1 SUNNYVALE, CALIFORNIA, MAY 13, 1994 2 * * * * * 3 ASSISTANT SECRETARY IRVING: Good morning. It's our 4 pleasure to be here, and it's my particular pleasure to 5 have -- is this working? Yes -- and it is my particular 6 pleasure to introduce Mayor Frances Rowe, who is going to 7 open our hearing this morning with some opening remarks and 8 announcements. 9 Mayor Rowe. 10 STATEMENT OF MAYOR ROWE 11 MAYOR ROWE: Good morning, everyone. I am Frances 12 Rowe, Mayor of Sunnyvale, and it is my great pleasure to 13 welcome all of you here today to our city for this hearing. 14 It is indeed an honor for Sunnyvale to be your 15 host for the United States Department of Commerce, excuse 16 me, and the California Public Utilities Commission today, 17 but it is also a logical choice. 18 Our community is the heart of Silicon Valley. And 19 the issues facing citizens, business and government caused 20 by the rapid changes of information technology have their 21 roots here. Public interest and the possibilities afforded 22 by new information technology runs wide and deep in our 23 region. I think you will find a greater willingness to 24 explore and develop its potential here today than in any 25 other place in the nation. 26 This hearing is jointly sponsored by the state and 27 federal governments. And I want to remind the hearing 28 board about the municipal role in the new world of PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 2 1 information technology. 2 As you consider state and federal policies and 3 legislation affecting innovation and access to information 4 services, technology and government, please remember that 5 cities are the governments -- the government closest to the 6 people. We are the ones on the front lines of public 7 service. 8 Universal access isn't going to happen in 9 Sacramento or Washington. It will happen in cities. The 10 information superhighway will be built in the streets of 11 our cities. 12 Cities therefore must be involved in the 13 development of government policies regarding the national 14 information infrastructure and the future of information 15 technology. Cities should have a degree of regulatory 16 authority over all telecommunications service providers, 17 especially as they affect the lives of our citizens and the 18 success of businesses in our communities. 19 This is an exciting and challenging time, however, 20 and we are fortunate to be the participants in the shaping 21 of the future of information technology as it does affect 22 our citizens and our businesses. 23 I look forward to a very productive day where all 24 of us can learn and share ideas and solutions. 25 Before I introduce our distinguished panel, I 26 would like to introduce several guests who are with us 27 today. 28 Bruce Ives, District Director for Congresswoman PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 3 1 Anna Eshoo; Manuel Valerio, field representative to State 2 Senator Alquist; Robert Harold, with Assemblyman John 3 Vasconcellos; Jerry Cookson, with Assemblyman Cortese; and 4 several of my colleagues on the Sunnyvale City Council: 5 Vice Mayor Robin Parker; Council Member Landon Noll; 6 Council Member Stan Kawczynski. 7 At this point I have the honor of introducing our 8 distinguished panel conducting today's hearing. 9 The Honorable Larry Irving, Assistant Secretary of 10 Commerce for Communications and Information and 11 Administrator of the National Telecommunication and 12 Information Administration. 13 ASSISTANT SECRETARY IRVING: Thank you, Mayor Rowe. 14 I want to also pass on thanks to all of the City 15 Council members who gave us so much assistance, the 16 Sunnyvale Community Center for giving us so much help. John 17 Christian, Scott Swail, and staffs. 18 Bruce Ives, thank you, and Congresswoman Eshoo. 19 And also I'd like to thank -- before the rest of 20 the panel is introduced -- my good friend Norm Mineta, who 21 has also been very helpful, and his staff for helping us 22 with this. 23 So I wanted to get those thank you's in early, 24 because I think it's so appropriate. This has been such a 25 gracious and hospitable city, and we have not had more 26 warmth in any other city we've been to, so we do want to 27 thank you for your help this week. 28 MAYOR ROWE: Thank you very much. Thank you. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 4 1 And the Honorable David J. Barram, Deputy 2 Secretary of Commerce and former Sunnyvale resident. 3 Welcome home. 4 The Honorable Andrew C. Barrett, Commissioner, 5 Federal Communications Commission; 6 The Honorable Norman D. Shumway, Commissioner, 7 California Public Utilities Commission; 8 And the Honorable Jesse J. Knight, Jr., 9 Commissioner, California Public Utilities Commission. 10 Welcome to Sunnyvale. 11 COMMISSIONER KNIGHT: Thank you. 12 ASSISTANT SECRETARY IRVING: Thank you. Well, Thank 13 you. 14 Again, I do want to thank Mayor Rowe and her staff 15 and all the citizens and residents of Sunnyvale for their 16 help and hospitality. 17 I am Larry Irving, and I'm the Assistant Secretary 18 of Commerce, and I'd like to welcome you as well, all of 19 you who have come out early this morning to participate in 20 this, our fourth field hearing on the National Information 21 Infrastructure and related issues. 22 Our first two hearings on universal service were 23 held in Albuquerque, New Mexico, and we held one in South 24 Central Los Angeles in February. 25 Our third hearing was in the Research Triangle 26 about three weeks ago in North Carolina, and we focused in 27 that hearing, as we will today, on issues affecting open 28 access to the NII. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 5 1 And today we will again address that issue of open 2 access. Open access goes to the heart of the Clinton 3 Administration's vision for the National Information 4 Infrastructure. 5 The basic question we pose is: How can we ensure 6 that everyone can use the information superhighway fairly, 7 and what are reasonable conditions for doing so? 8 During the Olympics, David Letterman quipped that 9 his show was like the information superhighway without the 10 information. 11 Now from his perspective, having access to people 12 without having content to bring them would be a little bit 13 of a problem; however, we in the Administration worry about 14 having content to bring people, having an information 15 superhighway where people have plenty of information to 16 impart to their fellow citizens but have insufficient 17 access to that highway or denied access to that highway. 18 The issue is enormously important to the 19 Administration and particularly to Vice President Gore and 20 to Secretary Brown. The priority the Administration places 21 on universal service and open access issues is reflected in 22 our NII Agenda for Action released last September. 23 And as many of you know, the Vice President has 24 made an effort to learn firsthand what we need to do with 25 access and universal service issues and recently was here 26 in Cupertino at Monta Vista High School to travel along 27 some of the information superhighway with students to find 28 out their needs and concerns. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 6 1 In January, the Vice President announced details 2 of our telecommunications agenda. We are working with 3 Congress to unscramble the legal, regulatory and financial 4 problems that could impair the nation's ability to build a 5 sophisticated information superhighway. And that's why in 6 Albuquerque, we focused on the telecommunications needs of 7 rural communities. 8 In South Central L.A., we examined the role of 9 universal service in urban areas and how deliverability and 10 accessibility of information and telecommunications can 11 help build communities and deliver needed services to some 12 of our more impoverished communities. 13 We also took a look at what the earthquake meant 14 and how telecommuting and other technologies have been used 15 since the earthquake. And we looked at how technologies 16 such as computer bulletin boards had helped people exchange 17 information even before the first aftershock was 18 registered. 19 In our third hearing in North Carolina, we 20 examined how best to achieve open access to that 21 infrastructure. 22 And now we are here in the Bay Area, more 23 specifically this community, collection of communities in 24 the Santa Clara Valley known as Silicon Valley. 25 I don't need to tell you that this area is 26 world-renowned as a dynamic center for computer and 27 technological innovation. And that reputation doesn't 28 appear to be in jeopardy, as evidenced by a recent study PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 7 1 which rated Sunnyvale, our gracious host city today, as the 2 best entrepreneurial hotspot among regions of comparable 3 size in the country. 4 Given that many of the innovations that will 5 provide affordable access to the NII will originate in this 6 community and Silicon Valley, broadly defined, this is a 7 logical place to advance the discussion we began in North 8 Carolina. 9 To cite just one innovation, Silicon Valley's 10 Intel recently introduced a wireless modem. Nolan 11 Bushnell, the Atari founder, said, "I went into the 12 redwoods behind my house. I had my laptop and my cellular 13 phone, and I downloaded my E-mail, and in every direction 14 all I could see was absolute beauty...yet I was totally in 15 contact with my office." 16 Now my wife would call that an enabling device for 17 workaholics. Wouldn't be excited about it. 18 (Laughter.) 19 ASSISTANT SECRETARY IRVING: But we have to make sure 20 that people who want to use such tools have access to these 21 tools at affordable prices and have access to the 22 information superhighway at affordable prices. 23 And at the same time, residents of the Silicon 24 Valley have the same problems as elsewhere when it comes to 25 having access to information. For example, Cupertino 26 resident and soon-to-be Stanford law student Mary Minow 27 sent us a copy of the April 27th San Jose Mercury News. 28 Adjoining an article on Silicon Valley's new city network PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 8 1 was one about the possibility of drastically reduced 2 services at Santa Clara County libraries, unless additional 3 funds can be found. 4 We are not here today to discuss specifically the 5 question of libraries, and we don't have an answer to the 6 questions affecting library funding; but we know that we 7 have to look at those types of issues, and we hope that 8 telecommunications can provide at least part of the answer 9 on how people, public institutions and information can link 10 up. 11 The principal questions for us today are: How we 12 to ensure that the information providers -- the small 13 providers, entrepreneurial providers, public providers as 14 well as the major corporations and universities of this 15 region -- can provide for the needs of the people they 16 serve? 17 How do we ensure that consumers can exchange 18 information and, in fact, become information providers 19 themselves? 20 We hope to hear today whether and how transport 21 providers should be obligated to provide access and what 22 the legal and practical barriers are to such access. 23 Before I introduce some of the hearing board, I 24 made one glaring omission in introducing and thank you's 25 this morning. 26 We are pleased to have with us this morning one of 27 the members the President's National Information -- 28 National Information Infrastructure Advisory Council, the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 9 1 Honorable Carol Fukunaga, a state senator from Hawaii. 2 I want to thank her for her hard work and for 3 joining us this morning. 4 All of the members, the 30 members of the Advisory 5 Council worked tirelessly with us in the Administration. 6 It is truly a public and private partnership where we have 7 some of the key leaders from the public sector and the 8 private sector in giving us advice and counsel as we move 9 forward. 10 And we have again a lot of the public part of the 11 public/private partnership up at this dais. 12 We are very fortunate to have with us today 13 Commissioners Norman Shumway and Jesse Knight of the 14 California Public Utilities Commission. We appreciate 15 greatly the activities of both the Commissioners, the 16 Commission and their staff in cosponsoring and assisting us 17 in preparing for this hearing. 18 Also joining us on the Hearing Board who has been 19 at all four hearings we have held is a member of the 20 Federal Communications Commission, Andrew Barrett, who has 21 been a leader in these issues and has certainly helped us 22 in defining these issues and discussing these issues around 23 the country. 24 We will here from Commissioners Shumway, Barrett 25 and Knight shortly. 26 We are also pleased to be hearing from three 27 distinguished panels of witnesses. And because of time and 28 space limitations, we could not fit on the panels everyone PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 10 1 who wanted to testify. For that I have to apologize. But 2 we do have and do want an audience participation. There is 3 a sign-up sheet that is at the registration table. If you 4 haven't signed up and would like to make comments during 5 the day, please do sign up, if there is space available. 6 And if you can't sign up, please feel free to submit 7 written testimony. I assure you that all testimony will be 8 incorporated in the final record. 9 It is now my honor to turn to remarks from other 10 members of the Hearing Board. Let me turn first to Deputy 11 Secretary of Commerce Dave Barram, my boss, and a Silicon 12 Valley veteran and a person with a rare combination of 13 talents. 14 Secretary Barram was appointed by the President and 15 confirmed by the U.S. Senate on October 7th, 1993 as Deputy 16 Secretary of the U.S. Department of Commerce. But more 17 importantly, his career prior to government service 18 reflects and spans the growth of Silicon Valley as one of 19 the nation's premier engines of both economic and 20 technological growth. 21 Dave joined the Clinton Administration from Apple 22 Computer where he was Vice President of the Worldwide 23 Corporate Affairs and Public Policies. And he joined Apple 24 in 1985 as Vice President of Finance and Chief Financial 25 Officer and also held the position of Vice President of 26 Corporate Communications. 27 Before joining Apple, Barram was Vice President of 28 Finance and Administration and Chief Financial Officer at PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 11 1 Silicon Graphics, I think, from 1983 to 1985. And during a 2 13-year career with Hewlett-Packard again in Silicon Valley 3 from 1970 to 1983 he was Controller of the Computer 4 Products Division and also held positions in finance and 5 marketing. 6 He earned his Bachelor of Arts and Graduate Arts 7 degree from Wheaton College in 1965 and holds a degree in 8 Business Administration from Santa Clara University. 9 He clearly has been throughout his career a leader 10 in technologies and certainly has extended and expanded 11 that leadership during his tenure in Washington. 12 It is my pleasure to introduce Deputy Secretary 13 David Barram. 14 DEPUTY SECRETARY BARRAM: Thank you very much. And 15 thank you, Mayor Rowe. It is nice to be home. 16 For those of you who don't know him, Assistant 17 Secretary Larry Irving has long been a major player in 18 communications issues. Before coming to the Commerce 19 Department, Larry was the Senior Counsel to the House 20 Subcommittee on Telecommunications and Finance. 21 In that position he served as the top advisor to 22 Chairman Edward Markey of Massachusetts on such issues as 23 mass media and advanced technology. He is truly an expert 24 on Cable TV, Cable TV reform, children's television and 25 universal service. 26 And as Administrator of the National 27 Telecommunications and Information Administration, he is 28 currently at the point in helping to create and implement PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 12 1 NII policies and programs, particularly those relating to 2 universal service and open access. But most important for 3 Larry, he is a Stanford Law School graduate, president of 4 his class in 1979. So he really knows how great it is in 5 this community. 6 That is even more true for me. Seventeen years ago 7 right here on this stage I took part in a debate when I ran 8 for City Council in Sunnyvale. And my life has never been 9 the same since. 10 But I'm very pleased that we have come to Silicon 11 Valley and to Sunnyvale. This Administration has a huge 12 challenge, a huge mission that we have undertaken to make 13 this information infrastructure come true in the best way 14 possible. 15 As Larry mentioned, last September the 16 Administration information infrastructure task force issued 17 a policy blueprint for the NII called the Agenda for 18 Action. In it we said that we would hold a series of 19 hearings to gather information from real people who use, 20 who want to use, who want to innovate on a world class 21 information highway and how we will ensure that everyone 22 will have access to the highway, to get service from it, 23 universal service and to have access to it to use it, to 24 communicate on it, universal access. 25 Our hearing today will be an important input in 26 that process. At the outset let me ensure you that this is 27 not a window dressing or promotional reason that we're 28 here. I'm convinced that our experience in Albuquerque, PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 13 1 South Central Los Angeles and Durham, North Carolina have 2 provided us with information and insight that we wouldn't 3 have gotten had we stayed ensconced inside the Beltway 4 around Washington, D.C. 5 I can tell you in my brief time in the government 6 it is really important, valuable and refreshing to take 7 that little trip outside the Beltway. 8 For the NII mission generally, we are here because 9 we want to make sure that the infrastructure isn't built to 10 look like the Winchester Mystery House. Instead, I would 11 like something that does it all where we can spend time, 12 share information, work, play converse and even ponder what 13 life is like on the information road. 14 We are here in this area because there is a 15 compelling reason to be here. This is the quintessential 16 high technology center in the United States and arguably 17 the world. 18 As Larry said, our colleagues in Washington don't 19 always know how to find Silicon Valley on the map but they 20 know that there is something about Silicon Valley that is 21 high tech and that will make a huge difference in the 22 future of the world. 23 It is almost synonymous with a state of mind. The 24 21st Century in a world that we really can only imagine is 25 close upon us. We need to be here in this community at 26 least one time and I think spiritually a lot more than 27 that, to have the best chance to glimpse the vistas that 28 await us as we imagine or approach the 21st Century. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 14 1 We have pushed the limits of technology in this 2 area for many years. The fires haven't subsided, I don't 3 think, and they won't for a long time. They may never. 4 There's just too much here for that to happen. 5 It starts with a history and geography of this area 6 and the whole of California and the indomitable 7 entrepreneuring spirit that dominates the region. 8 A lot of entrepreneurs have made a difference in 9 the country in starting in this Valley. 10 Information technology is one of the wonders of the 11 world, I think. Traffic on the Internet, for example, is 12 exploding, and more and more Americans and others around 13 the world discover its wealth of knowledge based 14 treasures. 15 Last year it doubled in size and is accessible to 16 some 20 million people. The volume of messages on the NSF 17 backbone grew by 21 percent alone, the largest surge in the 18 history of the Internet. And there is no end in sight. 19 As you know, it hasn't come easy. During the 20 1980's U. S. Corporations spent a trillion dollars on 21 computers and networking equipment with modest, some would 22 say, minimal productivity to show for it. 23 Having spent some time in Washington I can tell you 24 that there are pockets of society that have gotten minimal 25 benefit from productivity tools. But we're trying to 26 change that. 27 If Nelson Mandela can change a whole country, then 28 some of us can make some minor changes in how technology PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 15 1 works while in Washington. 2 But I think some of these gains, some of these 3 anticipated gains are starting to appear because of the 4 increasing use of distributed software networks and 5 collaborative software. 6 California is helping to show the way. The state 7 is installing one hundred electronic kiosks in shopping 8 malls and supermarkets where residents can renew driver 9 licenses, register cars and access government services. 10 You know, I read something the other day that the 11 most important thing people want from their Department of 12 Motor Vehicles is that they get a good picture. The 13 annoyance of standing in line is not as important to people 14 as making sure the picture is okay. I thought that was 15 ridiculous until I pulled my license out and I looked at my 16 picture, and I understand. 17 (Laughter.) 18 Through CityNet in Cupertino and similar systems, 19 including those in Palo Alto and as of this month or last 20 month here in Sunnyvale, residents can access their local 21 government. 22 Later this year Viacom plans to launch one of the 23 nation's first large-scale interactive TV trials in Castro 24 Valley, permitting some one thousand homes access to movies 25 on demand, shopping and a variety of information services. 26 The ability of information service providers to reach 27 prospective customers without competitive barriers or 28 unnecessary legal or regulatory restrictions is of more PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 16 1 than passing interest. 2 This open access issue is critical to the proper 3 development of the NII. If the information infrastructure 4 is to support a diversity of ideas and fair competition and 5 the free flow of information, then users, consumers, users 6 and businesses need something more than a simple telephone 7 connection that traditional universal service policies have 8 sought to provide. 9 Our open access policies need to ensure that 10 information providers and users, no matter how small or 11 large, can easily interconnect with and use the networks 12 that will make up the NII, even if those network operators 13 are competing in providing information themselves. 14 An open access policy must be flexible to adjust to 15 changes in technology. 16 The Administration is looking to establish 17 principles for the development of this concept that will 18 last into the 21st Century, while holding onto reasonable 19 rates for plain old telephone service. 20 Today we are holding our second field hearing on 21 open access after two hearings on universal service. 22 How do they differ? 23 Universal service is about connection, insuring 24 that the elderly and the disabled, as well as those in 25 rural communities and inner city neighborhoods, are not 26 priced out of the market for new communications services. 27 Open access is about how we use that connection. 28 Open access is an important part of the longstanding PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 17 1 national policy embodied in the First Amendment to promote 2 a diversity of ideas and fair competition and the free flow 3 of information. 4 In considering open access, several questions need 5 exploration. 6 Who has access, and who doesn't? Who are the 7 information providers today? How are they able to reach 8 the consumers? Excuse me. What factors help or hinder 9 network access for information providers and users? How 10 can we remove obstacles so that information flows freely 11 from information provider to transport provider to user and 12 back again? What is the government's role in ensuring 13 access and spurring innovation? 14 These are some of questions that we will be 15 addressing today. 16 And I'm excited to see so many of you here with 17 your strong interest this these matters. I'm sure that 18 many of you in the audience also have some ideas about what 19 the problems are as well as how we go about solving them 20 and preempting some of the problems that we haven't even 21 considered yet. 22 One of the benefits of the kind of forward 23 thinking that I think we get from being in this Valley is 24 that sometimes, sometimes we need to solve -- think about 25 where the puck is going to be, as Wayne Gretzky said, and 26 get to it, so we solve the problems that we haven't even 27 quite identified yet or make sure we have means to do so. 28 I'm really looking forward to today's activities, PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 18 1 and I hope we will have a pretty active discussion. 2 And let me personally also thank you all for 3 coming today, for those of you that will testify and for 4 those of you that just have shown your great interest by 5 being here. Thank you. 6 ASSISTANT SECRETARY IRVING: Thank you, Mr. Secretary. 7 Now let me turn to the next member of our hearing 8 board, the Honorable Norman D. Shumway, a commissioner with 9 the California Public Utilities Commission, and a man I've 10 known and known of for more than a decade. 11 Commissioner Shumway was appointed to the Public 12 Utilities Commission in February 1991 by Governor Pete 13 Wilson. His term of office is for six years. Prior to his 14 appointment, he served 12 years in the United States 15 Congress representing Central and Northern California. 16 He was first elected to the House of 17 Representatives in 1978 and successfully won reelection 18 five times before deciding to retire in 1990. 19 While in Congress, he concentrated on legislative 20 initiatives in the areas of banking, international 21 relations, trade and agriculture. His major legislative 22 efforts included the Financial Institution Reform Recovery 23 Act, Defense Production Act, expedited check cashing, 24 economic stabilization and foreign indebtedness. 25 Prior to serving in Congress, he was a member of 26 the San Joaquin County Board of Supervisors from 1974 to 27 1978, serving as chairman of the board in 1978. 28 He earned his associate's degree from Stockton PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 19 1 College, his bachelor's from the University of Utah, and 2 his JD from the University of California, Hastings. 3 Commissioner Shumway. 4 COMMISSIONER SHUMWAY: Thank you. I'm delighted to be 5 here. I'd like to welcome all of you and especially those 6 of you who may have traveled long distances, such as from 7 Washington. 8 Having served my time in the Nation's capitol, I 9 know well the rigors of travel and how difficult it is to 10 set up a hearing such as this from a faraway place such as 11 Washington. 12 In fact, I recall very vividly one of my first 13 trips back to California as a newly elected congressman, I 14 was in Dulles International Airport, visited the men's 15 room, had occasion to wash my hands, looked in vain for 16 paper towels. 17 Instead they had a blow dry machine mounted on the 18 wall, and someone had very artfully changed the 19 instructions, scratched out the old and written in new that 20 said, "Push button. Hear your congressman speak." 21 (Laughter.) 22 COMMISSIONER SHUMWAY: I don't want to implicate my 23 colleagues at the table here this morning, but I'm sure as 24 far as my brief remarks are concerned, you are hearing the 25 hot air portion of the program. 26 But I think it's very significant that we are here 27 in the Silicon Valley. I trust that we have a very 28 sophisticated audience. I suspect that everyone here knows PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 20 1 the importance of growth industries like computers, 2 information services and telephony services to the future 3 health of our State of California. 4 California is proud to be a leader in innovation 5 and high technology. And the success of the variety of the 6 companies that are represented here, I think, demonstrate 7 that success, that leadership, that drive that has brought 8 about success. 9 We are gathered here to learn from our panelists 10 about how we can harness some of that creative energy in 11 improving our regulatory environment so that we can improve 12 the uses and accesses to high technology for all 13 Californians, residential and business users included. 14 Increasingly, we are all interdependent on 15 networks. Today we have a variety of different networks 16 which connect us, telephone networks, cable networks, data 17 networks, and increasingly, I believe, hybrids between 18 these various network types. 19 As we know, these technologies have different 20 architectures, they have different protocols, and they have 21 very different regulations. 22 Our challenge in the future will be to find a way 23 to offer consumers the maximum amount of choice among these 24 technologies and at the same time with the ability to 25 integrate these technologies to their own advantages. 26 Today I hope to learn from all of you solutions on 27 how we can help to bring about these results for consumers, 28 that is, maximum choice of access and also of applications PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 21 1 and integration of different uses, data video and voice. 2 Part of the answer, I suspect, lies in the 3 laboratories and board rooms here in Silicon Valley. There 4 being discussed and planned perhaps are the applications 5 for developing the technologies for tomorrow. But part of 6 the solution also lies in finding ways to simplify and 7 demystify our government so that consumers have good 8 information about the choices available, and so that 9 companies have simple rules and regulations to follow to 10 get their products to market. 11 Today I hope to begin a dialogue with all of you 12 in helping us to work towards these goals. And again, let 13 me say thank you for being here. 14 ASSISTANT SECRETARY IRVING: Thank you, Commissioner. 15 And now it's my pleasure to turn to the Honorable 16 Jesse J. Knight, Jr., also a Commissioner of the California 17 Public Utilities Commission. 18 Commissioner Knight was appointed to the 19 California PUC by Governor Pete Wilson in 1993. Prior to 20 his appointment as Commissioner, Mr. Knight was employed as 21 Executive Vice President of the San Francisco Chamber of 22 Commerce and served also, and prior to that, as Vice 23 President of Marketing for the San Francisco Newspaper 24 Agency. 25 He serves on the board of directors of a variety 26 of international, national, civic, cultural and educational 27 organizations. 28 In 1991 he was co-recipient, with former Secretary PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 22 1 General of the United Nations Javier Peres de Cuellar of 2 the Eleanor Roosevelt Humanitarian Award, presented by the 3 United Nations Association of San Francisco, for Lifetime 4 Achievement, and is the youngest recipient ever of that 5 award. 6 He's a graduate of St. Louis University, a fellow 7 of the University of Madrid, and he holds an MBA from the 8 University of Washington. 9 Commissioner Knight. 10 COMMISSIONER KNIGHT: Thank you. One correction to 11 that, University of Wisconsin. 12 ASSISTANT SECRETARY IRVING: Oh, I'm sorry. 13 COMMISSIONER KNIGHT: We don't win too many Rose 14 Bowls. 15 (Laughter.) 16 ASSISTANT SECRETARY IRVING: I went to Northwestern. 17 All those state schools get confusing to me. 18 COMMISSIONER KNIGHT: I, too, would like to welcome 19 our guests here who are visiting us and particularly those 20 from the Department of Commerce to California. 21 California has a strategy for its 22 telecommunications future, and this strategy is based on 23 three principles. 24 First, we want to foster relentless innovation in 25 the delivery and the use of advanced telecommunications. 26 Secondly, we want to promote diversity in the 27 range of choices among services and providers. 28 And third, we want to ensure affordable widespread PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 23 1 access to California's public networks and the resources 2 linked to those networks. 3 Here in California we have taken a two-pronged 4 approach to ensuring access: First, unbundled and 5 nondiscriminatory access to the bottleneck facilities of 6 monopolies, and a second goal of opening all markets, 7 including the local market, to competition by January the 8 1st, 1997. 9 I believe that this two-pronged approach is the 10 best way to proceed and provides the greater guaranty to 11 access than either tack would be by themselves. It is my 12 belief that innovations and diversity cannot be provided by 13 a monopolist, but are natural in a competitive marketplace. 14 Clearly, open access and the interconnection are 15 in my mind necessary components of our strategy. 16 And as I look at the list of participants in 17 today's proceedings -- and I believe that the participants 18 bring a wealth of knowledge on innovations, diversity and 19 accessibility, and I look forward to hearing from each and 20 every one of you. I dare say that I think as we look out 21 into the future and we look back on this process as our 22 state and our nation moves to a new level of information, 23 that these kinds of meetings will end up being the most 24 important part of that process. So I look forward to 25 hearing from you today. Thank you. 26 ASSISTANT SECRETARY IRVING: And now it's my pleasure 27 to turn to the Honorable Andrew C. Barrett, Commissioner 28 with the Federal Communications Commission. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 24 1 Again, he's been a member of every panel we have 2 had as part of the federal part of the federal/state 3 partnership as we look at these issues. 4 Commissioner Barrett currently is Commissioner at 5 the FCC, where he's been since 1989. Nominated and 6 confirmed in -- he joined the Commission in '89, was 7 nominated and confirmed in 1990 for another five-year term. 8 Prior to serving in the FCC, he was an Illinois 9 State Commerce Commissioner. He was a Chicago Urban 10 Leaguer of the Year, DePaul University's Distinguished 11 Alumni, Chicago Jaycees' Outstanding Young Citizen. 12 He's a graduate of Roosevelt University, Loyola 13 University, Chicago, and DePaul University. 14 Commissioner Barrett. 15 COMMISSIONER BARRETT: Thank you very much. 16 One of the reasons they put me last is that -- 17 Norm may be right -- is that when he goes into the washroom 18 to push the hot air button is that they tell me to be quiet 19 and not expose you to too much of my hot air. 20 I am -- two things I'd like to know. I'd like to 21 know, number one, whether the Deputy Secretary won that 22 election where he stood on this stage and talked about, and 23 secondly, whether or not I can relay Norm's conversation 24 description of the hot air button back to some of his 25 former colleagues in Washington. 26 And it is a pleasure -- 27 DEPUTY SECRETARY BARRAM: And the answer is no, and 28 yes. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 25 1 (Laughter.) 2 COMMISSIONER BARRETT: It is a pleasure, and I look 3 forward to listening to the three panels. 4 I think that Larry and Dave and the staff at NTIA 5 certainly ought to be complimented, particularly the staff, 6 for really working hard in putting together the panel. 7 And I think the panels address the right issues. 8 And hopefully, with all of the brightness on the panels, we 9 will certainly begin to get what we hope are answers that 10 will carry us towards that sort of a seamless information 11 highway. And I'm glad to be with you. Thank you. 12 ASSISTANT SECRETARY IRVING: We're now ready to begin 13 with Panel 1. 14 You've heard from us, and I think we are going to 15 try to spend as much of the rest of the day as possible 16 hearing from the enormous talent assembled in this room 17 today. So if the panelists from Panel 1 would please come 18 up to the dais, we'll get started. 19 I would like to make one cautionary note, or two 20 notes. 21 One, there will be a press conference at 10:30 22 where the press can ask us up here any questions you might 23 have; but the second thing I'd like to note is that we will 24 have a five-minute requirement on all panelists this 25 morning. We'd like for you to hold your questions to five 26 minutes. 27 There is a young woman over here who will give you 28 a card sign when it's time to dispense with your remarks. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 26 1 And while I know I'm in California -- people are 2 normally laid back -- I'm actually a New Yorker and very 3 hyper. So I will cut you off, but try to do it in a 4 pleasant way. 5 COMMISSIONER BARRETT: He used to have a stick, and 6 Dave and I took the stick away because he it hit somebody 7 in Albuquerque. 8 ASSISTANT SECRETARY IRVING: Our first panelist for 9 this morning's panel is M. Strata Rose from Unix & Network 10 Consultant, SysAdministration and Internet Information, 11 Virtual City Network Project. 12 Whenever you are ready to begin. 13 STATEMENT OF M. STRATA ROSE 14 MS. ROSE: Well, thank you very much for letting me be 15 here today to address you. I have to say this is my first 16 large public speaking attempt, and I'm recovering from 17 laryngitis, so just bear with me. 18 It's a common saying that in order to understand 19 the future, you have to understand the past, and seems that 20 everyone is becoming a professional futurist with all this 21 future unfolding so rapidly in front of us. So if you'll 22 indulge me for a moment, let's travel into the past to a 23 past most of us share, which is hectic college days. 24 We ran around trying to do too much in too little 25 time on not enough sleep. Maybe that's not the past. 26 One of the most important things we always had 27 with us was a little black book of phone numbers. Much of 28 our waking time that wasn't spent studying or in the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 27 1 company of the interesting gender was spent on the phone. 2 Ironically, most of us didn't have access to 3 private phones. We were either poor college students or 4 the campus had a policy of not allowing private lines in 5 the dorm rooms, so we tended to spend a lot of time lined 6 up at the phone or using the local phone system and finding 7 that we couldn't use the on-campus phone system for 8 important things, like calling our parents or hometown 9 friends or the local pizza place when we were up studying 10 late and so on. 11 The telephone was generally our most important 12 communication channel to the outside world, and it tended 13 to be almost entirely outside of our individual control. 14 Now it doesn't take a rocket scientist to see that 15 computers are fast becoming the telephone equivalent of the 16 '90s. More than telephones, networked computers are 17 becoming our post offices, entertainment centers, 18 electronic storefronts and, in fact, even coming full 19 circle and becoming little college campuses. 20 But instead of a tinny voice in a receiver, we get 21 CD-quality digital sound and thousand-color pictures coming 22 up on the screen, virtual libraries in other states, other 23 countries, just a wonderful wealth of access out there. 24 In fact, there are people who are not here today 25 listening to us because they are busy building technology 26 that will let us do things like do some of our Christmas 27 shopping on the Internet, go and do multimedia 28 collaboration, meet with other people across the country PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 28 1 without leaving our home offices and telecommute and all of 2 that wonderful stuff that we have been hearing so much 3 about over the last year. 4 Right now a lot of these technologies are 5 novelties, but two or three years in the future, I think 6 millions of Americans will be using them. 7 The Internet community worldwide is already 8 extremely vast, and we're just seeing it grow by a 9 phenomenal rate. 10 If you can't imagine yourself buying Christmas 11 presents for your cousins and their kids over the Internet 12 via Mosaic, then just remember the ads that have been going 13 around saying, "You will!" 14 Actually that's a very good question, though. Will 15 we? 16 What if we can't afford it? 17 Right now most of us are in some ways back to our 18 student days. We are facing a very steep learning curve 19 both in the new technology and a steep financial curve in 20 being able to afford the level of access that some of us 21 are hearing so much about. 22 You may not recall a time when most offices had a 23 phone and most individuals didn't, but your grandmother 24 probably remembers. In a comparatively short period of 25 time, the telephone went from a convenient luxury item for 26 individuals to a modern world necessity. 27 Internetwork computers are undergoing a similar 28 transformation, but the issues have become a little more PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 29 1 complex. Universal Lifeline phone service is a reality in 2 America, but let's think about something that we could call 3 "Lifelink" service. 4 How much access will people need? Is plain text 5 enough? 6 Well, if we only have plain text, what about 7 catalogs, graphical interface to your remote banking 8 service, the front pages of on-line newspapers with the 9 photo of the day? 10 Okay, suppose we have text and simple graphics, 11 well, now what about on-line college courses, interactive 12 information, high-quality digital images, sales 13 videoclips-- Good Lord, one minute left -- and so on? 14 The average family is going to need network 15 bandwidth that today's small companies have. The need for 16 bandwidth is definitely growing. 17 Well, let me just accelerate right to my major 18 point, which is the Internet historically has been a very 19 open place where people are judged by what they say, what 20 they do, and what they create, and this has led to some 21 amazing innovations. 22 At this point, we're starting to see the Internet 23 become a more constricted place. We're starting to see 24 people trying to parcel out bandwidth. 25 Bandwidth is not a finite resource. "Finite" is a 26 physics term. The wavelengths of light are finite. We 27 have not yet begun to hit the cap on the bandwidth we can 28 have on the information superhighway. We are not pushing PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 30 1 quantum well technology or nanotech or anything like that. 2 Bandwidth is temporarily limited, but it's not 3 finite. So let's not -- end of time -- let's not treat it 4 as though it were the new frontier with only a limited 5 amount of land to grant to people. That's basically it, 6 end of time. 7 ASSISTANT SECRETARY IRVING: Thank you very much. 8 Our next panelist is Rex G. Mitchell, Vice 9 President, Regulatory Planning and Policy with Pacific 10 Bell. 11 Mr. Mitchell. 12 STATEMENT OF MR. MITCHELL 13 MR. MITCHELL: Thank you, Mr. Chairman, members of the 14 board. 15 I'm representing Pacific Bell, and I'm very 16 pleased to be here and to participate in these important 17 discussions. 18 A few months ago Vice President Gore said about 19 the future of telecommunications, It's easy to see where we 20 need to go. It's hard to see how to get there. 21 And I agree that there's a growing consensus on 22 where we need to go. 23 Policy makers and regulators have already made 24 their choice: Free and open competition in the 25 telecommunications and information industry. 26 For example, the Vice President continues to say 27 that competition is critical to the construction of the 28 National Information Industry. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 31 1 The California Public Utilities Commission, in its 2 Infrastructure Report to the Governor, recommended 3 aggressively opening all markets to competition and 4 streamlining regulation to accelerate the pace of 5 innovation. 6 Chairman Reed Hunt of the Federal Communications 7 Commission, speaking at a recent media conference, also 8 made the point that competition makes the most of every 9 opportunity. Given a fair opportunity for a fair return, 10 private resources will leap at the opportunity to build the 11 modern communications network in all markets. 12 Barry Diller, the CEO of QVC, has asserted that 13 government should stop micromanaging these industries and 14 let competing parties concentrate on creating full-service 15 broadband networks. 16 We agree. The time has come to remove legal and 17 regulatory barriers that prevent competition. 18 In our increasingly competitive industry, public 19 policy makers must create an environment that ensures that 20 winners and losers will be chosen by the marketplace and 21 not by the dictates of regulation. 22 When regulation is necessary, it's critical that 23 regulation be applied in an equitable fashion to competing 24 providers of services. 25 We agree with the Vice President about where we 26 are going. We also agree that the real problem is how to 27 get there. 28 The difficulty of the question of how is in the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 32 1 details. 2 As we talk about moving towards a free and open 3 market, we ask, What is the state of open access to 4 information markets today? 5 We believe that the state is good and getting 6 better. 7 Equal access, for example, is available to all 8 interexchange carriers. The state of interconnection and 9 interoperability of networks is moving forward. 10 In our central offices, we now have co-location 11 and expanded interconnection under FCC-tariffed services, 12 and the State of California is moving in that direction as 13 well. 14 Pacific has recently proposed to the CPUC that 15 interconnection to our local exchange network be allowed. 16 We've also proposed that competitors be allowed to 17 connect their loops to our central offices and vice versa. 18 So now we arrive at working through the details, 19 the most difficult part of the process. How should the 20 competing networks interconnect with each other? What 21 features and functions should be standardized and what 22 should be left for the market to innovate? Where should 23 competitors interconnect their networks? What features or 24 functions should a competitor have access to? What will 25 they pay? 26 In some cases our network will be technologically 27 constrained and dependant upon our equipment vendors to 28 respond to interconnectivity and interoperability needs. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 33 1 Sometimes where technically feasible the cost of 2 developing new features may not make economic sense. So 3 what we want to do is to work with information and network 4 service providers in detailed terms specifically addressing 5 their needs and the level of open access that allows them 6 to be competitive without putting us in a position of 7 disadvantage created by regulation. 8 The FCC has already established the means to do 9 that by creating a process that allows information 10 providers to ask for the functions they want. It should be 11 noted that in the arena of our own broadband effort, video 12 dial tone is a common carrier approach to broadband and 13 inherently provides open access for both broadcast and 14 interactive services. 15 We will offer 70 channels of analog video on our 16 new superhighway and 150 to 300 channels of digital video 17 as well as access to an unlimited number of switched 18 digital services. 19 Those are my comments on open access. I will now 20 address the impact of lifting MFJ information services 21 restriction that it has had on the marketplace. 22 I believe that the impact has been enormous and 23 positive. The information industry has grown as Pacific 24 Bell and others have offered new information services. At 25 home or at work consumers are now able to use their 26 telephones in completely new ways. 27 Pacific Bell has made a significant commitment to 28 making information services widely available and PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 34 1 affordable, working to serve the mass markets not 2 previously being served. 3 Since being allowed in the information market, for 4 example, we have installed nearly 600,000 voice mail 5 boxes. Through voice mail services and other products 6 offered by the Bell Operating Companies throughout the 7 country, thousands of Americans have entered the 8 information age. We are optimistic that greater access to 9 advanced telecommunication services will provide 10 significant support to both individuals and communities. 11 Thank you once again for inviting me. We look 12 forward to the information age. 13 ASSISTANT SECRETARY IRVING: Thank you very much. 14 And we will next hear from Dan Pulcrano, president 15 of Virtual Valley, Inc. 16 STATEMENT OF MR. PULCRANO 17 MR. PULCRANO: Assistant Secretary Irving, Deputy 18 Secretary Barram, Commissioners, thank you for inviting me 19 here this morning. 20 I guess you could call me a content provider. They 21 used to call me a newspaper editor. And thanks to this 22 initiative, I am now the CEO of a small high-tech start-up 23 on the information highway. We provide community-based 24 on-line services in several communities around Silicon 25 Valley. 26 My company, Metro Publishing, produces 7 weekly 27 newspapers, including the Sun right here in Sunnyvale and 28 the neighboring Cupertino. Our Los Gatos newspaper is the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 35 1 oldest business in town. It's operated since 1881 2 reporting on births and deaths and elections and fires and 3 earthquakes and other events too small to capture the 4 attention of the major media. 5 Our newspapers report when good things happen to 6 local people such as this. 7 In today's parlance we are a community information 8 system of the traditional sort. And for small community 9 newspapers like ours the information highway represents 10 both an opportunity and a threat to our survival. 11 The new technology can allow us to deliver services 12 to our readers and advertisers in a more timely fashion and 13 to offer information in an interactive environment, and 14 speaking of the environment, to kill fewer trees. But if 15 it creates unfair competition from large utilities and 16 media conglomerates, then the great American tradition of 17 the hometown community newspaper will be only left for the 18 Smithsonian. 19 All we are asking for is a level playing field. I 20 am acutely aware of the issues surrounding universal access 21 because we were denied access. We tried to get on America 22 On Line, but they had signed an exclusive deal. We asked 23 Pacific Bell for N11 services. We were told they weren't 24 available. We tried to set up a mail gateway with systems 25 such as CityNet, and they said no. 26 These types of things close the doors to us. So 27 what I did is I said, well, to heck, we are just going to 28 build our own. So we put up a server. We started our own PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 36 1 on-line service. It's called LiveWire. Next month we are 2 going to introduce the Virtual Valley Community Network to 3 all the cities of Silicon Valley. 4 We offer free dial-up public access to our server, 5 a wide variety of information about schools, municipal 6 governments, nonprofit organizations, along with articles 7 from our newspapers. I believe we are the first service of 8 this type ever started by a weekly newspaper in the 9 country. 10 We are creating a diverse and exciting on-line 11 community. We provide free on-line services and Internet 12 conferences, Internet addresses to local Hispanic, 13 African-American and gay community numbers. 14 We have an active forum for the deaf community. We 15 give bedridden people a telecommute path. We have helped 16 many local public officials and government agencies get on 17 line for the first time. 18 A major school district in the low income part of 19 the Valley will soon be using us to teach students how to 20 manage on-line servers. Dozens of nonprofit groups from 21 historical societies to 12-step programs, Planned 22 Parenthood, Big Brothers and Sisters, nonprofit arts 23 groups. Environmental coalitions are using us to publicize 24 their events and services. 25 I believe we are providing an absolutely essential 26 and vital service to community groups by helping them get 27 on the information highway. We have hired a field 28 representative to assist them. Yes, we make house calls. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 37 1 Our representative goes out to explain the technology, 2 suggests ways to use it, configure their modems and 3 alleviate their anxieties. We even installed the software 4 on their machines and sometimes donate modems to 5 cash-strapped groups, and our software is free. Our 2500 6 users also require customer support, and we give that 7 free. We have a phone number and a staff that is ready to 8 answer their questions. 9 Information management are very labor and capital 10 intensive business. We are investing a lot of money to 11 make this succeed. It will impact my company's profits 12 substantially this year, but I have to do it because we 13 have 150 employees and I want them to have a future. 14 We are not asking you for subsidies, but we are 15 asking that small information providers and small companies 16 have a fair shake. We think that if it is just going to be 17 a national system that will allow the big guys to market 18 national services, small newspapers will go the same way as 19 the small hardware store and the small drugstore which are 20 being put out of business by their larger competitors. 21 We need to wire together the superhighway and 22 mainstream to energize our communities. Remember we 23 created towns and cities first before we built the 24 interstate system. If we didn't, we would have a nation of 25 fast-food franchises, $49 motels and self-serve gas 26 stations. 27 We have to build communities. We have to build 28 local roads, and we can't depend on Internet as the only PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 38 1 solution. We need the intermediate step. We need the 2 people like us to provide customer service to the people 3 and help them get on the information highway. Let's give 4 away some modems. Let's hire some field workers. Let's 5 not fund services competitive to small organizations. And 6 let's encourage market-driven technologies. 7 Thank you. 8 ASSISTANT SECRETARY IRVING: Thank you very much. 9 I will now turn to Leslie Vadasz, the Senior Vice 10 President for Intel Corporation. Les, whenever you're 11 ready. 12 STATEMENT OF MR. VADASZ 13 MR. VADASZ: Thank you very much for the opportunity to 14 address you. 15 Being an engineer I need a security blanket. So I 16 will use the projector here if you don't mind. 17 I would like to talk about our point of view of the 18 evolving information infrastructure. The personal computer 19 is the most important access point for the information 20 infrastructure of the future. It is designed as an 21 interactive device. Telecommuting, distance learning, 22 electronic commerce and many, many other applications are 23 already being done in quite large numbers using the 24 personal computer of a variety of sorts. And it is there 25 in large volumes. 26 By coincidence I was traveling back from the East 27 Coast yesterday. I saw USA Today. The first page of USA 28 Today showed the use of PCs in the home. The statistic PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 39 1 that they quoted was that by 1996, 46 percent of all 2 personal computers will be used in the home. That is a 3 significant increase from 1992 of under 30 percent. And 4 this technology is being delivered in very large quantities 5 to our society. 6 Last year there were over six million personal 7 computers sold to the home alone. And this is just a 8 fraction of the total that was sold in the world market 9 which was over 40 million. 10 So the access point is already there. It is 11 unfortunate that the bandwidth is not. 12 Just if you reflect what happened in the last 13 decade or so, an open competitive computer industry 14 delivered thousandfold improvement in price performance 15 through the society. 16 While I think that we all can be proud of the 17 telecommunication capability that we have in this country, 18 I do not believe that they were able to deliver the same 19 level of improvement in capability over the same time 20 period. 21 We need an end-to-end digital connect of adequate 22 bandwidth. That is really the essential element to move 23 forward. Unfortunately, the current analog environment 24 that we live in is just not enough to go beyond where we 25 are. At minimum we need ISDN capability, and we certainly 26 hope that as time goes on we will be able to benefit from 27 the broadband networks that we all would like to have 28 eventually. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 40 1 What's Intel doing? What we are doing is what we 2 have done in the past. We develop products, technologies 3 and we work with other constituents of the marketplace. We 4 work with the Regional Bell Operating Companies. We work 5 with long-line carriers. 6 Recently we introduced our ProShare 7 teleconferencing product which augment the personal 8 computer to the electronic conferencing product. 9 We have shown interconnect between cable 10 infrastructures and the personal computers for high 11 bandwidth access. We have introduced wireless products as 12 it was mentioned before. And we have started to experiment 13 with CNN to be able to feed news to the computer on the 14 desktop at work. 15 In summary, I believe that the technology is 16 there. The economic benefits are there. The societal 17 benefits I think are obvious to all of us. And I would 18 like to encourage that the policies should really encourage 19 rapid deployment of the technology that we are learning to 20 use more and more. 21 Thank you very much. 22 ASSISTANT SECRETARY IRVING: Our next panelist is 23 Milton Chen, the Center Director for KQED Center for 24 Education and Lifelong Learning for KQED TV. 25 STATEMENT OF MR. CHEN 26 MR. CHEN: Thank you, Mr. Chairman. And good morning 27 members of the Hearing Board. 28 I am Milton Chen. I direct the educational PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 41 1 programming and services at KQED in San Francisco, the 2 largest public broadcasting in Northern California. I 3 appreciate inclusion of public broadcasting in these 4 hearings. 5 My station has benefitted from NTIA's public 6 telecommunications facilities program, which has recently 7 funded the purchase of new broadcast quality cameras. The 8 PTFP has already funded a key part of the national 9 information infrastructure through grants to public 10 broadcasting. 11 We believe that public television and radio provide 12 an important platform or a new information infrastructure 13 that seeks to preserve the public interest and to be 14 accessible to all. In the midst of fast-moving 15 technological change I believe we must keep asking the 16 fundamental question, what is this new technological 17 capacity for? What purposes do we want to serve with these 18 new channels of communication? 19 These new technologies can be used for many 20 different purposes, from making business more efficient to 21 supporting professional research and development, 22 entertainment, education, information and on and on. But 23 the purpose I would like to identify today is this, 24 community building. 25 I think it is very significant that we are meeting 26 here in a community center, although I would add that this 27 community center is much better resourced than many that I 28 could show you in the Bay Area and across the country. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 42 1 There is, as you know, a real crisis of community 2 in this country. It is the root cause of so much of our 3 declining skills as a work force, the violence in our 4 streets, our disaffected youth, our broken families. Who 5 are we as a nation and as Californians and as people who 6 live in the Bay Area, and whom do we seek to become? 7 Since we are living in a global community, how can 8 we better understand our place in the world? Well, 9 community building is what I believe public broadcasting is 10 all about. And public TV and radio help us better 11 understand the many communities that make up our world, our 12 common heritage, as well as our diversity. And every day 13 public broadcasting is working to better inform and educate 14 Americans to live in the 1990's and, I might add in a 15 phrase that I learned when I was in South Africa last fall, 16 in less than 300 weeks, the 21st Century. 17 Just last night, KQED, San Francisco Examiner and 18 Citibank hosted 200 community leaders in our studio to 19 honor unsung heroes in the Asian-American community as 20 parts of our Asian Pacific heritage month programming. 21 This project demonstrates the unique role played by 22 public broadcasting as a community convenor for the 23 important issues of our time and the many public and 24 private organizations with a stake in them. 25 Well, as you know, America's public TV station, 26 APTS, our representative in Washington, is developing a 27 legislative proposal entitled "Public Right-of-way 28 Legislation" that requests a portion of these new PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 43 1 information highways be made available for educational, 2 informational, structural and cultural services. 3 I would like to refer to you, and I have submitted 4 for your attention, a paper, one of the most valuable 5 papers I have read on the state of American media. It is 6 written by Leo Bogart who is formerly executive vice 7 president of the Newspaper Advertising Bureau. It is 8 called "The American Media System and Its Commercial 9 Culture". I have submitted copies. I have a few extra 10 copies for the audience. It is available from the Freedom 11 Forum Media Study Center in New York City. But it largely 12 discusses the overwhelmingly commercial nature of media in 13 this country and how we largely use media, newspapers, 14 radio and television to bring audiences to advertisers in 15 the service of selling product. 16 If we simply allow this new highway to be built for 17 commercial purposes, we will have lost sight of the public 18 interest. I also believe that commercial use of public 19 property, public airwaves, public utilities and other 20 public resources should help fund new noncommercial and 21 informational services. 22 There are many different aspects to the access 23 issue, and these of course include physical, financial, 24 technological access to both hardware and software. I know 25 you've heard this before, but I hope you will consider 26 greater efforts to provide access to schools, public 27 libraries, community centers such as this and other 28 community-based organizations that are vital but much PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 44 1 under-resourced in our communities. 2 I also support the clearance of software and 3 programming rights so that all organizations can make more 4 convenient and effective use of materials. 5 I also urge you to consider issues of human 6 access, which includes access for Americans who are 7 underserved. And in this regard, I would note that public 8 television has pioneered making our medium more accessible 9 for the hearing impaired through captioning, for the blind, 10 through descriptive video on the second audio program, the 11 SAP channel of our signal. 12 The SAP channel has also been used to present 13 broadcasts in a second language for the millions of 14 Americans for whom English is not their native language. 15 Human access also includes enhancing the 16 motivation and skill levels that users need to access new 17 resources. There will be need for new educational efforts 18 on the ground to ensure that the public sees the value of 19 these new services and is motivated to use them. 20 Many technological innovations have failed because 21 they focused on technology and not enough on the human and 22 social factors involved in helping potential users take 23 advantage of them. 24 Public broadcasting is hard at work using 25 communications media for the public interest and to inform, 26 educate and inspire a sense of the community locally, 27 nationally and internationally. 28 I'm sure I don't have to convince this panel of PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 45 1 the quality of our programming, from the MacNeil/Lehrer 2 News Hour to Sesame Street to Nova to NPR's Morning Edition 3 to our local current affairs reports produced by KQED, both 4 television and radio. 5 You may be less familiar with the extra efforts 6 we're making in our Center for Education. I have noted 7 them in my testimony. 8 I would also like to note that we're involved with 9 the San Francisco Multimedia Development Group and have 10 included some materials on tables from them. We helped to 11 house the MGG. 12 They are in support of our testimony today and 13 have been very helpful to us in staying abreast of current 14 technology. 15 ASSISTANT SECRETARY IRVING: Thank you very much, Mr. 16 Chen. 17 We'll next turn to Kari Peterson, the Executive 18 Director of Davis Community Television, the Alliance for 19 Community Media national Board of Directors, and President 20 of the Davis Community Network. 21 Ms. Peterson, whenever you're ready. 22 STATEMENT OF MS. PETERSON 23 MS. PETERSON: Thanks. Well, that's half my speech 24 right there. 25 ASSISTANT SECRETARY IRVING: We won't count that 26 against your five minutes. 27 MS. PETERSON: Okay. Thank you very, very much for 28 the opportunity to speak. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 46 1 As Mr. Irving said, my name is Kari Peterson. I'm 2 the Executive Director of Davis Community Television, which 3 is a public access television center, not to be confused 4 with public television in Davis, an agricultural college 5 town just outside of Sacramento. 6 I'm also the President of the Davis Community 7 Network, a newly formed nonprofit organization dedicated to 8 the creation of Davis's computer network -- our community's 9 on-ramp to the superhighway. 10 Today I'm representing the Alliance for Community 11 Media, formerly the National Federation of Local Cable 12 Programers. 13 The Alliance is a national membership organization 14 that's been around for twenty years. We represent and 15 serve 3,000 access centers and 1.2 million volunteers who 16 provide public, educational and government access 17 television, also known as PEG, across the country. I serve 18 as a secretary on its national board. 19 I'd like to start by reading from remarks made by 20 the Honorable Andrew Young presented at the annual 21 convention of the Alliance for Community Media, which took 22 place last summer in Atlanta. These comments put the 23 Alliance's position and my comments today into perspective. 24 Mr. Young said last summer, 25 "We see the public access 26 movement as a continuation of the 27 dream and the vision of the Civil 28 Rights movement, and the human PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 47 1 rights movement generally. What 2 we were marching for was to get a 3 hearing." 4 In examining the question on today's panel, who 5 has access and who doesn't, I'd like to look at the cable 6 model. Through the 1984 Cable Act, Congress empowered 7 communities to require from their cable operators channel 8 capacity and production facilities for public use. 9 With PEG access TV, for the first time modern 10 telecommunications became barrier free. Free speech and 11 lively debate connected communities, without respect to 12 race, age, gender, religion or financial means. Many 13 communities eliminated the gap between haves and have nots 14 as information providers, democratizing television in a way 15 never before applied to print or electronic media. 16 The modest resources -- channels, facilities 17 equipment -- provided by cable operator via the Cable Act 18 have served as "seed" money for tremendous participation by 19 community groups and individuals. Access centers have 20 provided the resources which otherwise would not have been 21 available to people. 22 Has this cable model been successful? 23 Yes and no. 24 We all recognize, I'm sure, with respect to open 25 access there are flaws in the cable model. I'm not going 26 to go into those. 27 But where it has been supported, public interest, 28 community-based programming is a cable model success story. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 48 1 Many communities have experienced astounding results. 2 African American programming, programs in Spanish, 3 Vietnamese, Farsi, Portuguese, and a wide range of 4 political opinion programs fill public access channels. 5 These channels and centers have fostered localism in 6 communications, another goal of Congress, with programs as 7 diverse and rich as local neighborhoods. 8 Access centers produce over 20,000 hours of new 9 programming per week, more than the output of all 10 broadcasters combined. In this respect, the cable model 11 has been successful. 12 In my written testimony, which you have copies 13 of-- it has a blue cover sheet -- I have cited examples of 14 how access centers have played a vital role in communities, 15 particularly in providing programming for and by minority 16 and traditionally under-represented populations. 17 The examples, and they are truly a small drop in 18 the bucket, demonstrate how access serves nonprofits, grass 19 roots, the disenfranchised, all ethnic and social groups, 20 and so on, and do so in a way that's affordable, in most 21 cases free, and effective. 22 PEG access has thus far been the most American of 23 communications institutions, providing a free opportunity 24 for every person to express their opinion, share their 25 culture and improve their local communities. 26 Finally, the superhighway will be privately owned 27 and operated. Cable and phone companies and other 28 telecommunications carriers do not have the economic PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 49 1 incentives to ensure broad public access. Only government 2 action will ensure full and affordable interconnection. 3 The Alliance recommends that government ensure, 4 through legislation, that: 5 No. 1, at least 10 percent of activated capacity 6 of communication systems be dedicated for public, 7 educational and government use; 8 No. 2, that there be an active outreach effort to 9 community groups, particularly minority and other 10 under-represented groups, to encourage the use of, and to 11 train in the use of, communications facilities. 12 No. 3, that there be dedicated facilities and 13 financial support for public, educational and government 14 use. 15 We further recommend that as Congress considers 16 the NII, it should provide for a structure that will permit 17 community-based, nonprofit organizations to facilitate and 18 administer these local access resources and services. 19 In conclusion, by passing legislation guaranteeing 20 public space, including this expanded definition of 21 universal service, Congress will assure that all of our 22 citizens, not just the wealthy, will be able to participate 23 in the communications revolution of the 21st Century. 24 Thank you very much. 25 ASSISTANT SECRETARY IRVING: Thank you very much. 26 And our last panelist for this mornings's -- for 27 this morning is Mr. Henry Der, the Executive Director for 28 Chinese for Affirmative Action. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 50 1 Mr. Der. 2 STATEMENT OF MR. DER 3 MR. DER: Thank you. 4 Members of the hearing panel, you have requested 5 witnesses in this panel to address who has access, who 6 doesn't. 7 In order to adequately answer these questions, one 8 really has to ask, who has access to what? 9 For decades, federal and state governments have 10 defined "universal service" as affordable access to basic 11 telephone service, the dialtone for virtually all citizens. 12 Rapid advances in information technology and information 13 network laid bare the inadequacy of the traditional 14 definition of "universal service." 15 In the mid-1980s, I had the opportunity to serve 16 with other distinguished citizens on this Intelligent 17 Network Task Force Advisory Committee to Pac Bell, and we 18 acted very independently. And this Intelligent Network 19 Task Force called for a redefinition of "universal service" 20 to include affordable access for virtually all citizens to 21 the intelligent network. 22 Such access would include a package of specific 23 network services deemed by law or regulation to be 24 essential in every day life, and thus included in the 25 regulated rate base. And such services would include 26 access to publicly supported information services, access 27 to information services integral to public education and 28 network provisions to serve customers not fluent in the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 51 1 English language, and network facilities for persons with 2 disabilities 3 It is critical for federal and state policy makers 4 to ensure for all citizens that information technology will 5 be used fully to advance social integration and to avoid 6 further social stratification based on race, class, 7 language or physical disabilities. 8 As the Intelligent Network Task Force cautioned in 9 its 1987 report, if access to advanced information services 10 is treated entirely as a marketplace issue, many citizens, 11 especially the poor, limited English proficient and 12 uneducated, will be disenfranchised from the benefits of 13 the information age and denied access to the information 14 barrier because of a number of barriers. 15 Information technology does not inherently foster 16 equal access, because of the cost to buy equipment, 17 software and the like. Absent enlightened public policies 18 and regulations, information technology will continue to 19 benefit the educated, financially capable segments of 20 American society. 21 According to most scholars and other experts in 22 telecommunications, and as Mr. Vadasz pointed out in his 23 testimony, personal computers are present in approximately 24 30 percent of all American households today. Yet, less 25 than 5 percent of all low-income, limited-English- 26 proficient households have such information-related 27 technological equipment. Unfortunately, most inner cities 28 are not like Sunnyvale. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 52 1 Many public agencies are turning to information 2 technology to serve and conduct their business with the 3 American public. The IRS allows taxpayers to file their 4 annual income tax returns through the information network. 5 As it plans for the 2,000 Census, the U.S. Census 6 Bureau is exploring outreach strategies that will enable 7 American residents to use advanced information technology 8 to respond to the Census questionnaire. 9 And as more and more public functions, especially 10 the application of social benefits, are conducted through 11 the information network, how will the poor, limited English 12 proficient and physically disabled access these functions 13 if they do not own or have access to advanced technological 14 equipment? 15 Last year Pacific Bell committed itself to 16 allocate $100 million to wire two classrooms in each 17 California school. Such a commitment is a good beginning 18 to bring the information highway to the classroom, but it 19 is only a beginning. 20 Of the five million public school students in 21 California, one in five is LEP. Twenty percent of our 22 state's high school students are living in poverty. 23 How can their families afford voice mail and other 24 information services to access these classrooms that will 25 be wired and wherein they need to better communicate with 26 their teachers and other school personnel? 27 Clearly, it is in the public interest for the 28 financial have nots in our society to be an integral part PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 53 1 of the information network and society. Both public policy 2 makers and the private sector must consider and implement 3 strategies that will create an inclusive information 4 network without regard to economic, linguistic or racial 5 status, so that all citizens can access the information 6 network and publicly supported data bases and services from 7 their homes. 8 And in conclusion, I would say we clearly need to 9 look at subsidies and other sources of public support to 10 ensure equal access to this information network. Thank 11 you. 12 ASSISTANT SECRETARY IRVING: Thank you very much, Mr. 13 Der. 14 Before I turn to the other panelists for some 15 questions, I do want to make one comment. A lot of our 16 witnesses this morning have talked about the need for 17 developing our public infrastructure and connecting 18 classrooms and libraries and hospitals and other public 19 institutions and nonprofit institutions. 20 A commitment was made by the President and the 21 Vice President, Secretary Brown and other leaders of this 22 Administration to connect every classroom, library, 23 hospital and clinic by the year 2,000. And as part of that 24 commitment, they initiated the NTIA Grants Program. 25 The application deadline for that Grant Program 26 closed yesterday. 27 Secretary Brown announced the availability of 28 funds on March 7th. Between March 7 and May 12th, we PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 54 1 received 10,000 inquiries. Yesterday were received 1300 2 applications for 20 -- 1300, approximately, between 1200 3 and 1500 -- we don't have an exact number. They were still 4 counting them and processing them, but something over 1200 5 applications for less than -- approximately $26 million in 6 grants. 7 There is tremendous excitement and clearly 8 tremendous interest in telecommunications infrastructure 9 development of our public institutions. 10 I know that many of those grants came from this 11 community. I want to thank those people who are here 12 today, and around this nation, who took the time and effort 13 and energy to prepare the applications. 14 I know there will probably be more than a thousand 15 disappointed applicants, but the important thing is that 16 the public sector, the private sector, public institutions 17 are involved, are engaged in putting applications together. 18 And it's both our hope and our belief that even 19 those applications that don't receive a grant or a matching 20 grant from the federal government will still -- the people 21 who put those grants together will still think about ways 22 to make their dream, their vision a reality and will go 23 forward even without federal money to connect those public 24 institutions to the nation's -- national infrastructure. 25 So I want to thank you for underscoring what we 26 believe is a very important role that this government can 27 play to providing seed money and demonstrating what 28 technologies can do in empowering public institutions to PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 55 1 those who are dependent on public institutions for 2 telecommunications and information technologies. 3 And for that I'm going to turn to Deputy Secretary 4 Barram to begin the round of questions. We're going to 5 hold ourselves to five minutes as well, and so we have 6 adequate time for audience participation. 7 DEPUTY SECRETARY BARRAM: First, let me say that you 8 were an outstanding panel, and you are very thoughtful and 9 not quite provocative enough, though. Let me tell you why 10 I say that. 11 I think that we -- I'm sure we agree that we need 12 to -- that our community, our society can't move into the 13 21st Century in a robust way if we don't bring everybody 14 into the picture. We know that. That's a powerful 15 objective of ours. We need to know how to do that. 16 Let me ask you a couple of specific questions, and 17 I guess they are really kind of directed to Milton, Rex and 18 Kari and Henry. 19 Rex, you get to be on one side of this picture 20 potentially. No matter what you personally believe, play 21 the game on that one side. 22 If we -- how are we going to fund the enlightened 23 public policies that you've asked for? How are we going to 24 make sure that we have the public interest activities occur 25 in a very competitive environment? 26 Do we have a tax on the commercial use of the 27 communications system? Do we take it out of general fund 28 money? How do we do it? PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 56 1 I mean I know this is an impossible question, but 2 try. 3 MR. CHEN: Milson Chen from KQED. I'd like to suggest 4 and propose the notion of a spectrum fee for commercial 5 broadcasters. 6 We believe that public broadcasting is very 7 under-resourced in this country compared to the job that it 8 ought to be doing. 9 In England and Japan, the license fee for the 10 ownership of a television set or a radio is about $120 a 11 year. And in this country the Corporation for Public 12 Broadcasting receives $1 per year per American. And that 13 is why you see so much BBC programming on the air on public 14 broadcasting. 15 It's one of the reasons that we continue to look 16 for funds that are very hard to get from our local 17 communities, local corporations and foundations to do the 18 job that we were given to do. 19 I would propose that you consider something 20 analogous to the use of public lands for farmers. When 21 public land is used for grazing for commercial purposes, a 22 fee is paid. And I would suggest that a similar thing be 23 done with these different bandwidths that we're talking 24 about, that commercial profit from these bandwidths be 25 given over to noncommercial and educational use. 26 MS. PETERSON: I would -- Kari Peterson from the 27 public access field. 28 I'd like to speak to the cable model. As I PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 57 1 mentioned in my testimony, I believe that there are some 2 flaws inherent in that model for a variety of reasons, but 3 I'd like to suggest that as one possible means for revenue 4 to support such community-based efforts to involve our 5 citizens in the dialogue and in the participation and, you 6 know, NII services and products, that we look at the model 7 and the elements of that model that have been successful. 8 You're aware that the cable industry pays a 5 9 percent franchise fee, which is collected by franchising 10 authorities, cities primarily. Cities then have been given 11 the authority via the Cable Act to negotiate with those 12 companies to provide additional funds above and beyond the 13 5 percent. 14 In the City of Davis, our city was successful in 15 getting -- in negotiating with TCI, for example, not only 5 16 percent of the franchise fee, but an additional allocation 17 that went directly to the public access facility to 18 support, namely, citizen access efforts. In our community 19 and in many communities across the country, this has been 20 very, very successful. 21 The cable operator without this requirement would 22 not have the motivation or the incentive to provide for 23 such community-based efforts. 24 The franchise fee model, I think, in its twenty 25 years has been successful. I described some of the 26 benefits of that -- the use of those funds. It's flawed. 27 It's not ubiquitous. 28 You don't see that in all communities, because the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 58 1 cities also retain that money and use it in their general 2 funds. So it's not automatically into the public interest 3 coffers. 4 DEPUTY SECRETARY BARRAM: Let me just ask you -- this 5 is probably going to have to be an opinion unless you have 6 some evidence for it, but if the public in Davis had a 7 choice of a lower cable fee or this 5 percent tax, if you 8 will, for public access, what would they do? 9 MS. PETERSON: In my opinion, if they understand how 10 those monies are used, I think they would be supportive. 11 I believe that the community of Davis, speaking 12 from experience only, is so supportive that we feel 13 confident in going back to our citizens and assessing an 14 additional fee to support perhaps our community network. We 15 are going to try the utility model in that particular case 16 where our community network offers the same sorts of 17 citizen access services that our public access television 18 does. 19 To answer your question, taxes are always 20 difficult. 21 The cable industry I think has done sort of an 22 interesting job of twisting the franchise fee and making it 23 appear as though it is a tax to support public access 24 television when in fact we view it as a cost of doing 25 business and the least that they can do to return something 26 to the community in which they have earned right-of-way and 27 the opportunity to do business. 28 So we don't view it as a surplus or a tax collected PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 59 1 from our citizens to support the effort; rather, an 2 obligation by the operators to return something to the 3 community. 4 MR. DER: Henry Der. 5 Very recently I had an opportunity to serve on an 6 advisory panel called the Education Infrastructure Funding 7 Forum again to Pacific Bell. And this forum made a wide 8 range of recommendations to Pacific Bell and, for that 9 matter, to state public policy makers about how this might 10 happen. 11 I would just hasten to add that -- and this would 12 reiterate what Miss Peterson stated in her written 13 testimony or oral testimony -- that our state and other 14 states should consider and adopt special education-related 15 user rates on the information network. And I, for one, 16 strongly support the need for state and telecommunication 17 service providers to support a customer user charge on 18 telecommunication services imposed on those who are 19 financially capable in order to help fund the education 20 infrastructure and other public benefit infrastructures 21 that our federal and state government deems fit. 22 It's important to acknowledge and to recognize that 23 as much as we advocate the need to access the information 24 network, service providers also want to be able to access a 25 much larger number of citizens, in fact all citizens in our 26 country. And really the value of the network is how many 27 people can request get on it. So it is a two-way street or 28 two-way highway as far as I can see. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 60 1 MR. MITCHELL: I would like to just add to what Miss 2 Rose said earlier. History is instructive here. In the 3 past universal service has been provided by a system of 4 rate subsidies internal to a single provider because there 5 was only one provider. A tax is not that much different 6 than that. The persons that heavily use the network and 7 that used it in low cost areas would help subsidize those 8 that used it in low cost areas and those who can ill-afford 9 to use it. 10 In the future a similar mechanism could be used, 11 only it's got to be just a little more explicit. The word 12 "tax" is a very difficult word to use. It is a very 13 difficult concept to get across. But it is not that 14 different from the way that we provided universal service 15 in the last 50 years. 16 So I think that if we provide what will amount to a 17 small surcharge that's imposed on a large number of users, 18 regardless of who provides the service, that that could be 19 used as the new universal service mechanism to bring the 20 broadband superhighway to all users. 21 We have a similar program in California for 22 low-income users of telecommunication services called 23 Universal Lifeline Service where a tax is imposed on all 24 toll services and used to subsidize the telephone rates of 25 those who can't afford it. I think a model like that will 26 help make sure that the superhighway is accessible by 27 everyone. 28 MR. PULCRANO: I guess since this is a government PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 61 1 hearing we have to talk about taxes and requirements. But 2 there is a voluntary way as well. Every community 3 newspaper in America provides free space for nonprofit 4 organizations to publicize their events. And all the small 5 on-line systems I'm aware of also provide free on-line 6 services to any nonprofit organization that wants to put 7 its material on. 8 I think that this need can be heavily addressed in 9 the marketplace if community-based providers have the 10 opportunity to get on the highway and make money for the 11 services. 12 It makes good business sense. What we need is the 13 ability to go on Pacific Bell's lines and charge like a 14 quarter a minute or a quarter every 10 minutes for our 15 services. 16 If we can make money at it, I think we will be very 17 happy to provide these services because it makes good 18 business sense for us. 19 MS. ROSE: I really have to jump in and say I agree 20 with you, Dan, on that. I have to say I disagree strongly 21 with some of the other panelists. I respect their 22 opinion. 23 The strength of this whole movement to the NII is 24 dragging people into it, getting community participation. 25 And many of us are very well off, but it is very easy to 26 see that with a quarter here and a quarter there, people 27 are going to get nickeled and dimed to death. They are 28 going to hook up to these new services. They are going to PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 62 1 start using them, and they are going to get a scary bill 2 and they are going to say, yikes, and back off. 3 I would like to see funding for this come from 4 fairly aggressive tax breaks for private individuals as 5 well as companies to help support this. 6 If you donate modems and some of your time to a 7 community network, you should be able to do that, get 8 people better informed about how to take those tax 9 deductions, support them in the tax structure. 10 One thing that would bring in probably a 11 substantial amount of revenue is putting a check box on the 12 1040, you want to donate your dollar to the presidential 13 campaign fund or do you want to donate it to the NII. 14 DEPUTY SECRETARY BARRAM: Norm, are you going to tell 15 us about the blowing machine in the restroom on that one. 16 (Laughter.) 17 COMMISSIONER SHUMWAY: My question I guess pertains 18 more to the timing of the events. You have all alluded to 19 various kinds of social programs that need to be looked at 20 and tended and built perhaps. 21 It seems to me that there is a certain time 22 required to do all of that. There's time required to build 23 the necessary social infrastructure as well as the 24 technological infrastructure that we talk about so much. 25 For example, if we are going to resort to some kind 26 of a subsidy for public support for the kind of outreach 27 services that you described, Henry, I think to gain that 28 public opinion that would support that kind of movement PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 63 1 would take some time, some degree of effort on all of our 2 parts. 3 Yet at the same time, this technology is obviously 4 marching on. And it seems to me that it is not going to be 5 delayed. I guess my question is how can we sequence the 6 timing? Should we try to delay the technology until we 7 have this social infrastructure in place? Or do you think 8 it is going to come about naturally as the technological 9 revolution occurs? 10 MR. VADASZ: If I may. I think that that is one of the 11 major issues that we are facing is that by waiting for 12 better technology, we are delaying our ability to learn how 13 to utilize the technology. 14 I think it is almost like saying that I will not 15 learn how to drive a car on 150 horsepower engine but I 16 will wait for a 400 horsepower engine. 17 We must learn how to use it. One of the success 18 stories mentioned was the Internet. It has 20 million 19 users worldwide. That is the good news. But the bad news 20 is that it only has 20 million users worldwide of several 21 billion population. 22 We need to learn how to use it. We need to deploy 23 the technology we have now in order to build more, provide 24 the economic motivation to infuse more technology into the 25 marketplace. 26 And as I mentioned before, I really believe that an 27 open marketplace like what we have learned in the computer 28 industry is the most effective way to rapidly infuse the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 64 1 technology and learn at every stage as we deploy the 2 technology. 3 MR. DER: By my testimony, I hope I did not imply that 4 I was advocating delay in the development of technology. I 5 fully support -- I don't even have to support. The 6 technology is being developed in a very rapid way and very 7 complex ways. 8 Status quo, we know there's already this gap 9 between the financial have and have-not, the information 10 have and have-not. 11 The comments that I and maybe some of the other 12 panel members have offered this morning is try to ensure 13 that that gap doesn't widen any more. And to the extent 14 possible we can fashion social and public policy to narrow 15 the gap, that's what we should be focusing our attention, 16 our ideals, our strategies, to collectively define what do 17 we see to be a full functioning American citizen in our 18 society today that is fully infused with a lot of 19 information technology. 20 And the operative word is how do we want our 21 citizens to function so that we can all be efficient in 22 terms of how we go about doing our public business or 23 interactions with public institutions and the like. 24 MS. PETERSON: I think Commissioner Shumway raises an 25 excellent issue. 26 I think when we consider universal service as we 27 have in past hearings, we are looking beyond just offering 28 access to new tools. We are looking at offering education PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 65 1 programs and outreach programs, training programs and 2 assistance programs so that not only do people have the 3 access but they also know how to use them, that that's a 4 really critical part of introducing this new technology to 5 our citizens. 6 Just very briefly, the model again through the 7 cable industry that has worked so well is the public, 8 educational and government access model where centers that 9 are set up across the country in cabled communities not 10 only have the responsibility for providing the tool of 11 television to the citizens, but they are also very much 12 engaged in outreach and education and training and 13 assistance. 14 My entire staff is available not to produce 15 programming but to teach citizens in the community of Davis 16 how to produce programming. And I believe that that model 17 needs to be carried over into community networking and 18 other such services that allow citizens access to the NII. 19 MR. CHEN: I will just add quickly that our sense is 20 for the right content and for the right technology, the 21 learning curve is very quick. Since last September we have 22 launched a computer network for teachers called Learning 23 Link here in California. We now have over 2500 users. It 24 is a free service with wonderful content on it. But 25 teachers are finding modems, they are finding computers and 26 they are getting on line. 27 If you look at the growth of Internet traffic, 28 Internet users, the way in which some of this is catching PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 66 1 on very quickly, in some ways the time frame has been 2 compressed instead of extended. Again, for the right 3 content at the right price, I think you will find that it 4 catches on very quickly. 5 MR. PULCRANO: I would like to take the existing 6 technology and let people take the first step. That 7 $26,000,000, divide it up by 200 and give out a hundred 8 thousand modems to nonprofit groups. Then let the 9 commercial organizations compete for their business. It 10 would be great. 11 MS. ROSE: That sounds like an interesting idea. That 12 sounds pretty cool, actually. 13 I want to raise the concern, I hear people using 14 again and again these terms like service and access and 15 citizen and education. And they also are all wonderful 16 terms, but they imply a certain one-directedness. 17 I think that if the NII and the worldwide Internet 18 are going to become a part of people's daily lives, we have 19 got to examine our assumptions and get away from this model 20 that we were stretching out our hands with content in them 21 and giving them to people. 22 People have got to have the tools to put up their 23 own content. People will educate other people, bootstrap 24 them, help them along. 25 We don't want to turn this into basically the 26 rampant consumerism scenario that some people have feared. 27 And public television does a wonderful job with 28 educational programs and such, but there is still someone PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 67 1 else's prearranged content that's been packaged together 2 for people to massively accept. 3 Now one of the great things about the Net is you 4 can go out, build your own content, put out your own 5 opinions, publish your own little newspaper on line for an 6 amazingly low entry cost. 7 You can get a $20 a month Netcom or PSI account and 8 put up your own newspaper in the public FTP directories for 9 people to get to. We have got to make sure the tools are 10 there to leverage this infrastructure so that the ordinary 11 Joe or Jane on the street can get their content, their 12 ideas and participate with their fellow citizens. 13 ASSISTANT SECRETARY IRVING: I'm going to now turn to 14 Commissioner Knight. 15 COMMISSIONER KNIGHT: Just a comment. As I sit here 16 listening to people make comments, it always strikes me 17 that we really don't know quite where we're going and what 18 we're really trying to achieve. And we're focusing on what 19 this brave new world is going to be without really being 20 able to describe what it all entails. 21 ASSISTANT SECRETARY IRVING: The mike isn't on. 22 COMMISSIONER KNIGHT: Is it on now? Yeah. 23 And I guess one of the things that I as a 24 regulator coming into this and trying to sort out what the 25 rules of this is going to be in order to try to move this 26 ahead as quickly as possible, I find myself saying, what is 27 it that we can do as government regulators to ensure we get 28 as many people into this to commercialize it as much as PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 68 1 possible so that we don't get into a world of subsidies? 2 I hated to hear you say that because you're 3 dealing with government representatives here, that we have 4 to deal with taxes. I'm not sure that that's necessarily 5 true. 6 And in fact, I think it's dangerous to believe 7 that actually. 8 That when I look at small groups like the small-- 9 the Multimedia Development Group that is silently working 10 over in Media Gulch in San Francisco and doing some very, 11 very exciting things, that those are the kinds of 12 organizations that we ought to turn our attention to, to 13 look at trying to promote innovation, and for them to be 14 able to participate commercially to drive business to get 15 more people into the process and to get away from our 16 focus, which unfortunately I think we're wedded to, is the 17 singular model of a monopolist in this business. 18 We are trying to disengage that now. And instead 19 of marrying ourselves to the idea of a one-entity provider, 20 that the more people we get participating in this to 21 compete, that we will be able to bring more people into the 22 circle. 23 Obviously, that is not going to get everyone into 24 that circle and for us is to think through what is that 25 threshold where we can define what -- how do you define 26 universal service that either would be supported by 27 government subsidy or some kind of tax credit program, or 28 what have you, but to try as much as possible to get PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 69 1 different providers in here to offer services that can be 2 marketed out there to pay for themselves from the 3 marketplace as opposed to being supported from a subsidy 4 with government. 5 So I would -- some of the comments that you made, 6 Mr. Pulcrano, I think are quite necessary for us to keep 7 our mind on in terms of how to develop them forward. 8 MR. PULCRANO: I worry the big subsidy programs, too. 9 These several-million-dollar initiatives to create new 10 technology seem to be biased towards platforms like 11 Internet and Mosaic. 12 And these platforms don't offer the opportunity 13 for community groups to provide customer service and 14 assistance to nonprofits and community groups. 15 So I think that any subsidized initiative, whether 16 it be CommerceNet or Smart Valley or any other, be required 17 to hook up with other community networks and not be an 18 Internet-exclusive platform or a Mosaic-exclusive platform. 19 You know, we want to promote the competition. 20 ASSISTANT SECRETARY IRVING: What platforms should 21 they be -- if I can step on your time a little bit -- what 22 platforms specifically would you want them to also be 23 consistent with? 24 I mean because there is a -- there is a tension 25 here in that we see growth of Mosaic, we see growth -- I 26 mean Internet from 3 million in 1992, when I was on the 27 Hill, to 20- to 25 million today. 28 So clearly there is a desire for people to use PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 70 1 Internet. Tools like Mosaic are making it -- people who 2 are, like me, relatively technologically illiterate to use 3 that technology, and it's taken them out of kind of a wonky 4 kind of an atmosphere and really expanded it. 5 I was up over in Harlem on Monday, and I'm 6 watching kids pointing and clicking their way literally 7 around the world. And I don't know that they would have 8 been as excited using FTPs to go around the world. Maybe 9 some of those kids would have been, but not all of them. 10 What should we be doing, in your mind, because 11 throughout your testimony, you have concerns about 12 subsidizing the wrong people? Who -- or giving grants to 13 the wrong people, and it seems to be a tension here. 14 MR. PULCRANO: Well, I think it should be platform 15 neutral. 16 I'm not proposing a different platform. I'm 17 saying, yes, Mosaic is a great platform, but there are 18 other great platforms available. Don't cut them out. 19 For example, we use a graphical BBS-type program, 20 which we've customized, and we like it because it, one, 21 allows to us package the information with some personality 22 that reflects our personality. Just like a newspaper has a 23 logo and identity, an on-line service has to, as well. 24 So what we would like to do is be able to gate to 25 it, have our community system gate to CommerceNet or 26 whatever. We gate our mail to the Internet. We pull 27 conferences off the Internet, and that's really good. 28 I see the Internet as this huge transit -- PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 71 1 transportation system, the superhighway that connects to 2 local roads. And I see us as the local roads. 3 I don't think everybody needs an eight-lane 4 freeway in their front yard, and that's where the tension 5 between Main Street and the superhighway comes in. 6 ASSISTANT SECRETARY IRVING: But then I'm listening to 7 Mr. Vadasz, who is talking about we do need ISDN and 8 broadband to -- ISDN deployed everywhere as soon as 9 possible, and broadband is the ultimate vision. 10 And I wanted to talk to Mr. Mitchell and say, you 11 know, is there -- is there going to be -- can you make a 12 business out of that? 13 If we required ISDN -- and I'm not saying that 14 either we or the states would -- or if we required 15 broadband to every home or as many homes as practicable as 16 soon as possible, is there a business to create the vision 17 that Mr. -- Is his vision marketable, is it a market-driven 18 vision? Or is it going to be a problem if we said, he's 19 right, let's do it, can you make money out of that, and you 20 are a for-profit company? 21 MR. MITCHELL: I think we can make money doing that. 22 ASSISTANT SECRETARY IRVING: So then you could live 23 with his vision of ISDN immediately and broadband to the 24 home very rapidly? 25 MR. MITCHELL: Yeah, I think we can. 26 I think that ISDN, we've made a commitment to make 27 ISDN availability universal by 1997, and we plan to keep 28 with that; but there are other costs associated with PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 72 1 purchasing the ISDN service that aren't a part of our 2 network. 3 The ISDN kind of modem, the computer that's going 4 to use those kinds of services and so forth are the things 5 that Mr. Der, I think, is concerned about. 6 ASSISTANT SECRETARY IRVING: So is that an enabling or 7 disabling technology then if you -- I mean are you going to 8 create a larger span between the haves and have nots if the 9 additional costs aren't going to be able -- if the LEP 10 population, low-income population, rural population, which 11 are going to be higher cost, are they going to be 12 enfranchised or disenfranchised by an ISDN or a two-way 13 broadband type of a universe? 14 MR. MITCHELL: Well, I think they'll be -- I think 15 they'll be helped by it. 16 I think that the people have -- if we're not 17 careful, people that have money will have superior access. 18 That's why we've presented proposals that will 19 bring them immediately or as soon as possible into the 20 schools, so that at least everyone would have a community 21 node that they can make an access to schools and libraries 22 and will be a community node. That's a good start. That's 23 a good place to start. Then ISDN is a good technology 24 that's going to be universally available now while we're 25 trying to build a broadband technology that will be 26 universally available in 10 or 15 years. 27 ASSISTANT SECRETARY IRVING: Well, let me ask you a 28 question that you won't have time to give an answer to, if PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 73 1 I may, because I've got to turn to my colleague. 2 But my question, there is a community in Silicon 3 Valley where 50 percent of the households have PCs at home. 4 They are connected on-line, and they have modems connected 5 to those PCs. 6 There are -- we are talking in a city like 7 Chicago, where I also spent some time and that Mr. Barrett 8 knows -- is very familiar with, you have a bank that did a 9 survey where fewer than 2.5 percent of the bank's customers 10 -- so it's a different, it's not just Chicago generally, 11 but the bank's customers, fewer than 2.5 percent of their 12 customers had both PCs at home and were connected on-line 13 with a modem. 14 So you have a relative disparity there about, you 15 know, 2,000 percent or, and I -- how do you get -- what 16 happens to the kid in Chicago who, let's say -- and let's 17 say we are successful in connecting the schools in Chicago 18 or the libraries in Chicago. And you have a 2:1 or 3:1 or 19 4:1, which is optimistic, computer-student ratio. So there 20 are four students to every computer, five students to every 21 computer. So a kid gets a half an hour or 45 minutes a day 22 on the computer at home. 23 What happens to that kid when he or she is 17 or 24 18 and they go to school with a kid who has it in their 25 community center, in their school, but also at home they 26 are on it for four or five hours a day, because they live 27 in a -- how do we get that kid at home the same kind of 28 access to the information they need as well in school? PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 74 1 Because you're not going to get a kid more than 30 or 40 or 2 50 minutes. 3 The kids I saw when I was in New York this weekend 4 were using their lunch hour at their own -- it was there 5 own voluntary lunch hour. I just walked into the school to 6 see what they were doing at this particular school, and the 7 teacher wasn't there, but it was voluntary. 8 How do I make sure that kid has the same -- it is 9 my job, it is my responsibility to make sure they have 10 access to those same kinds of technologies? How do we get 11 there from here? 12 And we are seeing right now, as we speak today, a 13 growing disparity in terms of knowledge of, and use of, 14 these technologies. 15 And then there is going to be another problem, 16 that clearly large corporate entities are going to have a 17 great opportunity to feed the one way, but some of the 18 questions we're talking about, like spectrum fees, I've 19 been there since 1982 involved in debates in Congress on 20 spectrum fees. It's not going to happen anytime soon. 21 I don't mean to rain on anybody's parade. It's 22 very unlikely. I would say on a scale of one to ten, it's 23 a minus five that we are going to get spectrum fees on 24 broadcasters. 25 So if that's not a realistic vision, how do we get 26 a realistic vision? 27 And I'm stepping on -- 28 COMMISSIONER BARRETT: That's quite all right, because PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 75 1 I -- you want your question answered. 2 Mine is going to go a little bit over, and I know 3 you and the Deputy Secretary had something to do. I will 4 forego mine for a while. 5 I guess my concern is that I hope we do not burden 6 what I think can be an even flow of information with all of 7 the subsidies in the world. 8 I'm against, generally, subsidies. 9 What I am for is subsidies to people who have a 10 need for it and who simply cannot afford it. I think we 11 ought to be very careful to make the assumption that 12 everybody 65 years old that lives in California and Florida 13 is, in fact, poor and everybody who is black is, in fact, 14 poor or Hispanic or Asian American. 15 My concern is that we do not burden a perfectly 16 great possibility of having technology enhance our lives 17 through all of the ways I think that Kari spoke of -- and 18 certainly, Ms. Rose, you spoke of -- with all of the 19 burdens in the world. 20 And I guess my concern is that I looked at Henry's 21 comments here, and you were a member of that Intelligent 22 Network. 23 Barbara O'Connor, who also was a member of that, 24 has suggested that even at that time in 1987 that you were 25 not getting the services that -- many of the services you 26 wanted, rather, could have been provided at that time and 27 they were not provided by the telephone companies. 28 What makes you think they are going to provide it PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 76 1 now with all of the updated and a new deployment of 2 technology? 3 And those are my questions. I don't want an 4 answer to them as opposed to being able to come back and 5 raise those questions at some point after you have your 6 conference, because I think that's equally as important. 7 But I just want to make that statement, where we do not 8 lose the vision of what these things are being driven by, 9 not necessarily the information highway. 10 I think that it is clear that this Administration 11 wants the things that Larry and Deputy Secretary Barram 12 talked about, but I also think on the other hand from the 13 corporate perspective it's being driven by a need for new 14 revenues and earnings growth. And that's okay as long as 15 we have our vision sitting up here as regulators on what we 16 want out of the system. 17 I don't know whether we have determined that out 18 in the audience yet. So I want to come back and do that, 19 but I think it's important to do the press conference. 20 ASSISTANT SECRETARY IRVING: Well, I think it's better 21 to keep the flow. I'd -- rather than artificially dismiss 22 and not have the audience participation right after this. 23 Let's not be held to artificial agendas or programs, that 24 if anybody would care to respond to the Commissioner's 25 question -- 26 COMMISSIONER KNIGHT: I just want to add on one other 27 point, since I started this line of questioning, is that so 28 that people don't throw eggs at me after I step down from PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 77 1 here, when I say commercialized, I think the opportunity 2 for some new thinking, innovative thinking in terms of a 3 state or federal government regulator is what role does a 4 government play in this? 5 Because when you look at a KQED, whom I would 6 consider a service provider, as we have more people come 7 into this circle, as I call it, to be an information or 8 service provider that there are ways for those kinds of 9 organizations to be, quote, unquote, subsidized to help 10 lessen that gap that you're referring to also. So it's 11 just not commercial enterprise as we normally would fashion 12 it in that making profit. 13 We need to rethink how organizations like a KQED 14 or Multimedia Development Group can participate in this to 15 lessen that disparity between groups. 16 ASSISTANT SECRETARY IRVING: And let's try to get a 17 response to any or all of those thoughts. But if they 18 could be brief, just because I really do want to have time 19 for the people who have been waiting patiently from the 20 audience who want to make comments as well. 21 MS. ROSE: I have just been dying to respond to your 22 concern, which I think is very valid, about the level of 23 access for the, you know, poor youngster in Chicago versus 24 the more wealthier peers. 25 One thing that seems apparent to me is that some 26 of you folks, you know, are extremely busy, and you may not 27 be as familiar with some of the low-level technology as us 28 who are slugging it out in the field. I wish I had a white PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 78 1 board right now. 2 But it is entirely possible to participate fully 3 in technologies like Mosaic with a modem that costs about 4 $80 right now. 5 My 56 K circuit at home is not being installed 6 until the end of the month. I'm starting a service 7 provider business, and I get on with a 9600 baud modem. And 8 if I'm downloading, you know, a gorgeous picture of the 9 Space Shuttle from NASA, sure, it takes five minutes, but I 10 get that picture. 11 ASSISTANT SECRETARY IRVING: But you need a PC. 12 MS. ROSE: You need a PC, or you need a smart 13 terminal. Some vendors are using that. 14 ASSISTANT SECRETARY IRVING: But you need -- I don't 15 disagree with anything you are saying, and a PC is down 16 about a thousand dollars o below for an entry level, but 17 for some families, a thousand dollars on a PC is not easily 18 attained. 19 MS. ROSE: I understand that. 20 The other thing, though, is that people are 21 working on the underlying carrier technologies on the Net. 22 So that, for instance, you could have the same body of 23 information, and people could access it with text-only 24 clients. There are text-only equivalents of the Mosaic 25 browser, so people with an ordinary terminal can get at the 26 information and use hypertext and so on. 27 They won't be able to see the pictures. That is a 28 concern, but they are not entirely shut out. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 79 1 There is a lot of text-based stuff out there, and 2 people are working to make it so that it can be used 3 transparently so that the same body of information as put 4 out on the network, and people just access it with whatever 5 tools they have at hand. And they don't have to worry 6 about what form the information is in. There's a lot of 7 development work going on in that right now. 8 ASSISTANT SECRETARY IRVING: Henry, and then Kari. 9 I really do have to cut this off, because we want 10 to get some full participation. 11 MR. DER: I just want to respond very briefly to 12 Commissioner Barrett. 13 I would agree with you that as we look at social 14 and public policy with regards to access to the information 15 network, that if there are programs to assist, that they 16 truly are targeted towards the needy, the poor, or those 17 who have to overcome substantial barriers. 18 And for that reason, I think this is a much more 19 difficult problem to try to overcome, unlike any other kind 20 of federal or state program where there's involvement of 21 that nature. 22 Because some of those schools and classrooms are 23 already wired before many inner city schools or schools 24 that are low funded -- not only are the other classrooms 25 deprived, but the very families that are served by that 26 particular school, as Assistant Secretary Irving commented, 27 those families that go to that school, they can't access 28 whatever node or whatever equipment may be at that school PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 80 1 because they don't have the equipment at home. 2 I think the important policy that we have to look 3 at is how can poor families access the network from their 4 homes, because we can't expect poor families to be going to 5 essentially a pay telephone booth in the middle of -- four 6 or five blocks away. It is not realistic. They will not 7 access it in a reasonable way. 8 MS. PETERSON: In the interest of time I don't have a 9 lot to add to that. But I would just agree that it is a 10 huge problem. It is going to be a long time before 11 computers and connectivity is ubiquitous in everyone's 12 homes. 13 I do think that there needs to be funds available 14 to not only provide the tools, but to provide the education 15 and outreach, as I mentioned earlier, and do expect and 16 hope -- expect to offer and hope to get the support of 17 regulators and legislators for the creation of funds that 18 allow for communities to develop public access terminals 19 with people available to help people that cannot get access 20 other than to access via public access terminals. And I 21 will let it go at that. 22 ASSISTANT SECRETARY IRVING: Thank you. 23 What I am going to try to do now is we are going to 24 turn to the public participation part of this. The first 25 of our audience participants, and I would like to make 26 special recognition, is Liz Kniss, the Mayor of Palo Alto. 27 She's in her third term and previously was on the Palo Alto 28 School Board. Professionally, she works at Sun PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 81 1 Microsystems. 2 And as provided in my remarks here, Palo Alto is 3 the first city providing service on the Internet. 4 I would also like to thank the Mayor and the 5 citizens of Palo Alto because when we were scrambling to 6 put this hearing together, they were also very supportive 7 of the idea of the possibility of going to Palo Alto, which 8 is a place I spent some part of my life in, as you know. 9 Sunnyvale is the place that Deputy Secretary spent a lot of 10 his life in. And some of you may also know, a Deputy 11 Secretary outranks an Assistant Secretary. 12 (Laughter.) 13 ASSISTANT SECRETARY IRVING: So, Mayor. 14 STATEMENT OF MAYOR KNISS 15 MAYOR KNISS: Good morning. High Dave and other 16 members of the panel. 17 I'm delighted to be here today. I'm Liz Kniss, the 18 Mayor of Palo Alto. I am a little surprised that we 19 actually aren't included in today's open access hearing. 20 When we heard of this demonstration, we did ask to be a 21 presenter, although we are not represented today. 22 However, as we always say, having said that, I am 23 still delighted to have the opportunity to speak to you for 24 two minutes. 25 When I was elected mayor this past January, I put 26 technology as one of my main goals. 27 We are very fortunate. It resulted in us going on 28 the Internet in late January. And I currently receive PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 82 1 E-mail interactively, two-way street, from my constituents, 2 fortunately at Sun Microsystems where I work, and I use a 3 Mosaic interface. It is very exciting to be able to do 4 that. I have had hundreds of messages since late January. 5 Regarding public access, we currently have public 6 access in city hall, in our lobby. We have two computers 7 down there. They are also interactive, on the Internet. 8 They have extensive information on them using the Palo Alto 9 Pages. The Palo Alto Pages have a great deal of 10 information on city government in addition to information 11 on our city restaurants, maps, so forth. 12 We are interactive with our schools, with the Palo 13 Alto Weekly and Stanford. And that will also be available 14 for World Cup this coming June. 15 Long-range, we need universal service, of course. 16 And that will either be facilitated by a public or private 17 communications utility. We do have our own utilities, much 18 as Santa Clara does, in Palo Alto. 19 The last thing I would say is come to our technical 20 showcase May 23 from 4 to 7 in city hall where we will show 21 you Internet demonstrations, GIS, optical imaging, our 22 library on-line data base and also our mobile computing in 23 our police cars. That is something new, and we are very 24 excited about it. We also have imaging and a machine for 25 the disabled. 26 Thank you. Made it to the end of my two minutes, 27 and I appreciate the chance to be here. 28 ASSISTANT SECRETARY IRVING: Thank you again. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 83 1 Now we'll here from Marianne Mueller from Sun 2 Microsystems, Inc. 3 DEPUTY SECRETARY BARRAM: Let me make a comment. 4 Dale Moody, who is a journalist with the Sunnyvale 5 Sun, just told me today is the first Friday the 13th of the 6 year. On that first Friday 13th of the year, you get to 7 blame somebody else. So Larry took great advantage of 8 that. 9 (Laughter.) 10 STATEMENT OF MS. MUELLER 11 MS. MUELLER: Hi. I work at Sun Microsystems, but I 12 should say I am definitely here on my own and not speaking 13 for my company and I don't think they know I'm here. 14 ASSISTANT SECRETARY IRVING: They will soon. 15 MS. MUELLER: And I'll be working late tonight to make 16 up for it, Boss, I promise. 17 I want to say really briefly two main things, one 18 about public access and the other about the structure of 19 the Net. I think what we need to do clearly is fund 20 libraries. We are not funding them now, especially in 21 California. I think librarians should be in the driver's 22 seat. I hate the information superhighway metaphor, but 23 librarians should be in the driver seat, not the 24 technonerds, and I speak to you as one of the nerds. 25 You look at what's out there now with Gopher and so 26 on, you know, either you get 8000 hits or you get zero 27 hits. So the nerds are really good at the technology. 28 They are really good at building all this stuff. Nobody PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 84 1 can navigate it. Information is not knowledge. So we need 2 to make sure people who understand how to navigate 3 knowledge are driving this more than they have been so 4 far. 5 I want to make sure we don't let the TV and radio 6 history of losing the public aspect of the space -- we 7 don't want to let that happen to the Internet. 8 As you can see, I never speak publicly. I just sit 9 in front of a computer and program. 10 The second thing I want to talk about real briefly 11 is I think even though it is a joke and a lot of people are 12 making jokes about the information superhighway, we need to 13 get rid of this metaphor and in a serious way and also 14 don't think of the Internet as being what the information 15 future is going to be. 16 The Internet has shown us that a net of nets work. 17 So what we want to build is a net of nets which will be 18 serving different interests, and they will have different 19 privacy and security needs and they can have gateways 20 between these networks. 21 You could have a kids playground network, a 22 commercial network, an academic research Internet style 23 network that has complete freewheeling open access and a 24 religious network, you can have an underground network and 25 then let these networks play together. 26 This way, I think if we think of it that way rather 27 than having this one big monolithic information 28 superhighway system with on-ramps, then you are not -- you PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 85 1 are going to avoid the problem where every little dispute 2 or conflict floats up to being a global wad of chewing gum 3 that stops everything from happening. 4 Right now there is all this concern about while 5 children have access to, say, unsuitable material. Well, 6 why let one little conflict like that blossom up and gum up 7 the whole works? 8 So two really quick points. What happened to the 9 peace dividend in terms of funding? Also, is there any NII 10 web page, and how do we make sure this isn't a one-day 11 deal? How do we get information to you and from you in an 12 ongoing way, not just right here today? 13 Thank you very much. 14 ASSISTANT SECRETARY IRVING: Thank you. 15 Let me answer your specific question and make one 16 brief comment. 17 There is an IITF web page, and on that web page 18 every press release, every speech by the Deputy Secretary, 19 the Secretary, the Vice President or even the Assistant 20 Secretary on this issue, all kinds of information, the 21 Agenda for Action, the grant proposal, all of that is on 22 the IITF web page. It is a hypertext where there are 23 bulletin boards. There are numerous ways to access it. 24 You can ask some of the people from NTIA how to access the 25 information with regard to the IITF, information task force 26 activities. 27 With regard to the one point you made, I just want 28 to respond to as far as libraries. We believe in the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 86 1 Administration the important role libraries have to play in 2 this. That is one of the reasons in the grants program 3 libraries are key to what we're doing. 4 But there are two things that are troubling. One, 5 David McCullough who wrote the Truman biography, noted in a 6 recent article that as we went through the recession we 7 didn't close one library. 8 Libraries around this country are in constant 9 danger of being closed and of having their hours 10 shortened. And they are important community access 11 points. 12 But there is another part that also has to be 13 addressed, and that is we had Jean Simon who heads the 14 President's Library Commission who was in my office maybe a 15 month ago. She gave me some statistics that are absolutely 16 astounding. If you live in a town of over 500,000, you 17 have about a 85 percent chance of having your library 18 connected to the Internet. Libraries in large cities have 19 better resources within those libraries. If you live in a 20 town of under 10,000, you have about a one in five chance 21 of having your library connected to the Internet. 22 So those communities who are most resource poor, 23 you have less likelihood to be able to get out to all the 24 resources on the network. 25 We do as a nation have to do something about that. 26 And we are trying hard not just to look at the hardware and 27 software end but also the human resource end and training 28 librarians and work with librarians to make sure they can PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 87 1 help their constituents and users. So I did want to make 2 that point. 3 Somebody had their hand up. If you could make it 4 very brief, sir. 5 MR. PULCRANO: Yes. I just wanted to say regarding 6 your point, you don't have to go to Harlem or Chicago 7 because 15 miles from here, east San Jose, they don't have 8 computers in the schools. And one of the things that we do 9 is we pick up computers in Cupertino and drive them over to 10 the east side and give them to the schools. 11 ASSISTANT SECRETARY IRVING: You could find that in any 12 impoverished community in this country is going to have a 13 similar problem. 14 MR. PULCRANO: I get scared the expensive technology 15 that the corporate sector wants. And back to your point, I 16 think we shouldn't push it too fast. We need to take it 17 step by step because as the technology becomes more 18 expensive, the disparities will increase. 19 ASSISTANT SECRETARY IRVING: We would like to now call 20 up Catherine Hung from the West Valley Community College 21 District, Saratoga. 22 STATEMENT OF MS. HUNG 23 MS. HUNG: Members of the hearing panel, I wanted to 24 give you a local picture and I am going to start with my 25 three suggestions based on what I heard on the panel before 26 going into the local picture. 27 But I think specifically for the grant program, for 28 those thousand people who will be disappointed, I hope that PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 88 1 your office will be able to work to bridge and connect some 2 of us together for a next step so that even if it is a 3 business partnership offer calling this particular 4 newspaper -- I would like to talk to you later -- so that 5 we don't work in isolation in competition for the same 6 small pie of money. 7 Two other points. One is to recycle outdated 8 equipment since we can't slow down technology, and also, I 9 think to continue to develop your social vision of focusing 10 on the community. I think that's really dire. 11 So this is a brief picture of what we are doing and 12 what we hope to do. West Valley Mission has as a 13 consortium already delivering teleconferences and one-way 14 telecourses with our schools, community service agencies 15 and businesses. This summer Pac Bell is sponsoring our 16 library as a demo project. 17 We need to expand to go into high schools. In San 18 Jose K through 12, 41 percent of the students are 19 Hispanic. 20 I want to say that it is difficult for people to 21 hook up. And I am lucky that I was able to sort of borrow 22 some equipment and only hope that more public places will 23 be able to offer access and training. 24 I want to say publicly for the record that the NTIA 25 staff has been, particularly your education staff person, 26 Tom Wasilewski, has been very helpful. 27 I am an unknown regular American citizen, but he 28 has not only heard my calls but we exchanged E-mail PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 89 1 regularly over the weekend in response to some questions I 2 had about the grant program. 3 Your staff is really shattering the government 4 stereotype of inaccessibility. 5 (Applause.) 6 ASSISTANT SECRETARY IRVING: I will tell Tom that, but 7 I will also pass on your kudos to the entire staff. They 8 are working very hard as we speak to get these grants out 9 by October 1. So thank you very much for the public 10 recognition of their hard work. 11 Now I would like to call up Bob Roy from the 12 Wireless Communications Alliance. 13 STATEMENT OF MR. ROY 14 MR. ROY: Thank you. 15 I am Bob Roy, a Sunnyvale resident and Director of 16 the Wireless Communications Alliance. Wireless 17 Communications Alliance is a Silicon Valley nonprofit 18 mutual benefit corporation. 19 Over 70 companies have participated since its 20 founding last June. I am providing excerpts of written 21 testimony prepared by Rick Allenger, a member of our 22 board. Wireless technology offers an opportunity to 23 address the universal access goal of the national 24 information infrastructure by providing communications to 25 portable equipment and mobile dispersed users. 26 Public access points for the NII and other 27 information sources can be ideally served with wireless 28 gateways that join Internet and other networks. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 90 1 We believe that unification of PUC regulation led 2 by the FCC could encourage interoperation among a variety 3 of the information networks. 4 Today's regulations which prohibit combining of 5 paging, cellular telephone and other communications in one 6 band become unnecessary restrictions when spectrum is 7 shared with high-speed digital bursts of signals in the 8 air. 9 Regulation of duty, cycle and power, not content of 10 an information service, is one way to ensure appropriate 11 coverage. 12 Service access regulation could ensure that no one 13 service overwhelms the NII and wireless capability. 14 One limiting belief is that wireless usage needs to 15 be channelized. Package transmission and CD and many 16 technologies are only two of many ways to provide efficient 17 use of spectrum for data communications. Too often 18 channelization which worked well for dedicated voice 19 communication works directly against high performance data 20 communication. 21 In summary wireless communications is a critical 22 extension for universal access to the NII. These 23 extensions could be piloted on the Internet. 24 Thank you. 25 ASSISTANT SECRETARY IRVING: Thank you, sir. 26 Now is Mark Roest from NGIN Research in Santa 27 Cruz. 28 PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 91 1 STATEMENT OF MR. ROEST 2 MR. ROEST: I would define open access broadly to 3 include those who have and those who have not mastered 4 liberal arts and technical education and those whose native 5 language is not English. 6 Displays of models of reality are key to 7 understanding, whether the subject is geography and the 8 environment and large scale economics, the natural and 9 physical sciences, local development opportunities, or the 10 organization of powers of institutions such as government 11 and education. 12 The current environment is forbidding technically 13 and economically to all but those with significant 14 education and/or those who have been introduced to it. 15 Moreover, it is so fragmented that most of those who use it 16 do so in a limited range of ways. 17 My answer to this is to propose a system of graphic 18 interfaces that permeates the information highway relating 19 both the parts and the whole to the users, whoever they 20 are. To do so, such a system must display organization of 21 the physical globe and the interacting systems that support 22 life in society and in the natural world, and two, provide 23 a range of modalities and interaction that can be 24 self-selected by the members of different user groups. 25 For example, an engineer could define the 26 parameters of a set of technical information desired, or a 27 recent immigrant could identify her nationality and 28 location and find a guide to cultural, social, educational PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 92 1 and employment resources along with information about how 2 this society works, all in her native language and be able 3 to put out things herself. 4 The foundation that makes this possible, as well 5 as solving a host of technical problems, is to create a 6 systematic architecture for knowledge and data that itself 7 reflects the organization of reality. 8 An old parallel for this is the Dewey Decimal 9 System for organizing the old greatest repository of 10 knowledge and data, the library. 11 Information was thus organized by topic, and 12 topics were related to each other. Let's build this 13 systematic organization of information in layers, starting 14 with geography and the natural sciences, then cultures and 15 how they relate to their environment, then economic 16 structures and progressively finer detail, and so forth. 17 And I could help do that. 18 ASSISTANT SECRETARY IRVING: Okay, thank you. 19 We'll now hear from Dave Crocker of Silicon 20 Graphics. 21 STATEMENT OF MR. CROCKER 22 MR. CROCKER: Thank you for this opportunity. 23 As with the speaker from Sun Microsystems, I'm 24 also here on my own behalf and not my company's. My name 25 is Dave Crocker. I have been focused over the last 22 26 years on technical and marketing planning design and 27 development of large-scale communication-based systems. In 28 particular, I have been heavily involved in the Internet PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 93 1 technology with a particular focus on the electronic mail 2 standards, including management of the standards process. 3 Four points, I hope I can fit them in. 4 First and foremost, I completely concur with the 5 very strong statements that we need a level playing field 6 both for consumers of the NII and for providers of NII 7 service. That's the bottom line. The only question is how 8 we achieve that. 9 In my own opinion, as with everyone else, I'm an 10 addict for high bandwidth, but the benefits of current 11 technology for dial-up data access are highly underrated. 12 It is extremely useful. The kinds of numbers you're citing 13 for Internet growth today are evidence of that. I hope we 14 don't lose sight of that fact. 15 Second of all, while I can't go into the detail, 16 obviously I would like to strongly commend to you the 17 Internet model not just for the technology, not just for 18 the sex appeal we have today. There is an economic 19 structure for funding today which does not depend -- 20 although there is federal money, that does not depend on 21 it. And there is an approach to developing technology and 22 service that is in place on the Internet which is extremely 23 broad based and open access. 24 The standards process that we use for creating 25 this is open to every participant at no incremental cost 26 everywhere around the world once they can gain access to 27 the Internet. The difficulties of gaining access to the 28 Internet have been stated. They are correct. We need to PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 94 1 fix them. But once you have access, there is no 2 incremental charge. Thank you. 3 ASSISTANT SECRETARY IRVING: Thank you very much. 4 John Powell from the Association of Public Safety 5 Communications Officials International in Berkeley. 6 STATEMENT OF MR. POWELL 7 MR. POWELL: Thank you. I'm the immediate past 8 president of APCO, which is an organization which Mr. 9 Irving and Commissioner Barrett hear from regularly. 10 And I'm glad you came to us this time instead of 11 causing me another trip to Washington. 12 ASSISTANT SECRETARY IRVING: It's a much better trip 13 this way than it is that way. 14 MR. POWELL: Yes, it certainly is, but you do have to 15 go back. 16 ASSISTANT SECRETARY IRVING: Do I have to? 17 (Laughter.) 18 MR. POWELL: I'm full-time employed by that other 19 great university in the Bay Area. And as the world's -- we 20 like to say, the world's greatest public institution of 21 higher education, even though we haven't won a Rose Bowl in 22 almost as long as Wisconsin, we are now providing access to 23 Internet for over 50,000 faculty, staff and students on a 24 no-fee basis beginning this year at Berkeley. 25 ASSISTANT SECRETARY IRVING: I thought you were 26 talking about San Jose State, the other great institution 27 -- 28 (Laughter.) PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 95 1 MR. POWELL: I know there are some Berkeley graduates 2 in the room that might disagree with that. 3 To my statement. Mayor Rowe's introductory 4 comments touched on the importance of local government in 5 implementing the NII. Written testimony provided to you by 6 the California League of Cities stresses the needs of 7 public safety as NII decisions are made. 8 I'm dismayed that there's only one member of 9 NTIA's task force representing state and local government 10 telecommunications. 11 Many of the NII technologies, for example, the 12 wireless modem that you mentioned earlier, compete with the 13 needs of public safety agencies for spectrum, spectrum 14 which by law and court decision is mandated to public 15 safety as a highest priority second only to national 16 defense. 17 Public safety, however, is implementing its own 18 high tech tools. And only yesterday those of you listening 19 to the radio know that a Petaluma Police Sergeant told the 20 Court that Polly Klass was alive when her accused abductor 21 was stopped and questioned by deputies from the Sonoma 22 County Sheriff's Department. 23 And I only wonder what the outcome of this tragic 24 case might have been had those deputies had in their 25 vehicle an NCIC 2,000 fingerprint photo terminal. 26 Public safety nationwide has had a documented need 27 for about 100 megahertz of spectrum since 1984, yet has 28 received only 6 megahertz, the equivalent of one television PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 96 1 channel. 2 And Commissioner Barrett isn't sitting there, but 3 just recently the FCC proposed to take away, in the PCS 4 action, a hundred -- over a hundred megahertz of public 5 safety spectrum. The last vollies of that battle have yet 6 to be fought. 7 And while public safety is implementing highly 8 spectrum efficient technologies, the broadcast TV industry 9 is telling the FCC and Congress that it needs to keep old 10 channels using over 50-year-old technology, plus their new 11 channels to implement high definition television. 12 Public safety wants to implement its own NII, as 13 called for in the Agenda for Action, but we believe that 14 ours must of necessity be a parallel highway. The safety 15 and security of the citizens of this country, now our top 16 priority, in reality must have diamond-lane priority. 17 I would urge you, when you're making spectrum 18 allocations, to consider assigning spectrum below 2.5 19 gigahertz those facilities that are serving fixed locations 20 to technologies that are cable- or fiber-based. Save the 21 spectrum for mobile applications. Thank you. 22 ASSISTANT SECRETARY IRVING: Thank you. 23 I do want to clarify one point, and that is that 24 there are at least three representatives of state and/or 25 local and/or public safety on the -- interests on the 26 Advisory Council: Senator Fukanaga; Susan Herman, with the 27 Office of Telecommunications in Los Angeles and works very 28 closely with the police department down there; and James PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 97 1 McPatterson, with the Governor's office -- and James 2 McPatterson from Oregon. So we have at least three. And I 3 think if I pushed it, I could probably think of a few 4 others who have state responsibilities. 5 I'd like to turn to Mr. Norman Jayo, the editor of 6 Media Arts and Information Network in Oakland. 7 STATEMENT OF MR. JAYO 8 MR. JAYO: Thank you. 9 The Media Arts and Information Network is an 10 information agent of the National Alliance of Media Arts 11 and Culture, some 200 organizations working in film, video, 12 multimedia and media literacy, representing about a 13 thousand -- 10,000 media makers in America. 14 One of the things that we're not hearing here, and 15 that we need to hear, is media literacy. If we were 16 talking about the invention of the printing press today, at 17 this time we would not be talking without the context of 18 teaching people how to read. We would not be giving them 19 typewriters without the ability to read. 20 Typewriters and the ability to read mean 21 empowerment of the mind, the ability to produce. 22 It's very good that this dynamic is being raised 23 under commerce, because to get away from the subsidies that 24 have existed in our world, to develop the poverty-stricken 25 world since the War On Poverty, we need to advance media 26 literacy and programs to bring people in to become 27 productive citizens. 28 It was raised by the gentleman from Intel that we PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 98 1 need personal commuters. 2 And, Henry Der, you raised it about the number of 3 personal computers in the homes. 4 In the disenfranchised communities around this 5 country, it's absolutely imperative to raise the question 6 of personal computers, because they have a direct control 7 of over the CPU and not just the service that's going to 8 bring them movies and Game Boys, because if we have a 9 society that's based on Game Boys, it's not going to bode 10 well for our economic competition in the world. 11 We need to develop a progressive program that 12 links in partnership people in the corporate world, people 13 in the communities and civic pools of this society to 14 develop a standard that says the personal computer is a 15 range and what range that should be. Perhaps it's 486 and 16 the 040 chip, not necessarily the Pentium and the Power PC, 17 but it allows them to operate a GUI, so they can get 18 on-line and talk and not be bowing to the old standard of 19 DOS and CPM that has really colored our thinking about 20 computers because they were not languages of literacy. They 21 were languages that are post-doctoral and doctoral, 22 naturally to develop code. 23 We need to go ahead then and set a benchmark 24 standard that can be set to evaluate community 25 organizations, to bring up their literacy and options to 26 get acquisitions to these machines, to get them over the 27 line so that they can participate. 28 If you offer access today, the underserved PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 99 1 communities will not get on-line because they don't know 2 what to do. 3 ASSISTANT SECRETARY IRVING: Thank you very much, Mr. 4 Jayo. 5 And finally, for our last audience participant 6 this morning -- do you want to comment last? 7 MR. VADASZ: If I may, briefly. 8 ASSISTANT SECRETARY IRVING: Briefly, if you would. 9 MR. VADASZ: I was very happy to hear the comments 10 made by the speaker here. 11 I also would like to comment to one of my fellow 12 panelist's statement about the suggestion that we need to 13 slow down technology infusion in order to assure that there 14 are no gaps existing in the user community. 15 I would like to suggest that, again taking a page 16 from the personal computer industry, the reason why we have 17 inexpensive access to the power of the computer is because 18 we have more expensive computers out there also. The reason 19 why you have a thousand-dollar computer is because you also 20 have $2,000 and $3,000 computers. 21 And the way to get access to this power is by 22 making sure that the best latest technology is available as 23 rapidly as possible and in as large quantities as possible 24 in the market in order to drive down the cost of access to 25 that technology. 26 ASSISTANT SECRETARY IRVING: Thank you. 27 And last this morning is Charles Evans from HF TV, 28 independent rural cable TV in Coleville, California. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 100 1 STATEMENT OF MR. EVANS 2 MR. EVANS: HFU-TV. Thank you, distinguished panel, 3 members of the audience. 4 My testimony might best be described as coming 5 from the weed patch, past the dirt, off the shoulder. 6 We operate a rural cable TV company in the eastern 7 Sierra of California and Nevada. By current technical 8 standards, our system is best described as primitive. 9 Austere as it may be, however, our remote location 10 in the rural eastern Sierra prevented most people from 11 receiving any television channels at all before we began 12 operating in 1979. We have added channels and upgraded 13 equipment as much as the marginal income we derive has 14 allowed. 15 The low population density of rural systems make 16 them inherently more expensive to operate. It also makes 17 them much less attractive to competition, the natural 18 market stimulus for lower rates and/or more services. 19 Our load density, approximately 16 subscribers per 20 mile of cable plant, does not provide us the wherewithal to 21 rapidly build the stylish interconnectability and resulting 22 accessibility to the National Information Infrastructure 23 being discussed in this open forum and being advanced by 24 many industries and public organs today. 25 In following the current debate concerning the 26 NII, we feel the push to provide universal access too often 27 ignores the limited ability of rural systems to afford the 28 technical architecture necessary to accommodate many of the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 101 1 features requisite to open access technology. 2 Even more importantly, though less fashionable to 3 suggest, we're not convinced there will be a great appetite 4 for open access when the bill is presented to the rural 5 customer. 6 We feel the added load of supporting the costs of 7 high-tech open-access platform will drive rural 8 telecommunications rates through the roof or drive rural 9 cable TV companies out of business. 10 We feel we have honestly served the interests and 11 wishes of our subscribers over the past 15 years, as have 12 many of the nation's small independent rural operaters. And 13 we are no less willing to continue to serve these 14 interests. 15 We have adapted to serving our sparse area and can 16 continue to provide our customers with good quality and 17 dependable TV reception as long as we're allowed to tune 18 our rates to the normal increase in our cost of doing 19 business, a move we presently are prohibited from doing. 20 If universal access is to become a feature of 21 rural America, we must allow its development to be driven 22 by the reality of the rural marketplace, not by an 23 ideological vision, however well-meaning, of Congress, the 24 FCC or state PUC. Thank you. 25 ASSISTANT SECRETARY IRVING: Thank you, sir. 26 I am going to do two things. After the 27 introductions, we were joined by somebody else who is one 28 of the federal officials with significant responsibility PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 102 1 over the direction we are going to take in the construction 2 of the information superhighway. Ginger Lew is another 3 transplanted Bay Area senior representative of the Commerce 4 Department. She is the General Counsel of the Commerce 5 Department. She has been very, very helpful in both 6 preparing this hearing and also in working on these issues 7 for Secretary Barram and for the President. 8 Ginger, could you stand up and let people know who 9 you are. 10 (Applause.) 11 ASSISTANT SECRETARY IRVING: Let me conclude by saying 12 this has been an excellent panel. The excellence is 13 underscored by how much off schedule we are. But we 14 thought it was important, and I know how important it was 15 to get the full flavor of all you wanted to say. And I 16 would rather cut lunch a little bit than cut your comments 17 at all. So we want to thank you. 18 MR. CHEN: Just something quick. I do want to respond 19 with a final word about regulation and financing. If you 20 didn't like the spectrum -- 21 ASSISTANT SECRETARY IRVING: It's not that I don't like 22 it. It's just that I can't get it for you. 23 MR. CHEN: I know you know more about the difficulties 24 of that issue than anybody else. 25 Then we do have to get creative about licensing, 26 regulation and financing. A case in point is that public 27 television is only able to recognize revenue from about 10 28 percent of our users. We get one dollar a year from the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 103 1 corporation for public broadcasting. That is why you see 2 us constantly begging on the air for support. 3 Only one in 10, in some places one in 15, of our 4 users contributes to public television. 5 I think you have to admit that that is a hell of a 6 way to do business. 7 We do need to get creative about how we can then 8 recognize the full value of our service to the American 9 people. And we need to get creative about licenses, fees, 10 all of which goes back to our licenses that were created in 11 1950. We need a different system, and that's what we're 12 asking you to examine. 13 ASSISTANT SECRETARY IRVING: Thank you. 14 Let me give you my profuse thanks for your 15 outstanding testimony. If there are other comments or 16 concerns you would like to express, please feel free. 17 Kari. 18 MS. PETERSON: I have a very quick comment. I put 19 copies out on the table of a press release that was issued 20 yesterday by a coalition of 93 public interest 21 organizations in support of the public right-of-way 22 provisions for NII legislation. 23 This group is calling for public hearings on this 24 very important topic to ensure that public interest is not 25 overlooked. And we would just draw your attention to that 26 and encourage you to pick up a copy. 27 ASSISTANT SECRETARY IRVING: Thank you. 28 I'm going to cut this thank you short because the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 104 1 longer I make it, the longer this is going to go on. Thank 2 you so much. 3 We are going to have a brief press availability. 4 We will be back in this room at 11:35. We will be in the 5 technical demonstration room in about two minutes for the 6 press who want to talk to us and be back here in exactly 12 7 minutes. Thank you. 8 (Recess taken.) 9 ASSISTANT SECRETARY IRVING: If all the witnesses would 10 take their seats, we are going to go ahead and get 11 started. 12 We have a quorum up here. So rather than wait for 13 everybody to get back, if you don't mind a little bit of 14 confusion behind us as people get their seats, why don't we 15 kind of get started. 16 This second panel, thank you for your patience. 17 Our panelists this afternoon will talk about factors that 18 will help or hinder network access for information 19 providers and users. 20 Our first panelist this afternoon is Jeff Rulifson, 21 the Director of Technology Development and Development 22 Group at Sun Microsystems Computer Corporation. 23 Mr. Rulifson. 24 STATEMENT OF MR. RULIFSON 25 MR. RULIFSON: Thank you. Actually, I am here a little 26 bit appearing here on the part of Sun but also personally. 27 I will try to keep that straight. 28 ASSISTANT SECRETARY IRVING: You are aware of the 5 PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 105 1 minute rule. I want to make sure that you know there are 5 2 minutes. The gentleman to your left, my right, will let 3 you know when you have one minute left and when your time 4 is up. We will try to be fairly strict on that 5 minutes. 5 MR. RULIFSON: Maybe in response to Dave, I will try to 6 be a little provocative. I want to talk about access but 7 in a very different way than most of the people have been 8 talking about it, but not all. 9 Access comes -- it is not just users trying to get 10 access to a network to get onto something, but there is a 11 serious issue of access around sort of the cottage industry 12 as we see it growing in Internet. There is an issue here 13 of people, anybody being able to provide software into the 14 network, people being able to use that software to provide 15 content and then people getting access to the content. 16 And the issue that is surrounding things right now 17 in a very large way has to do with the barriers to people, 18 to anybody in general being able to do that, to build 19 application software, to build operating systems software, 20 to offer that software in a commercial way. 21 And a lot of the barriers in fact have to do with 22 the interfaces and the protocols cost that have grown up 23 over the various networks. 24 There are many examples, but many of these, not 25 all, but many of them are interfaces in fact that came out 26 of commercial endeavors. And large companies have them 27 locked up in various ways. 28 The interfaces, even though they are sometimes said PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 106 1 to be open and even advertised in the newspapers as open, 2 they are only open in very limited and restricted ways. 3 Companies will keep them, call them open but keep 4 them closed by charging for them in ways that people can't 5 afford. They will put intellectual property in them and 6 require licensing rights and then restrict who can actually 7 use that because they have intellectual property control. 8 They will control them by having closed processes 9 for changing the interface standards, running what they 10 call open processes but not really do it in public forums. 11 So at many different levels in this sort of total 12 access of not just access as a user, but access as a 13 provider of either appliances or software into the 14 networks, there are a lot of these barriers. 15 Sun has proposed, actually as a company, that we 16 develop a national policy around declaring which of these 17 interfaces are really critical for the NII and a national 18 policy around making them barrier free. 19 In the papers I have given you we really talk at 20 length about what barrier-free means. There is a lot of 21 technical, legalistic stuff behind it. But really it means 22 a public process for the change and control of the 23 interfaces, and it means free document from the 24 intellectual property constraints that I am sure you have 25 seen so many lawsuits over in the computer industry in the 26 last few years. 27 So we have this notion of barrier free. We would 28 really like to see it not for every interface in the world PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 107 1 and not for every product but for the key critical elements 2 of the NII, a policy of barrier-free interfaces set up to 3 really sort of get this grass roots growth in competition 4 going on. 5 Now the arguments that we get against this are 6 really -- it is amazing to watch them at times. Some of 7 the companies will argue, Gee, we really had to have 8 barrier-free interfaces, we couldn't make any money if we 9 didn't control the interfaces. 10 Well, that's really not true. They make a lot of 11 money at products where the interfaces were barrier open. 12 There is a lot of argument that if these interfaces were 13 barrier free, then the large companies wouldn't invest in a 14 technology nor for the interfaces. That's just not true 15 either. 16 I think if we want to spend days at this, I could 17 take you through dozens of open interfaces, completely open 18 and barrier free where companies invest millions of dollars 19 in innovation. TCP/IP in the Internet I think is a 20 wonderful example where that interface, that specification 21 is completely barrier free. It is developed on a 22 completely open basis. And yet the companies put huge 23 amounts of money into it. 24 So what should we do about this? What could the 25 government do? I just don't believe that industry or 26 standards organizations by themselves will really come to 27 anything, at least in the next few years, maybe in the next 28 century, but certainly not in the next few years opening up PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 108 1 these interfaces. 2 So our proposal is that the government actually 3 take some direct action but not in a legal way but through 4 its buying power. We would like to see the government -- 5 we suggested the FCC, there could be other people, make the 6 list, get input from everybody and make the list of the 7 critical interfaces, allow companies to post their 8 interfaces barrier-free on the list and then buy off that 9 list and say if it is a product, a software product, an 10 information type of product or even a hardware product, if 11 it incorporates one of these interfaces, then that must be 12 one of the barrier-free interfaces and allow some chaos and 13 wild growth at first. But I think you see more 14 competition, more innovation, more open access, more 15 cottage industry style involvement if you took such a 16 policy. 17 Thank you. 18 ASSISTANT SECRETARY IRVING: Thank you. 19 We will now turn to Leslie Saul, Public Policy and 20 Education Project Manager of Smart Valley. 21 STATEMENT OF MS. SAUL 22 MS. SAUL: Good morning. I am here today representing 23 Smart Valley, Inc., a nonprofit organization affiliated 24 with Joint Venture Silicon Valley Network. 25 Smart Valley was formed last year to facilitate the 26 construction of a pervasive, high-speed communication 27 system and information services that will benefit all 28 sectors of our community. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 109 1 Today I will focus my remarks primarily on 2 education. Smart Valley, Inc., believes that a public 3 institution should be the focal point for widespread access 4 to the National Information Infrastructure. Just as the 5 public schools and libraries serve as information access 6 equalizers in our current society of books and documents, 7 they will serve as information access equalizers in the 8 electronic information age. 9 Through our public school system each child in 10 America can have access to and be trained in the use of 11 information technologies. Public libraries will serve as 12 the main access points for adult Americans who do not have 13 information technologies available to them at home or 14 work. 15 Smart Valley, Inc., envisions our schools and 16 libraries taking a leading role in preparing people for the 17 information age. We are working on two initiatives in 18 support of public access to the NII, and I will briefly 19 describe these for you as examples of how one community is 20 addressing these issues. 21 First, we are developing a county-wide public 22 access network, the Smart County Public Access Network. We 23 have applied for a TIIAP planning grant for this 24 free-of-charge Santa Clara County network of Internet 25 public access sites in schools, libraries, retail outlets, 26 city and county offices, and other public facilities. 27 My friend Dan will be happy to know that our 28 proposal includes the incorporation of local networks as PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 110 1 well. 2 Second, Smart Valley is championing a Smart Schools 3 Initiative. In February we convened a meeting of 4 educators, community leaders, business leaders, librarians, 5 nonprofit directors and telecommunication service 6 providers. We brought the group together to assess 7 community interest in providing our schools with 8 connections to the Internet. The group quickly agreed that 9 the schools needed Internet access and that they needed it 10 yesterday. 11 Connecting our schools to the NII is essential for 12 preparing our children to live and work productively in the 13 21st Century information age. Three groups are coming 14 together in the Silicon Valley to develop a plan to achieve 15 that vision: Smart Valley, Inc., providing technical 16 information infrastructure expertise; the 21st Century 17 Education Initiative providing standards for student 18 achievement; and the San Jose Education Network, a local 19 test bed which is already connecting San Jose high schools 20 to the Internet. The Smart Schools Initiative will combine 21 equipping every school with advanced network based 22 information technologies, training teachers and students to 23 make best use of the technologies and producing measurable 24 improvements in student achievement by the year 2000. 25 With any change of this magnitude, barriers to 26 progress are to be expected. Some of these barriers are 27 attitude analysis. Parents and school board members are 28 concerned that with introduction of new technologies into PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 111 1 the classroom, the basics of education will be lost. We 2 must emphasize that surfing the Internet will not replace 3 California history, mathematics, chemistry and reading. 4 The new technologies will serve as tools to enhance the 5 learning process by providing access to libraries, 6 scholars, peers, mentors and collaborative projects 7 worldwide. 8 There are also concerns about controlling what 9 children can access the Internet, security and intellectual 10 property. These are issues which need to be addressed. 11 Smart Valley is a test bed for these kinds of 12 challenges, and we will be exploring them hand in hand with 13 the education and policy communities. Another barrier is 14 the lack of technical and networking expertise in our 15 schools. Frequently, school administrators tell me that 16 they want Internet access but that they have no idea what 17 needs to be done or how to proceed. The Smart Schools 18 Partnership will be developing a technology guide to assist 19 K through 12 schools with these issues. Public-private 20 partnerships have a significant role to play in assisting 21 and advising the schools. Finally, there is the problem of 22 cost. And there are no easy solutions here. 23 We must create a school system which will grow and 24 adapt with technological advances. Our schools need enough 25 equipment to avoid long lines. The equipment needs to be 26 kept up to date. Ongoing technical support is required. 27 Funds need to be allocated for communications, access 28 charges and services. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 112 1 Accomplishing this will require new long-term 2 funding models for our public institutions. The government 3 can reduce some of these costs. Connection costs can be 4 reduced through tariffing policies. Equipment costs can be 5 reduced with tax incentives that encourage donations and 6 discounts for educational institutions and libraries. 7 In sum, if we are truly going to have widespread 8 access in the near term, the foundation of that access must 9 be public access points, including the public school and 10 library systems. Our schools and libraries cannot face 11 this challenge alone. 12 The solution requires a collaboration of the public 13 school system, federal, state and local government, local 14 business, high-tech industry, librarians, parents and 15 community leaders. 16 Thank you for giving me the opportunity to speak to 17 you today. 18 ASSISTANT SECRETARY IRVING: Thank you very much. 19 We'll now turn to Stephan Adams, the founder of 20 Adamation, Inc. 21 STATEMENT OF MR. ADAMS 22 MR. ADAMS: Thank you, Committee members. 23 I also want to recognize Brian Harris, who is a 24 staff member who worked with me on my presentation and was 25 very, very useful for me in my presentation. 26 So I want to give a snapshot as a founder of a 27 small software company of ten people what -- how I use the 28 Internet and concerns that I see as a professional and also PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 113 1 as an individual privately. 2 As a professional, I use the Internet as a 3 distribution mechanism for software. One of the ways that 4 I stay in contact with our user base is we disseminate our 5 software through the Internet to get there quickly and also 6 to be able to provide personal boutique services to our 7 customers, something that we can do that is difficult for 8 our competitors to do. 9 As a person who uses the Internet, I use it as a 10 correspondence tool, and I also use it as an educational 11 tool in surfing the Net to access information in various 12 libraries, et cetera. I find it also very useful to be 13 able to use it in that way. 14 My professional concern that I have with the 15 Internet is that I have quick access to transport -- to my 16 transport service providers in that at peak times, 17 sometimes we have difficulties getting to our providers, 18 and that is a concern to me because at some times we rely 19 on the Internet to be able to get software to our 20 customers, and when they need things quickly, and as our 21 standard mode of distribution now we have problems, and 22 then our customers have problems. And once again, that 23 comes back to my problem. 24 The other thing that I also like is I like to have 25 a reliable distribution source as well as a security. It's 26 very important when I'm sending a piece of software that 27 may cost a few thousand dollars over the Net, that it's 28 secure and make sure that it gets to its correct PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 114 1 destination. 2 I'm not as concerned about privacy issues as a 3 business, but I am concerned about it as a private 4 individual. 5 The other thing that I'm really concerned about as 6 a professional is a uniform protocol standard. Oftentimes 7 in dealing with different hardware that my customers may 8 have, and in dealing with different countries in 9 particular, we have protocol issues. And sometimes I 10 cannot send information because of protocol issues. 11 I think as our phone system, we have one standard 12 with telephones. No matter what provider I pick, I can 13 always be assured of a dialtone. I think that that same 14 issue needs to be addressed here in the Internet community. 15 Some of my personal concerns that I have with the 16 Net are graphic GUIs. There's lots. We have Gopher and 17 Mosaic, which are very good, but they are not as intuitive 18 as I would like. 19 I would like to be able to have an environment 20 that represents the type of information I'm accessing. If 21 I'm shopping, I like to have a mall. If I'm doing banking, 22 I like to have something that looks like a bank, something 23 that's very intuitive to me, and something that I can work 24 with other people and -- other people with. 25 I'm also concerned about autonomy and privacy. 26 Don't want to go into that. I'm sure many people talk 27 extensively about that, but I am interested in limitation 28 and restriction of downloading information. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 115 1 If I have information that's coming off the Net, 2 I'm really concerned about what are my limitations on use 3 of that information. If I access the National Gallery and 4 download information, I want to make a clip art newsletter, 5 can I use that? Is it license free? 6 How do I know if I'm violating a copyright or a 7 trademark? 8 A lot of times I don't know. As a business 9 person, I'm pretty savvy on these issues, but I would take 10 that not a lot of people are -- understand copyright 11 issues. And it's not widely known. So I'm interested in 12 that. 13 As far as the merging of my two concerns, the 14 thing that I'm really most concerned about is the cost, the 15 increasing cost of the Internet. And I think that we need 16 to have a tiered structure for the Internet, very much like 17 we have with the postal service. 18 We have first, second and third class. And it 19 serves two purposes, as I see. The first purpose is to be 20 able to route mail most effectively, but it's also so the 21 Post Office doesn't get swamped with everything being first 22 class. 23 This is also an issue that needs to be addressed 24 in the Internet community, because we have private 25 individuals and corporations vying for the same bandwidth 26 and this collision: Whose is more important? 27 If we have a cost structure that's associated with 28 the different channel that you use, I think that would be PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 116 1 much more effective. 2 And the last thing I'd like to address is talking 3 about access disparity. I heard it in the first panel, and 4 I wanted to address it, that the computer may be the wrong 5 metaphor. And I think we may look at Segas and Nintendos a 6 as a proper metaphor for having access to the Internet, 7 especially with disadvantaged youths, who may have a 8 Nintendo in their house, but may not be able to afford a 9 486 computer. Thank you very much. 10 ASSISTANT SECRETARY IRVING: If I could interrupt, 11 it's curious you mentioned that, because one of the points 12 that was raised in a conversation I had in New York on 13 Monday is that 80 percent of kids 8 through 16 have a Sega 14 or Nintendo or similar device, and that the Reality player, 15 I guess, a Nintendo player will have the processing power 16 of a 1976-era Cray computer; whereas the Sega basically has 17 the same processing power of the original Apple Macintosh. 18 And the question is whether or not you can create 19 a platform where people could use a $200 device for the 20 same kind of purposes they use PCs now to download 21 information and to use educational, and I'll come back to 22 the question, but it's curious that the exact same point 23 was raised by some panelists on Monday at another forum I 24 was at. 25 Didn't mean to interrupt -- 26 COMMISSIONER BARRETT: The other thing I'd like -- to 27 think about is that you mentioned the two-tier service like 28 the Post Office. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 117 1 As you well know, some has priority and some does 2 not in delivery. 3 Are you suggesting that you have a variety of 4 service qualities? 5 Don't answer now. Just think about it for me, 6 would you? 7 MR. ADAMS: Yes. 8 ASSISTANT SECRETARY IRVING: Ms. Swenson, Susan G. 9 Swenson, the President and CEO of Cellular One. 10 Sorry to interrupt and -- 11 STATEMENT OF MS. SWENSON 12 MS. SWENSON: Not at all. These are interesting 13 questions. I appreciate the opportunity to address the 14 panel today. 15 We at Cellular One believe that cellular enjoys a 16 unique and pivotal role in the telecommunications industry. 17 Believe it fundamentally changes the whole infrastructure 18 as a result of opening it up and basically making it 19 anywhere, any time. You've heard this terminology, I'm 20 sure, probably used by one of my partners from McCaw 21 Cellular. And it's almost the trademark. 22 But we really view our role in telecommunications 23 and the information superhighway as yet really another 24 on-ramp to the already existing information superhighway 25 that exists, the main artery of the landline network. 26 We serve customers who have determined that 27 mobility is important to them and believe that the cost and 28 price that they pay for that service is worth the value PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 118 1 that they derive from it. 2 And it really -- I mean I think that's really an 3 important point to consider, because one thinks about what 4 the landline network provides today. And sometimes people 5 think that we are essentially replacing the landline 6 network. 7 We, in fact, are replicating the landline network 8 for those who believe that the features and services 9 provided by mobility are right for them, but we certainly-- 10 there is certainly not a displacement of the landline 11 network, at least not in my lifetime, I believe, or any of 12 ours here. 13 As a relatively young telecommunications company 14 -- we are fairly young, just really about eight years -- 15 we're still in the process of building our network. 16 I guess maybe some people perceive that we're just 17 ubiquitous as we need to be, but in fact we still have 18 quite a bit of building to do. 19 Today I believe you know that Cellular in 20 California, the California carriers serve about 2 million 21 customers, but certainly don't serve all of the customers 22 in California. 23 We project our growth to stay about 40 percent 24 annually, and obviously with that growth millions of 25 dollars have to be invested to continue the building of 26 that network. 27 We not only need to expand our network but add new 28 services. Digital, as you know, we're converting to PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 119 1 digital. Many companies across the country are converting 2 to digital, not only for increased capacity, but also to 3 add new services, such as message waiting, paging, two-way 4 services, and all of the services that people are looking 5 for in mobility. 6 We are also looking to provide storing forward, 7 wireless PBX and neighborhood plans, those services which 8 sometimes people consider to be more PCS-type services or 9 personal communications services. 10 The current capacity of the network is not -- is 11 really not sufficient to provide unlimited access. I think 12 that's really an important point to remember. 13 This condition is really exacerbated by the 14 significant barriers we experience, and I'm sure this is 15 not new to the Commissioners from the California 16 Commission, but we do have barriers regarding our ability 17 to expand the networks due to our cell-siting process. 18 I recently returned to the wireless community from 19 working at Pacific Bell for a number of years and am 20 currently finding out that it take on average 13 months to 21 build a cell site. 22 If I decided that I need to expand and increase 23 coverage in a particular location and I found a location 24 today that met the requirements of that coverage, it 25 literally would take a year and one month from today to get 26 that cell site in place, because of the processes that we 27 go through. And that obviously is a barrier to building 28 out the network at the speed with which we think it needs PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 120 1 to be built. 2 We need the new sites for increased capacity and 3 obviously then enhanced information access or information 4 to the access -- or access to the information highway. 5 Another potential barrier is the issue of 6 standards. And I know this issue has been raised by a 7 number of people, and I think it depends on how the 8 standards issue is handled. 9 I have had some experience where standards have 10 taken any number of years to get done. And it's 11 frustrating, I think, for not only the end-user consumer, 12 but obviously for the manufacturers of equipment. 13 But the cellular industry did something in the 14 last couple of years that was a first for the industry, 15 because I think they recognized the problems experienced by 16 the computer industry. And they got together as a 17 consortium of carriers and said, We don't want this to 18 happen. We don't want there to be a number of standards 19 out there that cause problems for the development of the 20 infrastructure and the development of equipment, and then 21 therefore cause the prices of that equipment to be high for 22 the end users. 23 The consortium over approximately a two-year 24 period developed a standard for cellular digital packet 25 data, which is a pretty extensive standard and fairly 26 complex, but it literally took about two years. 27 And as a result of that, we're deploying CD PD in 28 our networks today, probably about two years from the date PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 121 1 that we decided to start that. And I think that can serve 2 as a model for how we deal with standards issues so that we 3 can move this technology forward. 4 And I think that that -- it serves as a model in 5 that I'm not sure to what degree government intervention 6 needs to play in the whole standards issue. So I think 7 it's an issue that needs to be seriously considered, and I 8 would hope that there would be endorsement of this 9 approach. 10 Another barrier is the perceived need for 11 historical regulation in order to artificially replicate 12 competition. 13 Again, this is an issue that I know has been 14 brought forward to many of you on many occasions. 15 And we believe that the existing and emerging 16 competition in wireless service calls into question the 17 need for this type of regulation. 18 In fact, as potentially one of many users of the 19 network, we believe that we should not have any more 20 regulation than new competitors who are coming into the 21 marketplace today. And that is a potential barrier for a 22 cellular carrier like myself. 23 We believe that the information superhighway is a 24 powerful tool for Americans, and it's something that if we 25 collaborate, we're going to be successful in providing what 26 we need for the American society. Thank you. 27 ASSISTANT SECRETARY IRVING: Thank you very much. 28 COMMISSIONER BARRETT: Could I just ask Ms. Swenson to PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 122 1 think about a question? 2 MS. SWENSON: Sure. 3 COMMISSIONER BARRETT: You talked about the fact that 4 you did not want to be prohibited, I think, from -- the 5 regulation would cause you some problem. 6 Did you read last Thursday's Wall Street Journal 7 in terms of your pricing? 8 MS. SWENSON: Absolutely, and I have some other facts 9 to talk -- that might provide a different point of view on 10 that. 11 ASSISTANT SECRETARY IRVING: I look forward to that 12 exchange. 13 COMMISSIONER BARRETT: I would like for you to think 14 about that and think about whether or not, as opposed to 15 enhancing wireless technology with your 25 megahertz, 16 whether or not if, in fact, it is a so-called level playing 17 field, which is almost as bad as super information, I would 18 like for you to think about whether or not you would -- 19 you, if you had 20 or 30 more megahertz, whether or not you 20 would not utilize that not to enhance wireless technology, 21 but to prevent additional providers. 22 ASSISTANT SECRETARY IRVING: Thank you. 23 We'll now turn to Mr. Bill Mitchell, the director 24 of Electronic Publishing, Mercury Center. 25 Mr. Mitchell. 26 STATEMENT OF MR. MITCHELL 27 MR. MITCHELL: Thanks for including me this 28 morning. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 123 1 The Mercury News is owned by Knight Ridder 2 Incorporated and is the main daily newspaper in Silicon 3 Valley, one of the big guys who Dan Pulcrano mentioned 4 earlier. 5 My responsibility for Mercury Center is new 6 electronic extension of the traditional printed paper. I'd 7 like to take just a few minutes to tell you what we're 8 doing with Merc Center and why we're doing it. 9 As you know, more and more newspapers around the 10 country are taking similar steps. And I think we're all 11 finding that the issue is not so much a barrier to entry as 12 it is a barrier to survival once we've entered. 13 We don't need a big, multimillion-dollar press 14 unit to go on-line. All we have to do is figure out 15 compelling enough content and deliver it in an accessible 16 enough fashion to create a real business. 17 To my knowledge, no newspaper has really pulled 18 this off yet, certainly mine included. 19 I think while some of the hype surrounding the 20 information superhighway has led to speculation about 21 electronic newspapers replacing ink on paper, we think 22 reports of our print demise are probably premature; but we 23 are realistic enough to see that over time readers and 24 advertisers are certain to discover the advantages of 25 digital media. Rather than fighting to keep people tied 26 just to the printed paper, We're hoping projects such as 27 Mercury Center will enable us to sustain relationships with 28 our customers and our communities regardless of the form of PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 124 1 delivery they choose. 2 In fact, the mission of Mercury Center is to lead 3 today's readers into tomorrow's new forms of personalized 4 information and communication. 5 We think for the foreseeable future that this 6 vision really calls for the creative integration of print 7 and electronic services rather than any kind of abrupt 8 shift from one to the other. 9 It was just a year ago this week that the Mercury 10 News began publishing its on-line service, called Mercury 11 Center on-line. It's accessible to people with computers 12 and modems and resides on America on-line, one of the 13 national on-line services. 14 Mercury Center includes nearly the full text of 15 the news and classified sections of each day's newspaper, 16 as well as about 300 unpublished stories every day and a 17 wide range of messages and computer software available for 18 viewing or downloading. 19 We encourage members to help us build an on-line 20 community in several ways. On our message boards, members 21 not only tell us what they think of our news coverage, but 22 they get into doing some of their own. 23 They write their own versions of news, whether 24 that takes the form of their own movie reviews or their own 25 commentary on local, national or foreign affairs. 26 We have also set up message boards for community 27 groups and organizations and set up a community advisory 28 group to help us figure out how we can become a more PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 125 1 efficient clearinghouse for information and have 2 communication throughout the community. 3 But even here in Silicon Valley, only about 25 4 percent of our subscriber households have computers and 5 modems. 6 To begin reaching as many customers as possible 7 with electronic extensions of the Mercury News, we launched 8 a telephone and fax service called News Call at the end of 9 November. This service is accessible to anyone with a 10 Touchtone telephone or access to a fax machine, even if it 11 is only walking distance to the office fax. 12 As with most new technologies, though, there are 13 serious issues of access on all of these platforms. With 14 America On Line we have developed a Schools On Line program 15 which currently provides 21 local schools with one hundred 16 hours a month of free on-line time. 17 We have also set up accounts in several public 18 libraries. We are hoping that our on-line service will 19 provide the hearing impaired with expanded opportunities 20 for communication as well as more traditional news and 21 information. 22 And we are working with representatives of 23 sight-impaired groups to make use of our audio services and 24 to explore the possibilities of expanded speech synthesis 25 conversion of our on-line material. 26 But these are only beginning steps. We are hoping 27 that the traditional paper will serve as a bridge to these 28 new electronic services. One way to think about Mercury PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 126 1 Center is in fact as a first step in the redesign, perhaps 2 the reinvention of the traditional printed newspaper. 3 At the same time we begin taking advantage of the 4 opportunities presented by new technology, our credibility 5 in the communities we serve demands that we continue living 6 up to such traditional responsibilities of the press as 7 fairness and public service. 8 We hope the combination of the traditional and new 9 services will enable us to thrive as a business and to 10 serve our communities in ways not possible before. 11 Thanks very much. 12 ASSISTANT SECRETARY IRVING: Thank you, sir. 13 And finally, it is always a pleasure to introduce 14 every panelist this morning, but it is of particular 15 pleasure to introduce one of the members of the President's 16 National Infrastructure Advisory Council. Deborah Kaplan 17 does serve as a member of that council, and she also serves 18 as Director of the Division on Technology Policy for the 19 World Institute on Disability. 20 Miss Kaplan, it is a pleasure to welcome you here. 21 And thank you for your testimony. 22 STATEMENT OF MS. KAPLAN 23 MS. KAPLAN: I was going to say good morning, but I 24 realized it has to be good afternoon. 25 It is a pleasure to be here. I am pleased that 26 NTIA held a hearing close enough that I just had to jump in 27 my van instead of on an airplane. 28 Let me summarize some of the major points I make in PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 127 1 my written testimony. 2 I am here today talking primarily about how the NII 3 will have an impact on people with different kinds of 4 disabilities. 5 And I will skip the text that tells you about how 6 many of us there are and why this is so important. I don't 7 think I need to do that. 8 But let me point out that the prevailing approach 9 in technology right now for disabled people is to adapt 10 inaccessible products that disabled people can't use or 11 services and make them usable either through retrofit 12 solutions or substitute technology applications. 13 This is the most costly means for both government 14 and individuals to provide access for disabled persons. 15 And it just doesn't make sense from a market point of view 16 either for private companies. 17 We believe there's nothing inherent or unavoidable 18 about the barriers that disabled people face in accessing 19 new technologies and that through adopting a new policy 20 that we call Universal Design where technology is up front 21 in the beginning process of designing new services or new 22 technologies, is thought of as something that everybody is 23 going to use. 24 So the design parameters have to be for all people, 25 whether they happen to be seniors or children, people with 26 disabilities, and not just the, I could say 20-year olds, 27 but they are probably 30-year olds now that are designing 28 these technologies. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 128 1 Universal design is properly thought of as 2 accessible or inclusive design because it benefits far more 3 people than just people with obvious disabilities. 4 Some specific things that we think that the federal 5 government ought to do to move us closer to this goal of 6 universal design, we are essentially coming to the curb 7 pouring stage for our electronic highways, yet we have not 8 yet begun to identify good cross-disability curb cuts that 9 will help disabled people have access to the technology. 10 We understand it is unfair and impractical to insist these 11 curb cuts be installed in the electronic highway if we 12 can't describe what these curb cuts should look like and 13 how they should be designed. 14 At this stage, one of the most positive 15 contributions of that the Administration could make would 16 be to encourage, nurture and support efforts to support 17 information and eventually guidelines that could be used by 18 NII planners and developers to build accessibility for all 19 people into the NII. 20 In addition, the federal government must move 21 beyond the very positive statements it's made about 22 accessibility for disabled people into deliberations of the 23 information infrastructure task force. The access for 24 disabled persons is a concern that's relevant to most of 25 the separate activities of the IITF. And the federal 26 government has plenty of talent inside it of people who 27 understand disability and technology. And I give reference 28 to some of the specific agencies that should be looked to PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 129 1 to be included in the IITF deliberations now. 2 We are looking at possible platforms that have been 3 discussed today like Mosaic. We note that the IRS is using 4 the Adobe interface for dealing with the public and need to 5 point out that there are significant access problems, 6 mostly for people who are print-disabled with those 7 particular platforms right now. 8 Looking at those as a way of getting information 9 out to the public scares us a great deal. 10 In addition, the Federal Communications Commission 11 needs to expand and lengthen its capability to respond to 12 disability access issues. 13 We note that there are currently two issues pending 14 before the FCC, one dealing with proposed NII numbers being 15 reserved for use for the relay services around the country, 16 and the other dealing with hearing aid compatibility of 17 public telephones. Neither of those has been resolved. 18 We must assume that having more capable staff at 19 the FCC specifically addressing these issues would help get 20 these issues resolved in time for the next generation of 21 disability access issues to hit the FCC. We promise you 22 that they're coming. 23 The Administration is to be commended for its 24 commitment to access to the NII for disabled people. It is 25 time to get more specific, both in terms of nurturing 26 guidelines that can be developed collaboratively with 27 private industry and disability technology experts, in 28 terms of the internal workings of the II task force and PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 130 1 also at the FCC where very important policy decisions in 2 the future will be made. 3 I would like to thank you very much for the 4 opportunity to make this presentation. 5 ASSISTANT SECRETARY IRVING: Thank you very much. 6 I want to turn now to Commissioner Barrett. I 7 think he already has two questions on the table. 8 COMMISSIONER BARRETT: Yes, I do. And if they answer 9 them in 15 seconds, then I could ask the other ones. I 10 think Dr. Adams was first. 11 MR. ADAMS: Yes. The first question I remember was 12 about tiered services. 13 COMMISSIONER BARRETT: Yes. You had talked about a 14 variation using the post office system which if you are 15 from Chicago where I am it is not the best system to use. 16 I was wondering whether or not if you have a two-tier 17 service, as you well know, one is called bulk mail and one 18 is called something else. Are you also suggesting that as 19 bulk mail is allowed to do at the post office, is allowed 20 to lay around as long as a week or two, do you suggest 21 varying qualities of service? 22 MR. ADAMS: Yes, I am. As a matter of fact, that was 23 part of my -- 24 COMMISSIONER BARRETT: From a technical perspective? 25 MR. ADAMS: Yes, from a technical perspective because 26 there is some information that I send out to hundreds of 27 users at one time. 28 I don't care when it gets there. I don't care if I PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 131 1 send it at two in the morning and it gets there two days 2 later. The point is that it comes electronically and not 3 through the mail. 4 COMMISSIONER BARRETT: Then that answers -- I am 5 sorry, Dr. Adams, did you want to say some more? 6 MR. ADAMS: There was one other thing I did want to say 7 about that. I also want to talk about the tiered system 8 from the standpoint of using cellular, cable and the 9 telephone networks as different channels, not just relying 10 all on, say, one channel, but use all the different 11 channels that are available to us to disperse the data 12 that's coming over it because as more people come on we are 13 going to have a collision. 14 COMMISSIONER BARRETT: Which brings me to another 15 question which is probably more political than anything 16 else. Cities around the country, and I am not suggesting 17 all the cities where we sit have channels. Are you able to 18 utilize the channel as they have now? 19 MR. ADAMS: No. 20 COMMISSIONER BARRETT: I know why but I am just 21 curious. Not this city and not any city around here. But 22 I'm just curious because I've seen channels for all and for 23 whatever reason, be they economic or political, those 24 channels are not properly used. I'm sorry. Susan, you 25 were next. 26 MS. SWENSON: Responding to your questions about 27 pricing, I just want to make sure you understand that we 28 really do welcome competition. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 132 1 I think more competition will drive prices down. 2 Prices have come down over the period of time. And I will 3 be happy at a later point to provide you with that data 4 versus sharing with the group. In terms of the additional 5 spectrum -- 6 COMMISSIONER BARRETT: Which I cannot discuss with you, 7 by the way. I can't even listen to you because we have 8 spectrum things that are restricted at the FCC. I don't 9 want to get into a debate with you about that. 10 MS. SWENSON: I guess it wasn't an issue about spectrum 11 other than to whatever degree there is new competition in 12 the marketplace, that's great. 13 The thing is that there should be some common 14 expectations in terms of oversight about those, 15 particularly since carriers like ourselves are not 16 considered dominant carriers today. 17 COMMISSIONER BARRETT: Okay. Let me ask you another 18 question. You talked about mobility. If you look at the 19 three sub questions we have here, what are the barriers to 20 entry for information providers, for users and the other 21 one is a question but it doesn't apply to what I am going 22 to ask. 23 Is there a problem with number mobility if in fact 24 your vision of a seamless kind of nationwide system -- 25 tell me what barrier would the lack of number portability 26 cause? 27 MS. SWENSON: What it would cause is that you wouldn't 28 be able to have any one number and take it with you. In PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 133 1 other words, you take that number with you for life like 2 your social security number. If you don't have that 3 capability to move that around the U.S., and have it 4 essentially be in the network, you wouldn't be able to do 5 that. So that is an important thing. Also the 6 availability of numbers which is something that is being 7 addressed by the appropriate people as we speak because 8 there is a scarcity of area codes. 9 COMMISSIONER BARRETT: Leslie and Miss Saul, you and 10 Dr. Adams mentioned security and intellectual properties 11 rights. Is security synonymous in your conversation with 12 privacy? Or were you talking about the security of your 13 product? 14 MR. ADAMS: They are two different issues as far as I'm 15 concerned. 16 COMMISSIONER BARRETT: One is the security of your 17 property because you made a statement that you were 18 concerned about the security issue, which I assume was the 19 protection of your property. And you were less concerned 20 about the privacy issue. Why are you not concerned about 21 the privacy issue? 22 MR. ADAMS: Because security is a licensing issue. As 23 a licensing issue, you are not as concerned about the 24 privacy of it because once someone has it, privacy doesn't 25 really mean anything. 26 So I'm really concerned about the licensing, the 27 security of my license and my trademarks, et cetera. 28 That's what I am more concerned about. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 134 1 As an individual I am concerned about who I may be 2 talking to and people eavesdropping on my personal 3 conversations, but not, say, a data packet that is going 4 over the Internet. 5 COMMISSIONER BARRETT: Looking at this, there is the 6 security of your product. Let me take Miss Saul's term, 7 not term, but her concern about security and intellectual 8 properties right. Do you see either of those responding or 9 being a problem for the first two sub questions here, 10 barrier to entry for providers or barrier for users? 11 MR. ADAMS: I don't see it as a barrier. What I do 12 see, though, is I do see -- 13 COMMISSIONER BARRETT: The concerns about it being a 14 barrier at all? 15 MR. ADAMS: Personally, no. I do see a broader issue, 16 and that is the dissemination of information, what the 17 copyright laws are, and patents and trademarks. I think 18 people on the Net feel that if they can get to it, it's 19 theirs. And I for one who has spent a lot of money to have 20 developed products don't agree with that idea. 21 COMMISSIONER BARRETT: Thank you. 22 ASSISTANT SECRETARY IRVING: Miss Saul. 23 MS. SAUL: In the school context, I think we're 24 definitely more concerned with security in terms of -- 25 COMMISSIONER BARRETT: Of the product? 26 MS. SAUL: -- off the campus network. 27 COMMISSIONER BARRETT: Okay. 28 MS. SAUL: Security, who can get into the school PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 135 1 system or what can they do to the work that the children 2 are doing there, and to the records that are stored, and 3 also security as far as controlling what students have 4 access to outside of the school walls. 5 COMMISSIONER BARRETT: What is your concern about the 6 intellectual property rights? Is it that one may be 7 conveying over that network information that, for example, 8 a Bar review that one does not want someone to steal and 9 reproduce, or what is the concern there? 10 MS. SAUL: No. I think it's the availability of 11 literature, books and copyrighted material for schools to 12 use. 13 COMMISSIONER BARRETT: So if Catcher In The Rye was 14 presented over -- tell me the danger of that being on the 15 network. 16 MS. SAUL: Well, I don't see that there's a danger, 17 but the publisher of that book has problems about 18 intellectual property and copyrights and in making that 19 book available to schools. 20 COMMISSIONER BARRETT: How do we solve that problem? 21 Do we go to the publisher or do we go to the 22 writer -- obviously it's Salinger -- is J.D. still alive? 23 MS. SAUL: I have no idea. 24 COMMISSIONER BARRETT: One of the few books I read. 25 After I got older, I got smart and went to Cliff Notes. 26 (Laughter.) 27 COMMISSIONER BARRETT: But how do we do that? Do we 28 go to a J.D. Salinger, if he were alive, or if you're PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 136 1 looking at Moby Dick, do you go to the publisher? 2 Who do you go to? 3 MS. SAUL: I was hoping you could tell me that. I 4 have no idea. 5 COMMISSIONER BARRETT: You know, one of things that 6 I'm not very good at intellectual property law, although we 7 did have a professor at Duke, I think, that did a very good 8 job on the issue of privacy and went into the intellectual 9 property thing, which I'd be glad to send you one. 10 You remember the guy we had -- but thank you very 11 kindly. 12 ASSISTANT SECRETARY IRVING: Mr. Adams, if you could 13 make it brief, because I want to -- 14 MR. ADAMS: I just want to comment on that. 15 As a software provider, how we deal -- and it's a 16 growing trend with smaller companies at least -- is to be 17 able to provide locking mechanisms to protect intellectual 18 property. And then as somebody wants to bring up Catcher 19 In The Rye, if you would like to even look at it, you'd 20 have to register somehow or let the publisher know that you 21 are looking at it. Leave a card or something. 22 You have a certain amount of time that you can 23 look at it. Maybe parts of it is encrypted so you can't 24 have the full text, but the publisher is not going to look 25 kindly to have a clearinghouse to protect -- to have 26 someone protect their intellectual property. 27 COMMISSIONER BARRETT: You know, and I think it's 28 necessary if we are going to do the things Dave and -- PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 137 1 excuse me for being personal -- Larry and I have been going 2 around the country since December the 17th, and I think if 3 you look at the vision that I always talk about, what 4 elected officials and appointed officials ought to have, 5 clearly we want to be able to bring to the public the flow 6 of information with the least number of legal problems we 7 can. 8 And it may be better that one does, in fact, read 9 Catcher In The Rye or would also read it from the book 10 fashion, but if we go back to my earlier questions about 11 the lack of ability, financial ability, one, to be able to 12 buy any number of books, that does become a problem. 13 And I think if we -- if we want to go forward with 14 that vision, I asked the question in the context of course 15 of those two subquestions, because it is important, I 16 think, to be able to move forward. Thank you very kindly. 17 ASSISTANT SECRETARY IRVING: I'm going to now turn to 18 Commissioner Knight. 19 COMMISSIONER KNIGHT: A question for Mr. Mitchell. 20 A number of years ago -- I played many years in 21 the newspaper field, and a number of years ago, I wrote an 22 article about strategic alliances between the newspaper 23 industry and potentially some of the information providers 24 such as a Pac Bell. And now that paper is seen as 25 visionary. And originally, I can assure you, that's not 26 how it was described. 27 And you happen to come from an organization that 28 is obviously truly enlightened and looked to in the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 138 1 industry as a leader. 2 How would you characterize now the view of the 3 industry in terms of their role in this emerging new world, 4 not for the San Jose Mercury News, but the newspaper 5 industry itself, particularly when you get into interactive 6 kinds of opportunities? 7 MR. MITCHELL: I think at least for the foreseeable 8 future, if we are smart, we'll look primarily to the areas 9 that we know most about, which are the skills of 10 newspapering, which is information gathering, synthesis and 11 presentation as opposed to some of the delivery mechanisms. 12 And I think that's why alliances really do make a 13 lot of sense, as you suggested in that visionary paper. 14 ASSISTANT SECRETARY IRVING: Commissioner Shumway. 15 COMMISSIONER SHUMWAY: Thank you. 16 My question is addressed to the comments -- to the 17 panel as a whole, and I'm not sure it will even elicit 18 comments, but it's something that strikes me as each of you 19 presented your remarks this afternoon. 20 You've all illustrated various things that may be 21 impediments or barriers to you in doing what it is you want 22 to do. 23 We recognize those, but it seems to me that we 24 have a very fragmented approach to addressing some of these 25 problems. We are here, at least Commissioner Knight and I, 26 as regulators set up at a time when all of these various 27 services were put in niche categories. They were not 28 melded together as we now see them being presented. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 139 1 And our particular jurisdiction is to regulate the 2 telephone industry. And to the extent that we can do that 3 and address some of the problems, for example, those that 4 you suggested, Ms. Swenson, we might be helping you. 5 But it doesn't seem like that's going to really 6 solve all of the problems. There's a great deal more to it 7 than just the telephone aspect of this. There are other 8 players, and we don't regulate them. And there is no one 9 central regulator, one central omnibus agency that can take 10 all of these problems and make them right. 11 How do we get from here to there with a fragmented 12 system we have, you having to deal with regulators like us, 13 and yet having a very broad array of problems that goes 14 well beyond our specific jurisdictions? 15 COMMISSIONER BARRETT: I hope she says allow the FCC 16 to preempt the states and go on and do it in one single -- 17 COMMISSIONER SHUMWAY: She better not say that. 18 (Laughter.) 19 MS. SWENSON: I don't think I would answer that 20 question in this forum. It would be committing suicide. 21 I guess I would react to say that we haven't had 22 this kind of issue before. I mean this is what this kind 23 of technology and opening up causes us to have to do. So 24 it causes us to think about what is the appropriate 25 oversight required. And I don't think we have the 26 infrastructure today to provide that kind of oversight, 27 addressing the broad array of issues that obviously you're 28 hearing over a long period of time. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 140 1 So I think that's something that has to be 2 considered, and an upgrade to and a change to these types 3 of issues, because I think this is just the beginning of 4 things that we're going to have to deal with over time 5 because of this evolution of technology. 6 COMMISSIONER SHUMWAY: Could I just follow up on that? 7 Do you see passage of any of the bills now pending 8 in Congress as being -- as moving at least in the direction 9 that we're trying to talk about here, giving a broader, 10 umbrella-like structure to -- 11 MS. SWENSON: I think that's the intent. I think some 12 of them are more narrow than they probably need to be, but 13 I think the intent is right. 14 MR. RULIFSON: Yeah, to go back to the suggestions I 15 was making, at the particular problems that the computer 16 industry has with a lot of its standards and interface 17 protocols and things like that, not telephony regulation, 18 but in that area, we're not proposing any sort of 19 regulation actually. 20 We think the government's setting technical 21 standards is a very bad idea. I think even most people in 22 the government agree with that. And casting a lot of these 23 things into law, I guess it's certainly viewed inside our 24 company as not a good idea. But there was a program 25 recently, Energy Start, that the government put into 26 effect, which was really interesting, where you set a set 27 of standards about power-consumption and power-saving 28 features and computers. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 141 1 And a lot of us fought it. Industry opposed it. 2 And it went into effect, and what do you know? Everybody 3 figured out how to do it really easily and quickly, and 4 it's working well. 5 And that kind of thing, I think, can actually 6 work. I think the government can bring people together 7 here and cut the Gordian knots in industry and get people 8 to focus and do things without having to do it in a 9 regulatory way. 10 ASSISTANT SECRETARY IRVING: Mr. Adams. 11 MR. ADAMS: I'd like to pay you back on that statement 12 and say that I think we've seen an example of it where it 13 has worked really well, and that's HS -- with HDTV, where 14 the government and the commercial sector came together to 15 establish standards. And it started analog and changed to 16 digital as the technology evolved. 17 I think we have a similar issue here, where we 18 have divergent -- the community is fragmented. We have 19 service providers, we have hardware manufacturers, we have 20 software manufacturers -- all with our individual concerns. 21 And I feel one of the things that the government 22 can help in that is to provide a forum where the various 23 parts can come together and hack it out over a period of 24 time and then establish standards that all -- that we are 25 all working as a unit. 26 As it is right now, we are all working 27 individually, and the government can serve as a forum for 28 us all to come as consortium. That's my suggestion to your PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 142 1 question. 2 COMMISSIONER BARRETT: I was just telling Larry, I was 3 trying to get him to say this. I would remind you that 4 notwithstanding the fact that we put that group together, I 5 think the standards this coming September of getting us to 6 vote on would be about two years late. 7 COMMISSIONER SHUMWAY: Just one last comment. 8 I was not suggesting a regulatory solution, you 9 know, essentially to your problems. In fact, I recognize 10 that maybe the better answer is to get us out of the way, 11 find ways to get around us -- 12 MR. ADAMS: Marriage brokers. 13 COMMISSIONER SHUMWAY: -- or have us change the mode 14 of regulation that we have followed for so many years. 15 We are undertaking to do that, but it's a slow 16 process. But I recognize that many of your solutions don't 17 lie within the regulatory ambit. I'm not suggesting they 18 did. 19 MS. KAPLAN: But government does more than just 20 regulate, as has been pointed out. And I think there is 21 more than just a lot of different companies involved in 22 what the NII is going to mean and what it's all about. 23 There are many different government -- local, 24 regional government entities involved, and there are many 25 different consumer groups involved. And government has a 26 role to play in giving people a chance to listen to each 27 other, like in this forum, and giving people incentives to 28 work together. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 143 1 One of the interesting aspects of the recent RFP 2 that came out from NTIA for the TIIAP program was that it 3 encouraged partnerships. And I think that there are many 4 different ways that government can incent partnerships to 5 be formed, not just between different companies, but 6 between the public and private sector in order to help some 7 of the nonprofit sectors get more involved in the NII, not 8 through government helping them, but through encouragement 9 of having private businesses help them and form relevant 10 partnerships when necessary. The Smart Valley Project, I 11 think, is an example of doing that. 12 There are things that government can do through, 13 as was mentioned earlier, the Tax Code and other 14 incentives. 15 I think one thing that government can do is to 16 bring the people in the various companies together, say, 17 what do you want, what are the things that you think 18 government can provide, instead of what you don't want. 19 We all know they don't want to be regulated, but 20 there are things that they probably want as well. Those 21 things should be a reward for good citizenship and good 22 behavior in bringing the NII to the segments of our economy 23 and of our country who are not going to get served just by 24 free market forces. 25 My constituency is one that is not that well 26 served by free market forces. And I'm not sure when we 27 ever will be. 28 I think there are good market arguments that can PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 144 1 be made that companies should pay attention to disabled 2 people as a market, but it hasn't really happened yet. 3 Government has a role to play in helping that to 4 happen and in making sure that disabled people don't lose 5 their jobs because they can't use a particular interface 6 that's the only way to get to the different ways of doing 7 business anymore. 8 Government has a role to play in helping 9 businesses get to where they want to go. 10 It's very interesting when I talk to people, 11 especially in Silicon Valley, about accessibility for 12 disabled people. They have come back to me and said, well, 13 we think there is a need for legislation. 14 And after I pulled myself back up into my chair 15 and get over the shock at hearing that, what they are 16 saying is they want a level playing field so that what is 17 perceived as a risk is something that one company doesn't 18 have to go out on a limb for. So there are appropriate 19 times when government does need to regulate and set 20 standards. 21 COMMISSIONER KNIGHT: You are making the point that I 22 was saying earlier this morning on the first panel. I was 23 really trying to establish what the threshold is of 24 delivery of services that government would have to protect. 25 I also might add that one of the tough problems we 26 have, to piggyback on what Commissioner Shumway had to say, 27 everybody, I think the spirit of the Commission is that we 28 want to get out of the way as quickly as possible, but PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 145 1 making that decision and that transitional phase is very 2 difficult, because of the fact that -- because of the 3 timing. And when you move out of the way, trying to 4 establish what this level playing field is, is very 5 difficult for us to accomplish. 6 So yes, we want to do it as quickly as possible, 7 but there are trade-offs in doing it also, in the 8 transition. 9 MS. KAPLAN: But also -- you know, I think the mode of 10 regulation we have gotten into in this country is one where 11 we assume that the people who are being regulated are the 12 bad guys, and we have to keep -- government has a role to 13 play to keep them from being as bad as they would be if 14 they were left all alone. And people want to move away 15 from that. 16 I think there's a role for regulation, though, in 17 assuming that people want to be good. And maybe there are 18 things government can do to help bring out the good 19 intentions, the good motives, and the feeling of wanting to 20 contribute. 21 I don't think companies want the NII to only serve 22 certain segments of society, but they are driven by their 23 own bottom line. 24 How do you structure that so that the bottom line 25 takes them to a place that also serves a public interest? 26 That's government's role. 27 DEPUTY SECRETARY BARRAM: I want to go back to 28 something that you said, Steve Adams. When you talked PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 146 1 about you wanted the interface to relate to your desires, 2 you mentioned that you wanted -- a bank you wanted to look 3 like a bank. Sort of flashed to me that I -- I -- the gas 4 station where I get my gas looks like an ATM to me and, you 5 know, what I think is going to happen, the reverse will 6 happen too. Banks will begin to look like tagooey. 7 So we have to think, if we want to skate to where 8 the puck is, we have to think about how the world will 9 change. 10 I will bet you there are a lot of things today that 11 we do as a matter of course without thinking about them 12 that are designed as they are because some software program 13 somewhere two or three years ago treated it that way. And 14 now that's how we expect it to be. It is like a television 15 program making you think that the world is a certain way. 16 So it sort of leads me to a question. You talked 17 about the multiple levels of classes of mail. This maybe 18 three or four of you could comment on this. When someone 19 wants to get full motion video, let's say from the Mercury 20 Center or from anywhere, or a school wants to get -- one 21 of the poorest consumers, schools, in terms of 22 resources -- wants to get full motion video versus a 23 simple text, how should -- how are we going to price 24 that? Should it be the same cost to get "Catcher in the 25 Rye" in full motion video as it is to get it in text if it 26 has the same value? And if it doesn't have a different 27 price, how do you keep someone from always getting full 28 motion video because that's cool versus getting it in PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 147 1 text? 2 MR. ADAMS: Well, I have two positions on that. 3 First of all, using the dreaded metaphor that I 4 don't like, the superhighway, there are things about the 5 highway -- we have four or five lanes for different types 6 of traffic that goes on the lanes. That type of metaphor 7 can also be used here where text could take one lane and 8 video could take another lane. 9 But something that is also important, I think that 10 when we register our vehicles, we pay a different rate if 11 we have a scooter, car or an 18-wheeler truck. And we can 12 use that metaphor and looking at the types of data that is 13 being sent over the highway. 14 But the second part to that that's a little bit of 15 a concern is hardware restrictions. If I have a 2600 baud 16 modem on one side and my service provider has a much faster 17 one on the other side, my buddy next door to me might have 18 a much faster modem, so he or she is going to be paying 19 cheaper for the same thing that they are downloading than I 20 am. 21 So we have a disparity in the hardware -- 22 DEPUTY SECRETARY BARRAM: So that implies that you pay 23 by the minute or the second versus by what you get? 24 MR. ADAMS: Right, because what you might think is 25 valuable to you might not be valuable at all to me. So I 26 could say that if I am going to take "Catcher in the Rye" 27 and it is only a couple of megabytes, I will download 28 that. I am going to think twice if I will take the Star PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 148 1 Wars Trilogy and download that. I would think maybe I 2 should go out and rent it on video. It might be cheaper 3 for me that way. 4 DEPUTY SECRETARY BARRAM: Remember that Cheers episode 5 when Sam read "War and Peace" all week instead of -- 6 MR. RULIFSON: Let me try a little bit. Interestingly 7 enough, the network, the service providers, mainly the ATM 8 people that are using extraordinarily high bandwidth are 9 beginning to do some serious experiment about charging on a 10 packet basis rather than a connection basis. 11 DEPUTY SECRETARY BARRAM: On a package basis? 12 MR. RULIFSON: On a packet basis. The history sort of 13 out of the telephone company in the notion of a circuit 14 connection and charging by circuit connections is going to 15 have to break down some day. 16 And while they are not doing it down sort of at the 17 low end, telephony baud rate stuff, the major ATM trials 18 that are going on in the country are experimenting this and 19 beginning to develop ways of gathering the data to be able 20 to charge and then trying to figure out how to maintain a 21 charging rate in this. 22 It is very complicated. Do you want the movie in 23 realtime, or do you want to download it and then play it? 24 Do you want half the movie. 25 DEPUTY SECRETARY BARRAM: Why are the ATM people doing 26 this? 27 MR. RULIFSON: Because one is they can. 28 DEPUTY SECRETARY BARRAM: They can analyze it so they PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 149 1 are? 2 MR. RULIFSON: The protocol structure allows them to 3 analyze it for the first time. The second is they 4 realize -- when you develop a connection over an ATM line, 5 you don't have a circuit. You have a virtual connection. 6 Therefore, charging by the minute doesn't make any sense 7 for them. They have to charge by volume. And there are 8 naturally levels of priority defined in protocol. So they 9 can start to do this now. 10 I know Sprint has done quite a bit of it in St. 11 Louis. So those models are being developed, if you get the 12 right people. 13 ASSISTANT SECRETARY IRVING: One of the things charging 14 by volume rather than by circuit connection, you could have 15 another problem. We are moving to a system of integrated 16 broadband switched digital network. If you have voice, 17 video and data, voice there is virtually no volume versus 18 video which will have huge volume. So you either have to 19 price the voice at nothing or if you price voice the way 20 it's been priced historically, then video, which is huge is 21 going to have to be priced at an uneconomic cost for most 22 people. So there are going to be some questions in there. 23 MR. RULIFSON: Voice actually is more realtime than 24 video because it turns out you can drop some of the video 25 but you can't drop the voice or it clicks. It is a very 26 complicated issue for them to basically come up with an 27 equitable pricing structure. 28 COMMISSIONER BARRETT: If you do it in packets and then PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 150 1 telephone service generally would call that volume 2 discount. What is it to make it available to anybody other 3 than large hotel chain at a discount volume with discount 4 volume and it won't be available to anyone else who may 5 have the same needs? 6 MR. RULIFSON: No. It is a completely different idea 7 going on here. 8 COMMISSIONER BARRETT: I'm sorry. You compared it with 9 what telephone companies did. I thought you said volume 10 discount. 11 MR. RULIFSON: No. 12 COMMISSIONER BARRETT: Then I withdraw the question 13 then. 14 MR. RULIFSON: We are getting ideas mixed up. The 15 telephony companies are basically -- 16 COMMISSIONER BARRETT: Except you compared it with 17 that. And I made the statement if you make that 18 comparison, volume discount and in the telecommunications 19 area, I don't know about your business, but I happen to 20 know about that, is one where you sell to larger 21 customers. It is not available to me who talks a great 22 deal at home. That was all the point I was trying to 23 make. 24 DEPUTY SECRETARY BARRAM: Let me pick another question 25 or maybe just make a comment. 26 It goes back to sort of this paradigm shift, the 27 180 degrees look at things. You mentioned, John, the idea 28 of the federal government with its great buying power using PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 151 1 that buying power to effectively establish the way things 2 will be hopefully, to listen to you, sensibly. 3 One of the other observations I have had in my time 4 in Washington is that we are incredibly awful as procurers 5 because making a mistake is deadly. You make a mistake as 6 a career bureaucrat and it's over. We don't learn from 7 mistakes like we do in Silicon Valley. We do everything to 8 avoid them. So it is a very risk-avoiding environment. 9 I would be a little afraid -- I will come back to 10 why I am not so fearful -- but I will be a little afraid 11 when I start to think about it that we end up getting 1989 12 technology in 1994, which is even an advancement over where 13 we are. 14 But when I think about it more and I think about 15 this looking through a different window idea, maybe if we 16 tried to do that it could help us procure differently. It 17 could -- if our procurement system had a different set of 18 objectives, additional set of objectives to it than the 19 present, which is make sure you get it at the lowest cost 20 and avoid ever buying a $600 toilet seat, that is mainly 21 what you're graded on, if we had other things that were 22 graded -- I have been looking for ways to add to the 23 objective list so you can bat something over zero. 24 MR. RULIFSON: To respond a little bit, to do nothing 25 is to determine how things will be, too. We just don't 26 have time. There are a number of spots where really the 27 computer industries and the cable industries to some 28 degree, too, are really stuck. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 152 1 And standards are not coming together. I guess it 2 is a personal belief of mine that because of that things 3 aren't growing and we are not seeing sort of the innovation 4 out of small groups of people that we could get. Major 5 companies have major road blocks in the way. 6 So if the government is to do nothing, it is also 7 to determine the way things will go. 8 DEPUTY SECRETARY BARRAM: Let me ask Bill one quick 9 question, if you don't mind, Larry. 10 How many people, your subscribers, use both the 11 Paper and the on-line at the Mercury Center? 12 MR. MITCHELL: The real answer is we don't actually no, 13 which is one of the factors in all this because tracking 14 usage is much tougher than you would think. 15 There are about 35,000 America On Line subscribers 16 in our circulation area. And when they log on, they get 17 the Mercury Center icon at the top of the screen. How many 18 of them actually come in, we don't know. We have 19 distributed about 6500 software kits. We now have a 20 distinctive customized software kit. About 6200 actually 21 of those are now in use. But the real number is the 35,000 22 who have access to us every day. 23 DEPUTY SECRETARY BARRAM: Which is one tenth of your 24 subscription base? 25 MR. MITCHELL: Yes, a tiny slice at this point. 26 DEPUTY SECRETARY BARRAM: Will USA Today do this 27 sometime? 28 MR. MITCHELL: They are available on various electronic PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 153 1 platforms, not with the full text that we and Tribune 2 Company and some others are doing. But I think they 3 certainly are looking at it. 4 DEPUTY SECRETARY BARRAM: Do you have any idea how many 5 people -- you may have to give me the same answer -- but 6 do you think people are getting, going on to the Mercury 7 Center when they are not in town and can't get the paper? 8 MR. MITCHELL: Yes, at least anecdotally, we find 9 that's useful. But I think the core concept is that the 10 printed newspaper is going to remain mass media, something 11 that serves the entire community, with the idea of linking 12 the print and the electronic is to enable people to drill 13 down much more deeply on things they care about, whether it 14 is their local community, an interest group or the Boston 15 Red Sox. So we think there is a linkage between the two. 16 DEPUTY SECRETARY BARRAM: You talked about the 17 newspaper at the breakfast table, and I understand that. I 18 also can imagine screens on the dinner table that you can 19 use, too. 20 MR. MITCHELL: I think you are an exception in your 21 generation when you think that way, though. 22 ASSISTANT SECRETARY IRVING: I think with the next 23 panel I am going to have you raise red cards on us, too, so 24 that we don't go beyond our time. 25 Two questions, very quickly. I am going to follow 26 up with you, Mr. Mitchell. On our first panel, 27 Mr. Pulcrano talked about a problem he had. I spent ten 28 years of my life on the hill. Some of that time I spent PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 154 1 talking to people from the newspaper industry who are very 2 concerned about the power of the Bell Operating Companies 3 getting into information services because they use the 4 economic power and their bottleneck capabilities to keep 5 newspapers from being prominent as information providers in 6 local communities and that they thought that allowing them 7 in information services would be the death knell. 8 Mr. Pulcrano raised the question that he is 9 concerned that San Jose Mercury News has used its economic 10 power to prevent it from getting access to America On Line 11 and constituents and that the open access, the kind of 12 factors, we are talking about factors helping or hindering 13 network access and information users, are exactly the kind 14 of things your industry was worried about with regards to 15 the Bell Operating Companies is what you're doing to small 16 information providers like him. 17 Should we try to do things such as -- we are not 18 supposed to impair contracts under the constitution, but 19 should we be looking at ways to make sure that the large 20 information providers aren't setting up through exclusivity 21 contracts other walls and barriers precluding small 22 entrepreneurial community-based information providers from 23 getting access to the major networks? 24 MR. MITCHELL: I don't think the analogy quite holds. 25 We do have an exclusive arrangement for our area for 26 America On Line. 27 ASSISTANT SECRETARY IRVING: What would happen if you 28 took all the information providers or went to Pac Bell Net, PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 155 1 then you went to Prodigy and then you went to CompuServe, 2 you could conceivably use your existing clout in the 3 marketplace to do that. 4 MR. MITCHELL: I think we couldn't do it at all in the 5 marketplace. I think we could do it with one provider, but 6 I think America On Line is only one provider. 7 I think you are overestimating our clout if you 8 think that we could persuade a wide range of on-line 9 providers to be exclusive with us alone. 10 ASSISTANT SECRETARY IRVING: I'm not sure, but it 11 raised an interesting question because it does set up a 12 roadblock. It was curious to me, everybody says they want 13 a level playing field. But how level that playing field 14 is, whether or not the playing would actually work seems to 15 change depending upon what position you're in. 16 And I think Mr. Pulcrano raised a really important 17 question, the fact that you even ask for exclusive 18 arrangement in the Bay Area is interesting. Can you give 19 us some insight as to why you did with America On Line? 20 MR. MITCHELL: Yeah, it was a matter from both of our 21 points of view, from America On Line and from the Mercury 22 News, to be able to focus our energy on one single service. 23 I think from our point of view, it's a matter of being as 24 much the single clearinghouse of information as we can be. 25 COMMISSIONER KNIGHT: There's another partial answer 26 to it, which I think is interesting from a strategic point 27 of view from a newspaper as a provider, which was one of 28 the frustrations I found in the industry. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 156 1 If you look at it as a static data base of 2 information, that is, what you read on the printed page, 3 then there is probably no concern. But if you really push 4 the envelope in terms of what information is available 5 in-house in a newspaper, particularly on the advertising 6 side where there's a great deal of information about 7 individual households, individual businesses, and the 8 ability to marry databases together, you start becoming 9 much more protective, because it ties directly to your 10 economic interests. 11 And right now I think the primary push, at least, 12 I think, in this generation has been more toward the 13 editorial side as opposed to business information. And 14 there is housed business information that needs to be 15 protected and considered before they would want to have 16 that door be able to open up easily. 17 MR. MITCHELL: I understand that. But my major 18 experience in openness and accessibility of information 19 really comes from cable. And I think it seems to me that 20 one of the biggest problems with regard to cable has been, 21 and was, the exclusivity arrangements. 22 On the one hand, it does have some benefit in 23 terms of building the system faster. On the other hand, 24 exclusive arrangements between content providers and 25 service providers hampered development of competition, 26 i.e., wireless cable or satellite cable provision. 27 And going the other way, exclusive arrangements 28 have kept -- there are certainly problems where, because of PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 157 1 vertical relationships in cable, where a content provider 2 has had trouble getting on because there is a contractual 3 and/or ownership relationship between the wire into the 4 home and one of the content providers into the home. And 5 as a newspaper industry or at least San Jose Mercury News 6 starts going down that path, it raises a whole bunch of red 7 flags to me. 8 MR. MITCHELL: I'm no expert on cable, but isn't one 9 consideration the fact that there generally is one cable 10 provider in an area where there are many providers of 11 on-line and electronic information for local information 12 companies to form alliances with? 13 COMMISSIONER BARRETT: But to carry out Larry's 14 question which he is raising about vertical integration, it 15 doesn't make any difference if you have other people trying 16 to access the program historically -- 17 ASSISTANT SECRETARY IRVING: And also, that would seem 18 to put the lie to the newspaper industry's protestations 19 over the Bell Operating Companies. 20 There are, in fact, lots of providers, then the 21 protection you say you need against Bell Operating Company, 22 you know, distorting the marketplace would seem to fall. 23 MR. MITCHELL: Yeah, I think -- 24 ASSISTANT SECRETARY IRVING: It can't work both ways. 25 MR. MITCHELL: I think that's a fair point. And I 26 think in retrospect the -- I can't speak for the newspaper 27 industry. I was a reporter at the time of that battle and 28 not wearing suits, but I think that it could fairly be said PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 158 1 that that position the industry took was not very well 2 conceived. 3 ASSISTANT SECRETARY IRVING: It's sinking. As we go 4 through the legislative process, it's still taking the same 5 position. 6 I have one other question, so if you could briefly 7 respond. 8 MR. RULIFSON: Well, just briefly on this exact point, 9 so our house got to the point where we had four people with 10 CompuServe, America on-line, Prodigy and Delphi and charge 11 bills that nobody understood what was going on. 12 So we cancelled out of all of them except 13 CompuServe for this reason. And it's just -- and so you 14 can't do the Mercury at our house amazingly enough even 15 though you can do almost anything else. 16 And it's back to one of the points that I was 17 trying to make: If the interfaces were set up right, you 18 wouldn't have to have these exclusive interrelationships. 19 And, in fact, any one of the service providers could be 20 taking the news that the Mercury is providing and offering 21 it on a much wider basis, but it's only because we don't 22 have the right standards and interfaces in place that you 23 have to get these mutual arrangements going in order to be 24 able to get it from the Mercury out to the person. 25 ASSISTANT SECRETARY IRVING: My major concern is kind 26 of a populist concern that the big don't drive out the 27 small who are trying to grow, and that's what got me 28 interested, but there are some other questions that PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 159 1 certainly raises. 2 Very briefly, because I really -- we're really 3 killing people's lunch hour. 4 The Game Boy question that you raised, which I 5 mean literally this week it's kind of been bracketed. 6 What's wrong with this particular theory that was raised? 7 If 80 percent of boys -- and I don't know what the number 8 is for girls -- but if 80 percent of boys have a Sega or 9 Nintendo or similar type game, and those games are, quote, 10 unquote, information devices with processing capabilities, 11 and they -- is it possible to -- it was theorized that it's 12 possible to create those as a platform plugging into your 13 cable, into your telephone, maybe make a wireless modem 14 when that technology comes on board, and bring information, 15 allow people to manipulate information, bring information 16 to the household of low-income people who may not have a 17 thousand dollars to spend for an entry-level computer. 18 Now I know there's something wrong with that 19 theory, so tell me what it is. I'm not sure what it is, 20 but I know it's out there so. 21 MR. ADAMS: I don't know if you're totally wrong on it 22 at all. 23 Have you ever tried to get your modem hooked up to 24 a computer and onto on-line services? 25 It's not an easy task, but it's very -- you know a 26 Nintendo box is plug and play. The joy stick adapter can 27 be taken out. The keyboard can be put into it. There's all 28 kinds of mechanisms that can be used inside of it, and they PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 160 1 are just as powerful. And the new ones coming out from, 2 say, the 3 DO and the newer Segas are more powerful than 3 what I have in my own desktop. 4 So as an input device and as a navigation device, 5 I don't see anything wrong with it. And I know in some of 6 the depressed neighborhoods that I've been in that there's 7 a lot of Nintendos. There is a VCR and a Nintendo. There 8 may not be electricity, but there is a Nintendo in there. 9 And I think that it's a friendly interface. 10 A computer screen is very intimidating. It's even 11 intimidating to me as a business person at times, but it's 12 -- it's one thing to have access to the Internet, and it's 13 another thing to feel like you are welcomed to the 14 Internet. And your input device or your navigation device 15 goes along ways of telling you how well you use that. 16 I use the telephone because it's very easy. I 17 don't think about it. It's intuitive. 18 A Nintendo is intuitive. 19 A computer, once you turn it on, even if it's a 20 Windows' based application -- screen, sometimes you have to 21 read a manual. 22 ASSISTANT SECRETARY IRVING: In other words, we should 23 tell Sega and Nintendo and others to start marketing these 24 things as information devices as opposed to games so 25 parents would be more excited about buying it, and people 26 will prepare software that's educational, and you're still 27 going to get the 80 percent of the kids who want to use it 28 as a game anyway. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 161 1 MR. ADAMS: I don't think people are going to have to 2 tell them. I think the economics of scales will tell them 3 that they are already there and they might do it without 4 any urging. 5 ASSISTANT SECRETARY IRVING: All right. I'm going to 6 cut off although I -- there's, like, a million questions I 7 would love to ask each of you because, Ms. Saul, I have 8 some questions about Smart Valley, but I just don't have 9 the time. 10 I'm going to turn to -- but I will -- I hope all 11 of you will stay in touch with us, either through E-mail or 12 through telephony. 13 One other thing, Mr. Mitchell, we were mentioning 14 this morning, we looked at Mercury News -- 15 MR. MITCHELL: Right. 16 ASSISTANT SECRETARY IRVING: You have this page of how 17 to reach government, and you had fax and phone numbers. 18 You know, a lot of us in government -- for 19 example, I saw you had Secretary Brown. He has an E-mail 20 address. And it may make some sense to find out those who 21 have E-mail addresses and let your consumers know that, 22 rather than just pick up a telephone or faxing, because I'm 23 much more likely to E-mail something that's arrived on my 24 desk than to send a fax about something that arrives on my 25 desk. 26 MR. MITCHELL: Sure. Good point. We're collecting 27 them. 28 ASSISTANT SECRETARY IRVING: I'd like now to call up PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 162 1 Dianah Neff for the City of Palo Alto, if she's here. 2 We're now to a two-minute policy. 3 STATEMENT OF MS. NEFF 4 MS. NEFF: Thank you. 5 The City of Palo Alto is a service provider. One 6 of the problems that we've had as an information provider 7 was first finding where we should go for an access provider 8 and how we should do that, where was our community 9 connected. 10 As you say, there is CompuServe. There's America 11 On Line. There's Delphi, Prodigy, and then there's the 12 Internet. 13 We chose to be a service provider on the Internet 14 because it afforded the most open possibilities, and 15 hopefully the proprietary service our access providers are 16 going to provide accesses out to that Internet. So that's a 17 first stumbling block when you get involved in deciding to 18 be an information provider, is who do you provide through 19 or for or where do you get that service. 20 That steep ramp-up that you have to have of your 21 technical staff if -- we have now an entire library on the 22 Internet. We have drawn on the expertise in our community, 23 from our business partners to help us get this set up, to 24 work with us on the costwise for equipment. 25 And then security is an issue. We now have a 26 public access network that is not tied into our city 27 network because of the security issue. 28 Security is for governments a prime area where in PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 163 1 those governments that are networked, how do you prevent 2 hackers out on the Internet getting in and getting access 3 to the information on your secured network? So we're 4 working on those issues. 5 Universal service is a another problem that we see 6 as an information provider. How do we get out to our 7 schools, our nonprofits areas, our seniors? How do we draw 8 them into this and make them comfortable? 9 The libraries obviously were very -- believe in 10 them as an information provider out to our community. We 11 will be establishing public access terminals in libraries, 12 but that comes with problems on education and bringing your 13 staff up to date on those areas. 14 Problems that we've heard from our users. We 15 formed a committee based on businesses, schools, nonprofits 16 and the city to design what they wanted, and number one was 17 an easy graphical user interface. 18 So how do you do that and have the problem, the 19 technological problems that that comes with, somebody 20 having a 1200 baud modem? 21 ASSISTANT SECRETARY IRVING: Thank you very much. 22 I'd now like to turn to Edward J. Radkowski from 23 the Northern California Healthcare Technology Alliance in 24 Palo Alto. 25 STATEMENT OF MR. RADKOWSKI 26 MR. RADKOWSKI: Thank you very much. And the Northern 27 California Healthcare Technology Alliance is a consortium 28 driven by hospitals, physicians and supported by Silicon PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 164 1 Valley software, hardware and system integration developers 2 and communication companies, many of which have been 3 represented here today in our nine-county Bay region. 4 We, like the NII and others, in reports estimate 5 that there are between 37 and a hundred billion dollars 6 that can be saved on regional health care through 7 information technology. 8 In offering promise to reduce health care cost by 9 a portion of what has been reported that can be saved are 10 regional medical networks when augmented with advanced 11 information technology. 12 To the extent that incomplete patient records 13 contribute to redundant tests, misdiagnoses, delayed 14 intervention and adverse medical reactions, then advanced 15 information technology will also enhance the quality of 16 health care itself. 17 I'd like to comment on two quick examples in our 18 region. In studies that we've undertaken, it is estimated 19 that the ability to combine multimedia forms of patient 20 records automatically from diverse physician, laboratory, 21 clinic and hospital sources, a capability which does not 22 exist at present, is the greatest stumbling block to most 23 regions and is a barrier to utilization of the information 24 highway. 25 We believe that we can save almost a million 26 dollars per year per hospital using this capability. 27 Arguing that this capability could save over a 28 million dollars a year, one local hospital information PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 165 1 system officer projected that about $200 a day per patient 2 could be saved by automating patient records alone. 3 A second example is, in our local Bay Area, is 4 that a second 400-bed hospital, Redwood City, would have 5 the ability to provide patient information to physicians 6 that could be automatically extracted from various regional 7 information data bases to form a complete medical record. 8 We need technology to solve this problem, and we 9 believe that the technology is an automated means of 10 collecting medical information in multimedia formats and 11 gathering it together. Some people refer to it as 12 intelligent middleware, and we believe that this is 13 necessary interactively on demand and can use rules-based 14 artificial intelligence and other local technologies. 15 We encourage your support for funding these 16 activities and believe that the technology, while being 17 first applied to medical information, can go to others, to 18 other fields. 19 Also, please regulate the telephone companies to 20 ensure them that they don't become repositories of medical 21 information. 22 Thank you very much. 23 ASSISTANT SECRETARY IRVING: Thank you very much. 24 We'd now like to call up Gary Shitz from the 25 Multimedia Research Group. 26 And I'd like to ask please, if you hold it to 27 about two minutes, it helps the rest of the people. 28 PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 166 1 STATEMENT OF MR. SCHULTZ 2 MR. SCHULTZ: That's "Schultz," and it's Multimedia 3 Research Group and -- 4 ASSISTANT SECRETARY IRVING: There's no "L" in your 5 name, so I'm sorry. 6 MR. SCHULTZ: Yeah, there is. 7 ASSISTANT SECRETARY IRVING: Not written down here. 8 Sorry, sir. 9 MR. SCHULTZ: And go Badgers, by the way. 10 ASSISTANT SECRETARY IRVING: What's wrong with 11 Northwestern Wildcats? 12 MR. SCHULTZ: This is a tremendous opportunity. I 13 really want to thank you for taking the extraordinary 14 effort that you have to go out and get information from 15 smaller business people such as myself. 16 Our group, Multimedia Research Group, is a 17 publisher of market reports on subjects pertinent to tools, 18 title development and multimedia distribution. We have 19 been doing this for four years, and we try to take a 20 business model to everything we do. 21 So this is really a welcome opportunity for us to 22 try to interface with you, and I hope we can probably 23 continue the dialogue. 24 We just finished a report, for example, on 25 independent video on demand interactive television 26 providers and how they can make it in this emerging telco 27 and cable com world. Another one on intellectual property. 28 Another one on wireless cable. So we try to look at the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 167 1 independent operator and how that independent operator can 2 make a living in this confusing domain. 3 Multimedia Development Group, which, as has been 4 mentioned by KQED, is trying to do what I'm trying to talk 5 about here, which is to help to fan the entrepreneurial 6 flames of the multimedia developer so that that person or 7 that group or that company can make a living. 8 At conferences like this it tends to be the large 9 network and infrastructure people, once in a while some of 10 the publishers standing up and talking, but not very often 11 the small distributor or the small multimedia developers. 12 So, briefly, free up the telcos to promote being 13 common carriers. Free up the cable companies to also do 14 the same. Make sure the broadband carriers' status is 15 maintained in these communities, like in the Pac Bell 16 community where there can be more than one infrastructure 17 carrier. Make sure that the independent video-on-demand 18 interactive TV developers and multimedia developers can 19 compete. Make multimedia publishing possible in 20 multi-platform ways. 21 And that addresses your question, Larry, about 22 Sega. 23 Right now it costs 750 K if you can develop a good 24 competitive Sega title, plus the promotion costs. 25 Then please do more of this articulation. Get out 26 of the way of the small, emerging multimedia publishing 27 companies. 28 Thanks. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 168 1 ASSISTANT SECRETARY IRVING: Thank you, sir. 2 Now we have Peter Farmer from the Tetherless 3 Access, Limited, in Menlo Park. Mr. Farmer? 4 (No response) 5 ASSISTANT SECRETARY IRVING: We will move to Dennis 6 Engdahl from the college in Mount Shasta, California. 7 STATEMENT OF MR. ENGDAHL 8 MR. ENGDAHL: I'm from College of the Siskiyous. 9 ASSISTANT SECRETARY IRVING: Thank you. 10 MR. ENGDAHL: We are very rural. We are at the base of 11 the mountain of Mount Shasta. And College of the Siskiyous 12 does support the idea of open access to the Internet. But 13 in the present telecommunications arena, any rural access 14 at all is extremely expensive. 15 As the gentleman this morning from Intel stated, 16 there's been a thousand-fold increase in technological 17 computer capability over the last several years. This can 18 also be looked at as a thousandfold decrease in cost to 19 computer capability to the individual, which is probably 20 why we are all here in the first place. 21 The real problem is that this has not occurred in 22 the telecommunication industry. We are still believing 23 that the analog voice circuit is worth $10.00 a month and 24 should be usage and distance sensitive. This is the major 25 barrier to access in rural areas. 26 At the same time, the providers of 27 telecommunication services have been able to take advantage 28 of this thousandfold decrease in their costs. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 169 1 The Internet, however, is the key to rural 2 communities being able to participate in the exchange of 3 ideas on the Net and to partially -- and a potentially 4 important key to communications with government. 5 The Internet opens opportunities for rural 6 communities to participate in the information age jobs, to 7 stay abreast of opportunities for employment, and to 8 participate in the development of our areas as these 9 opportunities become available. 10 The media also has incredible potential to assist 11 isolated communities to become less isolated. 12 We thank you for the opportunity to voice our rural 13 concerns. 14 ASSISTANT SECRETARY IRVING: Thank you very much. 15 Next we will have Ralph Gilman of Sunnyvale, 16 California. 17 STATEMENT OF MR. GILMAN 18 MR. GILMAN: Thank you. 19 I stand here as a person who volunteered for a year 20 to do the original grass roots creation of the Smart Valley 21 Project. 22 During that time I had a chance to see some of the 23 regional telecom planning that was done and how that was 24 done here in Silicon Valley. I would like to emphasize the 25 last speaker and some of the questions you had earlier. 26 This is a side comment right now in my two minutes. And 27 that is I think that you can have for one monthly fee of 28 $20.00 or so a month like it cost me now to get on PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 170 1 Internet, you can have video access, voice access and so 2 forth. It doesn't have to be time or distance related. 3 That is because the cost of telecommunications is 4 going down so rapidly with fiber-optics. And it costs no 5 more to string a mile of fiber-optics than it does to 6 string a mile of copper cable today. 7 My first point is -- I have two points and one 8 conclusion. My first point is that I don't think that we 9 have had proven regional telecom demand yet. I think the 10 reason that's true is because we haven't had real access to 11 fast telecommunications. We haven't had the chance to do 12 that. 13 The average student, teacher, senior citizen has 14 not been able to access this. 15 And I think these things have not been put in 16 because of the regional policy. You have done the national 17 infrastructure. The last mile is where the question is. 18 And I think there are a lot of people who are sitting here 19 concerned with who is controlling that last mile. Is it 20 going to be the telecom providers and so forth? And as a 21 result, we are not having the kind of experimentation that 22 we really need. 23 So this is really not happening as fast as we 24 should. My conclusion is that the regional projects should 25 be encouraged and that we should have much more user 26 control of these regional projects. 27 What's happening is that when we have control of 28 the regional projects by vendors and providers, we don't PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 171 1 have enough user control. 2 Thank you very much. 3 ASSISTANT SECRETARY IRVING: Thank you very much, sir. 4 Now we will turn to Judi Clark of CPSR, Computer 5 Professionals for Social Responsibility. 6 STATEMENT OF MS. CLARK 7 MS. CLARK: Thank you. 8 I am Judi Clark with Computer Professionals for 9 Social Responsibility. I am also founder of a group of 10 women that do technical support for other people on line. 11 Some people just don't think women know a thing or two. I 12 am going to make three brief recommendations and then two 13 seeds for thought. 14 My recommendations are to first look at the local 15 and community-based models for networking, many of the 16 civic networks locally and across the nation, Santa Monica 17 PEN, Berkeley Community Memory, Silicon Valley PAL, 18 Cleveland Freenet, Washington DC Cabnet, Seattle Community 19 Network. These community networks embody many of the 20 principles regarding purpose, access and role in community 21 that we believe should be embodied in the future NII 22 plans. 23 Second, take a look at the plans and proposals of 24 large network providers. Listen to the terms that they are 25 offering for their service. Compare and contrast those to 26 the local community-based models. Listen to things like 27 open systems, hardware and software. What is their entry 28 cost? Are they low or are they high? What is their PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 172 1 service provider options? Are they offering service 2 provider for the lower service provider levels? Is this 3 something that they are encouraging, or is there a lot of 4 restrictions to their interaction with lower level service 5 providers? What is the terms of their common carriage and 6 their communication standards? 7 What is their record on free speech? Also, how are 8 they encouraging citizens to be able to add to the pool of 9 resources without penalty? And third, to discourage a 10 design in which the information service providers rely on 11 targeted electronic advertising which promotes the 12 collection and abuse of personal information about 13 consumers. 14 Rather, the commercial side of the NII should use 15 more of a Yellow Pages approach than a direct marketing 16 approach. 17 The NII will no doubt provide such couch potato 18 conveniences and we have heard clearly. 19 Due to time I am only going to give one example of 20 some of these conveniences that are alternatives to some of 21 the 500 channels and movies on demand and ordering from 22 your local health food or fast food chains according to 23 what is available. 24 Rhonda is angry. This is a scenario that I might 25 suggest is playing out somewhere. Rhonda is angry. She 26 just read in the newspapers that the State Transportation 27 Board is considering reducing funding for public transit. 28 They seem to be falling for the argument that people who PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 173 1 don't use public transportation shouldn't help pay taxes, 2 shouldn't pay for it through taxes. 3 She goes to the branch library near her house, sits 4 down at a public terminal, inserts her user card and 5 composes a message to her state representatives, the 6 Transportation Board, the editor of the newspaper where she 7 read the original story. 8 She explains that those who don't use public 9 transit benefit nonetheless in reduced traffic. Think how 10 much more jammed the roads would be if even half the people 11 who use the subway and the Metro Rail drove to work. She 12 sends it off and looks through her E-mail. 13 Would you look at that, she exclaims, drawing sharp 14 looks from the librarians and other terminal users. 15 Senator Morehouse wrote me back. 16 Two weeks ago Rhonda had sent notes to Morehouse 17 and her other senators in support of the public transit 18 bill. Morehouse's reply said that he supported the bill 19 but it had strong opposition. 20 She prints out a copy of the reply to show her 21 husband who doesn't believe that government representatives 22 bother to read E-mail from their constituent. I think this 23 is one likely possibility. 24 There are a lot of others that play out. I would 25 like to make these scenarios available to anyone. My 26 E-mail address is JUDIC at CPSR.ORG. 27 Thank you for your time. 28 ASSISTANT SECRETARY IRVING: Thank you. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 174 1 We will now here from Helen Hernandez from The 2 Legacy Group in Encino, California. 3 STATEMENT OF MS. HERNANDEZ 4 MS. HERNANDEZ: Good afternoon, Mr. Secretary, 5 Assistant Secretary, Commissioners. My name is Helen 6 Hernandez, and I have a governmental affairs firm in 7 Encino. And I am former executive with an entertainment 8 company. 9 I had occasion to tour with Assistant Secretary 10 Irving for many years in the past and am very pleased to 11 see you again, Larry. 12 One of the things that I think we fought over the 13 course of the years is certainly access for minorities and 14 women with regard to ownership, radio, of radio stations 15 and television stations. 16 Here we have a new technology that certainly needs 17 to be inclusive of all the minority groups across the 18 country. 19 We want to make sure, and I would want to encourage 20 you to ensure the access and the information to the 21 communities that are going to be affected. 22 I know that your organization has worked with the 23 CPUC to disseminate information with regard to these 24 hearings. I would like to offer any kind of support that 25 we might be able to give you. 26 I am a member of the National Board of the National 27 Council La Rasa in terms of helping to get the word out 28 because when you talk about factors that hinder network PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 175 1 access, it is very basic. 2 Unless people know and have the knowledge and the 3 understanding that the hearings are taking place, they 4 can't really begin to be included in the process. 5 We want to try to be as inclusive as possible. I 6 flew up from Los Angeles to come to this hearing. And I 7 found out about the hearing through someone who found out 8 from Pac Bell. So we have our own little network going 9 on. 10 But we really want to make sure that word gets out, 11 that people are included, and that the access is provided 12 because access -- for example, I have a little slogan, 13 "Communications is really the bridge to understanding." 14 The way you get the knowledge is really to be able 15 to understand what the technology is going to be. 16 This is a new technology. It is very complex. It 17 is very complicated. We really need to keep the community 18 apprised to really what it is all about. 19 Thank you very much. 20 ASSISTANT SECRETARY IRVING: Thank you very much. 21 Solomon P. Hill from Computers and You, Glide 22 Memorial Church. 23 STATEMENT OF MR. HILL 24 MR. HILL: Hi. Thank you very much for the opportunity 25 to speak today. 26 Computers and You has been serving homeless and 27 impoverished community of the Tenderloin district and has 28 been providing access and training for computers for the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 176 1 population for over five years. We are part of Glide 2 Memorial Church which provides a lot of services for the 3 impoverished community there, including crack recovery, a 4 food program where they feed over 2 million people a year, 5 and the computer program which services about 1000 people a 6 year. 7 We recently had to ask ourselves the important 8 question, well, would Internet access, which we are just 9 starting to provide, really help the homeless? And we 10 thought about it. And we came up with some of the typical 11 answers, access to information about jobs and service 12 information. But I don't really think that was it. 13 We also came up with the access to the American 14 democratic system that allows the people that are possibly 15 locked out, and that really wasn't it. What really hit and 16 the true answer I believe is that only the homeless people 17 really know how it can help them. That knowledge can only 18 be unleashed by giving them access to the technology and 19 setting the tools for them to use in front of them and 20 watching them go with that. 21 The people will find very creative uses for the 22 technologies, especially for people who have to find 23 creative ways just to survive day by day. In other words, 24 we have to empower them and really provide that technology 25 for them. 26 Pertaining to the question of how to overcome 27 barriers for users that we serve, as mentioned before, 28 everyone has access to a television. You go in the poorest PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 177 1 neighborhoods and there are TV's and there is a Nintendo 2 and all the kids are using them. 3 However, certainly we can implement access to 4 technology that actually engages these children. And I 5 feel that is very important. 6 And also in order to overcome the barriers for 7 these people, everyone needs to remember that the 8 information infrastructure is really about people. It is 9 about people communicating, about people learning. And if 10 everyone keeps that in mind, then there is a lot of hope 11 that that will happen from everyone, the corporations, 12 everyone. 13 And in conclusion, the Internet, particularly for 14 the sector that Computers and You serves, allows for unique 15 part of the American experience to be expressed. And with 16 people's own voices, that currently hasn't happened in the 17 other media. And this enriches our entire community. 18 Thank you. 19 ASSISTANT SECRETARY IRVING: I just want to note that I 20 had the occasion in the inaugural week last year to attend 21 a service of Glide Memorial, and I know what your pastor is 22 trying to do with the community. I am glad to see he is 23 also using technological tools to reach out to that truly 24 community at risk and in need. So please pass on our 25 appreciation of his efforts. 26 MR. HILL: Come back. 27 ASSISTANT SECRETARY IRVING: I'll try to. 28 Our final public participant this morning is Peggy PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 178 1 Liu from Net Manage in Cupertino. 2 STATEMENT OF MS. LIU 3 MS. LIU: First I have to lower this to my level here. 4 My name is Peggy lieu. I am from Net Manage, Inc., 5 in Cupertino down the street. I am the product manager for 6 the Internet Chameleon. The Internet Chameleon is the 7 currently the only shipping product for Internet access on 8 Windows which also includes both protocols and Internet 9 access applications. 10 This morning we have mainly focused on the hardware 11 infrastructure of the Internet and public universal access 12 to this infrastructure. But what I would like to do is 13 take a look and say what is the Internet really? 14 My picture of the Internet is that it's a 15 distributed network that exists to provide new solutions to 16 address people's needs. And moreover, the Internet can be 17 thought of in three layers. 18 The first one on the bottom is hardware, which is 19 the most obvious. And we have talked about multiple 20 platform solutions, like over PCs or Sega, Nintendo and 21 either net over cable TV. 22 The middle layer consists of individual 23 applications, including E-mail for sending and retrieving 24 information, directory services for navigating around the 25 sea of information, remittance for allowing payment through 26 the Internet, and finally security for preventing 27 misplacement and misuse of this information. 28 Finally, the top layer is the front ends that PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 179 1 provide the immediate solutions for vertical markets. 2 In this panel you asked the question, what factors 3 would help or hinder network access for information 4 providers and users. So I'd like to draw your attention to 5 the security element in this picture. 6 One of the objectives of the NTIA is to be 7 trustworthy and secure, protecting the privacy of its 8 users. 9 Secure. Six out of the eight examples listed in 10 your brochure describe ways that people will derive benefit 11 from the Internet. 12 Well, they require ways to have secure 13 transmissions of payment records and confidential 14 information. 15 How can we charge for health care on-line and 16 ensure confidentiality of health records without security? 17 Who will want to mail their Visa number when 18 buying something on-line from the Gap without security? 19 And what companies will want to collaborate in the 20 development of sensitive technologies on-line without 21 security? 22 I'd like to make some recommendations on this 23 issue. 24 One, security algorithms developed in the U.S. 25 Must be able to be exported freely worldwide. 26 Not freely without payment, but freely, liberally 27 worldwide. 28 And, you know, the Internet is a worldwide PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 180 1 network, and our legislation should be changed to reflect 2 that. 3 Number two, Clipper-type technology is inherently 4 limited when used on a worldwide network. Not only does it 5 have the imagine of Big Brother ten years later -- who 6 wants to give government the ability to decrypt information 7 at their will? -- but also what international government 8 will want to use this technology when transmitting 9 classified materials? 10 This Clipper proposal should be dropped. 11 Finally, instead, the government should fund 12 grants to both nonprofit and commercial entities to develop 13 secure algorithms and promote the use of standards and 14 secure transmission. Thank you. 15 ASSISTANT SECRETARY IRVING: Thank you. 16 A couple of announcements before we break for 17 lunch, if that's okay. 18 Lunch will be sold on the patio for those of you 19 who have been patient and are hungry. 20 Technological demonstrations going on -- 21 continuing going on across the hall, and please spend the 22 limited time we are going to break for lunch to see as much 23 as of that as you can. They are in the Community Room. 24 Brian Harris of NTIA will be conducting an update 25 on the NII Grant Program in this room immediately following 26 break of this. 27 If you have any comments or questions about 28 anything that happened this morning or anything we are PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 181 1 going to do this afternoon, please feel free to ask a 2 member of the NTIA staff. They are scattered around the 3 room. 4 If you'd like to make audience participation 5 comments in the afternoon, please sign up. There are some 6 sign-up sheets in the back of the room. 7 And please write clearly so that if there are 8 "L's" in names like "Schultz" and that I can pronounce the 9 name of your college. And we'll come back to this room in 10 precisely 28 minutes. We are going to take 28 minutes for 11 lunch. 12 At two o'clock precisely, we will be back. 13 Before we -- I would be remiss if I did not thank 14 all of the outstanding testimony -- all of the outstanding 15 panelists for their great testimony this morning. It was 16 absolutely wonderful. 17 The only thing I apologize for is we didn't have 18 as much time as we wanted for the interaction between us. I 19 think all of us felt it would have made this hearing even 20 more valuable. So thank you and please feel free to 21 continue to comment to us. 22 23 (Whereupon, at the hour of 1:32 p.m., a recess was taken until 2:00 p.m.) 24 25 26 27 28 PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 182 1 AFTERNOON SESSION - 2:15 P.M. 2 * * * * * 3 ASSISTANT SECRETARY IRVING: In the interests of time, 4 we're going to go ahead and get started. I don't know if 5 Mr. Bidzos has -- is going to make it or not. I assume 6 he's -- or he's here. He is here, and we will start -- we 7 will let him start his testimony when he gets here. 8 Mr. Holub, would you be willing to start? 9 Our first witness this afternoon will be David S. 10 Holub, the Vice President of Operations of hooked, and I 11 hope I pronounced your name right. 12 MR. HOLUB: Yes. 13 ASSISTANT SECRETARY IRVING: Is that microphone on? 14 There is a little button. Pull it toward you. 15 MR. HOLUB: How's that? 16 ASSISTANT SECRETARY IRVING: That's better. 17 STATEMENT OF MR. HOLUB 18 MR. HOLUB: I first want to express my appreciation to 19 Mr. Barrett and Mr. Irving and Mr. Barram and Mr. Knight 20 and Mr. Shumway and your staff for having me down here. 21 I guess this morning or this afternoon I feel a 22 little bit like an Internet poster child -- 23 ASSISTANT SECRETARY IRVING: Would you pull that a 24 little closer? We're having a little trouble hearing. 25 MR. HOLUB: I was saying, I'm feeling a little bit 26 like an Internet poster child here today, pretty new to the 27 business. And I guess the most important thing that I want 28 to communicate this afternoon is that the promise of an PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 183 1 inexpensive and easy-to-use access to the Internet is 2 absolutely deliverable, and it's deliverable this very day. 3 I have been in the process of establishing an 4 Internet gateway which offers a well-organized graphical 5 user interface for navigating the Internet. And I have 6 made it a priority to offer that service for $2 an hour or 7 less. 8 What I'm saying is that organized access to this 9 information society is available at a delivered cost of $2 10 an hour or less virtually anywhere in America, and if it 11 cost more than that, it's because that cost is attributable 12 to the phone or the cable companies. 13 The panel asks how -- specifically how increased 14 competition in local access services would affect the 15 delivery of information. 16 A point of my story is that local 17 telecommunications competition has everything to do with my 18 company and how others like us would be able to provide 19 low-cost, innovative services. 20 The largest obstacle, I feel, is not technology. 21 It's the cost and the limited admittance to the 22 infrastructure required to deliver these services. 23 And beyond the ability to develop interfaces and 24 integrate hardware and software, I find large companies who 25 promote their capabilities with regard to information 26 technology yet have few if any products to deliver in this 27 arena. 28 And these are the very same businesses in control PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 184 1 of the delivery mechanisms. 2 So I suppose it's no surprise that they need not 3 be too responsive to the needs of small businesses like 4 mine who are prepared to deliver on those promises today. 5 In my particular application, the most effective 6 way to lower cost and offer sophisticated Internet access 7 is via modems in area codes or local dialing areas such 8 that the users nor the access providers like myself incur 9 any additional long-distance charges. 10 What that means is to have physical access to 11 those wires and antennae and fibers at reasonable cost, but 12 I'm kind of getting ahead of myself. I have a story to 13 tell. 14 In early February this year, I contacted Pacific 15 Bell to order two T-1 trunks -- those are 48 digital 16 circuits -- and for termination of those trunks into some 17 specialty modem devices in San Francisco. 18 I went to great lengths to explain my application 19 to any and all at Pac Bell who would listen. I forwarded 20 all the specifications I had for the equipment that I was 21 installing and encouraged Pac Bell in every way I could to 22 work with me and the manufacturer to ensure that these 23 services would be compatible with the equipment. 24 To my surprise, what Pac Bell installed at our 25 site was not compatible with my equipment. And 26 furthermore, after this became apparent, I was informed 27 that Pac Bell offered no such service because they were 28 not, quote, unquote, tariffed by the CPUC to provide it. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 185 1 Things were looking bleak right then, and it 2 looked as though the only source of local service was -- 3 either would not or could not provide to it our business. 4 I anticipated the need to connect to other 5 carriers and had leased space in a building whose tenants 6 included many other telecommunications service providers. 7 And soon I found a phrase Catch-22 featured largely in my 8 speech. I had found Teleport Communications Group, a 9 competitive access provider, was capable of delivering the 10 circuits I required, but they complained that the CPUC 11 precluded them from doing so. 12 I contacted the CPUC office of the Public Advisor, 13 and after consultation with them, I learned that it wasn't 14 that the new providers were precluded from providing me the 15 service. It was that I was precluded from reselling it. 16 Nevertheless, I convinced TCG to experiment with 17 my equipment and provide me a local connect. To them my 18 modem simply looked like another PBX. And as we all knew 19 all along, everything just seemed to work fine once the 20 service was provided. 21 If it were not for that experiment, I am convinced 22 that I would not have service today basically, and this 23 story sort of doesn't end there. 24 Once we established this connection with a single 25 T-1 circuit, I ordered another. And this required that 26 TCG, the competitive access providers, order additional 27 service from Pac Bell. 28 They, in an effort to address the regulatory PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 186 1 concerns and disclose the nature of these services, very 2 thoroughly explained the situation to Pac Bell. And then I 3 think an amazing thing happened. Pac Bell put forth a 4 proposal for the same services and is now telling me that 5 TCG cannot legally provide them. 6 As I have stated all along, I really don't care 7 who gives me the service. I just simply wanted good 8 service and to be able to provide these Internet 9 connections at a low cost to the end user and so forth. 10 In their defense, Pac Bell is now offering me the 11 service I require, has credited me for the services that 12 didn't work, and has apologized about all the confusion. 13 I guess my point is that, call it obstruction or 14 bureaucratic inefficiency or regulatory constraint, you 15 know, that's the story. 16 And my concern is that between the need for 17 regulatory process and legal infighting between 18 telecommunications providers, cable companies and the like, 19 small technology businesses like ours will pay the price of 20 time. And in the meantime, these larger players will 21 mobilize their resources and small businesses with limited 22 financial resources will lose their technical edge. 23 The public will lose through slower implementation 24 of services and ultimately fewer choices among information 25 service providers. 26 And I know that may not be the intent of the CPUC 27 or the federal government, but I think that that's 28 certainly what is happening right now. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 187 1 ASSISTANT SECRETARY IRVING: We'll now turn to -- 2 A VOICE: Mike, mike. 3 ASSISTANT SECRETARY IRVING: Sorry. Thank you. 4 Mr. Holub -- I apologize. 5 We'll now turn to -- I'm still technologically 6 illiterate after all these years -- Dr. D. James Bidzos, T. 7 James Bidzos, the President of RSA Data Security in Redwood 8 City. 9 STATEMENT OF MR. BIDZOS 10 MR. BIDZOS: Thank you very much, and thanks for the 11 opportunity to speak here today. 12 I represent a company that represents some 13 inventors from Stanford University and from MIT who 17 14 years ago came up with a very innovative technology that is 15 going to provide the equivalent of handwritten signatures 16 and envelopes for the information age. 17 It was very exciting when it was developed 17 18 years ago, and one can certainly imagine the applicability 19 today as there's literally an explosion of electronic 20 communications. We're on the verge of a new era in 21 electronic commerce and these kinds of controls, these 22 kinds of integrity mechanisms are going to become very, 23 very important. 24 There's a difference between what's been happening 25 in the private sector and what's been happening in the 26 government. And I'd like to talk about the technology and 27 how it spread throughout the private sector and how an 28 infrastructure is being built and stress the importance of PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 188 1 government essentially working with and adopting the 2 technology that's out there in the private sector now. 3 Because as we move towards paperless transactions making 4 the government more efficient -- for example, we know today 5 that patent information, information from the SEC, other 6 kinds of things are available on-line -- some day we hope 7 to make other transactions paperless, like even the filing 8 of electronic tax returns. 9 Questions of access control, information 10 integrity, information confidentiality are going to be 11 become critical questions. 12 So I think we're dealing with a technology here 13 that's very exciting, very important and very critical to 14 the information infrastructure in order to make it all 15 work. 16 The written testimony that I've submitted talks a 17 little bit about the history and the technology, and I 18 won't bore anybody with any of the underlying mathematics, 19 but one of the interesting things about the technology is 20 that it is very controversial. 21 I'm sure a lot of the folks here have heard about 22 and read about something called the Clipper Chip. This is 23 kind of representative of some of the controversy. 24 There are competing interests here. While law 25 enforcement and intelligence gathering are of course 26 important functions that have very legitimate concerns 27 about the uncontrolled proliferation of this technology 28 could make their job very difficult, it's also crucial to PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 189 1 the information infrastructure. 2 Business simply can't benefit from the information 3 superhighway without this kind of technology. I think 4 government can't either. 5 People aren't going to put their information 6 on-line, people aren't going to do electronic commerce if 7 they don't have the kind of controls and mechanisms that 8 provide data integrity, access control, confidentiality. 9 One can imagine medical and tax information being 10 readily available to anybody with a computer and a modem. 11 It just won't happen without these kinds of protections. 12 Today out in the marketplace there are close to 13 four million products, and that number almost doubles every 14 single year. Standard commodity products that contain this 15 technology, an operating system from Apple Computer, Lotus 16 Notes, one of the most successful kinds of products that's 17 out there today, there are free embodiments of the 18 technology available to anyone who wants to use it. 19 The government really has yet to move into this 20 world, and it's the controversy that surrounds this 21 technology that's made it difficult. 22 There have been some attempts to strike a balance, 23 but I think they can be improved, and I hope more attention 24 will be paid to it. Thank you. 25 ASSISTANT SECRETARY IRVING: Thank you. 26 Our next panelist is Ed Spivak of First Pacific 27 Networks. 28 PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 190 1 STATEMENT OF MR. SPIVAK 2 MR. SPIVAK: Thank you, Mr. Chairman and 3 Commissioners. 4 I want to personally thank Mr. Joe Gattuso of NTIA 5 for extending the invitation to participate in today's open 6 access hearings. My name is Ed Spivak, Regional VP for 7 First Pacific Networks. We are a 150 person firm in San 8 Jose. We design, develop, manufacture equipment to put 9 telephone and data services over fiber-optic and coaxial 10 cable networks. We call this type of network Hybrid Fiber 11 Coax or HFC for short. 12 Our products allow cable TV operators to deliver 13 telephone service and the telephone companies to deliver 14 cable television services. 15 Our products are at the heart of enabling 16 convergence, that is, the merger of two of the three access 17 infrastructures that serve almost all homes and 18 businesses. 19 My remarks will stress three points: One, the 20 technology is here and available now and the economics make 21 the deployment of broadband services very attractive; 2, a 22 very critical potential player in creating broadband access 23 is being ignored; an 3, the governments role. 24 We are in the process of shipping 20,000 units to 25 the United Kingdom. The units will be used to provide 26 telephone services to 20,000 people. Telewest, a 27 subsidiary of U.S. West and TCI, has purchased these units 28 for installation in their UK cable television system. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 191 1 This order demonstrates that product is available 2 now and that it takes a blend of expertise, that is 3 telephone and cable TV, to tackle convergence and it takes 4 a stable regulatory framework to convince a network 5 operator to combine these services. 6 The largest single driving force behind convergence 7 is economics. Our experiences to date with Telewest and in 8 over 20 pilot deployments worldwide has demonstrated that a 9 HFC network can be deployed for about one half the 10 investment and can be maintained for about one half the 11 cost of an equivalent telephone access network that depends 12 on traditional copper wires. I'm providing a paper for you 13 with my testimony that delves into the cost aspects of 14 HFC. 15 Much of the testimony that you hear from network 16 operators is calculated to convince you to level the 17 playing field, but only on the conditions and terms that 18 most advantage each specific network operator. 19 My testimony has a different perspective. FPN is 20 desirous to see the deployment of HFC begin as soon as 21 possible. That is how we will stay in business. 22 We believe that the best way to stimulate this 23 deployment is to have full competition. The competitive 24 model will spur deployment and drive HFC product costs 25 down. As the costs come down, deployment will expand into 26 areas with less and less revenue potential; that is, rural 27 America. We believe that that is the way to stimulate 28 universal access. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 192 1 We agree with most all of the legislative goals 2 that we have heard. However, we believe that additional 3 emphasis should be placed on two areas. First, there must 4 be open and standard interfaces with unbundled rates for 5 interconnection. This will help the large and small 6 companies to be players, will greatly speed deployment and 7 will create a seamless network. 8 Second, if it takes years to develop deployment 9 rules, then broadband access will be delayed by years. We 10 estimate that providing broadband access to all Americans 11 will cost about 300 to $600 billion. No prudent investor 12 will begin to commit money to broadband access until the 13 rules are clear, written so they can be understood and 14 probably tested in the courts. 15 We encourage you to provide for full competition, 16 interconnection and a legislative mechanism to expedite 17 rule making and the appeals process and to be very clear in 18 your legislative intent and direction, especially in 19 clarifying federal versus state powers. 20 As we mentioned, the US infrastructure will cost 3 21 to 600 billion. Who will or can put this type of financial 22 commitment together? We believe that the telephone and 23 cable TV companies are obvious candidates. We believe that 24 the utility companies also have an enormous stake in wiring 25 to the home and business and should be allowed to 26 participate along with the telephone and cable companies. 27 The telephone, cable TV and utility companies all 28 have separate and extensive fiber-optic cable networks, PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 193 1 poles, ducts, various right-of-ways and incredible 2 expertise. If allowed to play on a level field, we believe 3 that tremendous synergies and efficiencies will result 4 which will benefit the consumer through better services at 5 less cost and with wider availability. 6 In summary, our key points are the technology is 7 here today. It is extremely attractive economically, but 8 substantial access investments will only be made when 9 interface standards are in place and the regulatory 10 environment is stable. 11 Full competition is necessary to create a level 12 playing field and must include the companies that own the 13 third set of wires to the homes and businesses, the power 14 companies. 15 The rest of the world is moving quickly to deploy 16 broadband, and as our paper, which is attached, describes, 17 they will use broadband as a strategic competitive weapon 18 to enhance their global competitiveness. Thank you for 19 this opportunity to share our views with you. Please 20 accept my invitation to visit our San Jose headquarters and 21 see this technology first hand. 22 Thank you. 23 ASSISTANT SECRETARY IRVING: Thank you very much. 24 Our next panelist is -- 25 COMMISSIONER BARRETT: Ed, because you are not going to 26 answer the question, I want to ask something. You are 27 talking about your Telewest thing is important in the UK. 28 I would like for you to tell me whether or not that is PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 194 1 transferable? I visited that last October with people from 2 U.S. West in the United Kingdom -- whether or not that is 3 transferable. I want to know whether or not it is the 4 total part of the UK or just a section and whether or not 5 BT, British Telecom, and Mercury and cable and wireless can 6 also offer cable? 7 Thank you. I am going to hold it. 8 ASSISTANT SECRETARY IRVING: Hold that thought and 9 after the other panelists make their presentations, we will 10 come back to that. 11 Now we will turn to Elaine Lustig, staff attorney 12 of GTE California. 13 STATEMENT OF MS. LUSTIG 14 MS. LUSTIG: Thank you very much for the invitation, 15 and good afternoon. 16 I am here representing GTE California, 17 Incorporated, which is the second largest local exchange 18 carrier in California and an active player in the 19 information society in this state. 20 In the invitation to testify, I was asked to 21 concentrate on what is government's role in ensuring access 22 to information and spurring innovation in the provision of 23 access. 24 The short answer to that question is that 25 government can best achieve these worthy goals by 26 establishing the kinds of market rules that encourage and 27 reward innovation. 28 Traditionally such motivation has been provided by PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 195 1 competition and the possibility of profit. The free 2 enterprise approach has brought this country to a position 3 of global leadership and quality of life. And as many 4 other participants have stated, I also urge you to consider 5 that the innovation that you want to achieve in 6 telecommunications will occur most quickly through the same 7 force that made the USA leader in other arenas, that force 8 being competition. 9 In the short time that I have to address you, I 10 would like to focus on two main areas: First, what 11 safeguards are needed to ensure effective competition and 12 equal access; and second, what role can the U.S. Government 13 regulators play? 14 To determine the appropriate safeguards that are 15 needed, I think we need to look at the goals that we're 16 trying to reach in the information society. And you have 17 heard many of those goals. But I think that two of the 18 most essential ones can be boiled down to quality service 19 at a reasonable price. 20 Now there were two key protections that are needed 21 to ensure these benefits. With respect to price, one very 22 well established safeguard which is necessary during the 23 transition to a competitive market model is protection from 24 unjustified price increases for those who buy services that 25 are not yet subject to forces of the competitive 26 marketplace. 27 Price cap regulation is an accepted means of 28 providing the safeguard for consumers, and it has been PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 196 1 successfully implemented in California for GTE and Pacific 2 Bell. 3 Price regulation, however, must eventually change 4 and diminish as a more competitive marketplace replaces the 5 need for it. 6 Second, quality of service will require that all 7 interconnected users and providers be able to talk to each 8 other quickly and reliably. Essentially, that's what I am 9 talking about is the goal of interoperability. And that is 10 an area where the government should, as many other people 11 have said to you today, encourage the development of 12 industry-wide standards by industry participants who are 13 most familiar with the technology and its uses. 14 As the telecommunication access industry further 15 evolves into a network of networks, this ease of 16 interoperability will be essential for all carriers and all 17 subscribers. 18 I would also note that ease of interconnection will 19 provide greater benefits to network users than will 20 regulatory efforts to simply break up or unbundle the 21 network into piece parts without regard for any demand that 22 may exist for those piece parts. 23 The second question I wish to focus on is the key 24 one before us today. What is government's role in ensuring 25 access and spurring innovation? 26 Before answering this question, I want to stress 27 that regulators cannot build a national information 28 superhighway. Only service providers can do so. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 197 1 In particular, telephone companies are uniquely 2 positioned to play a major role in spurring innovation, but 3 only if they are given the necessary flexibility and 4 freedom to do so. 5 GTE is not saying that there should be no 6 regulation. Where competitive alternatives do not exist, 7 appropriate regulation is necessary to ensure that the 8 public interest is protected. 9 The focus should be on consumer protection in terms 10 of quality and price. 11 However, regulators must reexamine the 12 marketplace. Where competition exists, regulation must be 13 reduced, if not eliminated, so the competitive marketplace 14 can determine when, where and how new services become 15 available. 16 Earlier I mentioned that government should 17 establish market rules to promote competition. These 18 market rules should be based upon the following 19 principles. 20 First, regulatory symmetry should be the rule for 21 all providers of hybrid services, for example, voice and 22 video, so that whether it is a cable company providing 23 telephone service or a telephone company providing video, 24 the same rules should apply. 25 Second, common carriage principles should be 26 applied to all services provided over hybrid networks. 27 Essentially, that means that networks and providers are 28 indifferent to who uses the network and what they do with PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 198 1 it. 2 Finally, regulation should be as light as possible 3 as an incentive for service providers to deploy 4 high-capacity technology with interactive capabilities. 5 Policy makers must recognize that specific outcomes 6 or technologies cannot be completely dictated in a 7 competitive market. 8 As the California Commission has recognized in its 9 infrastructure report, micro management of utility 10 operations must be avoided and regulation must be 11 streamlined. 12 Thank you very much. 13 ASSISTANT SECRETARY IRVING: Thank you, Miss Lustig. 14 Our next panelist will be John Siegal, Senior Vice 15 President of Chris Craft/United Television. 16 STATEMENT OF MR. SIEGAL 17 MR. SIEGAL: Thank you for the opportunity to appear 18 before you today. 19 I'm John Siegal, Senior VP of Chris Craft/United 20 Television, which owns eight television stations around the 21 nation, including KBHK, just to the north in San Francisco, 22 and KCOP in Los Angeles. 23 I also serve as the Chairman of the Television 24 Board of Directors of the National Association of 25 Broadcasters. 26 Universality and affordableness are among the 27 primary goals of both the Administration's Information 28 Infrastructure Task Force and those in Congress charged PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 199 1 with crafting the information highway. 2 Broadcasters are uniquely positioned to realize 3 these objectives and more. 4 In terms of universal access, broadcasting has the 5 widest coverage of any wireless or wired media today. More 6 homes in America have televisions, 98 percent, than 7 telephones, only 93 percent, or cable with just 62 percent. 8 The indispensability of this universal and stable 9 access was never more apparent than during the natural 10 disasters that have struck our nation in the past few 11 years. Broadcast stations delivered information services 12 that saved lives and then led the drive to raise money, 13 food and clothing for the survivors. 14 And if we are to consider affordable access, once 15 again, there is no industry with a better record than 16 broadcasting, which for decades has made available free 17 service to both rich and poor, urban and rural, educated 18 and those not so fortunate. 19 Broadcasting can ensure that the economically 20 disadvantaged do not become the informationally 21 disadvantaged. 22 We support Congressional efforts that have 23 resulted in two NII bills now pending and are working with 24 their authors to further improve these important 25 initiatives. 26 Let me take a moment to discuss three provisions 27 that must be included in any legislation to provide a level 28 information highway. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 200 1 One, flexibility to use allocated broadcast 2 spectrum to offer competitive services. 3 Two, strong safeguards that promote vigorous 4 competition among wired and wireless providers. 5 And three, a review of the structural radio and 6 television broadcast rules that may restrict broadcasters' 7 full participation. 8 First, the NII legislation recognizes that in 9 order to maximize broadcasting's ability to serve the 10 public, we must be allowed flexible use of our allotted 11 spectrum. 12 NTIA is to be commended for supporting this 13 important concept when it told a House panel that flexible 14 use of broadcast spectrum would promote spectrum efficiency 15 and help develop a new consumer service, increasing the 16 total benefits to society. 17 We also applaud NTIA's careful analysis of how to 18 assess fees on broadcasters' providing these services. 19 Their recommendation that fees should not be set so high as 20 to inhibit innovation is right on the mark. 21 These new services, whether they be data, 22 broadcasting or faxing or paging or messaging or whatever, 23 will be in addition to, and in no way diminish or replace, 24 our free over-the-air public service core responsibilities. 25 Regarding the need for government to put in place 26 safeguards to ensure effective competition and 27 nondiscriminatory equal access, broadcasters support 28 Congress's attempts to rein in potential unfair PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 201 1 monopolistic activities of the regional Bell Operating 2 Companies and other carriers. 3 NII legislation contains a prohibition against 4 telcos' simply buying up cable systems in the same service 5 area. This is the only way we can prevent the substitution 6 of one monopoly, cable, with a larger, even more powerful 7 monopoly, the local phone company. 8 Such mergers will lead to less competition, not 9 more, and will not serve the interests of a competitive 10 marketplace or the interests of either the general public 11 or other competitors in the video and audio marketplace. 12 The House and Senate bills also widely mandate 13 that telcos be required to create separate subsidiaries. 14 A Californian's phone bill should not include a 15 hidden tax for Pactel's risky new business ventures. 16 And we would like to acknowledge important 17 safeguards in the two bills that specifically protect the 18 viability of television stations like KCOP and KBHK. 19 Both the House and Senate bills apply existing and 20 much needed rules, such as syndicated exclusivity and 21 network nonduplication, which ensure the integrity of the 22 local broadcast marketplace to all video delivery 23 technologies. 24 The government must also ensure that telephone 25 companies capable of transporting video programming be 26 required to offer nondiscriminatory access to that capacity 27 under common carrier principles. 28 This means strong penalties that will result in PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 202 1 deterrence and swift resolution of any anticompetitive 2 behavior. 3 These concepts presently are not included in both 4 bills, but their in inclusion is essential for assuring 5 nondiscriminatory access, interoperability and 6 interconnection, particularly with regard to consumer 7 programming selection aids, the so-called navigational 8 devices. 9 Lastly, while our competitors are gaining freedoms 10 to move into new businesses, including ours, broadcasters 11 face restrictions that date back before the advent of 12 network television. That is why we are very supportive of 13 the provisions in both the House and Senate bills that 14 direct the FCC to review all the current structural 15 limitations to see how and where appropriate relief should 16 be granted. 17 Broadcasters are working hard to include these 18 provisions and assure passage of the NII bills this year, 19 because without any action from Congress, we will have to 20 brace ourselves for a telecommunications future shaped by 21 the RBOCs for the RBOCs with little choice and no 22 protection for consumers. 23 In closing, let me say that broadcasters 24 appreciate the leadership of NTIA and the Clinton 25 Administration with regard to moving the information 26 highway forward. And again, thank you for the opportunity 27 to share with you broadcasters' perspective on this 28 important issue. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 203 1 ASSISTANT SECRETARY IRVING: Thank you very much. 2 We'll now turn to Mr. Dale Bennett, Regional Vice 3 President of TCI Cablevision of California. 4 Mr. Bennett. 5 STATEMENT OF MR. BENNETT 6 MR. BENNETT: Thank you. Thank you for inviting me to 7 speak this afternoon. 8 My duties entail managing the California 9 operations of TCI, which accommodate bringing cable 10 television service to about a million customers in 11 California. 12 We at TCI feel that the best way to ensure open 13 access is through the spirited competition between multiple 14 network providers. 15 The government's role and the policies it adopts 16 are critical to ensuring that competitive marketplaces for 17 telecommunications services are permitted to evolve and the 18 broadband infrastructure necessary to support these 19 services is deployed. Enlightened government policy should 20 enhance consumer access to information and spur industry 21 innovation. 22 We believe it is sound public policy for all 23 levels of government to strive to proactively promote 24 competition with enlightened policy, to provide consumers 25 with choice, and to protect consumers as the marketplace 26 transitions from the dominant carrier monopoly environment 27 to a fully competitive one that offers choices between 28 multiple digitally switched full-service networks. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 204 1 To accomplish this, we feel that all statutory and 2 legal barriers to competition must come down as soon as 3 possible. If they don't, our incentive to build the 4 networks of tomorrow is removed, because it is currently 5 illegal for us to compete. 6 In California, however, legislation has been 7 introduced that begins to address these concerns. The 8 bill, Assembly Bill 3606, sponsored by Assemblywoman Gwen 9 Moore, adopts the California PUC position that all 10 telecommunications service markets throughout California 11 should be open to competition by July 1st, 1997. 12 The bill, however, goes a step further and states 13 that if the telephone company is allowed by federal 14 government to offer video services in any area of the 15 state, then the California PUC is directed to immediately 16 allow cable into telephone services in that same area and 17 to establish appropriate rules to affect openly competitive 18 telecommunications service markets. 19 We wholeheartedly support Ms. Moore's initiatives. 20 The policy that permits competition must also be 21 enlightened. It is critical that Congress and the 22 California PUC strive to achieve true regulatory parity 23 between the dominant local exchange carrier and those who 24 would provide competition in the local exchange. 25 We recommend to you the Markey-Fields legislation 26 pending before the House of Representatives as an example 27 of proposed policy that squarely balances the introduction 28 of competition in the cable and telephony marketplaces with PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 205 1 the strong policy interest in protecting consumers and 2 ensuring that they will have a choice of providers, 3 therefore -- thereby insuring open access to all. 4 Further, the jurisdictions of regulatory oversight 5 need to be established so that cable and its competitors 6 answer to the same regulatory authority determined by the 7 services being offered. 8 It needs to be clear, as it is in Markey-Fields, 9 that when telephone companies provide video services, they 10 are regulated, pay franchise fees, and provide public, 11 educational, government access facilities and bandwidth to 12 the franchising authorities, just as a cable provider does. 13 And when cable television companies offer voice or 14 regulated telecommunications services, they should answer 15 only to the state Public Utility Commissions, just as the 16 local exchange carrier does. 17 Moreover, let me point out that today the cable 18 television industry cannot be viewed as a monolithic 19 competitor to local exchange carriers. 20 An interaction initiated by a customer of ours 21 here in Sunnyvale cannot reach the entire Bay Area unless 22 we are interconnected with other cable systems and with 23 Pacific Bell. 24 Until there is interoperable equipment and 25 regulatory interconnection mandates, there will be no 26 head-to-head competition throughout an entire service area. 27 In conclusion, we believe the government's proper 28 role is to promote competition by removing all statutory PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 206 1 and legal barriers to entry, establish enlightened policies 2 that achieve true regulatory parity between competitors, 3 resolve regulatory jurisdictional allocation questions, and 4 to ensure that consumers have a choice between multiple 5 digitally switched full-service networks. Competition in 6 the marketplace will then guaranty access to all. 7 In closing, I'd like to point out that the 8 California cable television industry is opening access to 9 this meeting and to many other daily public policy hearings 10 to three and a half million homes in this state. 11 We also currently provide free broadband services 12 to over two-thirds of all California schools, and our 13 company and our ex-fiance, Bell Atlantic, jointly pledged a 14 couple of months ago -- 15 (Laughter.) 16 MR. BENNETT: -- to provide free access to all schools 17 in our service areas. 18 COMMISSIONER BARRETT: I'm not sure whether Ray Smith 19 considers his company a fiance as opposed to probably you 20 all being the fiance, particularly the bride. 21 MR. BENNETT: Probably. 22 COMMISSIONER BARRETT: Okay. 23 ASSISTANT SECRETARY IRVING: And now our final 24 panelist of the afternoon is John Gamboa, Executive 25 Director of Latino Issues Forum and Co-chair of the 26 Greenlining Coalition. 27 Mr. Gamboa. 28 PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 207 1 STATEMENT OF MR. GAMBOA 2 MR. GAMBOA: Thank you. 3 Latino Issues Forum is an umbrella organization 4 composed of the major Hispanic organizations in the state. 5 It's -- I don't want to lose this microphone here yet. 6 It's an advocacy-oriented organization working in 7 the area of public policy. 8 I also represent the Greenlining Coalition, which 9 is a multi-ethnic coalition working in the areas of 10 utilities, insurance companies and banking, most of the 11 industries who have in the past redlined our constituency, 12 which is the low-income minority communities, the 13 limited-English-speaking recent immigrants and the disabled 14 communities. 15 We have been involved in the area of 16 telecommunications for a minimum of 25 years. We have been 17 involved before the coining of the phrase "the super 18 information highway." We have been involved from the 19 aspect of access, access to the system. 20 We got involved in 1970 in trying to get access to 21 emergency services for people who couldn't speak English. 22 We got involved in trying to get access for our communities 23 to be market-driven access, so we could also contribute 24 into the economy by having the companies market to our 25 communities and provide us the services, and in turn, we 26 would provide them the profits they need to continue. 27 We have one fear. One of the things that I've 28 noticed in the discussions going on in this particular PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 208 1 panel is that there is no discussion about the impact of 2 the least-able-to-defend-themselves consumer in the super 3 information highway. We have a fear that what's happening, 4 what's happened before in the recent past will happen once 5 again, and that is that our community will be left out. 6 At the time of divestiture when the Bell system 7 was broken up, our community, although it did not 8 participate or its penetration was not equal to the 9 majority community, we were close to 90 percent of our 10 community had access to telephone service. 11 Since divestiture in California, that access has 12 decreased considerably. And in fact, Pacific Bell's own 13 witness in a recent CPUC hearing admitted under 14 cross-examination that their own records show that the 15 Hispanic community suffers a 19.6 percent of its 16 population without access to telephone service. 17 What this means is that about 800,000 children, 18 Hispanic children, Latino children, do not have access to 19 an ambulance or the fire department in times of emergency. 20 It is interesting to me -- there is also 800,000. 21 That means there are two million children of all ethnic 22 groups without access to these emergency services. 23 We are discussing today the access to the 24 superinformation system, and I heard the needs discussed, 25 the business needs, the providers' needs, but nobody has 26 talked about the low income consumer needs there is a 27 tremendous need to hear. 28 The superinformation highway should be a system. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 209 1 It should not be just a highway and discussion of the 2 on-ramps to the highway. There is also the surface 3 streets. And the surface streets is the local telephone 4 loop, access to local telephone services that has fallen 5 behind. 6 I think the government role in this whole arena 7 should be that the ante, what every service provider, every 8 company that provides the service has to do to get access 9 to providing superinformation highway system or equipment 10 has to provide a plan, a plan to ensure that what's 11 happened on the surface streets in the local telephone loop 12 does not happen in the superinformation highway system. 13 Pac Bell has recently made a lot of publicity about 14 giving free service, and I have heard it also mentioned 15 here of other companies providing free service to schools, 16 connection. That free service to schools does not mean 17 that all schools and all children are going to have equal 18 access. Simply giving the hook up to schools for one year 19 at no charge does not ensure that all the students of those 20 schools will have access to the system. 21 In the first place, not all schools have the same 22 amount of money that would be able to pay for the hardware 23 that's necessary to use the hookup. 24 Secondly, part of the hookup to the schools is so 25 the children and the parents can use them at home. If the 26 parents and children don't have access through the surface 27 street system, they are not going to have access to this. 28 This is the role that I believe and that our PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 210 1 organization believes is a critical role that you and 2 government must play. We can't forget people on the 3 bottom. 4 So I will leave it at that. I see my red light on 5 over there. 6 ASSISTANT SECRETARY IRVING: Thank you very much. 7 I would like to thank all of the panelists for 8 their outstanding testimony this afternoon. I am going to 9 turn now to Commissioner Knight to lead us off on this 10 round of questioning. 11 COMMISSIONER KNIGHT: After listening to everybody and 12 almost without exception, it was like preaching to the 13 choir. I certainly agree with everything that I heard. 14 One of the things that we are facing as an organization, 15 Mr. Irving said to me at lunch today, he said I'm a policy 16 wonk, but you're in a position, you have to implement 17 this. And indeed we are wrestling with this daunting task. 18 What I will like to present to the panelists, 19 particularly those of you who have ongoing day-to-day 20 relationships with the CPUC, we are ourselves -- again 21 this is something that isn't probably as publicly noticed 22 as the issues we are facing with these industries -- that 23 we are having to look at ourselves in terms of how we're 24 organized, not only the rule making in order to try to 25 ensure less regulation and encourage competition, but look 26 at ourselves on how we are organized, look at ourselves in 27 terms of the kinds of organization that we have in order to 28 respond to this ongoing transition. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 211 1 In reflecting back on your individual businesses, 2 what are some of the things you would see as changes 3 specifically in this implementation process that you would 4 recommend for the California Public Utilities Commission to 5 look at? 6 MR. BENNETT: I think I'll start. 7 Part of your preface was those of us who have 8 ongoing day-to-day business operations with the CPUC. One 9 of the problems is we don't have ongoing business 10 operations on a day-to-day basis with the CPUC, yet we seek 11 to enter a business that you regulate. 12 To kind of get away from the superhighway metaphor 13 and maybe move into a sports metaphor, you are refereeing a 14 contest that can only impact one of the two teams. And the 15 other team can't interact with you, doesn't interact with 16 you, has no rules under which to operate, is kind of 17 sitting on the sidelines waiting for its opportunity to 18 play. 19 We would like to begin to accelerate that process 20 and to begin sitting down with the CPUC and working out the 21 rules for the entry of our industry into your marketplace, 22 the marketplace that you regulate and control. 23 MR. SIEGAL: We also are not generally regulated by the 24 Public Utilities Commission. However, one of the concerns 25 that we have, whether video programming over a telephone 26 line becomes a regulated issue before the CPUC, one of the 27 concerns that we have is the issue of equal access to that 28 delivery system. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 212 1 We can reflect back on the notion that common 2 carrier access was somehow or another the end-all answer 3 when the long distance lines became a competitive 4 industry. 5 However, it took I think ten years for MCI to get 6 what is known as equal access. 7 If you recall, MCI service came out in the early 8 80's, I believe. And you had to dial 17 numbers just to 9 access a presumably pro consumer lower cost long distance 10 transmission. 11 We would hope that the notion of access of 12 television signals over other video carriers will not have 13 to go through some anticompetitive obstacle such as MCI had 14 to go through in order to gain access to that transmission 15 line in order to compete with its competitors in that 16 marketplace. 17 MS. LUSTIG: Well, speaking as somebody who represents 18 an organization that does have day-to-day dealings with the 19 PUC, I would like to take a stab at your question. I think 20 it's a very candid question, and it's very difficult to 21 answer. 22 But I think a starting place might be the -- I 23 think that the Commission's infrastructure report was very 24 well received by a lot of regulated industries. And it 25 sets forth very lofty goals. 26 And I think that a good place to start would be 27 looking at those goals and compare to existing procedures 28 and operations and how long it takes to take a complaint PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 213 1 through or get an issue resolved or something like that. 2 The present mode of operation has been to have 3 large proceedings where all parties are heard and all 4 parties have the opportunity to present their evidence and 5 their points of view. And as an attorney I have to admit 6 that that process has its benefits, but it also has a lot 7 of delays built into it. 8 I think that somehow those processes for the 9 day-to-day operations are going to have to be looked at and 10 reexamined as to whether they are the best mode of 11 processing new services, complaints, rate design issues. I 12 don't know what the answer is, but that might be one area 13 to look at. 14 MR. GAMBOA: There is one other aspect on this, and 15 that is I don't think that you receive enough information 16 from grass roots community organizations. I think there 17 are very few organizations that have the capacity to come 18 to the PUC hearings and present the needs of the community 19 or go back to even do research and provide you with 20 information. It is a limited few. 21 I think we are one of the few that are able to do 22 it. TURN does it from a larger perspective, consumers, not 23 from the low income poor consumers. I think the reason you 24 don't get a lot of input from our community organizations 25 is simply because of the way the system is set up, that we 26 are almost punished for going into the system because of 27 the intervenor payment system on it. 28 I will give you an example is that any time our PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 214 1 community organizations will provide information to that, 2 if the DRA itself also provides the same information or 3 something close, then you deny the intervenor fees to our 4 organization saying it is a duplication without even 5 investigating to find out who was the originator of the 6 information provided, whether it was -- who actually 7 duplicated the information. 8 That has a real inhibiting factor in community 9 organizations. We just simply don't have the resources to 10 stay on top of the issues and to go back and research and 11 provide the needs of our community sufficiently. 12 So we are at a very severe handicap in comparison 13 to, say, the operating companies. 14 We will go into the hearings and they will bring in 15 16 attorneys and 40 witnesses. That's really not a fair 16 way for us to be able to present our information and the 17 needs of our community. 18 So if you could look at a way to improve the 19 intervenor system so that we can at least break even when 20 we go into it, it would certainly help a lot. 21 MS. LUSTIG: Just to follow up on a comment that was 22 made by one of the members of the last panel, and I kind of 23 wrote it down because it made me feel good, it said the 24 regulated companies are not -- shouldn't always be 25 regarded as the bad guys. And I think the existing 26 regulatory process, the way it is set up, polarizes 27 people. It pits the regulator against the regulatee and 28 the intervenor against the regulated entity. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 215 1 And a lot of time and energy is spent on this 2 contentious process that perhaps now that we are moving 3 into an era when we are all going to be interconnected, 4 that that isn't the best mode of regulation and something 5 less contentious might be more appropriate. 6 COMMISSIONER KNIGHT: You are probably aware of, we are 7 looking at alternatives to litigation which would help 8 address that in terms of process. 9 ASSISTANT SECRETARY IRVING: Secretary Barram. 10 DEPUTY SECRETARY BARRAM: I want to comment on some 11 ideas, some thoughts I heard about interface in 12 relationship of people to machines and the network and then 13 ask you a question, Mr. Spivak. 14 I spent a lot of years working for a company that 15 only existed because it tried to and I think was successful 16 at creating an interface that made it easier for people to 17 use technology. It was Apple, for which I am not employed 18 nor own any stock. 19 And I -- because of that experience, I know that it 20 can be done and that I'm still annoyed to this day when I 21 see it not being done by people who are -- who I think 22 could. 23 I also had another interesting experience while 24 working at Apple, and that was that we tried to make sure 25 that all of our technology was developed so that people 26 with disabilities could use it without having to do a whole 27 lot of adaptation. 28 The incredible result of that was that we learned PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 216 1 an awful lot, and it made it better for everybody by doing 2 it that way. 3 So if Deborah -- I don't know if Deborah is still 4 here or not, but I think that you can, if you think about 5 all of the communities in America, if you focus on them 6 all, it might work out, it probably will work out, for 7 everybody's best. 8 Technology is changing faster than ever before. 9 You might have heard that before somewhere. It's 10 definitely changing faster than we can make laws. It's 11 making -- it's hard to, even with something more flexible 12 like the FCC, make rules fast enough to handle technology. 13 The most important skill any of us should have is 14 the ability to adapt to change. And so we need to think 15 about that as we talk about all these issues. 16 Sometimes I even notice within our own community, 17 the technology community, not everybody is up to speed on 18 what everybody else is doing. 19 I think 1994 is going to be not just a year of 20 some interesting new legislation on telecommunications and 21 whether local telephone companies can get into cable, 22 whether long distance can get into local, and so forth and 23 so on; but if we're right, if it works, it will be the year 24 where we began to engage the public, the private enterprise 25 communities, education, government in a process that allows 26 us to evolve, to -- an evolving process that allows us to 27 have any chance at all in dealing with the changing 28 technology. Very important thing that has to happen this PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 217 1 year, I think. 2 Now to my question. Does the HFC, the -- 3 MR. SPIVAK: Hybrid fiber co-ax. 4 DEPUTY SECRETARY BARRAM: -- hybrid fiber co-ax allow 5 Mr. Bennett's cable company to talk to another cable 6 company or -- and/or Pac Bell also? 7 MR. SPIVAK: Theoretically, yes. 8 I don't know of an example where cable companies 9 have interconnected. There may be some I'm not aware of. 10 DEPUTY SECRETARY BARRAM: But technologically you can 11 do it, for example? 12 MR. SPIVAK: Over a number of different techniques, 13 both with fiber and with copper and a number of different 14 technologies that are out and widely deployed in the 15 marketplace. 16 DEPUTY SECRETARY BARRAM: So there are standards, sort 17 of, for that? 18 MR. SPIVAK: Yes. 19 DEPUTY SECRETARY BARRAM: How did they happen? 20 MR. SPIVAK: One standard that the telephone industry 21 uses is called SONNET, for synchronous optical digital 22 network. Well, that's not quite right, but the acronym is. 23 And that was developed primarily by BellCore and, I 24 think, with working groups in ANSI, the American National 25 Standards Institute. 26 There is a European equivalent of that called the 27 Synchronous Digital Hierarchy, SDH. 28 Those are typical telephone networks that'll PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 218 1 connect at speeds up to over 2 gigabytes per second. 2 There are likewise in widespread use analog fiber 3 optic systems that do interconnect analog signals over 4 fiber systems. So those interconnections can be done in a 5 number of ways. 6 DEPUTY SECRETARY BARRAM: If Superman stopped the 7 world right now, except for people who had connecting 8 technology, could we connect virtually everything together? 9 MR. SPIVAK: I believe we could, Mr. Secretary. It's 10 a question of the economics, and I think that the economics 11 are coming down virtually as we speak. 12 And that it is possible to connect everybody 13 together with a combination of wired as well as wireless 14 technologies. 15 DEPUTY SECRETARY BARRAM: Anybody else want to 16 comment? 17 MR. SIEGAL: Could I just respond quickly? 18 ASSISTANT SECRETARY IRVING: Oh, sure. 19 MR. SIEGAL: We could do that, too. 20 If Mr. Bennett's cable system in Sunnyvale wanted 21 to communicate with all of his other cable systems, he 22 could easily telco that to our studio in San Francisco. And 23 we could put it out depending on the data rates. 24 We know we can currently transmit 384 kilobytes a 25 second inside our active video in the NTSE signal and have 26 it received at least 70 miles out. We tested this in 27 Phoenix, which may be an opportunistic marketplace because 28 of its bowl-like characteristics. But theoretically, if he PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 219 1 wanted to communicate, we could do it. 2 It would be one telephone line passage to the 3 transmitter at Mount Sutro here, and we could hit all of 4 the cable systems that Mr. Bennett has, certainly all the 5 cable systems that he's carrying us on right now. 6 DEPUTY SECRETARY BARRAM: Mr. Bennett, if you have -- 7 TCI owns a number of cable systems in this area, for 8 example, right? 9 MR. BENNETT: That's correct. 10 DEPUTY SECRETARY BARRAM: Are you hooked up -- do you 11 have those hooked together? 12 MR. BENNETT: We're in the process of building a fiber 13 optic SONNET ring around the Bay Area to interconnect all 14 of our cable systems. 15 DEPUTY SECRETARY BARRAM: Is it a technical problem or 16 a regulatory problem? 17 MR. BENNETT: It's a regulatory problem. Technically, 18 I mean the technology is considerably ahead of the 19 regulatory environment at this point in time. 20 DEPUTY SECRETARY BARRAM: So is Cupertino's cable -- 21 no, that's United. 22 MR. BENNET: That's us. 23 DEPUTY SECRETARY BARRAM: That's you. 24 MR. BENNETT: Yes. 25 DEPUTY SECRETARY BARRAM: And so is Sunnyvale? 26 MR. BENNETT: That's correct. 27 DEPUTY SECRETARY BARRAM: Can you connect schools 28 together, for example? That's one school district that PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 220 1 covers those. 2 MR. BENNETT: Yes, and that's the reason for building 3 the SONNET ring, is to in connect all of our cable systems. 4 And the problem is in California we cannot 5 interconnect them on a switched basis, because that would 6 be telephony, and we're prohibited from doing that. 7 DEPUTY SECRETARY BARRAM: Who stops you from doing 8 that, Jesse? 9 MR. BENNETT: Yes, Jesse. 10 (Laughter.) 11 DEPUTY SECRETARY BARRAM: Why do you do that? 12 (Laughter.) 13 COMMISSIONER KNIGHT: For all the reasons you heard 14 today. 15 COMMISSIONER BARRETT: Can you do it on a satellite 16 basis, interconnect, connect all your systems together? 17 MR. BENNETT: Ultimately, yes. 18 COMMISSIONER BARRETT: No, no, no. I don't mean 19 ultimately. 20 TCI does much -- some of its programming by 21 satellite distribution, and I'm asking, can you connect by 22 satellite all of those Bay Area cable companies that you 23 own today? 24 MR. BENNETT: On a -- today on a one-way basis, no. 25 Probably very quickly on a two-way basis. 26 COMMISSIONER BARRETT: What is it technically stops 27 you from doing it on a two-way basis via satellite? 28 And yes, it really is based on ignorance, that last PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 221 1 question. 2 DEPUTY SECRETARY BARRAM: As compared to what, the 3 other questions? 4 (Laughter.) 5 COMMISSIONER BARRETT: I was about to go to sleep. 6 I'm still trying to -- I'm still trying to figure 7 out whether or not he won both of these elections he ran 8 but he won't -- 9 MR. BENNETT: I'm not sure that that approach has been 10 fully explored, quite frankly, of linking all of our 11 systems two-way interactively on satellite. 12 COMMISSIONER BARRETT: Okay. Ed, I had asked you a 13 question, and the original question was that I have visited 14 in London, in the Gorton community, Telewest, and one of 15 the most exciting things about it -- and you might want to 16 tell people, but it's one of the few times that I've ever 17 seen telephony and cable sold door to door. And they go 18 out and they make reservations to come back and see 19 someone. And the marketing is just absolutely -- it's in 20 an old warehouse. 21 And I'd had asked you several questions in terms of 22 whether or not it was transferable and whether or not 23 British Telecom, Mercury and/or cable and wireless could 24 offer cable. 25 MR. SPIVAK: Well, I'll extend some of my comments and 26 also try and qualify them where there really should be 27 Telewest folks commenting. 28 COMMISSIONER BARRETT: Well, we've only got a short PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 222 1 while, because we're only allowed one minute to respond. 2 MR. SPIVAK: Okay. First area really is the 3 technology. There are technology differences, different 4 standards and such in the UK, and our equipment is adapted 5 to those. 6 We are doing -- looking at doing business in about 7 19 different countries worldwide, so that area is not a 8 difficult thing to make those adjustments in the 9 technology. 10 We think the technology itself is directly 11 transferable, not only to the U.S., but of course 12 worldwide. So we're quite excited about that. 13 There are several small-scale deployments of 14 equipment, but nothing in the order of 20,000 units. 15 So we're very excited to learn of the unique 16 things that start to happen when you get that scale and 17 size, and that starts to be the threshold of gathering 18 reliable marketing information as well as operational 19 information and cost information. And that's what most of 20 our customers look for in making a decision on putting 21 telephone service over hybrid fiber co-ax systems. 22 So the market and operational aspects are really 23 important. 24 The technology, we think is -- it's essentially a 25 tune-up job on the technology from country to country. 26 COMMISSIONER BARRETT: Does VC cable, Mercury offer 27 cable? 28 MR. SPIVAK: To my knowledge, they are strictly PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 223 1 focused on offering their services over copper wires. 2 And, of course, there is a substantial price 3 difference between the price that telephone can be offered 4 for over hybrid fiber co-ax versus over twisted copper 5 pairs. 6 COMMISSIONER BARRETT: Thank you very much. 7 MR. SPIVAK: Thank you. 8 MR. HOLUB: I have a comment here. As a newcomer to 9 being an information service provider, I mean I think we're 10 all marveled by the various mechanisms for delivering 11 bandwidth or interconnecting the available infrastructure, 12 but I just wonder who is going to end up with the 13 footprints. I mean will newcomers have a chance to make 14 their own footprints, and, you know, what can be done in 15 the regulatory environment in order to help encourage that? 16 COMMISSIONER BARRETT: I think that if you -- and I 17 don't know if you're asking me or not. I think if you 18 address all of the issues of interconnection, access and 19 talk about what I think Elaine was talking about, some -- 20 drop the relationship between cost and profits and look at 21 proper costing and pricing and incent someone to do that, 22 clearly that will be done. 23 But I think we also have to look at the fact that, 24 whether we like it or not, people are going to go where 25 they can get the highest rate of return on their investment 26 initially. 27 But I think that the vision that -- you were not 28 here this morning. I talked about the vision that I think PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 224 1 that the Deputy Secretary and the Assistant Secretary and I 2 have been talking about over since December. Clearly, I 3 think with that vision in mind of what we have from 4 companies and what we're willing to do in terms of making 5 that transition a lot more reasonable, clearly I think that 6 can occur. 7 And certainly if all of those things occur in 8 terms of the interconnection, the proper pricing and 9 nondiscriminatory kinds of things and the mobility 10 hopefully of numbers, and any number of things, certainly I 11 think that the provisions will be possible, will make it 12 possible for small players to be a part of it. Otherwise, 13 all we're going to have is three Bigfoots. 14 MR. HOLUB: That's my concern. 15 COMMISSIONER BARRETT: Four Bigfoots. 16 ASSISTANT SECRETARY IRVING: Thank you. 17 Let me quickly -- in Ms. Lustig's testimony, she 18 stated four principles: 19 Regulatory submission should be the rule for all 20 providers of hybrid services. 21 Common carrier principles should be applied to all 22 services provided over hybrid networks. 23 Open access to hybrid networks should be assured 24 to all information providers. 25 And I think all of you will agree with the last 26 one, that regulation should be as light as possible. I've 27 never heard anybody say it should be otherwise. 28 Are there any of those principles there that PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 225 1 anybody finds any quarrel with or question about? You all 2 accept those as kind of the fundamental principles we 3 should be looking at? 4 MR. BENNETT: I think probably a question through a 5 lack of knowledge since we have never been a common carrier 6 and never been regulated as a common carrier as to what 7 content would still be provided by the owner of the network 8 at the same time under common carrier status would 9 certainly be a question we would want answered before we 10 would agree -- 11 ASSISTANT SECRETARY IRVING: Let's take the assumption 12 that you could carry some content but you would have to 13 provide access to your network at nondiscriminatory terms 14 for any other provider. 15 MR. BENNETT: That's certainly agreeable, as long as 16 there is not a total ban on content by the network owner. 17 ASSISTANT SECRETARY IRVING: Regulatory symmetry goes 18 one way or the other. I would assume you would want 19 must-carry layered over to the telco's? 20 MR. SIEGAL: Yes. However, it is in a telco digital 21 environment, it must carry with navigational interfaces is 22 a very difficult concept to reconcile. 23 What we are seeking is the concept of 24 nondiscriminatory access. 25 ASSISTANT SECRETARY IRVING: What does that mean? 26 MR. SIEGAL: Basically, the analogy that I mentioned 27 before with MCI gaining access to the AT&T long distance 28 network to compete with AT&T in the long distance PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 226 1 business. We're concerned when you have the gate keeper, 2 either the telephone company or the cable company, backward 3 integrated to whatever degree into programming, that there 4 is an inherent desire to disadvantage their competitors. 5 ASSISTANT SECRETARY IRVING: So in the interest of 6 time, is the concern that if I lived in Sunnyvale and I 7 turned on United cable here, that the first thing I would 8 get when I hit my little -- when my mouse clicks on to 9 video, up would come the TCI gateway to the services they 10 have an interest in? 11 MR. BENNETT: That's a major concern. 12 ASSISTANT SECRETARY IRVING: As broadcasters move from 13 a one channel world to a five or six or seven-channel world 14 themselves with varying ability to scale, should we be 15 looking at some kind of -- does nondiscriminatory access 16 also mean that maybe there should be some compensation for 17 accessing your network for more than just your broadcast 18 signal? 19 MR. SIEGAL: Yes. I think broadcasters are willing to 20 discuss that and recognize that. And we certainly 21 recognize that in the fee area, that if it is a 22 subscription service that we are going to be offering, we 23 feel that we should be paying a fee for that. 24 ASSISTANT SECRETARY IRVING: And if you are providing 25 more than one channel, you would also pay? 26 MR. SIEGAL: I think it depends on what the channel 27 is. Let's assume that in some broadcaster's mind, for 28 example, they will like to offer a sporting event with the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 227 1 ability for the viewer to access maybe five or six cameras 2 and have the viewer's choice of the cameras. But it's all 3 being free to the viewer, all within the six megahertz free 4 to the viewer. 5 I think that maybe one of the ways of approaching 6 this very complex question is -- maybe this is too 7 simplistic -- is to look at whether the consumer in fact 8 is getting the product for free. Certainly if they are 9 getting the product for free, maybe that's a situation 10 where there isn't any added cost. 11 ASSISTANT SECRETARY IRVING: So you mean if, in other 12 words, I have a television in my bedroom and it isn't 13 connected to my cable and I can get the service for free, 14 whatever that service is, I should be able to get through 15 my cable system on a must-carry basis rather than a fee 16 basis? 17 MR. SIEGAL: Yes. I think that is one way to approach 18 this very difficult question. 19 We are talking about things right now that don't 20 exist. But when you talk about multi channels or multi 21 services being offered, maybe the question should be as to 22 what the services are, if it is a subscription service or 23 is it more data related to the content that they get for 24 free? If, for example, we are offering data that is 25 textural in nature that relates to some sort of public 26 service fulfillment, it would seem to me that that would 27 not be something that we should be paying a fee for 28 carriage for or that the consumer should be having a hidden PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 228 1 fee being charged them for that. 2 That's something that in fact is in the public 3 interest, is what we do in serving the public. And that's 4 something that I think is very, very important. School 5 closings, you can go through a number of these issues, 6 tornado reports, any of these issues that come up, those 7 things may be offered in a textural way on a subcarrier, 8 currently maybe through radio stations. But we may be able 9 to offer them inside active video or in multiplexing it, 10 multiplexing it in the ATV channel. 11 ASSISTANT SECRETARY IRVING: At some point we will have 12 to have a conclusion on how this all squares with 13 retransmission consent. 14 Mr. Bennett, normally I would ask you questions 15 about how you feel about -- since you are suing to 16 overturn must-carry, I have a feeling of how you feel about 17 the must-carry rules. 18 MR. BENNETT: We have a terrible time reconciling 19 having to pay for Dan Rather before you can watch CNN with 20 the first amendment. We find that a little bit of a tough 21 concept that we don't understand. 22 ASSISTANT SECRETARY IRVING: It is a question I know is 23 before the other branch of our tri-partner in government. 24 And they will be ruling at some point in the not too 25 distant future. So I will let that go for the moment. 26 Miss Lustig, we have heard from Pac Bell and we 27 have heard from TCI about their commitments to the citizens 28 of California with regard to hooking up public PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 229 1 institutions, particularly with regard to classrooms and 2 schools. And I am curious with regard to GTE, what, if 3 any, responsibility should an information provider have 4 with regard to connections to public institutions, 5 particularly classrooms or schools? 6 MS. LUSTIG: Well, I guess just last week GTE announced 7 a similar initiative of a $2,000 credit to schools. So if 8 your question is what kind of commitment should carriers 9 have, I think that's probably answered by the fact that the 10 major carriers have expressed that kind of commitment and 11 obviously feel it's appropriate. But that wasn't something 12 that -- well, I guess there were legislative initiatives 13 and what not. So I think it is appropriate. 14 ASSISTANT SECRETARY IRVING: I will give you the 15 background for the question. I know my former boss sent 16 letters out to a lot of the information providers, 17 including GTE and the other RBOCs, Congressman Markey. And 18 I would say GTE met their request to send information back 19 with a lack of alacrity would be a light way of putting it, 20 didn't seem enthusiastic about connecting classrooms. 21 I did not know about the $2,000 credit. I don't 22 know how that stacks up against the investment required to 23 Net to school or some of the tariffing questions that we 24 have seen in places like Texas. But it is important to 25 this Administration to hook up schools and classrooms. And 26 I think in the earlier two panels, we talked about the 27 problem of have and have not. And public institutions may 28 be one of the ways to decrease that problem. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 230 1 But again, we are talking about access today and 2 universal service keeps seeping in, but it is not just 3 access out. It is giving parents and teachers ways of 4 getting information out of the schools. Schools and 5 libraries will be an important source of information out. 6 You are talking about access into the network. 7 That connection is not just so that kids can use tools in 8 the classroom, but also there is a project, for example, in 9 Maryland where teachers are E-mailing or voice-mailing 10 information daily to certain parents about attendance or 11 assignments. And to the extent that schools don't have 12 those connections, they can't be done. Curiously, 13 attendance is up among students where the teacher can let 14 the parent know that Johnny or Susie didn't come to school 15 today. So it is a question of a lot of different issues 16 are involved in connection to classrooms. 17 And GTE's initial lack of enthusiasm has troubled 18 this Administration from time to time, not to any great 19 extent because we know you will come around to doing the 20 right thing by your consumers and constituent. But it is 21 something we had some questions about. 22 MS. LUSTIG: Well, I obviously can't speak for the rest 23 of the GTE operating companies, only what we have done in 24 California. 25 It's kind of hard to answer the question in a broad 26 scale, but one of the things that we included in our 27 initiative in addition to providing a credit for purchase 28 of telecommunication services to schools was to provide the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 231 1 schools themselves with education consultants free, to 2 assist them in figuring out how best they could use the 3 services that we do provide. 4 And presumably, if the schools felt the consultants 5 could work with them on that issue, that some kind of home 6 connection was an appropriate thing, then that would be 7 something that I think would be a good thing to come out of 8 that. 9 ASSISTANT SECRETARY IRVING: Could you maybe send to us 10 any information you have for the record on the new credit. 11 I will be curious. I know my principals, the Secretary and 12 Vice President and President, would, as we are doing this, 13 I would like to inform them of what is happening. I guess 14 Mr. Markey would also like to know what GTE is doing here 15 in California since I know he has expressed some concern 16 about lack of enthusiasm expressed earlier this year for 17 those kinds of public institution connections on the part 18 of GTE. 19 MS. LUSTIG: I will be very happy to do that. 20 ASSISTANT SECRETARY IRVING: Thank you. 21 I don't think we have time for this last question 22 unless someone wants to answer this briefly. We had a lot 23 of discussion today about navigational tools. On the one 24 hand, I honestly believe PC prices are going to continue to 25 come down for entry level computers. But a thousand 26 dollars is still high. 27 On the other hand some people have talked about a 28 hundred dollar Sega platform or $250 Reality player or PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 232 1 whatever as being something less than the cost of a PC but 2 also having significant computational power and maybe being 3 a tool. 4 What are some of you thinking about in terms of 5 trying to empower people to have tools and devices? One of 6 my fears is you divide it even differently. Instead of 7 having a have, you have a kind-of-have and have or you have 8 a have and sort-of-have, but you don't get have-not, but 9 they don't get all of the tools they need to compete with 10 their colleagues around the world. 11 But we really have to start thinking about what's 12 happening. This is an issue that is not going to go away. 13 I am curious if any of you from a corporate standpoint have 14 given some thought to how we can make Vice President Gore's 15 dream of the school kid plugging into the library of 16 Congress as easy as plugging into his Nintendo game or 17 Reality, not just for the kid on the affluent side of the 18 tracks in Carthage, but on the lower end of the economic 19 spectrum in Carthage, Tennessee also. Mr. Holub. 20 MR. HOLUB: I think there is a lot of very interesting 21 innovation in that area, and I would like to hope that the 22 regulatory environment allows it to occur. 23 I regret not participating or having a chance to 24 even listen to the conversation or presentation this 25 morning, but I can tell you what my application tries to 26 accomplish, which is to distribute processing, to basically 27 make the application on the user end as processor 28 unintensive or as simple to use on the front end as PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 233 1 possible and distribute that processing out over a network, 2 first, to a place where it is terminated locally, and then 3 processed again primarily on a Unix machine far away. 4 I guess from a technical standpoint, I had to come 5 from a school in which we think some day everybody is going 6 to run Unix but nobody is going to know it. That is kind 7 of the idea here, is that you distribute this processing 8 out over a network. Access providers have physical access 9 to places where they can terminate connections and 10 multiplex them and drag them off to another place to 11 process them. And that makes it cheaper on the other end. 12 It makes it more usable. And from my standpoint I think it 13 is an innovative solution. 14 ASSISTANT SECRETARY IRVING: Thank you. Anybody else? 15 MR. BENNETT: From my standpoint there are a couple of 16 things happening. Your saying a Nintendo analogy was 17 exactly right on. We currently have a joint venture with 18 TCI, Time Warner and Sega to build the Sega channel where 19 we download video games to the Sega Genesis machine through 20 the cable television system. There is absolutely no reason 21 you can't download educational software or anything else. 22 ASSISTANT SECRETARY IRVING: As part of your corporate 23 strategic plan, have you included that in that plan? 24 MR. BENNETT: Sega is currently developing educational 25 software to download at the same time -- 26 ASSISTANT SECRETARY IRVING: One of the gentleman, one 27 of the two-minute audience participants noted a $750,000 to 28 design a product to Sega specifications. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 234 1 Is it going to be less cost intensive? Will it be 2 an open platform so if I've got a great application I can 3 get into that system? Am I going to have to -- 4 MR. BENNETT: At this point, that is in Sega's 5 bailiwick rather than our bailiwick. 6 But the other side of that coin is that our vision 7 is that the cable television or telecommunications, if you 8 will, converter that attaches to the television set that 9 interfaces between the switched digital network and the 10 television set becomes the home computer and becomes the 11 most powerful computer in the home. It has a platform and 12 a chip for doing all of this. 13 And the current cost of the base level platform 14 today is about $300, and we hope through mass production 15 that comes down to the 150- or 200-dollar-range level where 16 the computing capability resides in that box and becomes 17 part of your service and either is purchasable or -- and 18 your TV becomes the video display for the box, and that 19 becomes the most intelligent piece of equipment in your 20 home. And this intelligence resides in that piece of 21 equipment and is affordable either on a lease purchase -- 22 lease or purchase by just about anyone, because it will -- 23 can be purchased for a couple hundred dollars a month, or 24 the lease rate would be in the two to five dollars a month, 25 or part of some type of service offering. 26 ASSISTANT SECRETARY IRVING: I have seriously intruded 27 upon the good graces of my colleagues on this panel in 28 terms of the amount of time I've taken, but obviously I PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 235 1 have a small interest in this line of questioning. 2 Just one comment, and then if anybody else wants 3 to respond briefly, I'll turn to you. 4 But because you do have a contractual relationship 5 with Sega, while it is in their purview, you might be able 6 to give them some encouragement to possibly open it up to 7 -- 8 MR. BENNETT: Certainly. 9 ASSISTANT SECRETARY IRVING: -- if there are people 10 that have great ideas, it would be horrible to see, as 11 we're talking about open access, particularly with regard 12 to educational applications, it might be something 13 interesting to have a discussion with about how people can 14 use -- if it's going to be used as a platform, how not to 15 use economic disincentives or -- or -- or barrier interface 16 disincentives keeping people from, particularly students, 17 from getting software that might be beneficial. 18 I don't want to intrude in a commercial 19 relationship, but it is something that might be a 20 reasonable line of inquiry. 21 MR. BENNETT: Yes, it's an excellent point. And part 22 of the initial software is an SAT coaching program and a 23 number of other types of software be downloaded, instead of 24 just games. 25 ASSISTANT SECRETARY IRVING: But if I want an SAT 26 coaching program for my niece, you know, or my nephew who 27 is getting ready to go to college in a year, I can go and 28 get a Barron's, or I can go out and get Prentice Hall, or I PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 236 1 can get a lot of them, and I just go to a book store. 2 MR. BENNETT: Sure. 3 ASSISTANT SECRETARY IRVING: If the only SAT coaching 4 available over a network is that which has a proprietary 5 relationship or ones that might be as good as Barron's or 6 Prentice Hall are kept out because of an interface problem 7 or an access problem, that would be to the detriment of 8 these students, wouldn't it? 9 MR. BENNETT: Obviously. 10 ASSISTANT SECRETARY IRVING: I don't know if either 11 Ms. Lustig or Mr. Siegal had a comment they'd like to make. 12 MS. LUSTIG: Well, I really only had a tongue-in-cheek 13 response to that, which is, being the regulated company 14 that we are, our customer premises equipment or anything 15 that goes beyond the D mark is not only unregulated, but 16 it's a separate subsidiary, and that when you try and take 17 that kind of a structure into new areas, it raises so many 18 legal and regulatory questions within the company that, 19 I've seen time and again, it's almost a paralysis kind of a 20 syndrome. 21 People don't pursue things they might otherwise 22 pursue. And I think that's a real prime example of how 23 regulation stifles innovation. 24 ASSISTANT SECRETARY IRVING: Thank you. 25 John -- Mr. Spivak. 26 MR. SPIVAK: Just an aside on that. 27 In each of the units that we put on the side of 28 the homes in the UK, we put a 386 processor in that box. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 237 1 And with volume purchase agreements, the price is less than 2 $10 per processor. 3 Seven, eight years ago, of course, that was 4 hundreds of dollars per processor. 5 What we find is it's certainly not the hardware. 6 It's the number of units that are being sold and that 7 manufacturers can project selling, and the prices come down 8 rapidly. And that if there are open interfaces both in 9 software as well as in hardware, then you really get the 10 efficiencies of that competitive marketplace. 11 ASSISTANT SECRETARY IRVING: I think you put it as 12 well as I wanted to put it. So thank you very much. 13 MR. SIEGAL: I think that's a great model. 14 What concerns me, and I think what concerns a 15 number of broadcasters, is the concept of the location or 16 the situs of the intelligence. 17 Is it going to be at the consumer location, or are 18 you going to have to access a gatekeeper at a head end or 19 at the switch? 20 And if you -- we are embracing this world where 21 there's a head-end switched gatekeeper as opposed to the 22 intelligence or a memory device in the home, we've -- I 23 think we've got some very serious concerns. 24 If the memory device is in the home, such as the 25 processor that was noted here in England, I think that's a 26 real positive. 27 If, however, you have to go through the 28 gatekeeper, TCI or Bell Atlantic or whomever, you've got PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 238 1 serious potential anticompetitive acts that can be taken 2 against software content providers that compete with their 3 own content providers. 4 COMMISSIONER BARRETT: Let me ask you something. 5 You're talking about intelligence to access? 6 MR. SIEGAL: I'm talking about -- 7 COMMISSIONER BARRETT: And the reason I ask you the 8 question, because historically intelligence has been in the 9 node. And clearly, you're seeing more and more 10 intelligence in the switching capability -- in the 11 switching. 12 Now you're not suggesting at all that we go back 13 and not have intelligence in the switching? 14 MR. SIEGAL: No, I'm not. 15 COMMISSIONER BARRETT: Okay. I just want to be clear, 16 because if you're suggesting that, then all of the reasons 17 why a TCI and a Bell Atlantic may have even considered 18 coming together for switching capabilities on one hand from 19 Bell Atlantic and programming and building mechanisms and 20 other -- other programming talents that they have would all 21 be for naught. 22 And you would be suggesting that what we are 23 sitting here talking about is a waste of your time, 24 notwithstanding the fact I'm about to fall out from sleep, 25 lack of. 26 But intelligence will always be at the consumer's 27 hand to access what the consumer wants to access. 28 The question is whether or not the consumer has to PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 239 1 see TCI's first, Pacific Bell's, or whether or not they can 2 in fact have intelligence in their handset to be able to 3 bypass all of their menu and go straight to yours. 4 MR. SIEGAL: I would beg to disagree with that. I 5 think that -- 6 COMMISSIONER BARRETT: Beg to disagree with what? 7 MR. SIEGAL: With the notion that the consumer will 8 always have the access. 9 COMMISSIONER BARRETT: They'll always have the 10 capability to determine what it is they want to see to an 11 extent. 12 But I would -- I agree with your earlier comment. 13 I would be much more comfortable if I had the ability to 14 access a cable, either a TCI system or any telephone 15 company's system, and bypass all of their menu and go 16 straight to mine by pushing an "X" or double "X" or 17 whatever, but that is technically possible now. 18 MR. SIEGAL: But if we take Mr. Bennett's industry's 19 approach that it violates their First Amendment, or Bell 20 Atlantic's ultimately approach, because Bell Atlantic and 21 NYNEX and other companies joined in an amicus brief in the 22 Supreme Court, that in fact must carry in the cable 23 environment violates their First Amendment rights in the 24 telco environment, then we have a situation which, not 25 dissimilar than in 1989, I believe, where I testified just 26 down the road here in front of Mayor Larry Stone about 27 actions of the cable system moving us above the channel, 28 putting us on a channel number above the cable box's PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 240 1 ability, that they were -- their response was, well, we are 2 providing you in carriage. 3 The problem was we couldn't get out of the 4 carriage. We couldn't get on the TV because the cable box 5 only went to 36, and they felt very comfortable that since 6 KBHK was 44. 7 But I would suggest that where you have this -- 8 this head-end switched gatekeeper, you might have a 9 situation where it is in their interest not to provide the 10 consumer access. 11 ASSISTANT SECRETARY IRVING: John, my feeling is no 12 matter what happens in the next 45 days before the Supreme 13 Court, this issue is going to get more complicated with 14 regard to broadcasters, cable and telcos, not less 15 complicated. 16 I don't know if any of the other panelists have 17 any additional comments or questions before we move to the 18 audience participants. 19 Our first audience participant for the final round 20 of audience participation is Richard Pettinato from the 21 Media Captioning -- for Media Captioning in Carlsbad, 22 California. 23 Mr. Pettinato. 24 STATEMENT OF MR. PETTINATO 25 MR. PETTINATO: Thank you. I'll be brief in light of 26 the time constraints today. 27 I'm a CFO of Media Captioning, which is located in 28 Carlsbad, California, which is the emerging answer to PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 241 1 Silicon Valley in Southern California, located in San 2 Diego. 3 Our company is unique, and our perspective, we 4 think, on access is also unique. And specifically, my 5 comments are in our written testimony, but our concerns are 6 as follows. 7 We were somewhat dismayed to learn that in this 8 recent grant application process that the eligible 9 applicants were restricted to state and local governments 10 and nonprofits. 11 We were incorporated in 1987 as a for-profit 12 company. Our company, in fact, has grown somewhat rapidly 13 due to a lot of hard work, talented people, some federal 14 support, to the fourth largest company in the country. 15 We're the only company west of the Mississippi, in 16 fact, that is providing national closed captioning on a 17 daily basis. We, in fact, do so for a major commercial 18 cable company, nationally and internationally. We do that 19 seven days a week. 20 The point being that the concern is simply this: 21 That if, in fact, you have nonprofit concerns -- and there 22 are many of which are very fine and have a great deal to 23 offer in the development of the infrastructure, the 24 information infrastructure highway -- the key is that there 25 are many nonprofits that are substantially in the same 26 commercial businesses as for-profits, and why not include 27 or allow smaller for-profits that, in fact, are in fact 28 enhancing access, providing social services, give us a PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 242 1 chance to compete. That is the key. 2 If you look at our company, you can see a classic 3 example of how, in fact, federal support has done things, 4 you know, in the right way. 5 We, in fact, provide captioning services at about 6 50 percent of what the government is currently paying. And, 7 in fact, we're doing so with 13 people as opposed to 8 another company Back East, a nonprofit, doing it with over 9 200 people. 10 We're very efficient. We are very well-regarded 11 in our industry, but we've identified some derivative and 12 ancillary services that can be developed and perhaps used 13 over many different platforms that were discussed today 14 that in the process can also expedite and provide full 15 access for traditionally under-represented groups. 16 And I think that really comments on what Deborah 17 Kaplan said about making the bottom line serve the public 18 interest. We can do that very effectively and get it done 19 fast. 20 ASSISTANT SECRETARY IRVING: Thank you. 21 I guess that not only deserves but requires a 22 response. 23 There are both logistical and policy reasons for 24 making the decision to cut it off at nonprofits, state and 25 local governments. 26 Logistical were we had 13,000 inquiries and over 27 1200 requests for funding, just limiting it to nonprofits. 28 If we'd opened it up to for-profit corporations, that PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 243 1 number would have expanded perhaps exponentially. 2 The second substantive reason is we are trying to 3 take care of those areas that the marketplace won't take 4 care of. And that's public institutions. We think that's 5 a great reason. 6 The third is there is absolutely no prohibition. 7 In fact, we encourage for-profit entities to joint venture 8 with nonprofit entities for TIIAP grants. So there was 9 nothing precluding any for-profit entity from going forward 10 with a grant in conjunction or in partnership with a 11 not-for-profit or state or local government. 12 So I think we want to encourage a synergy between 13 the public sector and the private sector. We think the 14 TIIAP program does that. And I will be happy to talk to 15 you off line. But I know some of my staff already has. 16 But the next year's grants, we hope, Congress willing, we 17 will have a significantly higher grant program. 18 There are a lot of people. There is a young woman 19 right here, she would love to talk to some people about 20 doing joint ventures. Maybe you could be somebody she 21 could do a joint venture with. I apologize that you feel 22 aggrieved, but I really do think we made the right 23 decision. 24 Our next public participant is Landon Noll, council 25 member from the City of Sunnyvale. 26 STATEMENT OF MR. NOLL 27 MR. NOLL: In light of my time constraint, I will talk 28 fast. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 244 1 ASSISTANT SECRETARY IRVING: I do, so you might as 2 well. 3 MR. NOLL: I am a member of the Sunnyvale City 4 Council. I am also employed by Network Computing Devices 5 with the title of corporate cryptographer. Today I am 6 speaking as a private citizen with over 20 years of 7 experience in computer and network technology. You have 8 heard Jim Bidzos discuss cryptographic technology, the 9 importance. I will not repeat his comments. I will state 10 simply that the federal government has impeded the 11 development and use of cryptography in two ways; first, 12 through export controls such as the defense trade 13 regulations formally known as ITAR, and second, through 14 imposing standards on industry such as the Clipper. 15 I urge the government to relax its controls and 16 ideas found in HR 3627 and work with organizations such as 17 the Electronic Frontiers Foundation and Computer 18 Professionals for Social Responsibility. I also urge the 19 government to allow the industry to develop standards for 20 cryptographic rather than opposing them. 21 Organizations such as IEE can help in this matter. 22 As for controls, they interfere with commerce over the 23 national infrastructure. 24 Firms must develop two types of products, one with 25 encryption, one without. The one with encryption can only 26 be sold in the U.S., while the one without is only sold 27 overseas. 28 Foreign companies don't have this problem. And the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 245 1 US companies are at a competitive disadvantage. Please 2 revise the trade regulations to allow US firms to be 3 globally competitive in the national information 4 infrastructure. 5 Please work with industry to develop standards 6 instead of opposing them. Finally, please support the 7 policies that are found in the League of California Cities 8 Telecommunication Policy; in particular, the policy that 9 says support freedom of choice in the use of encryption 10 technology to ensure privacy and security. 11 I would be happy to answer any questions. 12 ASSISTANT SECRETARY IRVING: I apologize, but since 13 there are several other people who would like to give 14 testimony this afternoon, we won't have time for 15 questions. But we do appreciate your comments. Thank you, 16 sir. 17 Next is Stan Kawczynski, also a council member from 18 the City of Sunnyvale. 19 STATEMENT OF MR. KAWCZYNSKI 20 MR. KAWCZYNSKI: Good afternoon. I'm Stan Kawczynski. 21 I am a member of the Sunnyvale City Council and also a 22 member of the League of California Cities 23 Telecommunications and Technology Task Force. 24 First, I would like to once again welcome Assistant 25 Secretary Dave Barram to our beautiful city since you last 26 visited officially with the President and Vice President, 27 September of '93, and to Larry Irving, Deputy Secretary 28 Larry Irving when we last met at the Smart Valley board PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 246 1 meeting in May of '93 and to the rest of the board and the 2 staff. 3 ASSISTANT SECRETARY IRVING: I am only Assistant 4 Secretary. I don't want him to think his job is in 5 jeopardy. 6 MR. KAWCZYNSKI: Now I want to bring to your attention 7 the written testimony submitted by the League of California 8 Cities on behalf of all 467 cities and the 30 million plus 9 residents of the great State of California. 10 While the League supports development of a 11 competitive telecommunications marketplace, we are deeply 12 concerned that proposed federal and state legislation 13 disregards the important role cities play as regulator, 14 consumer, and provider of telecommunication-based 15 services. 16 The absence of a local government voice on the NTIA 17 hearings panel validates this concern. Leaving cities out 18 of the game is not only poor public policy, but it is 19 inconsistent with the philosophy of open and universal 20 access. 21 Access to the so-called information highway is a 22 matter of local concern because it will take place locally, 23 in city neighborhoods and within the right-of-way that 24 cities maintain. The telecommunications policy report, 25 which is attached to the League's written testimony, 26 details the telecommunication policy objectives for 27 cities. 28 The report identifies universal access to PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 247 1 information and resources as the key issues surrounding the 2 development of the NII. 3 Briefly, the Leagues policies are: 4 One, to ensure the access to advanced 5 telecommunication services is available to all citizens; 2, 6 that the role of cities in regulatory structure, the League 7 supports the preservation of local authority over matters 8 of local impact; 3, the compensation for use of public 9 right-of-way and negative impact on local infrastructure; 10 4, cities and users, providers of telecommunication 11 services, cities should help safeguard citizens against 12 market inequities; fifth, adequate spectrum capacity for 13 public safety and other public use. Cities should be 14 allocated adequate spectrum on the 800 megahertz band for 15 public safety, emergency services, public works and other 16 public use; 6th, FCC certification of local franchising 17 authority is to encourage cities to certify their local 18 cable TV franchising authority to protect the interest of 19 their citizens; And 7th is privacy. The League supports 20 protection of privacy and security for consumers of 21 advanced telecommunication services. 22 In closing, while increased competition will allow 23 for better choice, it will not ensure access for all 24 citizens. Government will be called upon to be the 25 provider of last resort. To fulfill this role effectively, 26 local government must have ownership of the resource. 27 The League of California Cities wishes to thank the 28 NTIA, this Hearing Board, for the opportunity to address PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 248 1 this very important issue. If anybody wants an extra copy, 2 I will be happy to submit it. 3 ASSISTANT SECRETARY IRVING: We apologize not just to 4 you, but to all the people who wished to be part of the 5 panel. Unfortunately, I think we had 20 people and over 50 6 total, 20 panelists and 50 others. We didn't have the room 7 for everyone who wanted to participate. But we appreciate 8 the interest. 9 Now we will turn to Steve Cisler from the Apple 10 Library of Tomorrow in Cupertino. 11 DEPUTY SECRETARY BARRAM: I have to leave to be 12 somewhere that I am not going to make it on time as it is. 13 I just want to say good-bye and thank you for this very 14 stimulating day and see you again. 15 STATEMENT OF MR. CISLER 16 MR. CISLER: My name is Steve Cisler. I work at Apple 17 Computer in a grant program called Apple Library of 18 Tomorrow. 19 For the last three years we have been helping 20 libraries, museums, Indian reservations and towns build 21 electronic public spaces on the Net or what I call 22 electronic green belts. 23 As with actual green belts, these are frequently 24 surrounded by and supported by residential and commercial 25 development. 26 As I watched the developments in Washington and 27 elsewhere I am concerned about two different issues. Kari 28 Peterson mentioned one of them, the lack of attention given PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 249 1 to training and support for new network users and 2 information providers. 3 Although I am from a hardware and software company, 4 I think NTI programs really need to focus on this as much 5 as on hardware and transport. 6 Second, there is a lack of attention devoted to 7 designing interfaces that will work for low bandwidth 8 connections that are prevalent in rural areas. 9 People I know designing worldwide web pages are 10 used to fast direct connections and large monitors running 11 on fast workstations. 12 The converging companies are focusing on broadband 13 connections. That is where the money seems to be and what 14 interests companies. And research is being funded by the 15 government. 16 I urge the government to support scalable projects 17 to pay attention to the user experience for those who don't 18 have ISDN, or T-1 or Fiber Link. I think Mr. Irving's 19 recent questions toward the end of today have addressed 20 some of this. 21 Thank you very much. 22 ASSISTANT SECRETARY IRVING: Thank you. 23 Let me make two emergency announcements. 24 (Off the record)