TESTIMONY OF MITCHELL D. KAPOR CHAIRMAN OF THE BOARD ELECTRONIC FRONTIER FOUNDATION BEFORE THE SUBCOMMITTEE ON COMMUNICATIONS SENATE COMMITTEE ON COMMERCE, SCIENCE AND TRANSPORTATION REGARDING THE TELECOMMUNICATIONS INFRASTRUCTURE ACT OF 1993 (S. 1086) September 8, 1993 I. Introduction and Overview Chairman Inouye, Senator Danforth, and Members of the Committee: I want to thank you for the opportunity to come before this committee, and to commend your for taking such a strong interest in telecommunications infrastructure modernization policy. I am the Chairman of the Board of the Electronic Frontier Foundation (EFF). EFF is a non-profit, public interest organization whose public policy mission is to insure 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 actively to build coalition 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. Over the last two years, EFF has been an active participant in the telecommunications infrastructure debate. Our chief concern in the past has been to identify economically, technically, and politically practical infrastructure improvements that can bring the benefits of new information technology to the American public without having to wait until the year 2015 for the deployment of a fiber-to-the-home network by local telephone companies. To this end, we have suggested that technologies which enable the delivery of video information services over existing copper telephone lines be implemented while fiber optic deployment proceeds. This effort is still vitally important to the development of the nation's telecommunications infrastructure. In this testimony, we take the opportunity to offer a somewhat more long-term view of telecommunications regulation. II. Infrastructure Policy Goals Before discussing the details of the legislation before us, I suggest that we all step back from the inter-industry political squabbles that have long characterized the telecommunications policy debate just long enough to reflect on what is at stake in the development of the national information infrastructure (NII). Technological advances now put in our reach a dazzling array of new information and communication capabilities which, if successfully deployed, can revolutionize the way that we all live, work, learn, play, and entertain ourselves. I know that this Committee, others in Congress, the Clinton Administration, state regulators, and private industry, all share the common goal of developing the NII. The findings of S. 1086 carefully sets out these goals: "(3) advancements of the Nation's telecommunications infrastructure will increase the public welfare by helping to speed the delivery of new services, such as distance learning, remote medical sensing, and distribution of health information;" "(20) access to switched, digital telecommunications service for all segments of the population promotes the core First Amendment goal of diverse information sources by enabling individuals and organizations alike to publish and otherwise make information available in electronic form;" Today I would like to give you my thoughts on the importance of these two goals and ways that they might best be realized. A. A Jeffersonian Vision of the National Information Infrastructure Properly implemented, the growing infrastructure is nothing less than the new printing press, offering as yet unimagined opportunities for personal communications, for building and revitalizing communities, and for the development of vast markets for tomorrow's information entrepreneurs. The infrastructure can help business to work more efficiently, realizing global competitive advantage. And if the infrastructure is truly extended to all parts of the country, rural businesses can compete in markets previously closed to them. Workers, too, will benefit by being able to match their work demands to their lifestyle needs through telecommuting. To achieve these and other benefits, we know that we need more capacity than is currently available in today's analog voice telephone system. We also need more than merely 500 channels of one-way cable television. Today's telephone system does not have enough capacity to enable us to exchange the multimedia information sources that will be the staple of our information diet in the near future. And the 500 channels which many look forward to fail to meet our real needs because they only allow one way distribution of information from the network operator down into each subscriber's home. The interactivity that is critical for educational services, for library access, for online medical assistance, for telecommuting or rural business connections and for the next generation of multimedia entertainment, cannot be accommodated in a one-way system or one with other limitations on its use. This is our Jeffersonian vision of the information infrastructure: one that promotes a rich diversity of information sources and new applications, that creates new entrepreneurial opportunities, and that is resistant to the monopolization of information channels and promotes the free flow of ideas. 1. Promoting Diversity of Information Sources and Equitable Access Aside from the universal service guaranty, the driving communications policy value for the last fifty years has been promotion of the maximum diversity of information sources, with the greatest variety of view points. As we move into the multimedia information age, we have a new opportunity to shape communications policy in ways that promotes maximum diversity in a way not possible in earlier mass media such and broadcast and cable television. Historically, the print medium has been the most successful at promoting a diversity of information sources because it allows easy entry as an information provider and easy access as an information consumer (a reader). Compared to both the broadcast and cable television arenas, print is the vehicle for the greatest diversity of viewpoints and has the lowest publication and distribution costs. Despite the regulatory steps taken to promote diversity in the mass media, the vexing problems of spectrum scarcity and limited channel capacity have always limited the variety of opinion and information. The switched nature of advanced digital network technology offers to end the spectrum and channel scarcity problem altogether. Broadcast and current cable media have a built in distribution bottleneck because of the limited number of channels and the hierarchical nature of the distribution system. An independent content producer must always negotiate with the channel owner for the ability to communicate with others. In a switched, digital network, of the kind that phone companies and cable companies both speak of deploying in the near future, any user can communicate with any other user. The distribution bottleneck caused by having a small number of channel-holders is eliminated. Thus, anyone with content to distribute -- whether to one, one hundred, or one hundred thousand users -- can do so without the permission or advance approval of the carrier. 2. The Need For Open Platform Services To achieve the full potential of new digital media, we need to make available what we call Open Platform services, which reach all American homes, businesses, schools, libraries, and government institutions. Open Platform service will enable children at home to tie into their school library (or libraries all around the world) to do their homework. It will make it possible for a parent who makes a video of the local elementary school soccer game to share it with parents and students throughout the community. Open Platform will make it as easy to be an information provider as it is to be an information consumer. Specifically, Open Platform service must meet the following criteria: * widely available, switched digital connections; * affordable prices; * open access to all without discrimination as the content of the message; * sufficient "up-stream" capacity to enable users to originate, as well as receive, good quality video, multimedia services. Open Platform service itself will be provided by a variety of providers over interconnected networks, using a variety of wires, fiber optics, coax cable, and wireless transmission services. But however it is provided, if it is affordable and widely available, it will be the on-ramp for the nation's growing information superhighway. B. Public and Private Roles in Infrastructure Development Congressional action on the issues raised by S. 1086 is absolutely critical to the growth of the National Information Infrastructure as a whole. This year there are a number of legislative and executive branch actions contemplated in support of the NII. Senator Hollings, through S.4, and Congressman Boucher, through H.R. 1757, are both working to promote the development of new network-based applications for the Internet and the NREN. Chairman Markey, on the House side, has been hard at work on an infrastructure bill which we hope will be introduced very soon. Last year, Senator Burns, in S. 1200, also showed a desire to work for infrastructure improvement. The Administration has indicated that the National Telecommunications and Information Administration will also play a role in funding network access for local community institutions such as schools and libraries. These funding initiatives are important steps toward making electronic networks more useful to individuals. But those funding efforts will only bear fruit for Americans if appropriate public policy and private sector investment succeeds at extending the on- and off-ramps of the data superhighway into Americans' homes, schools, and libraries. This task of actually deploying Open Platforms must be accomplished or the groundbreaking applications developed through government and private initiative will never be accessible to the vast majority of the population. Any suggestion that the government might be able to build an NII through public funding is misguided. The government has neither the money, as you know, nor the expertise, to undertake such an effort. But EFF firmly believes that given the proper regulatory environment, the private sector will build the kind of infrastructure that the country needs. However, we should recognize that if the infrastructure goals of S. 1086 will not be achieved without comprehensive, legislative restructuring of telecommunications policy. III. Public Policy Recommendations What can Congress do to ensure that the potential of this technology is realized? In my optimistic moments, I am nearly persuaded that policy-makers don't have to do much at all. The many announcements of new technology experiments and increased infrastructure investments by both the cable and telephone industry certainly suggest that the private sector is rising to the challenge of building new information infrastructure. If all goes well these industries will be persuaded by the logic of self-interest to build broadband networks consistent with Jeffersonian ideals of openness, even if they are unaware of or uninterested in the full range of democratic goals. Optimism does not always carry the day, however. If competing cable and telephone companies have too narrow of vision of what will be successful telecommunications services, the country will never realize the great potential that Open Platform services offer. For example, providers may decide that there is more safe money to be made simply be offering more and more one-way video entertainment services. Or, some infrastructure providers in some parts of the country may make the choice to retain full control over the content on their networks, rather than make their networks open to a diversity of information, consistent with Open Platform principles. If these or other less optimistic scenarios are realized, we would simply go from 57 channels and nothing on, to 570 channels and still nothing on. All of the potential for the NII that we have been hoping for would be squandered. Sadly, it does not take much to fail in building the NII. Islands of progressive infrastructure investment surrounded by a few market failures would lead to infrastructure balkanization and of disenfranchising individuals and organizations in underserved areas. Moreover, the whole country would be left with an incomplete infrastructure. Therefore, if this committee and the Congress in fact find that infrastructure growth and full access to the information age is indeed important, then active steps must be taken to ensure that these goals are realized. A. Optimistic View: Achieve Social Policy Goals By Reliance on Market Forces, Fairly-Shared Universal Service Subsidy, and Appropriate Safeguards To the greatest extent possible, it is wise to rely on market forces to deliver the services and functionalities that the public needs as part of the National Information Infrastructure. Federal policy makers should not put themselves in the position of mandating a particular technology or of anointing a particular industry as the infrastructure provider of choice. Rather, Congress should concentrate on ensuring that basic information and communications needs are met, and on creating conditions for fair competition which protect consumers and providers alike. In many areas, vigorous competition among enlightened providers in local exchange markets may well lead to the deployment of Open Platform services that we believe are essential to a flourishing NII. Where such deployment occurs, regulation can be limited to the interconnection requirements and universal service guarantees outlined in S.1086, as well as comprehensive anti-competitive safeguards. Dramatic advances in network technology over the last few years promise to render obsolete traditional communications industry categories. Technology exists today which enables telephone companies to offer video programming service in competition with cable television providers even without waiting until the year 2015 for the deployment of a full fiber-to-the-home network. By the same token, cable companies are already experimenting with systems to offer both voice and date telecommunications services over their networks. EFF believes that this competitive environment can be a major positive force in bringing affordable Open Platform services to the American public. The competition in video programming could also, of course, improve the cable consumer's lot. In order to be sure that this competitive opportunity produces real infrastructure improvements for the American public, regulation should be structured to meet two criteria. 1. Universal Service Goals for the Information Age The principle of equitable access to basic services is an integral part of nation's telecommunications policy. From the early history of the telephone network, both government and commercial actors have taken steps to ensure that access to basic voice telephone services is affordable and accessible to all segments of society. Since the divestiture of AT&T, many of the internal cross-subsidies that supported the "social contract" of universal service have fallen away. Re-creation of old patterns of subsidy is no longer be possible, but serious thought must be given to sources of funds that will guaranty that the economically disadvantaged will still have access to basic communications services. The universal service guaranty in the Communications Act of 1934 has, until now, been interpreted to mean access to "plain old telephone service" (POTS). In the Information Age, we must extend this guaranty to include "plain old digital service." Extending this guaranty means ensuring that new basic digital services are affordable and ubiquitously available. Equity and the democratic imperative also demand that these services meet the needs of people with disabilities, the elderly, and other groups with special needs. Failure to do so is sure to create a society of "information haves and have nots." In a competitive telecommunications environment, regulatory paradigms must be industry neutral and treat all similarly situated providers equally. S. 1086 sets out just this kind of framework by defining interconnection and universal service fund obligations for all entities that provide telecommunications service, regardless of which traditional industry category they are associated with. So, a cable television company that provides voice or data telecommunications service, would have the same obligations as any other telecommunications provider, such as a local phone company or a wireless service provider. The scope of these obligations should certainly be proportionate to the companies market presence, but otherwise, all who chose to provide telecommunications services should be subject to the same requirements. We hope that a more thorough consideration of the universal service funding mechanisms is included before S. 1086 is reported from this committee. Also, a forward-looking definition of the universal service level, including multimedia information service access capabilities, must be incorporated in legislation. 2. A New Common Carriage Regime For 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 as 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. Re-shaping common carriage duties 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. 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. In framing common requirements for all telecommunications carriers, S. 1086 already suggests this direction (see Section 5). 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 NII. EFF proposes that the "price" for participating as both a video programmer and a telecommunications provider, would be willingness to offer true Open Platform services on the telecommunications side. We would like to see S. 1086 amended to include this provision. A venerable regulatory tradition exists which argues that content and conduit providers must be separated in order to guard against anti-competitive behavior which could stifle, not enhance, diversity. Recent judicial action does cast some doubt on the constitutionality of such absolute cross-ownership bars. However, strong statutory safeguards are certainly required where content and conduit services are provided by a single network owner. We would support safeguards in the tradition of antitrust law, that allow victims of discrimination to seek remedies directly from carriers. The very existence of affordable Open Platform services will be the most important step toward promoting diversity of information in the new multimedia environment. Shaping the architecture of the new NII in a way that promotes easy access for all programmers is the most important safeguard of all, if the goal is diversity and fair access. B. Competition is Necessary, But Not Always Sufficient, To Ensure Adequate Infrastructure for All S. 1086 wisely recognizes that competition is necessary, but not always sufficient to promote the widespread availability of advanced infrastructure (See Section 6). Despite the virtues of marketplace competition, policy makers must not assume that the Open Platform vision that I have laid out is self-executing in all circumstances. The importance of having an information infrastructure that promotes diversity, and that is accessible to all Americans is simply too great to be left to the vagaries of as yet undeveloped markets. Section Six of S. 1086 provides that the FCC has the authority to mandate infrastructure deployment to meet Open Platform standards if it is shown that competitive forces are not making such services available: "If State regulatory authorities fail to achieve the goal of ensuring that telecommunications carriers provide consumers in rural markets and noncompetitive markets with access to high quality telecommunications network facilities and capabilities which- "(1) provide subscribers with sufficient network capacity to access information services that provide a combination of voice, data, image, and video; and "(2) are available at nondiscriminatory rates that are based on reasonably identifiable costs of providing such services, then the Commission may take any action necessary to achieve that goal. "(b) FULL EFFECTUATION.-The Commission shall have the authority to preempt any State or local statute or regulation, or other State or local legal requirement, that prevents the full effectuation of the goal embodied in subsection (a)." We would suggest, instead, a pro-active regulatory process to have tariffs filed for affordable digital services. If these tariffs are inadequate, or if there is some other market failure, then the FCC would be authorized to intervene, under the authority granted by Section Six. We believe this is a less intrusive approach, in that carriers are allowed to come forward with plans suggesting the ways in which they will meet the need for Open Platform services. Mandatory authority would only come into play if it is shown that the needs, as outlined in Section Six, have not been met. We believe that this proposal is fully consistent with the spirit of this bill, and that it will ensure that all Americans have access to Open Platforms services in the near term. In order for the NII to truly benefit Americans, we need more than just transport services which will carry bits of data around the country. We need to spur the development of applications -- the hardware, software, and services -- which will make the NII truly useful to the country. This will not be done merely by lifting regulatory restrictions on the current carriers. Rather, we have to create opportunities for small, independent entrepreneurs to develop the Information Age equivalents of the PC industries word processors, spread sheets, and data bases systems. In the few years that I have been investigating the telecommunications industry, I have learned that it is different in many respects from the personal computer industry which I came from and helped to found. Perhaps the most important difference, from a public policy perspective, is that you cannot build a whole National Information Infrastructure in a garage. Steve Jobs and Steve Wozniak could build the Apple II in their garage, on their own initiative. And it was that kind of entrepreneurial initiative that gave me and others in the software industry the platform on which to build the innovative products and services which enabled the personal computer industry to grow from zero to $150 Billion dollars in just ten years. We need that same kind of innovation in the development of new information and communications services, but it won't happen unless Open Platforms are in place. The development of this kind of platform, however, requires more than just a Silicon Valley garage, or a small factory in Boca Raton (the birthplace of the IBM PC). The development of the NII requires coordination of many industries -- from telephone companies, to cable companies, to wireless providers -- which are operating in a great variety of urban, rural, suburban, business and residential markets. Failure to achieve consistent infrastructure deployment across the country will seriously impair the usefulness of the new services, and more importantly, will have the effect of disenfranchising those communities and individuals who do not achieve adequate service. The prescription here is not a heavy regulatory hand. Where the market is delivering the necessary services, intervention should be minimal. But merely lifting existing line-of-business restrictions will not guaranty that the market will deliver necessary new services. As Section 6 of the bill notes, regulatory action should be authorized to see that a minimum level of connection to the infrastructure is available to all areas of the country in the event the market does not provide such connection. We encourage the Committee to be sure that the terms of this section give regulators a clear mandate for action when infrastructure deficiencies are identified. IV. Conclusion I want to thank you again for the opportunity to appear before the committee on this very important issue. The Electronic Frontier Foundation is committed to working with you, as well as a range of public interest and industry groups to reach consensus on a new regulatory paradigm that will bring the benefits of new information infrastructure to the American public.