TESTIMONY OF MITCHELL KAPOR CHAIRMAN OF THE BOARD ELECTRONIC FRONTIER FOUNDATION BEFORE THE SUBCOMMITTEE ON TELECOMMUNICATIONS AND FINANCE HOUSE ENERGY AND COMMERCE COMMITTEE REGARDING THE NATIONAL COMMUNICATIONS COMPETITION AND INFORMATION INFRASTRUCTURE ACT (HR 3636) February 3, 1994 Introduction ------------ Mr. Chairman and Members of the Committee: My name is Mitchell Kapor and I am the Chairman of the Board of the Electronic Frontier Foundation (EFF). I want to thank you for the opportunity to come before this committee again, and to commend your strong leadership role in guiding the nation towards an open, accessible information infrastructure. EFF is a nonprofit, public interest organization whose public policy mission is to ensure that the new electronic highways emerging from the convergence of telephone, cable, broadcast, and other communications technologies enhance free speech and privacy rights, and are open and accessible to all segments of society. To achieve these goals, EFF works to build coalitions and consensus among public interest organizations, consumer groups, computer and communications firms, and cutting-edge providers of new information services. For those of you who do not know me, I am also the principal designer of the Lotus 1-2-3 spreadsheet program and served as the CEO of the Lotus Development Corporation between 1982 and 1986. Open Platform Vision -------------------- EFF came to the telecommunications policy debate two years ago, in large part as a result of encouragement from this subcommittee. We came with a vision based on the experience of the computer industry with open architecture and Open Platforms. We knew that the personal computer industry grew from zero to 150 billion dollars per year in just a decade, in large part because Open Platforms encouraged entrepreneurial innovation. The key attributes of an Open Platform, whether in personal computers or telecommunications are these: * _Low_barriers_to_entry_for_independent_application_ and_content_developers:_ Innovation is fostered when independent, unaffiliated developers can try new products and services in the market without having to seek permission from the network operator. Principles such as common carriage and open standards support this goal. * _Easy,_ubiquitous,_and_affordable_access_for_users:_ Ease of access for all promotes the democratic potential of the NII and creates markets for new services. Careful expansion of the definition of universal service is a key policy tool in this regard. These Open Platform goals are critical, in both the near term and the long term, to realize the full potential of the National Information Infrastructure. The legislative and regulatory challenge is to create a mix of incentives and requirements which lead to a network architecture that promotes these Open Platform goals. Realizing Open Platform Goals in a Time of Transition ----------------------------------------------------- EFF's infrastructure policy mission has been driven by the desire to identify practical public policy steps to achieve the long-term goal of an NII built according to Open Platform architectural principles. This task is made difficult, at times, by the fact that the telecommunications environment is in such turbulence. This committee knows as well as anyone that markets are gradually shifting from traditional monopoly structures to more competitive environments. Citizens' need for network access is shifting from mere voice telephone service today, to access to interactive multimedia information sources in the future. Many of the provisions of HR 3636 are efforts to set a course for the transition from a monopolistic, voice-based network to a competitive, multimedia environment. The local competition sections of the bill seek to create a level playing field for new competitors in a highly monopolistic local communications market. The video platform sections seek to create a transition path which would gradually allow telephone companies into the video programming market. And finally, to the subject of today's hearing, the bill would create a process to preserve and enhance universal service and make Open Platform services widely available. With regard to universal service, I am struck by the fact that it is much easier to predict the desired outcome, than it is to chart the course to that final goal. We would all agree that in the long run, there should be a policy mechanism in place to ensure access to a two- way, broadband network, once such a network exists. But what about today? We only guarantee access to voice telephone service, yet it is clear to me, at least, that the ability to access multimedia information services, beyond what can be carried over voice telephone lines, will be increasingly important. Open Platform Services and the Expansion of Universal Service ------------------------------------------------------------- When we first entered the telecommunications modernization debate (it wasn't called the information superhighway, yet), we suggested that one way to move toward the goal of an Open Platform architecture was to make narrowband ISDN service widely available and affordable throughout the country. With great support from this committee and a significant amount of economic and technical analysis, we confirmed our view that digital technologies (including but not limited to ISDN) could make valuable services available to individuals and businesses all over the country. In the one year since I last appeared before this committee to support near-term deployment of Open Platform services, the technology and market landscape has changed significantly. New players have joined the competition to build the NII, and it appears that interactive broadband networks may be available in some localities within a few years. So, I ask myself, is it still necessary to require tariffing of Open Platform services? The answer is a resounding YES. Competitive broadband networks pose numerous policy challenges for universal service provision and open access. But there is still a need, in the ten or fifteen years before most of the country has the benefit of broadband access, to ensure that the benefits that Open Platform service can deliver right now be made widely available. The result of our work with the committee was the inclusion of the Open Platform services section in HR 3636. The Open Platform services section refers to a family of telecommunications services which meet the following criteria: a switched, end-to-end digital telecommunications service, subject to title II of this Act, which provides subscribers with sufficient network capability to access multimedia information services, is widely available throughout each State, is provided based on accepted standards, and is available to all customers on a single-line basis upon reasonable request. [HR 3636, ¤101(b)] Under HR 3636, the FCC would be required to study ways to promote widespread deployment of Open Platform services in ways that are technically and economically feasible. The Commission is then empowered, but not mandated, to require that carriers file tariffs for these services. What has changed in the intervening year, is that we have learned that there are many technologies--broadband, narrowband, and wideband--which meet the goals set out for Open Platform service. It is the intent of the Open Platform sections of HR 3636 to promote the deployment of any and all technologies which meet Open Platform goals. Our commitment is to ensure that the NII is built as a switched network, allowing many-to- many information access, as opposed to just hundreds of one-way TV channels which will dull our minds rather than enhancing our economy and culture. I want to stress several points about our Open Platform services proposal. 1. _Open_Platform_services_can_deliver_critical_ telecommunications_services_soon_ Many of the multimedia information and communication services which will help increase educational opportunity in our schools, provide access to library resources, enable telecommuting, and make businesses more competitive, can be delivered over technology that is available today. Schools and health care facilities all around the country have already demonstrated that digital service over existing facilities allows them to participate in multimedia information exchange. Widely available Open Platform service will be a critical to achieve the Clinton Administration's goal of connecting all schools, libraries, and clinics to the NII by the year 2000. A concrete example of the need for Open Platform access is a very exciting new application on the Internet called Mosaic. This application allows users to access and create information services which combine text, still images, audio, and even video. With Mosaic one can see the latest images from the Hubble Space Telescope, check digitized pictures from the National Center for Missing and Exploited Children, and watch video animation from Internet sites all over the world. Anyone in the country could have access to this information, but today's analog phone lines are simply too slow to carry the high volume of data required for image transfer. Open Platform services, whether ISDN, ADSL, or another technology, could provide easy and affordable access to the wealth of information available on the Internet. 2. _Businesses_need_symmetrical_communications_ capability_offered_by_Open_Platform_services_ Many of the early beneficiaries of Open Platform services are likely to be from the business community. The two-way nature of Open Platform services are critical for business applications such as video conferencing, telecommuting, and electronic data interchange (EDI). As knowledge workers come to dominate the office environment, two-way access to information from home and on the road is becoming critical to business success. Of course, large business can already lease high- capacity, dedicated lines. But small business does not have the economies of scale to do so. Open Platform services can help small businesses and organizations gain access to the NII. 3. _Open_Platform_service_sets_a_floor,_not_a_ceiling, _for_infrastructure_modernization.__It_does_not_ choose_any_technology_ Some local phone companies have recently announced plans to accelerate deployment of residential broadband networks. Since the Open Platform sections of the bill only set minimum, not maximum functional requirements, nothing in the bill would hinder such investments, provided the networks planned offer switched broadband or narrowband access. We believe that any such investment should be encouraged. However, if the new networks are designed simply to offer hundreds of channels of one-way television, then the captive ratepayers in those areas will be denied access to the information age. Furthermore, nothing in the legislation mandates any particular technology, nor does EFF believe that it is appropriate for the government to choose a single technology. In arguing for the viability of Open Platform services, we have often used the example of ISDN and ADSL as technologies which would meet the functional standards in the bill. But in no way do we intend to limit deployment of more advanced technologies. 4. _Open_Platform_services_deployment_is_technically_ and_economically_feasible_ State regulators and economic experts alike confirm over and over again that initial Open Platform deployment can be accomplished at minimal expense to the local exchange company and without harm to basic ratepayers. Our economic analysis indicates that Open Platform services can be delivered to individual subscribers who request it at an increment of $4.50 to $10 per month over the cost of basic telephone service. Since the bulk of the cost of the service is incurred by the telephone company on a subscriber-by-subscriber basis, investments are only required as the service is actually purchased by the ratepayer. Thus there is no stranded or dead-end investment. State public utility commissions in Massachusetts, Tennessee, and now California have shown that digital services which meet Open Platform requirements set out in this legislation can be deployed widely and tariffed at relatively reasonable rates. The aim of the legislation before us is to ensure that the advanced service just now made available in these few states is offered to citizens in all parts of the country. 5. _Open_Platform_services_will_build_demand_for_new_ applications,_creating_market_demand_for_broadband_ network_capacity_ Some view the Open Platform requirements as a distraction from the construction of a broadband network. I believe it is just the opposite. The primary problem that network operators face in building new infrastructure is the worry that if they build it, there's no guarantee that anyone will come. Thus, despite the rhetoric of press releases, many carriers are only building capacity for well-known, primarily one- way, traditional services such as video-on-demand, home shopping, and 500 channels of entertainment. 6. _Congressional_action_is_critical_to_ensure_ equitable_access_to_the_NII_for_all_regions_of_the_ country_ Given that deployment of Open Platform services are good for the market, even the carrier's market, why should Congress have to act at all? First, despite rapid digitization of local exchange networks, local telephone companies have been very slow to actually tariff digital services for the residential market. Even though more than half of the telephone lines in the country are served by digital switches, only three states (Massachusetts, Tennessee, and California) offer single- line, residential digital service. The technical facilities are in place to offer this service, but the carriers refuse to tariff it. Congressional action is required to break this logjam. Open Platform Services are Critical for Reaching ------------------------------------------------ a New Definition of Universal Service ------------------------------------- One of the challenges that policy makers face is to strike a balance between protecting affordable voice telephone service and ensuring that the NII is accessible to all from the start. The Open Platform sections of HR 3636 are the first step that the Congress can take toward promoting universal access to the NII. Rather than making digital service a part of basic service for every subscriber, a move which we believe is premature, Open Platform service should be available on request at a reasonable price for those who ask. This allows those with an interest in new information access to have it at affordable rates, but does not burden the rate base with charges for services that are not in universal demand. The policy framework established by the Open Platform sections of the bill are consistent with two important features of any universal service policy: 1. _Steady_but_gradual_increase_in_NII_access_ guarantees_ Congress has a vital role to play in setting broad standards for universal access to the NII, but should not make judgments which force new services on ratepayers in advance of demand, or which anoint one technology or one carrier as the sole component of an universal service definition. By setting a goal of access to a "switched, digital telecommunications service, subject to title II of this Act, which enables access to multimedia information services," Congress sets out a basic goal, but leaves to federal and state regulators the process of determining more precise functional specifications, and allows the market to make all choices about the best technology to achieve this goal. 2. _Reliance_on_States_to_set_prices_and_deployment_ schedules_ The Open Platform section recognizes the crucial role that state regulators have to play in setting fair, affordable prices, and determining service deployment details. As the needs and circumstances of states vary, we believe that it is appropriate to leave ultimate pricing authority to the states. Changes Required in HR 3636 to Meet Open Platform Goals ------------------------------------------------------- If this committee agrees with the Open Platform goals that I have laid out here, I would ask that the Open Platform language currently in HR 3636 be strengthened in two respects: 1. _Require_that_carriers_file_tariffs_ HR 3636 empowers, but does not require, the FCC to write rules which would compel carriers to file Open Platform tariffs. To ensure that all citizens have access to Open Platform service, Congress should require that local exchange carriers file both inter- and intrastate Open Platform tariffs. If Congress supports the goal of widespread, affordable access to the NII, then it must see that this goal is realized by requiring that tariffs be filed in all states. In the event that carriers other than the monopoly telephone company provide residential telecommunications services, we would expect that these competitors would also be subject to Open Platform obligations. Of course, if existing tariffs meet Open Platform goals, there would be no need for the carrier to refile. 2. _Set_schedules_for_Open_Platform_deployment_ We have no expectation that Open Platform service should be universally available immediately, even though much of the equipment required is already in place in most telephone company networks. By the same token, local telecommunications providers should take reasonable steps to make service available throughout each state. Thus, the FCC should set deployment timetables, subject to tests of economic and technical feasibility. Otherwise, too many citizens may be denied NII access for far too long. The Open Platform Model for the Long Term ----------------------------------------- Once subscribers have a choice of bi-directional, broadband transport from several competing providers, the policies required to ensure an Open Platform environment shift in character. Here, I think that the Clinton Administration approach outlined as "Title VII" breaks important ground. To be sure, it will be necessary to check that the competitive market prices basic communications access at affordable prices, but the greater challenge will be to ensure that the network-of-networks to which we all have universal access is an Open Platform: one which promotes free exchange of ideas and innovation. Two issues take on paramount importance in support of Open Platform values: common carriage and open network standards. 1. _Common_Carriage:_The_Cornerstone_Of_Free_ Expression_in_the_Information_Age_ In a society which relies more and more on electronic communications media as its primary conduit for expression, full support for First Amendment values requires extension of the common carrier non- discrimination principle to all of these new media. Common carriage platforms will be critical in the new electronic public fora for politics, culture, and personal communications. They are the soap box, the local op-ed page, and the printing presses of the Information Age. If all carriers were to limit access to their networks based on the content of messages sent, the opportunity for free expression in society would be dramatically limited. Reshaping common carriage responsibilities for new media environments will be necessary as mass media and telecommunications services converge and recombine in new forms. Telephone companies, the traditional providers of common carriage communications services, are moving closer and closer to providing video and other content-based services. By the same token, cable television companies, which have functioned as program providers, are showing great interest in offering telecommunications services. The desire of these industries to cross over into new businesses can be a source of great opportunity to consumers, if proper regulatory safeguards are put into place. Any carrier that is willing to offer Open Platform services on a non- discriminatory basis should be allowed to offer video programming as well, subject, of course, to necessary safeguards. EFF believes that it will be possible to structure a regulatory regime in which infrastructure providers can provide both video programming, and common carrier-like telecommunications services on the same network. By allowing any infrastructure provider to co-exist in both regulatory categories, the provider will be encouraged to invest in both expanded entertainment services and, at the same time, make real contributions to the development of the national information infrastructure. 2. _Open_Access_to_Critical_Network_Components In today's environment, limited bandwidth (or spectrum) and central switching facilities choke off competing services and stifle information flow. Much of communications regulation has been devoted to easing the anti-competitive impact of these bottlenecks. High capacity, bi- directional networks that are now on the horizon hold the promise of stimulating tremendous innovation in new multimedia applications and a diversity of information sources such as has not been possible in any medium other than print. As transport technologies become more sophisticated and diverse, the market for bandwidth and even switching resources will become more competitive. Users and content providers will likely have more choices for transport of information and communications. The bottlenecks of tomorrow's networks will not be the same as those in today's broadcast, cable, and telecommunications media. Therefore, realizing the promise of high-capacity networks requires that certain key points in these networks are kept open and accessible to independent content providers, third-party equipment manufacturers, and competing carriers. To create an Open Platform network, policy makers must work to minimize legal and technical barriers to accessing critical network components such as set top boxes and network interconnection points. Careful attention to this issue will ensure that the abundance of broadband networks is not squandered by network operators or equipment manufacturers who would find ways to create new bottlenecks in place of old ones. Conclusion ---------- The overriding goal of our Open Platform campaign is to promote the deployment of open, switched networks which enable the NII to be an environment that promotes democratic values and innovation. We have no commitments to any particular technologies--neither ISDN nor fiber optics. We believe it is critical for Congress to act, however, to ensure that the information superhighway offers us a richer, more open environment than just thousands of channels of what we have today. For more information contact: Daniel J. Weitzner Senior Staff Counsel Electronic Frontier Foundation 1001 G St., NW Suite 950 East Washington, DC 20001 202-347-5400 Internet email: djw@eff.org