NEW DIRECTIONS IN TELECOM
A CONVERSATION WITH ASSISTANT SECRETARY LARRY IRVING
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20 MR. IRVING: Let's talk a little bit about
21 wireless. Howard -- and you might want to answer this --
22 what should we be looking for in terms of innovation and
23 new services, new products innovations in the wireless
24 industry over the next year, 2 years, 3 years?
25 MR. TAYLOR: I think you're going to see
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1 innovations and that 1998 will be the year for wireless
2 fiber.
3 MR. IRVING: So it's not the year of Internet
4 telephony, but it will be the year of wireless?
5 MR. TAYLOR: It will be the year of wireless
6 fiber.
7 MR. ERNST: It might be both.
8 MR. TAYLOR: I hope it is. But getting back to
9 the other question, I think wireless technology will help
10 expedite some of the things that we've talked about in the
11 industry.
12 There's a strange thing that's happening in the
13 marketplace today. The traditional ways and means that
14 we've looked at of telecommunications being driven, which
15 is really by the traditional RBOC's and AT&T and those
16 companies, is -- it's completely been reversed in terms of
17 the consumer.
18 IP technology will, I think, be validated in
19 1998 as a technology from a telephony standpoint and will
20 be the driving force in telephony for years to come, and
21 it's really changing the trend, changing the trend of how
22 we've traditionally thought about telecommunications
23 networks being put out there, and the end users are now
24 driving this technology and innovations that are taking
25 place, and technological innovation that is going to bring
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1 a whole new price point to this industry.
2 We're breaking down new governmental barriers.
3 They're breaking down what traditionally we have looked at
4 in terms of information interchange, across lines, and
5 companies are getting into this now of saying, why should
6 we look at and pay the rate that we've had for
7 communicating with people and companies across the world,
8 so this has really changed.
9 I think it will also change how we look at
10 education, and that's one of the driving forces that we've
11 seen in terms of one of the benefits of the Telcom Act of
12 '96 is the E rate, and from that standpoint driving
13 technology into a whole new sector that does have profound
14 impact in terms of residential users, bridging the haves
15 and the have-nots in our society. That is one of the
16 things we look at and take very carefully.
17 MR. IRVING: Will you be applying in some areas
18 the E-rate?
19 MR. TAYLOR: Absolutely. We have a subsidiary
20 of Winstar for education, one of the unique products and
21 programs we have. We've talked a little bit about the
22 title Passages, where we have a school teacher, Rona
23 Metzger out of the Poughkeepsie school system who is
24 traveling the world in a tall ship, and she's connected to
25 thousands of children across the U.S. and around the
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1 world.
2 We have a chat program in utilizing a laptop
3 computer, a satellite phone and some other services. She
4 is holding chat forums and teaching and educating in New
5 Zealand. She is in Africa. She's out on the plains, and
6 education is taking place with the kids across the world
7 as she travels across the world in the tall ship.
8 MR. GREEN: Larry, I would agree with Howard, it
9 is really time for us to stop thinking about
10 telecommunications in a voice-centric mode. It is time
11 for us to stop thinking about the media in terms of copper
12 and circuits. It is time for us to understand that data
13 in all forums will become more and more predominant.
14 The packet switching will happen, that the
15 Internet has provided a real paradigm change. We've got a
16 totally different sort of network that people are piling
17 on at one person a second, or something like that. It
18 scares Washington to death, as near as I can tell, which
19 is not very positive. I mean, all the terrible things
20 that can happen on the Internet, all the revenue
21 opportunities.
22 And by the way, if you look at legislation the
23 way people think about it, it's with the telephone system
24 and the line and not all this new stuff.
25 Times are changing. These are explosive times,
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1 and yes, wireless is a major part of it.
2 MR. IRVING: How do you get the story out? A
3 couple of things you said resonated. I don't know that
4 Washington is scared of it. I think what happens in
5 Washington reflects two things. Let me be an apologist
6 for Washington, not a role I feel entirely comfortable
7 with, but a couple of things.
8 Ira Magaziner did an analysis. 80 percent of
9 the front pages on the Internet over some period of time
10 were negative stories, pornography, gambling, fraud,
11 crime, things that happen on the Internet, which drives
12 the average person who's not on the Internet -- and the
13 average person isn't on the Internet, or wasn't on the
14 Internet when the story came out. This is something to be
15 scared of.
16 Add that to the technophobia of the average
17 American consumer, and add that to the technological
18 illiteracy of most people in Washington. It kind of
19 builds on itself, and the average Member of Congress and,
20 I would dare say, the average Cabinet and sub-Cabinet
21 member doesn't carry a laptop, doesn't use the Internet in
22 his or her daily routine.
23 I think that is changing, but I will tell you
24 when I left in 1993 I don't think there were three Members
25 of Congress who were on the Internet. Now, in 1998,
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1 they've all probably seen the Internet but I'd be willing
2 to bet that 100 Members couldn't boot up a computer if
3 their lives depended on it, because they don't have to use
4 the technology and they're a different generation.
5 But the other part is the consumer, because at
6 the same time all these wonderful things that we're
7 talking about are happening, the consumer, to some degree
8 the voter still sees that $20 phone bill as being somewhat
9 sacrosanct, and they're not looking at the bundle, and
10 they're not looking at the fact that they're having six,
11 where you have competition and so yearly your prices are
12 going down 25 percent, but I can go out right now, as of 2
13 days ago, and get a prepaid calling card for 5 to 7
14 percent if I'm willing to use Internet telephony to make
15 my long distance calls in the United States.
16 Now, instead of 10 cents a minute, it's 5 or 7
17 cents a minute. How do you get that story out?
18 The folks around this room have an interest, or
19 folks have an interest in this, yet the full story is not
20 told.
21 Kathy.
22 MS. WALLMAN: I think everybody here would want
23 to go down on record as not being in favor of local rate
24 increases.
25 MR. IRVING: Including me, particularly me. I
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1 like my job.
2 (Laughter.)
3 MS. WALLMAN: I think Marius' point is the right
4 one. You have to be able to show consumers the whole
5 picture so that they know what they're getting and what
6 the trade-offs are.
7 If you said to consumers, look, here's the deal.
8 It will never go above $18.75 but the bad news is we're
9 not going to be able to give you any of these high speed
10 services that the network is capable of offering, they
11 might make a decision on that basis.
12 I think that there is a lot of cynicism among
13 consumers, that they would never believe you if you
14 offered them that choice. The reaction they would have is
15 oh, yeah, yeah, yeah, you want me to buy into this so my
16 rates will go up, but all these other wonderful things
17 will happen, all these other wonderful choices will be
18 available to me if I buy into this idea that my rates are
19 going to go up.
20 I don't think that we can talk about these
21 choices. I think that we have to let the system unfold in
22 a way that shows people that they really can have
23 meaningful choices about the kinds of services and the
24 combinations of services they may wish to select.
25 I don't think you can tell people in the
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1 abstract what it's going to be like. You need to show
2 them and let them make the choices.
3 MR. IRVING: You have this irrational
4 exuberance, on the one hand. I think there's a tremendous
5 amount of hype leading up to the act and after the act,
6 but at the same time, as we all talked about, the Internet
7 is real in a lot of lives in a way that it wasn't real to
8 any of us a few years ago, and it's been of tremendous
9 benefit.
10 Things like Ricochet are providing real service
11 to real people. We've got $16.95 providers who are giving
12 you call waiting and caller ID, and I know that, you know,
13 for $15 I carry around a little portable telephone that
14 gives me caller ID, voice messaging, call waiting, call
15 forwarding, and it's a wireless.
16 Unheard of. Who could have thought, 4 or 5
17 years ago, for $15 I could get that entire packet of
18 products, and yet still there's consumer cynicism. Why is
19 that?
20 MS. BERLYN: What I have been wanting to say all
21 along this morning is one of the most important concepts
22 here is choice. And when we think of choice we think of a
23 choice of the carrier. But what consumers really want is
24 choice of services. They want to be able to pay for the
25 basic telephone residential service and that be it or they
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1 want a package of services that Cablevision or Cox may be
2 able to offer and, as a tradeoff, receive discounts for
3 some of those services. But consumers really want to have
4 those choices.
5 And I do not think there is any one type of
6 consumer out there. I think smart companies will market
7 to a wide array of consumer types. But the most important
8 thing is that consumers maintain that opportunity for
9 choice.
10 MR. IRVING: Do they have that opportunity? Are
11 they getting that? Where are we on the spectrum, 10 being
12 utopia and 0 being 1950, black phone, you know, one
13 provider?
14 MS. BERLYN: Well, we have come a long way in
15 terms of choice. There is no doubt about that. We have
16 far longer to go. But if you look at choice, how choice
17 has developed in the long distance industry, consumers now
18 have the choice of determining a long distance company
19 that can perhaps offer them a lower service on Sunday as
20 opposed to a lower service in the evening or the day time.
21 So there is a choice there that consumers have for prices.
22 They also have choice of picking a long distance
23 company that can offer them frequent flier miles or other
24 types of bonuses and gifts. So there is choice out there
25 that is certainly starting to come about and offer
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1 benefits.
2 MR. IRVING: Frank, you seem to have an interest
3 in reaction to something.
4 MR. PLUMLEY: I was talking with Mr. Sullivan
5 down at the Alabama Commission right after he became a
6 regulator. And the Commission was looking at a rate
7 stabilization plan for I guess Southern Company. And I
8 said, well, gee, you know, if you lower this for Southern
9 Company, how about South central Bell? And he said, well,
10 Frank, you got to understand, an electric company has got
11 22 tariffs and South Central Bell has over 600.
12 Well, the electric company does one thing; it
13 runs electricity downhill. The phone company arguably
14 does a couple of different things, but not enough to get,
15 you know, 30 times, or whatever multiple, on the tariff.
16 So the frequent flier miles kind of packages, or AT&T's
17 Rewards Program or something, are sort of nice ways of
18 confusing the issues and trying to provide a perceived
19 benefit. It is a kind of marketing I do not particularly
20 like. I will just leave it at that.
21 (Laughter.)
22 MR. IRVING: Okay. Well, I did not sign up for
23 it.
24 MR. GREEN: They would not do it if it did not
25 work, though.
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1 MR. PLUMLEY: Right. But you get the whole
2 question: Is it to AT&T's benefit or Chesapeake & Potomac
3 or Bell Atlantic hyphen whatever? Is it to their benefit
4 for you to have a very clear -- as the consumer -- to have
5 a very clear understanding of what the costs and benefits
6 are of any particular pricing package? Or do confused
7 customers tend to stay where they are?
8 So I think that is a big part of those marketing
9 plans.
10 MR. GREEN: I have a feeling that customers are
11 not that dumb, I do not think. And if they do not like
12 it -- for example, AT&T's thing makes my wife mad. She
13 will not have anything to do with it. And she is a
14 non-technical, plain old consumer kind of person.
15 Sometimes you might look at the wrong end of the
16 animal. If we did not have cable television, we would be
17 saying, please, please, please, give it to me. And we
18 would not worry about the cost. It is when we have got
19 it, now we do not like the price to go up, and we never
20 like that on anything.
21 If we did not have telephone service -- listen
22 to what you said -- you know, I will pay anything.
23 Please, come give me cable.
24 And consumers are looking at all kinds of new
25 things now. The things that they have, will they be
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1 concerned about the price going up? Sure. But I think
2 they can make the value judgment as they look at new
3 services.
4 MR. TAYLOR: Yes, I think consumers -- and one
5 of the things that Kathy says -- I mean they are looking
6 for choice. And I think competition will regulate the
7 market on its own. And so I am a strong advocate to let
8 the market kind of regulate itself. Let's have a lot of
9 competition. Let's give choice in markets. And I think
10 you are going to see, in 1998 and 1999, in terms of
11 telephony, you are going to see fee to free or free to
12 fee.
13 And what is going to be the differentiator, be
14 it free, perceived will be Internet telephony; be it fee,
15 will be the value-based services; and the level of service
16 and the different levels of service that will be offered
17 on a fee basis. And there are going to be packages and
18 there are going to be offerings. But that is what is
19 really going to differentiate, from a residential
20 standpoint to services, to end users.
21 MS. WALLMAN: And I think one of the things that
22 is going to have to be managed here and in other areas are
23 how do you help consumers with the search costs. How do
24 you help them figure out what the best choices are?
25 When the number of long distance choices
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1 proliferated, the FCC had to deal with problems like
2 slamming. And the general frustration of consumers who
3 would call the FCC and say, you know, I cannot figure out
4 what is the best deal; you tell me. And, of course, the
5 FCC, you know, we did not feel like we are in the best
6 position to be picking for them among long distance plans.
7 (Laughter.)
8 MS. WALLMAN: And we encouraged some of the
9 consumer groups to see if they could figure out how to do
10 selection sheets and so forth, so that people could manage
11 the cost of finding the right deal.
12 The same issue is going to surface in retail
13 competition for electricity. Already consumers in test
14 markets, like Peterborough, New Hampshire, are finding,
15 gee, there are so many choices, how do I figure it out?
16 And we have the same issue when competition
17 really explodes and people do have different choices and
18 combinations that they can pick on data, voice, local,
19 long distance, and paging, and other wireless services.
20 There is a niche in the market for somebody who can go out
21 there and figure out how to provide a service and managing
22 the search costs.
23 MR. IRVING: Aren't there Internet services now
24 where you can put in three of four months of your
25 telephone bill and they will then go through the various
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1 long distance options and say this is the one for you?
2 MS. WALLMAN: There is actually an interface you
3 can put on your computer that will pulse the right kick
4 code, the right carrier code, to route your call,
5 depending on time and day.
6 MR. IRVING: I like that. Another device I do
7 not have at my house yet.
8 (Laughter.)
9 MR. IRVING: My wife is going to be very happy.
10 (Laughter.)
11 MS. BERLYN: I think it all points, though, to a
12 tremendous need for consumer education. I think consumers
13 are still confused about what their long distance service
14 actually costs. And we absolutely will see a tremendous
15 growth in confusion about what exactly am I paying for.
16 And if you cannot understand what you are paying for, and
17 you cannot understand how much it costs, then you cannot
18 be a smart shopper. Because you do not know what the best
19 deal is.
20 So I think consumers do need a great deal of
21 information and assistance. And we plead with the
22 companies also for clarity about costs.
23 MR. IRVING: Whose responsibility is that?
24 MR. SCHWARTZ: Yes, let me say something about
25 it. I think everybody is right; that is the good news.
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1 That is, companies sometimes have an incentive to make
2 their pricing structure a little bit different, a little
3 bit more complicated, so they can get by with some higher
4 prices. And choice is not the same as transparency.
5 On the other hand, if there is enough
6 competition, somebody will come along and say, let me cut
7 through all this junk, 6 cents a minute any time, any
8 place. So if you have enough competition, competing
9 through transparency is a dimension of competition. And
10 you see that.
11 Now, one question, though, I wanted to ask
12 Cherie as well as David, in terms of choice, one of the
13 benefits we keep touting to consumers, you are going to
14 get your choice of provider. And people say, oh, just
15 like long distance, more calls during the dinner hour.
16 This is really great.
17 MR. IRVING: It is just the dinner hour at your
18 house?
19 (Laughter.)
20 MR. IRVING: It does not stop.
21 MR. SCHWARTZ: What kind of reaction do you
22 encounter when you try to get people interested in another
23 telephone provider?
24 MR. CONN: You probably will not believe this,
25 and I have a hard time believing it myself, but we do our
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1 residential marketing, most of it now, through
2 telemarketing. And I have had more than a handful of
3 people come up to me and say, your telemarketers are so
4 nice and knowledgeable.
5 MR. IRVING: Could you have them call me instead
6 of the guys that call me?
7 (Laughter.)
8 MR. CONN: Well, I will tell you, that is not
9 consistent with what the general reaction to telemarketers
10 is. I have been very surprised at that. But the reaction
11 from customers, to answer your question, has generally
12 been pretty good.
13 Remember, too, though, that the markets that we
14 are in are markets where customers have traditionally not
15 expected to have a choice. You know they are markets
16 that -- you know, cities and towns in Iowa and Illinois
17 and Minnesota, with 8,000 people or 40,000 people or
18 60,000 people. They read about telecom competition, but
19 they are not sure it is ever going to get to them. So to
20 have a choice makes them happy.
21 MS. KISER: And I think, for Cablevision,
22 because of where we are starting in New York, the response
23 has been very positive. But the main reason is, and it
24 goes somewhat to what Frank said, you know, you are
25 looking for somebody new, and the people in our service
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1 area are looking for somebody new because of service
2 quality. The service quality by the incumbent local
3 exchange carrier in the area we are serving right now has
4 been poor. So when you come to them, either at their door
5 or on the telephone, they have been waiting for you for
6 some time. So it has been very positive.
7 But, now, when we move into other markets, we
8 may see the poor response.
9 MR. MCGARTY: If I could make a quick comment,
10 Larry, just to build on your comments, Cherie.
11 There used to be a Web site called Nynex
12 something or other, which I will not use here.
13 (Laughter.)
14 MR. MCGARTY: On which all the consumers would
15 relate their concerns. And when we did market research,
16 just to give you an example, up in Framingham, we got an
17 80 percent willingness to change at a 5 percent price
18 reduction. And we had people trying to sign up with our
19 market research people. And they said, time out, you are
20 asking questions, you are not taking orders. So we think
21 there is a tremendous pent-up demand.
22 I think, just to get back to Kathy's comment, it
23 really -- from somebody putting money into this stuff --
24 it is an economic decision that says, where do you put
25 your money early on to get the return, because you have
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1 got to worry about investors and the market and whatever?
2 And then, there is a point in which you will move over to
3 the consumer market. And that is a year down the road or
4 18 months. It is not 10 years.
5 And there is going to be a natural give and
6 take. Because what we are going to do is we are going to
7 drive down the rates on the business, which is going to
8 get rid of the cross-subsidy, which is going to force the
9 ILEC to increase, or to take rates, off of the local
10 residential side, and parity is going to start to get
11 reached.
12 So we can see that now, that it is occurring.
13 So, from a normal economic process, we think it is going
14 to be there. And Cherie's comment is that most of the
15 peak demand is that people are dissatisfied -- at least in
16 the region that you and we work --
17 MS. KISER: Precisely.
18 MR. MCGARTY: -- with the incumbent carrier.
19 MR. IRVING: Let me raise one other question
20 really quickly, because Howard talked about it and I
21 wanted to get back to the Clinton administration is not
22 going to not talk about schools and libraries.
23 David, Cherie, are you thinking about going into
24 schools and libraries in any kind of a --
25 MS. KISER: Well, Cablevision Systems has been
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1 in schools for some time -- from the video perspective --
2 that is something we have pursued heavily. And we
3 continue to move towards access to as many schools.
4 MR. IRVING: Is it a market opportunity?
5 Because it is kind of a good corporate citizen thing to
6 do.
7 MS. KISER: It is both. It is both. And the
8 fact that there may be Universal Service Funds available
9 in the future for the work that we have been doing in the
10 past, and we may have access to those, certainly we would
11 pursue them. But that is not going to change what has
12 been our business approach historically.
13 So, it is a good thing, but it is not a driving
14 force from our business perspective.
15 MR. IRVING: What about rural areas, what is
16 Cablevision's vision with respect to rural America?
17 MS. KISER: Well, much of what we do is based
18 upon where our facilities exist. So where we are now is
19 not rural area, in the New York area. And as you know,
20 there have been certain mergers recently, where we are
21 trying to cluster --
22 MR. IRVING: We have been watching very closely,
23 as a matter of fact.
24 MS. KISER: And so a lot -- you know, we are
25 dependent upon where our facilities exist. So it is
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1 driven by that. I mean, there are many areas where our
2 facilities exist, like the Bronx, for instance --
3 MR. IRVING: Not rural.
4 MS. KISER: -- would not be -- not rural, but
5 not an area that companies are vying to deploy facilities
6 either, because they do not see that as a large business
7 center.
8 MS. KISER: My mother was a welfare worker there
9 for many years. And I remember, the year she started
10 there, and then 15 years later, going to the same center,
11 and just looking at the decimation, I mean, with the
12 stores and buildings. Over a 15-year period, there was
13 like nothing.
14 MS. KISER: But that has proven to be an
15 excellent market for Cablevision. And so, to the extent
16 our facilities exist in an area that may not be an area
17 that other companies -- especially with the business
18 perspective -- are interested in, if we are there we are
19 going to pursue every customer.
20 MR. IRVING: Why is that a good market? Do you
21 have a sense of why --
22 MS. KISER: Cable is popular. People like cable
23 television. They are willing to pay for that before they
24 will maybe pay for something else.
25 MR. IRVING: I can see it, yes.
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1 MR. TAYLOR: And we have found also that it is a
2 great area for us to deploy wireless technology. The cost
3 of running, say, a land line, a terrestrial line, from a
4 fiber standpoint, is probably over $500,000. We can bring
5 that broadband capability to a school or to a university
6 campus for less than $40,000. And probably, by the end of
7 1999, for less than $5,000.
8 So the cost economies and the return we can
9 get --
10 MR. IRVING: By the end of when is it $5,000?
11 MR. TAYLOR: 1999.
12 MR. IRVING: So in a year and a half?
13 MR. TAYLOR: Absolutely.
14 MR. IRVING: Wow.
15 MR. KOUTSKY: And from the perspective of Covad,
16 when we collocate in an office, we can provide the service
17 to any line served by that office. So, by definition, we
18 pass every school in the South Bay area right now.
19 MR. IRVING: And are you doing things with
20 schools and libraries?
21 MR. KOUTSKY: Well, I mean, to a certain -- that
22 is part of our business plan -- is to offer those types of
23 services. I would almost say, right now, that the prices
24 for T-1's and partial T-1's that we can sell already, you
25 know, put the incumbent pricing to shame. I mean, we are
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1 talking not in terms of 95/5 percent price discount, we
2 are talking 50, 60, 70 percent price discounts.
3 And that is not a function of us doing anything
4 more than just taking an examination of the technology,
5 what it costs for us to deploy this service, and putting
6 in a reasonable markup. That is just the way that our
7 low-cost technology, and the fact that we are already
8 collocated in an office, to actually serve perhaps a
9 different type of consumer, that we happened to pass the
10 school.
11 And so that is the type of competitive dynamic
12 that at least our company brings up by building out. For
13 one particular reason, that collocation space and those
14 lines can be used to provide DSL service to anybody served
15 by that -- residents, schools. Also, the way -- when we
16 decide where to collocate -- you had mentioned rural
17 markets -- our focus being on teleworkers, the issue may
18 be that if we are trying to sign up, let's say, America
19 Online, who is out in Loudon County, I am sure they have
20 people living in West Virginia, I am sure they have people
21 living in Front Royal, I am sure they have people living
22 in Prince William County that would, quote, telework over
23 to America Online.
24 In order to acquire America Online as a major
25 client of ours, we will collocate in those offices. We do
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1 not view each collocation necessarily as can I make money
2 on it, you know, am I rate-return positive or am I
3 return-positive from that central office. We look at an
4 entire metro region in deciding our collocation, and what
5 does it cost me to collocate to provide coverage for that
6 region, and does that include 70 offices, 100 offices, 200
7 offices. That is the dynamic.
8 And then, once you are in that office, you have
9 the economics working in your favor. Because then you
10 pass a school in that, and it is served by that area. You
11 pass the library. You pass the other small businesses
12 that may happen to be in Front Royal.
13 So I think the economics of rural entry and of
14 school and library services are being changed
15 underneath -- basically out from underneath policymakers.
16 These economics may have changed in the last year or so
17 anyway. And I think they are going to continue to change.
18 MS. WALLMAN: Larry, I just wanted to ask. What
19 has been the competitive response on your T-1 pricing?
20 Because that is really bread and butter for the incumbents
21 today. What happens when you --
22 MR. KOUTSKY: Well, we have not really seen much
23 of a competitive response. We do not market them at
24 T-1's, per se. And a lot of that has to do with just the
25 way that we have chosen to -- because our initial focus is
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1 upon the teleworker situation, as opposed to just being
2 basically going into a T-1 technology arbitrage game.
3 I mean, we are using the same technology that
4 the incumbent uses to supply T-1 lines. You know, we just
5 call it HDSL technology.
6 So I suspect there will be a price response.
7 Has there been one yet? We have not seen one.
8 MR. IRVING: Let me go to Kathy. And then I
9 will go to Gary.
10 MS. BROWN: I want to build on Kathy's question.
11 The incumbent, sooner or later, is going to say, well, if
12 you can provide that service for that price using a
13 cheaper technology, well, so can we. And what happens
14 there to you, to the small niche player? And I have that
15 question all around the table.
16 I think we have incumbents who are waking up
17 from a long slumber, as the innovators -- or, as Larry
18 calls them, the blue jean crowd -- have come in and said,
19 gee, there is other ways and better ways to do this. And
20 the big players are saying, oh, well, then we can do that,
21 too.
22 What happens to all of you? And are there any
23 policy concerns that you would want to bring to the table
24 on that?
25 MR. KOUTSKY: This is one of the reasons we have
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1 focused our business not upon T-1 arbitrage -- which is
2 how I regard it -- because that is just basically moving
3 the technology, you know, using the technology to change
4 the price. That is why we focused on the teleworkers and
5 upon the residential access standpoint, and also on
6 partial T-1's, which, you know, are an effective and
7 efficient small business service that they can provide.
8 But our focus is really more upon the remote.
9 Basically, it is a land extension business. That is a
10 business that our research has indicated is not apt to
11 churn. We are effectively extending the corporate LAN out
12 to employees' homes. That is not an easy thing to do, nor
13 is the company willing to switch that on a given moment's
14 notice. They are reluctant to have to go through that
15 type of computer network upgrade.
16 But that is more of an innovative-type
17 telecommunications/computer service. And that is where we
18 have niched ourselves.
19 We also use Internet service providers as
20 re-sellers of our service, as well. Whether or not we
21 will be the only service that those ISP's will resell, I
22 mean, I think, from a customer service standpoint, we
23 still think that we will never lose a customer and we will
24 always be able to out-service and out-provide the
25 incumbent telephone company. And that is where we have
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1 decided to focus our energies.
2 MR. GREEN: The thread began with rural and
3 schools. Just two short comments.
4 We have a ricochet network in Scott's Bluff,
5 Nebraska, about a 25,000-person community. We have the
6 highest penetration per population of subscribership in
7 the shortest period of time. The folks there use the
8 Internet more than people in Silicon Valley. It is a very
9 active area. Maybe there is not much else to do, but they
10 are very, very active and very, very interested.
11 Wireless is unique in terms of its advantages to
12 school, I think. We have one school, a high school, that
13 checks wireless modems out to students so that they can
14 take the Internet home at night if they do not have it.
15 MR. IRVING: In a minute, I want to open this up
16 to the folks who have been patiently sitting here.
17 Because we said this is going to be a conversation. It
18 should be not just a conversation among ourselves, but get
19 to our questions.
20 Let me just turn to a couple of questions about
21 investment. And maybe I should, again, go back to Frank
22 and Daniel and talk about if you are a new
23 telecommunications service entrant and you are trying to
24 raise money out there in the capital markets, what do you
25 have to demonstrate to those folks with the money? What
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1 do venture capitalists look for? What is the street
2 looking for?
3 When I get tired of being -- or when my wife
4 tells me I am tired of being a technocrat -- and if I want
5 to start a business, what do I have to demonstrate?
6 MR. ERNST: I think you have to demonstrate what
7 the successful CLEC's have been able to prove. Which is
8 that there is demand, and that is clear. There is demand
9 for competition. And we have a team of people who can
10 actually serve that demand. So you take a group like
11 Covad and essentially come into the market and install the
12 network on top of the existing network and provide the
13 service. And they are not really worried about price.
14 They are focusing on servicing the customer.
15 A lot of people -- where the investment
16 community is looking, we had caps when there were still
17 caps. In other words, you did not have the switches
18 installed and they did not have access. And the
19 competitive response was the T-1 price went down, from
20 $2,000 a month to $400 a month.
21 And as Marius said before, once you have the
22 competition in the market, the price is necessary but not
23 sufficient to get to the next level. So the investment
24 community says, what is your next level that you have to
25 offer, outside of price? Because, at a certain point in
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1 time, Bell Atlantic and the others are going to install
2 the same DSL technology and have the same cost structure
3 as you. So how are you going to get by that?
4 That, we think, is bundling of the service. And
5 that is something that is hard to pinpoint.
6 MR. IRVING: Before I turn -- I guess my last
7 question before I turn and see if there are some other
8 questions out in the audience, is I do not think we can be
9 found guilty -- this particular group of 14 people of
10 irrational exuberance. But I do think that there seems to
11 be a sense that there is a good market. There is a lot of
12 opportunity. There is capital out there. We are in a
13 growth mode. And if we do things smart, this Nation is
14 going to soon be able to benefit. Investment is going to
15 benefit. Work is going to benefit.
16 What are some of the bumps on that road? If you
17 are trying to give cautionary advice to people who can try
18 to help make sure that the roads stay clear -- you know,
19 kind of a salting of the road before the snowstorm -- what
20 are the storm clouds on the horizon do you see?
21 Frank?
22 MR. PLUMLEY: I would advise people who are
23 trying to do so much to help the market adjust to change
24 reality to get out of the way.
25 MR. IRVING: We are out of the way. Are there
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1 people in the way? Who is in the way? Please, let us
2 know.
3 MR. TAYLOR: I would say one of the things that
4 we are concerned with, from a wireless standpoint, is that
5 we continue to see the nondiscriminatory access for
6 customers to rooftop and building rights and for inside
7 wire and from rights-of-way. We think that is really
8 essential. Right now, landlords hold a virtual monopoly
9 to that last 100 feet that is out there.
10 So one thing for all of us in the CLEC industry
11 is that we make sure that this is nondiscriminatory across
12 the base. Right now, the local LEC's hold the rights in
13 terms of many of the buildings, in terms of free access.
14 We think free access should be worldwide and industry-wide
15 for all of us.
16 MR. IRVING: Frank, I did not know if you wanted
17 to continue.
18 MR. PLUMLEY: I just personally find it
19 impossible to believe that every 800-page new ruling is
20 really deregulation. Any 800-page rule is regulation.
21 I think the marketplace has consistently been
22 ahead of the regulators for the last 25 years in this
23 industry. I think there are enough companies that are
24 doing innovative things around this table, I guess, thank
25 God, that regulators are not conscious of.
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1 (Laughter.)
2 MR. PLUMLEY: And several people have expressed
3 this, is willing and able to sort out subsidy issues and
4 some of these other things. If there is a social issue,
5 about what do we really want to do for the schools, what
6 do we really want to do for residential customers, then
7 people should stop waffling and go ahead and adopt an
8 explicit subsidy plan. Which that also is not popular.
9 You know, mobile rates cannot go up and
10 subsidies have to be there.
11 MR. IRVING: Trust me, we have these debates --
12 Marius?
13 MR. SCHWARTZ: I am all in favor of it. It is
14 politically unpopular, but the job of at least economists
15 is to keep harping on transparency. Let people know what
16 they are really paying for as opposed to finding variance.
17 I mean, part of this culture of burying things and keeping
18 it away from people is what is contributing to the general
19 cynicism about politicians. And I think if he got up and
20 faced the music, you might be surprised at how much
21 receptivity you might get.
22 MR. CONN: I want to give at least the observe
23 side of what Frank said. From our standpoint, we are in a
24 position now where we have good Federal legislation, we
25 have good Federal regulations, but I can tell you that
96
1 every day the incumbents are out there before State
2 regulatory commissions and State legislatures, when they
3 lose before the regulatory commissions, and doing
4 everything they can to prevent competition from
5 developing. And to me, that is the pitfall.
6 I cannot tell you how many times we are faced
7 with situations where we have fought a battle before a
8 regulatory commission and won, and we have a
9 pro-competitive decision, and 2 months later, we are
10 before the State legislature, trying to keep legislation
11 from being passed which overturns that same decision. And
12 I think that is a very substantial pitfall that CLEC's
13 need to watch out for.
14 MR. KOUTSKY: Yes, I would like to reiterate
15 what David just say. Covad, our business plan, you know,
16 we were founded in October of 1996, 2 months after the
17 unbundling rules came out. Because the idea was that --
18 we did not even know for sure whether or not a
19 DSL-compatible loop would be unbundled as a facility until
20 those August rules came out. So we are dependent upon
21 that.
22 We are running into both loop price and loop
23 availability issues. One example in Texas, Southwestern
24 Bell, the price of what is called a conditioned loop, or a
25 digitally compatible loop, is $46 a month. Which,
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1 essentially, is no different than the State of Texas
2 putting up a sign and saying, you know, no DSL entry
3 wanted, in my opinion.
4 Also, my understanding is -- we are not active
5 in Texas, but my understanding from other CLEC's is that,
6 right now, in that State, SPC will not permit a person to
7 put even DSL bandwidth capabilities on that loop; that
8 they are limited to ISDN 128 kilobits per second-type
9 bandwidth.
10 Those are not the types of policies that are
11 really conducive towards providing the big pipe, which I
12 think would permit the type of innovative services and the
13 development of those types of services over time. There
14 are other issues, when I talk with incumbent LEC's, where
15 the focus is that the Act was about bringing competition
16 to local exchange service and voice-quality service, but
17 not necessarily to high-speed data services. That is
18 legally incorrect, but I think that is a perception out
19 there and that is the type of undercurrent movement which
20 could really throw a lot of these things off kilter, at
21 least from my perspective.
22 MR. IRVING: It is interesting, listening to
23 this debate kind of reminds me of the old Certs
24 commercial. You know, Certs is a breath mint. Certs is a
25 candy mint. No, you're both right.
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1 (Laughter.)
2 MR. IRVING: It is like Frank is right and Tom
3 and David are right. In the ideal world, regulators would
4 get out of the business. We would just say, hey, you can
5 have at the marketplace. But I think the fear is that
6 because of the size and some of the activities of some of
7 the incumbents, some of the concerns in terms of access is
8 that -- manage is the wrong word, but insurance that a
9 committed marketplace can develop.
10 And I am going to turn in a second -- but I
11 think the hardest thing in the world is going from a
12 regulated monopoly, where somebody has a guaranteed rate
13 of return, you know, where millions of people are
14 shareholders in those companies, so you're not trying to
15 drive them out of business, into a world where it is a
16 competitive marketplace, where new ideas and new
17 innovation and new entrepreneurs and new investment can be
18 driven. And it is turned out to be harder than any of us
19 thought.
20 I mean, I think the work that Marius and Kathy
21 and Kathy have done have helped us get to a pretty good
22 place. But I think you are right, to get to where Frank
23 wants us to get to is going to require some very delicate
24 balancing of competing interests. Because we do have the
25 best telephone system in the world, and did even before
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1 the Telecom Act of 1996. But we can have a better Act if
2 we get more competition, more investment, more
3 entrepreneurs, new innovation, and give consumers more
4 choice.
5 Debra.
6 MS. BERLYN: The whole trick here for
7 competitive local exchange companies to offer services to
8 all consumers, business and residential, and to make this
9 whole thing work, to make competition work, is to keep the
10 pressure on the monopolies to open up their local
11 networks. And without that, as Dave is saying, you will
12 get frustrated on the State level.
13 We do have an Act that provides a delicate
14 balance to opening up those local networks. And key to
15 that is a strict adherence to Section 271, which provides
16 the incentive for the Bell companies to continue to pursue
17 opening up those local networks. And from a consumer's
18 perspective, it is important that we continue to consider
19 the three parts to Section 271. And it is not just
20 meeting a checklist of 14 very important elements, but
21 also a public interest test as part of that, to ensure
22 that the public is served by that.
23 MR. MCGARTY: An interesting comment, and I
24 know, Howard, you were at SNET and I was at Nynex, so I am
25 not going to encumber our pensions and our stock shares.
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1 (Laughter.)
2 MR. MCGARTY: But one of the things that we have
3 seen is that Bell Atlantic -- and I am not going to speak
4 for SBC or any others which I think are different -- but
5 in the Bell Atlantic context, what we have observed is
6 they are re-looking at their business. And they are
7 saying, long term, where do we want to make money and what
8 is the business that we want to be in? What business
9 don't we want to be in?
10 And there is an internal reorganization
11 occurring there -- you know, and I think for the positive
12 it is kind of strange for us to say this because we are
13 competing with them -- they are doing such things as
14 outsourcing or getting rid of their outside plant. So all
15 of those little trucks running around with Bell Atlantic
16 signs on it may now be out-sourced to some third-party
17 company. They are saying, where is the real engine that
18 we make money? Because, in the long run, we are going to
19 have to be competitive.
20 And I think we ask ourselves the same questions.
21 And I think, in the long run -- getting back to some of
22 the comments of Kathy, for example, looking at this as a
23 5- or 10-year view -- we look at it that way and say, who
24 are we competing with 5 or 10 years from now?
25 And I think it is not going to be the ILEC that
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1 is there today. I think they are going to go through a
2 transition. And Bell Atlantic, especially because of the
3 additional burden put on them because of the merger
4 specifications from the FCC, have those additional
5 burdens. And they seem to be responding better. I do not
6 want to be a polemic for them, but we see that change
7 occurring.
8 And don't not pay attention to the fact that
9 there are economic forces, where they are going to say,
10 gee, we may behave rationally in our own interest long
11 term.
12 MR. IRVING: Is rational behavior -- well, I
13 think some would argue that some of the things that we are
14 seeing in some of the States would be argued as rational
15 behavior in the long-term economic interests of their own
16 business.
17 MR. MCGARTY: Of their own business. Right.
18 MS. KISER: I really think it depends who they
19 are dealing with, too. Because Cablevision's experience
20 is clearly very different than what Telmarc has been
21 experiencing. I mean, the interconnection negotiation
22 wars, you get no movement until you take something to
23 litigation. So, on the whole issue of what are the
24 roadblocks, that is it. We have a terrific statute. Then
25 we have regulators working very hard to issue orders and
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1 decisions. But to see them implemented, you know, in the
2 marketplace, it is a battle and it costs a lot of money.
3 MR. MCGARTY: Cherie, from our perspective,
4 again, we are totally different. And of course, what we
5 do is we now have a whole bunch of Nynex retirees. We do
6 have an outsourcing program. No, there is none of that
7 there.
8 (Laughter.)
9 MR. MCGARTY: But the point is that we -- I was
10 surprised -- we have turned our markets, in 90 to 120
11 days, from initiation of interconnect agreement to
12 termination of first access line. Okay. Or activation of
13 first access line.
14 And I have been, with all due respect,
15 surprised. And what we did is I was going to go in the
16 way you all did, which is, let's fight. And somebody
17 whispered in my ear, be nice. Which is a change. Okay.
18 And we found out that, boy, they were nice in return. But
19 they do need a poster child. And we are much more -- we
20 are less risky a poster child than you are.
21 (Laughter.)
22 MR. IRVING: I do not think Chuck Dolan is Bell
23 Atlantic's choice of a poster child.
24 (Laughter.)
25 MR. SCHWARTZ: Can I just add one point, though?
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1 I think, generally, people view Nynex and
2 Ameritech as among the more progressive of the Bells, as
3 compared to, say, BellSouth and SBC. And in an
4 environment where it is very difficult to force companies
5 to do something they do not want to do, especially if it
6 involves new, complicated arrangements, where nobody knows
7 can it be done, how fast, et cetera, it is very important
8 to give them incentives to behave right as well as behave
9 wrong. And the 271 process has a very important role to
10 play in that.
11 In particular, you do not want to coddle the
12 entrants. You do not want to, say, have the incumbent do
13 everything for you, but you do want to tell them, do some
14 important things, like helping switch over customers,
15 help, et cetera. And that is basically the Justice
16 Department's open local market standard that I have helped
17 work on.
18 I find quite cynical some of the postures
19 recently taken by some of the Bell companies, when they
20 challenged the constitutionality of the Telecom Act. Two
21 years have gone by and they discovered it is
22 unconstitutional.
23 The CEO of USWest recently spoke about this.
24 And when he was asked, he said, we wanted to see how it
25 was implemented. I see. So if it is implemented well, it
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1 is constitutional. But if it is not implemented well, it
2 is unconstitutional.
3 Well, I do not think it works that way. The
4 point I want to make is that it is important to get to
5 know what to get out of regulation. It is also important
6 to set some basic -- get rid of some basic roadblocks that
7 incumbents can put up. But to do that, it would help a
8 lot to have a pretty clear commitment against the Bells,
9 saying if you do not behave, you do not get at the long
10 distance. And if they really believed that, they would
11 behave better.
12 The problem now is that they think they can get
13 by with Chinese torture. They can keep filing petition
14 after petition.
15 MR. IRVING: Once again, Marius has said more
16 eloquently that -- and maybe a little more directly --
17 that which I was trying to say before.
18 (Laughter.)
19 MR. IRVING: Let me turn. We have some other
20 things we can talk about up here. But you folks out there
21 have been very patient. There is a microphone right here
22 so that people out in the world can hear you. If you have
23 something you would like to ask, feel free, come on up.
24 Please identify who you are, who you are with,
25 and ask your question. If there is more than one person
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1 at once, please queue up.
2 MS. BURGITT: I am Anne Burgitt from the
3 Corporation for Public Broadcasting.
4 My question is I am spearheading the effort for
5 the transition to digital television at CPB. And one
6 thing I would like to ask this group is how do you see the
7 6 megahertz chunk that could be used fairly flexibly
8 coming on line soon? How is it going to affect the
9 provision of some of these services? And if you do think
10 it will have an effect, how so?
11 MR. ERNST: Well, 6 megahertz is probably not
12 enough spectrum to offer the types of two-way broadband
13 services that we are kind of talking about here. We are
14 talking about fractional T-1 lines to the home. But, on
15 the other hand, it does open up opportunities for new
16 video services and new types of programs that were not
17 available. So, to that extent, maybe it offers some
18 competition to cable operators or other satellite
19 operators, but I am not sure if it directly impacts the
20 access market.
21 MR. COWDA: I am David Cowda, BNA.
22 I have two questions, but they are related. The
23 first question is Internet telephony has been touted as
24 being superior to traditional telephony. I would like to
25 know if anybody can kind of break that down as to how much
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1 of that is a technological advantage and how much of that
2 is an artificial regulatory advantage, where you do not
3 pay access charges and other fees, possibly for Universal
4 Service. Which leads to my second question:
5 What do people here think about Senator Stevens'
6 push to bring Internet traffic in underneath the tent of
7 telecommunications service, subject to Universal Service
8 fees, though possibly you can forebear at this time if it
9 is de minimis, but you should, as a definitional
10 standpoint, have it underneath the big tent, so that if
11 traffic does go to Internet, you do not have the network
12 undermined, particularly in rural areas?
13 MR. IRVING: Anybody want to try that?
14 MR. MCGARTY: I will take three comments at it.
15 I will talk with a different hat, which is my MIT hat,
16 because we have a MIT Internet telephony consortium.
17 From a policy perspective, Internet telephony
18 quality right now is -- I think I said earlier -- it is
19 not ready for prime time. So the quality is not there.
20 For those people who have tried Internet telephony over
21 the Internet, the delays, the security, the reliability,
22 all of these issues are problematic at this stage.
23 With Internet II, which is the upgraded
24 Internet -- higher speed, more protocol capability in
25 TCP/IP, and various versions of this stuff -- one could
107
1 view, in the next 3 to 5 years, that feature functionality
2 being there. And then it is a question of how you price
3 demand Internet access. So it gets into a policy issue of
4 if somebody is demanding Internet access because they are
5 using realtime streaming of data, how do you charge for
6 that? And we have not really begun to even address some
7 of those policy issues.
8 That gets into the third issue of the Universal
9 Service Fund. Arguably -- and I think the FCC at least in
10 the Common Carrier Bureau, would say this already today --
11 that if I am going across a State line in TCP/IP, on a
12 private network, just because I change from voice to
13 TCP/IP to voice, that does not make me immune from the
14 current FCC strictures of interexchange carrier traffic.
15 That is, it is interexechange carrier traffic, and I have
16 got to pay access fees if I terminate on a LEC on the
17 other side. Okay. At least that is what the Commission
18 has told us.
19 There is a more complicated issue which is, if
20 you make that transition over the Internet, which makes
21 you immune from those types of termination fees, and
22 ultimately Universal Service, the argument is, what is the
23 Internet? I mean, if I have a private network which has a
24 firewall connection to the Internet, is that the Internet?
25 And I think there is a whole set of mushy issues there on
108
1 the policy side that really have to be sorted out over the
2 next few years.
3 So it is just a, with all due respect to the
4 good Senator, a blatant restriction without understanding
5 where this process is going. I think it is premature at
6 this time.
7 MR. IRVING: Lior, did you hear the questions?
8 Because I think you might have a perspective that might be
9 useful. Let me try them. I think the first question was
10 people talked about Internet telephony as being a superior
11 product or having some advantages. And are those
12 advantages technological advantages or are they regulatory
13 advantages? Because there are some things that Internet
14 telephony has been exempted out from.
15 And I think the second question is Senator
16 Stevens has raised some questions with regard to the
17 regulatory treatment of IP-based services, and
18 particularly with regard to whether or not Internet
19 telephony-like services should be brought under the
20 Universal Service umbrella.
21 And I do not know if I did a fair job with your
22 questions, but I had some notes here and I do not want to
23 butcher them too badly. But I have been butchering
24 questions all morning.
25 MR. HARAMATY: Well, Terry already touched very
109
1 good points about this. But, on top of that, also, we are
2 not talking about voice alone. And this should be
3 definitely treated differently.
4 When we enter into an era where voice, as it was
5 mentioned before, is only a small part of the overall
6 communications that is being done over the same lines, we
7 should apply new rules. The old rules, as was said by
8 Reed Hundt a long time ago, cannot be applied to the new
9 technologies.
10 MR. IRVING: And I guess for the record, I guess
11 I should say that the administration has been looking at
12 these issues. And our position has generally been that
13 these are promising new opportunities. And we do not want
14 to fail to realize a promise by premature regulation.
15 I think you have got to keep watching and
16 looking and seeing when and if, if ever, there is a right
17 time. You do not want to make the assumption that you
18 have to, but you want to be prepared that if you are
19 beginning to change the dynamics and the economics of the
20 industry, that you have a way of looking at it and
21 responding. But there are times when you can
22 prematurely -- I got petitions in 1995 and 1996, saying
23 that the FCC should start regulating Internet telephony.
24 And I think we made the wise choice at that time
25 to forebear and request that the FCC forebear from
110
1 beginning to regulate Internet telephony. Hundreds of
2 millions of dollars have been invested as a result of that
3 decision.
4 I do not know, had there been some kind of a
5 significant regulatory response, that the folks in the
6 capital markets would have been as willing to make some of
7 the investments. And I do not know that we would have
8 seen the progress we have seen to date with regard to
9 improving robustness and the viability of IP-based
10 services.
11 So there is a balance, but we want to make sure
12 that we err on the side of investment opportunity and
13 entrepreneurial activity as opposed to reflexive
14 regulatory responses.
15 Yes, sir.
16 MR. CATO: My name is Tom Cato. And I represent
17 a Tokyo-based think tank called the Institute for Future
18 Technology. I happened to find out about this meeting
19 actually yesterday, and I was very interested. That is
20 why I came here.
21 As you know, in Japan, we have the new kind of
22 competition. I think, unlike your country, we have not
23 had a type of competition. But that is going to happen,
24 based on a new law that was promulgated last year.
25 Basically, you know, this break of Nippon Telegraph and
111
1 Telephone Company.
2 And my question here is about research and
3 development funds. I would assume that this country, as
4 far as I know, the spirit of the AT&T, that innovation has
5 continued on a lot of products. Not necessarily in this
6 country, but all over the world. That we much appreciate,
7 number one.
8 And the other thing that happened, I think,
9 probably 2 years ago, is Bellcore that I understand being
10 acquired. And anyway, I would like to ask a couple of
11 people, particularly the CLEC representatives, how do you
12 get new technology, which I would say, while I was
13 listening, many people are hoping to distinguish their own
14 service over the other service. So that necessarily will
15 require, I think, the research and development strategy,
16 first; and, two, accomplish strategy. I think, you know,
17 they need to invest some money for research and
18 development.
19 But I have noticed -- well, I am guessing that
20 no new entrants have been made any statement in
21 research -- I mean in a technology fund. I would like to
22 listen, you know.
23 MR. IRVING: Does anybody want to talk about how
24 you get research and development --
25 MR. MCGARTY: Let me take a cut at that.
112
1 I spent 4 years as the head of R&D at Nynex.
2 And I was chairman of the council at Bellcore, so I know a
3 little bit of something of this process. In the United
4 States, we are fundamentally different, I think, than most
5 other countries, in the sense that, at least in the last
6 15 years, our research and development has been driven
7 very much so from the venture capital perspective.
8 I mean, if you took a look at Silicon Valley, 2
9 years ago, every town had its own ATM company. And it is
10 a very Adam Smith-like survival of the fittest process,
11 which works effectively. If you go take a look at Bell
12 Laboratories -- having spent the first part of my career
13 there -- the introduction of the digital switch was
14 despite Bell Laboratories. The chairman of AT&T had to go
15 to Bell Northern Research and have it developed there.
16 That was the creation of Northern Telecom. Despite AT&T
17 and Bell Laboratories.
18 So centralized research, from my perspective, is
19 the anathema of the creativity of innovation. Let the
20 venture market work. Put my own money and put others at
21 risk. And we are the most efficient country in producing
22 innovative technology. I think Howard would agree with
23 PCOM and the other stuff. Do not put money in a
24 centralized fund. Because the people that run it do not
25 have the faintest idea, generally, of what they are doing.
113
1 So, other than that minor comment --
2 (Laughter.)
3 MR. IRVING: Any other comments? Anybody want
4 to respond?
5 MR. ERNST: Yes. In the marketplace, it is not
6 necessary to be the leader, but a fast follower. And so I
7 think the CLEC's are not innovating technology. I do not
8 think they claim to be. But they are implementing the
9 technology that these new venture technology firms are
10 putting together. So it is a very neat process -- people
11 coming up with technology and someone coming forward and
12 putting it in place and directing it.
13 MR. IRVING: So you do not have to be the
14 Packers or the Cowboys, you can be the Buffalo Bills or
15 Minnesota Vikings -- never win, but come in a close second
16 -- or even a bad second?
17 MR. ERNST: It can be quite profitable.
18 MR. IRVING: All right.
19 MR. HUTCHINS: Just to comment on that. I
20 think, particularly in your market, it is interesting when
21 you talk about encouraging entrepreneurialism, and Terry's
22 comment, that, you know, the entrepreneurial drive and the
23 venture capitalists, that type of thing, I think if you
24 are going to look at where you expend your effort, it is
25 probably not in trying to preserve a current focus of
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1 innovation in one large entity, but what you can do to
2 encourage entrepreneurialism.
3 I think it is interesting to note that, so far
4 in Japan, with deregulation, most of the long distance
5 carriers are either major industrial corporations or they
6 are large bank companies that issue credit cards that
7 provide long distance. You have not seen a lot of the
8 small entrepreneurs coming up. And if there are things
9 that can be done across industry segments, including the
10 innovative side, to encourage entrepreneurialism, funding
11 for that, rewards for innovation, and that type of thing,
12 that is probably going to bring a lot more to the surface
13 quickly than to continue to try to fund the spinoff of
14 NTT.
15 MR. IRVING: Yes.
16 MS. NEWBERGER: Hi. My name is Lisa Newberger,
17 and I am with Andersen Consulting in Manhattan.
18 And my question is more about the content end of
19 these telecommunications topics that we are discussing.
20 And specifically, from the -- I am curious about anybody's
21 point of view on the topic of what services is the public
22 demanding or desiring regarding content that could be
23 distributed over the Internet or over the Internet and
24 other broadcast channels, such as television, digital
25 television?
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1 MR. TAYLOR: One of the things that I kind of
2 talked about was our Winstar for Education subsidiary, and
3 driving content from there. The other thing that we have
4 is a subsidiary that we bought -- a company called
5 Telebase, which is offering to small and medium businesses
6 pay-as-you-go services that have not been readily
7 available except for large businesses. So that type of
8 content that is being driven through the Internet to small
9 and medium businesses is one example as to how we are
10 trying to supply some new services to a whole new section
11 that had not been before.
12 MR. IRVING: Any other takers?
13 MR. PLUMLEY: I do not know. I can tell you I
14 spend my life largely on the SEC page, the FCC page, 51
15 State and D.C. regulators' pages. For me the Net has
16 pretty much been a business tool. And then I go to
17 FoodTV.com and print off recipes for my wife.
18 So it is a mixed thing, but 99 percent of my
19 time is business time. And I think the Internet has been
20 very helpful to us. We have a work-at-home program. And
21 I think without the resources that the Net makes
22 available, it would be very difficult for our people. And
23 we are pretty paper intensive. We shuffle a lot of
24 documents around. We have thick files and we document.
25 So without the provision of electronic files of
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1 one kind or another that the Internet makes possible, it
2 would be very, very difficult for our people to be in a
3 work-at-home mode. Even if they had a T-1 from the office
4 or something, it just would not do it. It is just the
5 absolute mass is an attraction. It is not so much a
6 specific niche that you can sell advertising on or
7 something, it is the mass, the fact that it is all there.
8 MR. GREEN: But let's not forget something. I
9 mean, the resources that we are beginning to find there
10 are valuable. E-mail is valuable, the ability to
11 communicate and all of that. But I think, if you are
12 honest, you end up saying that the common denominator for
13 kicking off the Internet -- and I think it will be very
14 important in the future as well as the same thing that we
15 see in cable -- entertainment. People love to pay for
16 entertainment.
17 And I am not saying it will not be useful for
18 business and in ways that have been described. But I
19 think you will always seen entertainment. You see new
20 sites coming on all the time now aimed at particular
21 segments of the population. And that will continue.
22 MR. IRVING: One of the things I remember when
23 the Net -- when I came over to Commerce in 1993, almost
24 exactly 5 years ago, one of the first things that I
25 implemented at NTIA was that everyone should have Internet
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1 access at their desk. And then, when the Web, we wanted
2 to make sure everybody had Web access at their desk. And
3 that was like the next year.
4 And I know that personally I would do things
5 that were work related until about -- always at least
6 until 6 o'clock --
7 (Laughter.)
8 MR. IRVING: -- but then I might find things
9 like the Seinfeld page, or I might find things that were
10 entertainment. But now, increasingly you are seeing,
11 because we have more bandwidth and because you have faster
12 modems -- well, we have a T-1 line directly to my desk, so
13 maybe I am a little better off than most people in
14 America -- but most people will have that in the
15 not-too-distant future, or that kind of equivalency.
16 And what you are beginning to notice is that you
17 can do things like real audio, you can do things like real
18 networks, you can do things where there is a lot of, you
19 know, where bandwidth is required. And I think that is
20 going to drive more and more usage. I mean people want --
21 my grandmother has WebTV, and it is interesting, she
22 doesn't think -- she looks at the Web as kind of a
23 subsurface of television, because she does it through her
24 television. And I think that is going to happen more and
25 more as cable and others --
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1 MS. NEWBERGER: With the digital spectrum
2 allocations.
3 MR. IRVING: I hope. I mean, no knows what DTV
4 is going to do. We will have a PIAC meeting -- we had
5 one -- a public interest advisory committee meeting where
6 we looked at some of the technologies. I do not know yet
7 what is going to happen with the cable industry or the
8 television industry or the Web industry. But I do know
9 that my suspicion is, 10 or 15 years from now, with regard
10 to entertainment, to the consumer they will be seamless.
11 That is my suspicion. That they will all be doing
12 interesting things that to the consumer will be seamless.
13 Because it is not going to work if it is not.
14 The average consumer does not want to have to
15 get off of their computer and go to their television to
16 buy a Ford that is somehow hooked into this new stream.
17 But I do not think this -- we will probably have to do
18 another one for you -- another one of these for you -- to
19 really have that debate. Except somebody down here wanted
20 to say something.
21 MR. KOUTSKY: Yes, I would like to point out one
22 interesting change in the Internet, say, in the last 3
23 years that I, just as a user, was the development of these
24 push media -- Pointcast in particular. The type of
25 service that -- or the type of functionality that Covad
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1 provides, which is an always-on, high bandwidth
2 connection, all of a sudden, if you take Pointcast and
3 basically, you know, take the band -- you know, give it a
4 T-1 rate to everybody in the home, I think that that is a
5 pretty interesting and compelling, both business service
6 for somebody who wants to work at home -- that basically
7 everybody at home has a Bloomberg box if they want it, and
8 also from an entertainment perspective.
9 That is where I personally think where we will
10 start to see the movement towards -- is really in favor of
11 that type of broadcast, you know, push-type medium, when
12 big pipes do get developed into the house. But that is
13 just my own --
14 MR. IRVING: And look at the hits. I mean, one
15 of the most interesting things was, last week, MSNBC went
16 from 300,000 hits a day 2 weeks ago to 830,000 hits last
17 week, because people were interested in some rumor.
18 (Laughter.)
19 MR. IRVING: But, I mean, it was interesting,
20 you know, it trebled in a 1-week period, in much the same
21 way that the Gulf War drove what happened at CNN, all of a
22 sudden a new rumor -- a rumor -- well, some new
23 allegations -- I am trying hard to stay off of that road.
24 But you get the point. And so there is -- people are
25 discovering it. And I think that some of those people
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1 will be repeat -- will return and will be repeat buyers.
2 MR. HARAMATY: I believe that what all of you
3 are saying is -- and these are very nice things about the
4 Internet -- that anyone can put anything over the
5 Internet. And the variety of things that we can do with
6 it is really the major point. And what's even nicer with
7 it is that we do not know what applications we will be
8 using in 2 years, because they were not invented yet.
9 And this is the main issue with the Internet.
10 It is a platform that can do things that we do not know
11 what it is capable of. And this is, I believe, where we
12 are going.
13 MR. IRVING: Yes.
14 MR. ERNST: One thing I would say is a lot of
15 times -- and we have seen this over the last 5 years on
16 the concept of convergence, with these pie-in-the-sky
17 ideas about interactive television and data interacting
18 with new medium. And ultimately, if it is not easy to
19 use, it is not going to be. All the convergence tests
20 that they have done with full-service networks in Orlando
21 and other ones in California, have not been successful,
22 because it is far too interactive.
23 The reason why push technologies such as
24 Pointcast are successful is because it is packaged well
25 and it easy to use. I do not have to spend a lot of time
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1 searching. My primary mode of researching on the Internet
2 is Pointcast. Because I just do not have time, even with
3 a T-1 access, to do all the searches. And this gives me a
4 first level.
5 And in the household, if you have to sit there
6 and wait for that horrible noise to get through, and that
7 ding-ding on the Compuserve, and then, you know, that will
8 ultimately drive more applications of the technology. If
9 it is easy to use, if you can turn on, it is
10 instantaneous, it is quick, there is not a wait, and the
11 information is packaged in a way that is useful, then that
12 will be an application.
13 But people talk about all of these applications.
14 We have to keep in mind -- narrow it down to like how do
15 people actually interact with it.
16 MR. IRVING: Thank you.
17 MS. TUCK: Good morning, everyone. I am Shanda
18 Tuck, and I am with the Office of Congressman Edolphus
19 Towns, who is on Capitol Hill, and yes, he has used the
20 Internet.
21 (Laughter.)
22 MR. IRVING: He's on the Net?
23 MS. TUCK: Yes.
24 MR. IRVING: All right.
25 MS. TUCK: He has clicked around.
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1 MR. IRVING: I was born in his district. I'm
2 happy to see it.
3 MS. TUCK: But I want to commend you for having
4 this roundtable here today. Because it is not often that,
5 as a Capitol Hill staff person, we get to hear and listen
6 and actually think proactively in terms of what the
7 business community is doing towards the future. And
8 actually there were some issues here that were raised
9 today that I personally had not been aware of.
10 As Mr. Taylor mentioned, he mentioned the
11 building issue in New York, in terms of building
12 nondiscrimination over leases. And that point, that is an
13 issue that I now know about that I can take back to my
14 member and let him know. So I really appreciate you all
15 for raising the issue.
16 But I am really here also because we are really
17 interested in the urban areas and the infrastructure
18 issues, and particularly, as was mentioned earlier,
19 narrowing the gap between the information haves and the
20 information have-nots. Because, as most of you know,
21 there is a large consumer market in urban areas such as
22 New York, specifically Brooklyn, and people spend millions
23 of dollars on various products every year. However, there
24 are other products that I am sure that they would be
25 interested in if they only, one, had the information and,
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1 two, perhaps if the infrastructure were a little bit
2 better.
3 Because I was really interested in the Bronx,
4 and how Cablevision, Ms. Kiser mentioned, is actively
5 going out into the Bronx, and you are showing that you are
6 making lots of money. So what I want to ask you all today
7 is, are there any infrastructure problems in urban areas
8 or any other issues that you see in urban areas that are
9 preventing the consumers, the so-called technology
10 have-nots or information have-nots, from getting the
11 information?
12 Because when I am out therein the community in
13 various community meetings, people are interested in this,
14 once you tell them this information. For instance, the
15 Congressman just had a seminar on the Universal Service
16 Fund there. And there was a myriad of people there from
17 business people to the New York State community. And it
18 was a good combination and diversity of people. And they
19 were very interested. It was just that they did not have
20 a lot of the information before that time.
21 So I want to put the question to you, again:
22 Are there any barriers in urban areas that you are seeing?
23 What is keeping companies out of urban areas in
24 particular?
25 MR. IRVING: Could you define what you mean by
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1 urban areas? Because a lot of these guys do a lot of
2 business in -- okay.
3 MS. TUCK: Yes. Yes. Well, actually, I look at
4 Brooklyn, even though the average person may say that it
5 is a urban area in terms of large populations of people,
6 et cetera, there are issues -- there are barriers in terms
7 of people being, say, on the outer parts of the borough,
8 where it is similar, in a sense, to a rural area. And
9 then there are parts of the area where, you know, it has
10 an older infrastructure, the train system has been there
11 since the early 1800's, most of the fiber that we took a
12 look at a few months ago has been there for a very long
13 time. And so there are also issues for other companies
14 coming in.
15 So I guess I am defining an urban area as where
16 there is a small geographical area, there is a large
17 population of people and a large infrastructure in terms
18 of buildings and transportation networks.
19 MR. IRVING: Anybody want to take a look at
20 that?
21 MR. TAYLOR: I think there is an issue. And I
22 think it is a big issue. And I think it is an issue that
23 part of the Telecom Act of 1996 -- and this is probably
24 not a Winstar opinion, I will say, but it is a Howard
25 Taylor opinion -- that we have disadvantaged parts of
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1 society.
2 Now, at the same point in time, I will
3 contradict myself in saying that I think competition
4 itself will help to bridge this gap. One of the things
5 that I will tell you all of us around this table are doing
6 is sitting down and seeing, per subscriber, who are the
7 ones that will pay us the most dollars.
8 We are looking at consumers from the standpoint
9 of not just the Larry Irvings that are there, with the
10 quality and the number of services that they can offer us,
11 and we want the Larry Irvings. We want those consumers
12 that are going to pay $50, $60, $75, $100 a month for a
13 combined package of services -- not saying that we are
14 going to let off, but those are the first ones that we are
15 target-marketing and going after to offer services to.
16 So those consumers that can only pay $20 or less
17 a month are at the bottom of the calling pattern that are
18 there. Will they be served? Yes, at some point in time.
19 However, at the same point in time I will say they are not
20 the highest priority that you are going to find from a
21 business standpoint, mainly because of the return that you
22 have that are going to be on the top of the list.
23 MS. BROWN: I feel a need to jump in. From my
24 days at the New York State Public Service Commission, when
25 I spent a lot of time thinking about Brooklyn and the
126
1 Bronx and Manhattan. And what we found was consumers in
2 those areas pay the same, at the same rate, took the same
3 services that people in suburban areas did. And that the
4 hurdles to entering those markets seemed to be other than
5 that they were not acting like consumers in other areas.
6 The experience of Cablevision in the Bronx, for
7 instance, suggests that these customers will pay $30 for
8 cable. And so the question becomes whether, in the way we
9 think about marketing, whether we are thinking about
10 different customer segments differently.
11 And I think we need to challenge ourselves
12 around that.
13 MR. TAYLOR: Well, I was speaking more from a
14 business standpoint, not from a public utility commission,
15 and giving you a perspective from a business standpoint
16 what's happening in the marketing departments in viewing
17 different segments.
18 Now, at the same point in time, I think
19 competition and looking at the Cablevision thing, in terms
20 of packaged services, is that will be the thing that will
21 bridge the gap between the profitable end users that you
22 may see and we look at today versus those that we will
23 have from a future standpoint.
24 And that is where I think partnerships and that
25 is where I think having other services beyond traditional
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1 telephony services will help bridge that gap.
2 MR. MCGARTY: I think, Howard and Kathy, we are
3 putting -- our second switch is in now in Brooklyn. We
4 chose to go in Brooklyn rather than Manhattan mainly
5 because of what exactly you have said. We took a look at
6 the statistics. Also the guy that is putting it in used
7 to run Brooklyn, Queens and the Bronx --
8 (Laughter.)
9 MR. MCGARTY: And we had the conversation with
10 the switch guy, right, okay. And his reward is he gets
11 the switch in the basement if he makes Brooklyn work well.
12 His wife does not like that.
13 But Brooklyn, from our perspective, we did the
14 demographics, and it fits exactly the profile we are
15 looking at, both, ironically, on the business side, which
16 is the average business access line of $100, and on the
17 residential side in certain markets, because of our
18 international company, it has a large community that make
19 international calls.
20 So what we did is we combined my international
21 company with the domestic company, and said, gee, I can
22 break even on local exchange, but in the Dominican
23 community or the Hasidic community or whatever it happens
24 to be, boy, we can get an uptick on the international
25 side. So that is part of the reason why we specifically
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1 chose Brooklyn.
2 I think the second part of your question, which
3 was how do you facilitate people access to this -- we can
4 put a fiber to somebody's home, but unless they have PC's,
5 unless they have the training, unless they have the
6 things -- the "ilities," I call them, that make the thing
7 work, we can give them gigabits, but it is going to be
8 gigabits going into nothing. So they really have to have
9 access to these facilities.
10 If you go into even the New York City Public
11 Library system -- and we were talking about this at
12 breakfast this morning -- in some of the better
13 neighborhoods, at best, there are two PC's that give you
14 Internet access. And all the kids run across the street
15 from the school and they line up on 20-minute sessions on
16 the PC over a 12-hour period. And it is a lock-up
17 problem.
18 So the issue, I think, at least from my own
19 experience in New York, is having access to the computers
20 and the tools to use that bandwidth. How do you solve
21 that problem? I do not think we as carriers know how to
22 do it.
23 MS. BROWN: Well, good news there, too.
24 (Laughter.)
25 MR. TAYLOR: One way is facilitating with
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1 libraries and schools and being able to bring the
2 technology into these neighborhoods.
3 MR. IRVING: Yes, if you really want to see how
4 people in New York use the library services -- if any of
5 you are in New York, and you are in downtown New York, go
6 over to SBL, the Science and Business Library, and there
7 are 400 PC's down there. And I am proud of it, because we
8 were one of the partners, with Paul LeClerk, to put them
9 down there. But you literally can use the computer for an
10 hour, and it is a slice of New York. It is everybody you
11 talked about, plus. You watch, you know, an Irish cop
12 sitting next to a Puerto Rican mother, sitting next to a
13 Hasidic Jew, and they are all, you know, accessing the Net
14 or a database in a library for free, 1 hour, you know, and
15 using the Web.
16 Jim, you are the last question, because we are
17 now at the end of the --
18 MR. GREEN: Can I ask one real quick perspective
19 that I think is relevant?
20 MR. IRVING: Sure.
21 MR. GREEN: I look at it a little differently.
22 Setting aside, you know, some of the things that were said
23 here related to capital availability -- and for us, we
24 think that will require a partner. We have characterized
25 our network very carefully, in fact, in Brooklyn, along
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1 with some Brook & Union Gas people.
2 It requires four things for us to come in:
3 Permission from the City. We have permission from the
4 City, but not enough to do New York City in total. So we
5 are going to have to choose where to go first. And that
6 will go back to marketing questions. And Brooklyn looks
7 like a good place, but most people say, gee, business is
8 Manhattan. So, you know, there is an issue with how much
9 permission the City provides.
10 We need access to electricity. And that means
11 going to the utility. Because the utility provides the
12 electricity to the City-owned poles.
13 We have to have access to building tops for
14 transition points to wire.
15 All of this has to fall together, and none of it
16 is easy. And it goes back to access, that Howard was
17 talking about before. And it is so critical. In addition
18 to capital, access is just dead critical.
19 MR. MCCONNAUGHEY: I am Jim McConnaughey, NTIA.
20 I will try to talk quickly.
21 Well, first off, I would like to echo what the
22 previous questioner said. It has been a tremendous
23 session, a real clinic. It has either had me stroking my
24 beard or scratching my head, which is usually a good sign.
25 A follow-up comment on the gentleman from Japan.
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1 I would like to throw out the idea of basic research, how
2 that will tend to fare in the -- wherever you want to take
3 the demarcation -- post-Bell system, post-divestiture --
4 whether private sources will be adequate sources of basic
5 research, as opposed to specific design and development.
6 Now, the question I really wanted to get to. A
7 number of folks think electric utilities are slumbering
8 giants in terms of possible participation in the local
9 markets. And the Telecom Act of 1996, I think, permits
10 exempt carriers to participate. I think there is
11 possibilities for that happening that did not exist in the
12 past.
13 I just would like to quickly throw out to folks
14 at the table whether they think that electric utilities
15 will be a serious participant in the local exchange market
16 within -- well, pick your time frame -- 2 years --
17 MR. GREEN: You know who my partner is here,
18 don't you, Pepco? So there is one answer.
19 MS. BERLYN: Yes, those partnerships have
20 already started.
21 MR. MCCONNAUGHEY: I understand they have
22 started, but in terms of a serious participant. Is there
23 going to be a critical mass or a groundswell in this area?
24 Or will they be niche players?
25 MR. IRVING: Anybody want to take a shot?
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1 MR. GREEN: I will.
2 From what we see, I think they are dead serious.
3 You see more and more of the electric utilities saying I
4 want to offer a full package of services to my customer
5 base. And that what is happening here. That is what is
6 happening in Scott's Bluff. I think they are serious.
7 They are all finding a new business.
8 MR. KOUTSKY: I think a lot of utilities are
9 looking at electric deregulation. And they are thinking,
10 when you get down to it, an electron is a commodity. And
11 they are looking for ways of getting total-bill customers,
12 too. And I speak at a lot of these conferences, and I
13 think that what is driving them is an ability to continue
14 to sell that person power; what can I put on top of that?
15 And I think that's what's driving them.
16 MS. KISER: I think what is key, though, from
17 what I am seeing in the industry, is that most of the
18 electric power companies are not going out and trying to
19 do this independently. They are looking for
20 relationships. And I think that, you know, that is
21 probably wise in initiating the service. And you are
22 probably going to see more of that, rather than them
23 acting independently -- especially in the New England
24 market, where this is in full force.
25 MR. PLUMLEY: I think electric companies serve a
133
1 market that is growing much less rapidly than the phone
2 companies. I think, for some of them, deregulation of the
3 electric industry is going to be a bit of a problem. And
4 for seemingly decades, they have been casting around,
5 looking for ways to invest in other businesses that are
6 not in electricity, and they have lost huge piles of money
7 doing this, and that includes investments in telephony.
8 So they might be a source of capital, but an
9 electric utility has all the wonderful attributes of, say,
10 a BOC, in terms of its wonderful marketing skills, its
11 super-defined, real quick decisionmaking process.
12 (Laughter.)
13 MR. PLUMLEY: I might have come on a little hard
14 before.
15 (Laughter.)
16 MR. PLUMLEY: One of my comments on sort of the
17 regulators getting out of the way is I am sick to death of
18 the fact that the Bell guys, AT&T and MCI are so big and
19 have so much money and so many lawyers that it really
20 behooves them to compete in the regulatory process in the
21 courts and legislatures, which was mentioned, rather than
22 in the marketplace. Electric utilities have been weaned
23 the same way. They have had one customer, the regulator,
24 for the last half century.
25 So in terms of electric companies having the
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1 skills to do anything, I mean, Duke Power has been very
2 successful in partnerships, but -- and FPL has done some
3 stuff, not all of it bad -- but overall, what you have
4 seen is you have seen electric utilities try to do
5 something with fiber and then sort of slam the brakes on
6 and go find partners who might actually be able to do a
7 business as opposed to, oh, gee, you know, like we're
8 going to hang something else on a pole.
9 So I am not real optimistic on that. I think a
10 good source of capital maybe for some of the smaller
11 companies in the industry, but not, as utility companies,
12 players in any way.
13 MR. IRVING: Well, that is a good note on which
14 to close. There were some questions here that I had that
15 I would like to have gotten to with regard to M&A's. I
16 think we could have spent hours probably on the
17 international opportunities for companies like yours and
18 for this Nation, in the post-WTO, both with regard to
19 telecom and the IT agreement. And unfortunately we did
20 not have time to do that. But I think this has been an
21 incredibly rich discussion.
22 I mentioned to my wife this morning that I was
23 going to be moderating a panel. She said, oh, just what
24 the world needs, another black, bald-headed moderator,
25 without the charisma of Montel or the humor of Keenan
135
1 Ivory Wayans.
2 (Laughter.)
3 MR. IRVING: So I get a lot of respect in my
4 house.
5 But I do want to thank you all. So if I do get
6 thrown out of business, maybe I can go in there as a
7 Montel imitator.
8 (Laughter.)
9 MR. IRVING: We got one thing today that I
10 wanted to share with you. Because we have been talking a
11 lot about competition. And all of you know that the
12 second birthday of the Telecom Act of 1996 is Saturday. I
13 hope you all send flowers or a card.
14 (Laughter.)
15 MR. IRVING: But there has been a lot of
16 discussion about the Act. And I have a statement from the
17 Vice President on the second anniversary of the
18 Telecommunications Act that I think is an appropriate coda
19 for the discussion that we have had here this morning, and
20 so let me read it as we conclude the session.
21 From the Vice President of the United States:
22 Today, as we approach the second anniversary of
23 the landmark Telecommunications Act, there is no question
24 that it is the right approach for America's economy and
25 for America's future. The information and communications
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1 industry is now the single largest and fastest-growing
2 industry in the United States. If we want this industry
3 to grow and to thrive, if we want to create more
4 high-paying jobs in this new economy, we need the greater
5 competition, greater investment, greater innovation, and
6 consumer choice that the Telecommunications Act promises
7 to create.
8 When we fought for and won this first overhaul
9 of America's telecommunications law in two generations,
10 updating communications law that were virtually unchanged
11 since the golden days of radio, we knew that the change
12 and growth we sought would not happen overnight. So, it
13 is not surprising that some are clinging to the status quo
14 that they have come to know so well.
15 But we cannot build the information age economy
16 with industrial age policies. We need to stay on the road
17 to competition. And that is why the President and I urge
18 all involved in implementing this Act to redouble their
19 efforts to open all communications markets. That is the
20 only way to build the 21st century economy we all deserve.
21 Thank all of you for helping build that 21st
22 century economy. And thank you for your contributions
23 today.
24 (Applause.)
(Whereupon, at 12:05 p.m., the conference concluded.)
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