar abuses in
overcharges for operator service, long-dis-
tance connection and caller ID, misleading
900 numbers, junk faxes and so on. A very
vigilant consumer could arguably keep track
of all of this and regularly change companies
or file lawsuits - but life is too short.
The Progress and Freedom Foundation
would leave complaints to the antitrust au-
thorities. But that would overwhelm the Jus-
tice Department and the courts. The AT&T
breakup indeed began as an antitrust cause,
but it stimulated actual competition because
the FCC, not the courts, had the expertise to
supervise the process.
Nearly everyone agrees that a converg-
ing superindustry will soon offer a cornuco-
pia of choices for telecommunications, enter-
tainment, home shopping, data processing
and so on - the vaunted superhighway. That
is the broad vision of the new right, and also
of Vice President Gore and the current FCC.
But the Clinton administration is worldly
enough to appreciate that this brave new
world of competition and choice won't hap-
pen spontaneously. In this business, there is
simply too much history of merger and mo-
nopoly, price-fixing and price-gouging, and
plain opportunism to trust that market
forces alone will yield the best results.
Regulatory agencies do not exist because
some pointy-head thought them up. They
were created in response to real anticompe
titive abuses. Shutting down the FCC would
lead to less competition and choice, not
more.
Robert Kuttner's column appears regularly
in the Globe.
***************End Article 1** ****************
Revolution on the airwaves: stay tuned
MARY MCGRORY
WASHINGTON
The word "revolution" is pret-
ty promiscuously used in
Washington now: Hardly a
day goes by without refer-
ence to changes that will alter the
world as we know it. The Federal
Communications Commission's chair-
man, Reed E. Hundt, thinks he's got
the real thing on his hands in the
shape of digital television, and he
wishes people would talk about it.
Digital television, a marvelous and
mysterious device that multiplies the
number of frequencies on a network
to six, will bring an explosion to the
information superhighway. It won't be
on line until 1997, a year after the
presidential election - a fact that may
explain the relative silence about what
Hundt calls "the greatest story in the
history of communications since the
invention of the printing press."
TV station WRC, for instance, will
suddenly have six more channels. So
will the other 10 stations in Washing-
ton. The question is who will get this
vastly multiplied "wasteland." The Re-
publicans, generally, favor selling the
new outlets at auction. Hundt, a
youthful and enthusiastic Clintonian,
thinks the new frequencies should be
given away under two conditions:
First, stations must pledge a certain
amount of time for educating children;
second, they must pledge free time to
political candidates.
The benefits of educational TV
have been measured and found to be
indisputably good. Hundt thinks that
we owe children the right to learn
things that their homes and schools
cannot teach them. "If you're going to
cut Head Start, you have to give them
something else," he says.
"Something else" is also his rem-
edy for violence on television - raun-
chy, degrading, corrupting fare that
parents constantly, and politicians
sporadically, inveigh against. "I don't
believe in censorship; the FCC should
not be the nation's nanny," Hundt
says. "You have to offer alternatives."
****************End Article 2*****************
House Speaker Newt Gingrich, an
easy rider on the information super-
highway, thinks that the FCC should
be phased out of existence. Needless
to say, he believes that the new fre-
quencies in digital television should be
*********************
Candidates would be
beholden to nobody
but the public.
*******************
sold at auction. The profits could prob-
ably balance the budget.
But Hundt believes the airwaves
belong to everyone, and they should
be used to profit everyone.
So far the only broadcaster who
has endorsed his idea of educating the
children and liberating the politicians from
the shackles of perpetual fund-
raising is Rupert Murdoch. He told
the National Association of Broadcast-
ers it was a capital idea
Politics would be transformed be-
yond recognition if free air time were
given to candidates. Aspirants could
rise up from their knees if they didn't
have to spend so much time groveling
for funds, 40 percent of which are ea-
ten up with purchasing TV time. The
average Senate campaign requires
$4.3 million. For a House seat, the go-
ing rate is $545,000, of which 25
percent is spent on media time.
Joshua Goldstein of the Center for
Responsive Politics says that the gift
of air time would change the whole dy-
namic of a campaign.
"Attack ads would be out of the
picture," he says by way of example.
"Taxpayers would not want their mon-
ey spent for spearing."
It could also mean some cutting
down to size of the consultants who
are waxing fat and rich on nervous
candidates, who need advice from hot-
shots on fund-raising.
Imagine the difference it would
have meant in the 1994 campaign of
Sen. Dianne Feinstein of California,
whose race against Michael Huffing-
ton was one of the country's hardest-
fought. At one point she was required
to raise $22,000 a day to reach her
goal of $15 million. Ordinarily a sena-
tor has to raise but $12,000 a week for
Six years.
If digital television were to relieve
them of almost half of their fund-rais-
ing chores, candidates could think
more about the issues, or even listen
to their constituents.
Any public financing of politics
raises Republican hackles. They al-
most overturned the modest checkoff
program that was put in place after
Watergate had exposed the back
alleys and dark corners where so
many presidential dollars were col-
lected. Only a rare show of unity
among Democrats and the courage of
11 Republicans saved it.
A commission is drawing up pro-
posals. Hundt wants broadcasters to
set up time banks from which candi-
dates could get vouchers for air time.
They would be beholden to nobody
but the public.
Hundt wants hearings, debates,
town meetings - any kind of forum to
discuss this great wonder and its uses.
It offers a clear choice between "100
percent pursuit of maximum profits"
and a clear public purpose.
Mary McGrory is a syndicated columnist
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