Wiring
the Future:
A freer marketplace for telecommunications would work wonders
By John M. Eger, San Diego Union-Tribune, Sunday, July
2, 1995
Hovering just below the level of consumer consciousness is sweeping federal legislation that will reshape every facet of our telecommunications landscape. Marking a turning point in the history of modern communications, the likely passage of this badly needed legislation will invigorate American companies and strengthen the United States' leadership in the emerging global information economy.
The legislation, which passed the Senate by a vote of 81-18, and mirrors a similar bill in the House of Representatives is simple.
By removing the fences between competing industries and allowing the marketplace to function more freely, cable TV companies, for example, will be free to offer telephone service. Phone companies will be free to compete head-on with cable operators, as well as others entering the lucrative TV business, whether by cable, satellite or "wireless cable" distribution systems.
As things stand now, the phone companies are prohibited from owning cable systems in their service area. That's a result of the 1984 consent decree that broke up AT&T into regional, "Baby Bell" phone companies. The current situation also reflects federal law that bars the telcos from offering anything other than telephone and data services.
The breakup of AT&T attempted to shield the three major long-distance carriers -- AT&T, MCI and Sprint -- from competition in their markets, at the same time that it protected the Baby Bells from intrusion into their local and regional markets. Under the new legislation, these artificial barriers would also be removed. The proposed changes would, for example, allow AT&T to provide local as well as long-distance service, while granting regional phone companies the ability to set their sights on national and international markets.
Broadcasters, including the networks that are now barred from owning cable TV systems, would also be free to acquire media properties across the nation, so long as their ownership didn't give them more than 35 percent of the national audience. Even utility companies -- now facing deregulation themselves, at a time when alternative energy suppliers are entering the market -- would be free to play in the new, robust communications arena. In fact, no one would be excluded.
The bills proposed by the House and Senate are much more than minor tuning. As Sen. Larry Pressler, the South Dakota Republican and chairman of the Senate Commerce Committee, put it, "What we are basically doing is letting everyone into everyone else's business."
Not since 1934, when the Communications Act established the Federal Communications Commission (FCC), has there been such a comprehensive overhaul of the law governing telecommunications.
Like the technology it affects, the reform package knows no artificial boundaries, has few restrictions and favors no sacred cows. If the House version survives, even the FCC itself would be eliminated.
Alaska Sen. Ted Stevens, a longtime member of the Telecommunications Subcommittee, put it succinctly: "This is a bill that will open the door to the future."
The timing for this legislation is certainly propitious. America is at a critical juncture in the history of communications, indeed the history of the world. Some economists have already written us off as a second-rate economic power. Historians are skeptical about the likelihood of another American Century.
It's undeniably true that the United States now shares economic and political power with many other nations. However, this legislation would position the nation to compete effectively in the global information economy that will dominate the next century. The United States needs the physical infrastructure of advanced communications in place to compete with other nations, and the reform package will facilitate a more sophisticated infrastructure.
In the race to wire the world, billions of dollars will be spent building the new networks. Because so much is still unknown about what efforts will prove profitable, billions more will probably be misspent on the way as companies try to use and sell the technology.
Spurred by the new legislation, alliances will be created to provide every home, school and office with broadband, interactive multimedia services. These alliances will be made, broken and remade, and in the process the industry will be completely restructured, resembling little of what exists today.
In all of this, many communications firms will be winners, whether they are telephone companies, cable companies, computer manufacturers, or software or entertainment producers.
The result will be an advanced communications infrastructure that will be the envy of the world. For no other country has the technological edge, or so fervently practices the free market approach that is opening the floodgates to investment in every area of communications.
The more important step, which the legislation would encourage by spurring both competition and collaboration, is creation of the systems and applications (such as software and multimedia) that are driving the global information economy. These applications are crucial because they hold the promise of enhancing the quality of our lives, while also preserving what is unique about the great American experiment in freedom and free enterprise.
Even five years ago, we did not seem to be so well positioned when compared to other countries. With the notable exception of the United States, almost every developed nation, and many less developed lands, had already created an information strategy to capitalize on a basic, structural change in the world's economy -- away from agriculture and manufacturing, and toward the production, storage, transfer and use of knowledge and information.
For example, Singapore, a city-state about the size of San Diego, has already started to implement an aggressive plan to wire with fiber optics every school, hospital, home, community center and business. With teleports spread throughout the nation and computers on every desk and in virtually every student's backpack, Singapore hopes to become an "intelligent island" attracting high-tech, multinational corporations eager to be part of their new Pacific hub.
Japan is no slouch in this area, either. It has developed Teletopia (for "telecommunications utopia"), a 15-year plan spending more than $400 billion to do much of the same. Japan already has more than a hundred high-tech, broadband communications experiments in place. Throughout the world, in Berlin, Biarritz and Brussels, in Australia, New Zealand and Taiwan, similar plans or experiments are in the works or under way.
Until now, however, Washington seemed oblivious to threats of world competition, and seemed satisfied with erecting new fences against these kinds of integrated and innovative plans. It did this ostensibly to the competition in one industry from spilling over into another; and overzealously to protect the consumer against abuses that often did not exist.
Along the way, Washington repeatedly underestimated American business's frustration with these archaic restrictions, as well as an even more restless public searching for economic leadership.
At last, things are shifting in the nation's capital. The November 1994 Congressional election enabled us to see the importance of a robust, free-wheeling communications industry to individual and collective wealth and well being in the new global information economy.
Last year's electoral upheaval, like similar changes in other democracies, is a direct result of the communications evolution that has been occurring over the last 100 years. With hundreds of satellites orbiting the earth, fiber-optic cables crisscrossing the ocean floors, and wired and wireless networks dotting the landscape, nothing of importance happens anywhere in the world that is not known instantly by virtually everyone else.
These advances in telecommunications have globalized the economies of the world, leading to a redefinition of wealth and a realignment of power. In political elections and by virtue of the technology of the networked personal computer, power is now flowing back to the people.
The Gutenberg printing press of an earlier era gave ordinary citizens the power of the pen and the expanded freedom that comes with it. Today, the tools of telecommunications -- the telephone, television, fax and PC -- are giving millions of citizens around the world powers they've never experienced.
With this new power, individual citizens are shaping public opinion and exploiting peaceful new ways to set local, national and global policy. While the power brokers in Washington were obviously present at the birth of this new legislation, American consumers and voters can take some of the credit, too. Their insistence on a more responsive government and a livelier marketplace has helped drive the legislation.
Sadly, however, the bigger questions about the future of telecommunications aren't receiving the broad public discussion and debate that they merit. Sad, because every American who owns a telephone or a television will be affected and their lives will be profoundly reshaped by the astounding changes in communications; first, because the legislation promises to unshackle communications companies so that they can offer a bonanza of new and expanded services to their customers, at prices that will be driven downward by intense competition for the customer dollar; and second, and more importantly, because the legislation is a harbinger of how our economy and society are being remade by the ubiquitousness of sophisticated communication networks. Not only are these networks creating new wealth and new jobs; they're also sparking a Second American Revolution that is shifting power away from presidents and prime ministers back to individuals and their local communities.
This shift in power is enabling each of us and our communities to pioneer and prosper in the emerging information economy. The realignment of power will flourish, however, only if we as citizens understand the changes taking place and aggressively embrace technology using it to control and shape our individual destinies at home and in the workplace.
This isn't the media's fault, of course. They've done their stories on Al Gore's National Information Initiative and their cover pieces on cyberspace phenomena and the Internet. Larry King and Ted Koppel have had their confabs with the Barry Dillers and Larry Presslers of the world. The techno-savvy Speaker of the House, Newt Gingrich, has appeared on more than one such show.
But the talk has been mostly about the 500-channel universe, video on demand, and interactive games. Amid it all, the public seems overdosed on information rhetoric. Maybe editors and producers sense as much and as a result, haven't tried to push the debate too far onto center stage.
But there is a larger question still to be answered. The bounty of expanded services can extend far beyond 500 channels and faster fax lines. It can extend to new ways of learning in our schools, increased productivity at home and in our offices, reinvigorated local communities and a broader-based democracy.
To realize these possibilities, the average American needs to know more about and be more involved in the Second American Revolution. How many of our people understand that telecommunications has become such a pervasive influence in our society? That information and information technology are the new wealth of our age? That understanding these tools and knowing how to use them is becoming an essential part of everyday life and work? And that there is no turning back?
The key is to recognize that this rush to rewire, this race to provide new communications services, is not about technology or legislation. Rather, it is about using these tools to launch the high-tech, information-sensitive industries that are critical to transforming education, health care, tourism, the entertainment industry, even business and government themselves.
Fortunately, America enjoys a slight leadership edge in the production of these tools of the new age, as well as in knowledge-based enterprise. After aerospace, theatrical films is our second-largest export. We produce more books, movies and software programs than any other country in the world.
Behind this cornucopia of creative, knowledge-based products is the First Amendment. Since the birth of the nation, it has encouraged a tolerance for dissent and a respect for diversity that are the heart and soul of creativity.
It is indeed the right time for Congress to remove the artificial barriers that have restricted the creative ferment of the communications marketplace. Driven by the First Amendment, the infrastructure and services that will come from this new legislation can -- if the American public seizes on the opportunity -- mean that what is in our economic interest will also preserve and extend the basic freedoms upon which the nation was founded.
John M. Eger, the Van Deerlin Professor of Communications at San Diego State University, was Director of the White House Office of Telecommunications Policy (1974-1976). He is currently writing a book about how the communications revolution is changing the way we live and work.