ADMINISTRATION COMMENTS ON H.R. 1555:
THE COMMUNICATIONS ACT
OF 1995, AND RELATED LEGISLATION BEFORE
THE HOUSE COMMERCE COMMITTEE
MAY 15, 1995

I. Introduction

The Administration believes that the key test for any telecommunications reform measure is whether it helps the American people. Legislation should provide benefits to consumers, spur economic growth and innovation, promote private sector investment in an advanced telecommunications infrastructure, and create jobs. Unleashing monopolies before real competition exists, however, could cause higher prices for consumers and hinder competition. During the transition, safeguards are needed to bring real competition and all of its benefits.

H.R. 1555 proposes reforms in key areas that the Administration agrees need to be addressed. These areas include promoting universal service generally as well as access to networks by individuals with disabilities; prompt lifting of the statutory ban on telephone companies providing video programming directly to subscribers (the telco-cable crossownership ban); requiring that telephone companies in most cases establish a video platform to provide video programming; authorizing the Federal Communications Commission (FCC) to prohibit discrimination on the basis of ethnicity, race, or income with respect to video platform service areas; and preempting state barriers to competition in local telephone service. The Administration has strong reservations, however, about other provisions in H.R. 1555 that fail to ensure the development of real competition or to protect consumers. The Administration urges the House to amend the legislation to ensure a truly competitive telecommunications marketplace by addressing our major concerns as discussed below.

II. Cable Rate Regulation

The Administration is concerned about the provisions of H.R. 1555 that severely limit government review of "cable programming services" rates and virtually eliminate rate regulation for small cable systems. While some relief in these areas may be warranted, the House bill as currently drafted would prematurely deregulate monopoly cable systems, to the detriment of millions of cable subscribers.

Deregulation of Cable Programming Services:

H.R. 1555 creates a new definition of "effective competition" as it pertains to cable programming services (commonly known as expanded basic services). The bill would terminate government regulation of those services (and associated equipment) when one of the following three conditions is met: 1) the FCC authorizes a common carrier to provide video dialtone (VDT) service in a cable system's franchise area; 2) the FCC or a franchise authority authorizes a carrier to provide video programming in the franchise area; or 3) the FCC has prescribed regulations relating to video platforms.

The first two prongs of this new definition base deregulation on a carrier's legal authority to participate in the video services market, well before the carrier has completed construction of the underlying facilities, let alone begun to offer competing services. Those provisions thus abandon the sound principle (contained in both the 1984 and 1992 Cable Acts) that cable rates should be deregulated only when a cable system faces actual competition. Instead, H.R. 1555 deregulates in the hope that the mere threat of telephone company entry will be enough to stop cable systems from charging excessive expanded basic rates. The years following passage of the 1984 Cable Act demonstrated the perils of deregulating on the promise of potential competition rather than the existence of actual competition.

The third prong of the new effective competition test would, in effect, deregulate all expanded basic services no later than 15 months after the bill's enactment, the date on which the FCC must complete proceedings to establish regulations concerning a carrier's video platform. As such, the provision does not even purport to link expanded basic service deregulation to the threat of competitive entry, let alone entry that might actually constrain a monopoly cable system's ability to set excessive rates. Under this new standard, consumers would be bereft of protection and cable system operators again would be free to exploit their monopoly status. The Administration would support reform that tied deregulation of rates to the presence of competition in a local market. We cannot support, however, deregulation based on the mere hope or promise of competition.

Deregulation of Equipment Associated with Cable Programming Services:

One of the major concerns of consumers and the Congress during consideration of the 1992 Cable Act was the pricing of cable customer premises equipment (CPE) and additional outlets. Due to the 1992 Cable Act, equipment rates which had been in the $4 to $5 range are now in the $1 to $2 range, providing considerable relief to consumers. The Administration supports the elimination of CPE price regulation when subscribers have an opportunity to purchase cable equipment from suppliers unaffiliated with the serving cable system, as proposed in Section 203 of H.R. 1555. When cable subscribers can purchase necessary equipment from competing suppliers, it would be appropriate to deregulate a cable system's provision of such equipment, even if it does not face "effective competition," as defined in the 1992 Cable Act. Unfortunately, H.R. 1555 would deregulate pricing of CPE under the new effective competition test discussed above, whether or not consumers can purchase such equipment from unaffiliated suppliers. This will again lead to unchecked increases in cable equipment and installation charges for millions of consumers.

Changes to Uniform Rate Structure:

An important provision of the 1992 Cable Act limiting monopoly abuses by incumbent cable operators was the requirement that rates must be uniform throughout the service area. Under H.R. 1555, however, multiple dwelling units are no longer subject to this policy. By allowing a monopoly provider to selectively drop its rates in any particular multiunit building in response to the arrival of a competitive provider, the bill would dramatically reduce the viability of competition from wireless cable providers and other potential competitors to incumbent cable operators.

FCC Review of Increases in Cable Programming Service Rates:

H.R. 1555 would amend Section 623(c)(3) of the Communications Act to permit FCC review of an increase in an expanded basic service rate only if it receives complaints within 90 days of the increase from either 10 subscribers or five percent of affected subscribers in a particular market, whichever is greater. The Administration notes that while a single complaint should not necessarily trigger a rate proceeding, the five percent requirement would result in virtually no review of allegedly excessive rates. In one of the nation's largest cable systems, for example, 20,000 households would have to file complaints within 90 days of an increase in order for the FCC to be authorized to review the rates. Given that States and local franchising authorities are primarily responsible for regulating cable television service, H.R. 1555 should preserve the ability of such authorities to file complaints with the FCC about unreasonable increases in expanded basic rates. The legislation also should permit the FCC to review rates upon receiving complaints from a representative number of consumers (i.e., five or ten households), without requiring that such number be "greater" than five percent of subscribers in a particular market.

Deregulation of Small Cable Systems:

The Administration agrees that small cable systems should be granted appropriate relief from the administrative burdens of rate regulation, but is concerned that the approach in H.R. 1555 may harm consumers, particularly consumers in small towns and rural communities. Over the past year, the FCC has granted rate relief to small cable systems based on a narrower definition than that contained in H.R. 1555. Under the FCC definition, relief is targeted at cable systems serving 15,000 or fewer subscribers that are owned by small cable companies of 400,000 or fewer subscribers. The FCC allows such small systems to use simplified accounting procedures and forms and enter into alternative rate regulation agreements with local franchising authorities, eliminating traditional rate regulation altogether. These mechanisms provide small systems with a great deal of flexibility while ensuring that subscribers remain protected. In addition, these mechanisms specifically target relief to those cable systems most in need.

H.R. 1555, on the other hand, provides for complete deregulation of most programming for cable operators that: 1) service less than 1 percent (i.e., approximately 600,000) of all cable subscribers in the country, and 2) are not affiliated with any entity whose gross revenues are less than $250 million annually. This definition does not provide for any limits on the size of the systems that would be deregulated. The FCC, in contrast, limits small system relief to systems with fewer than 15,000 subscribers since those systems have the hardest time complying with regulatory burdens. Large suburban and urban systems with more than 15,000 subscribers should not qualify for the same relief as small systems. In addition, complete deregulation ignores the fact that even small systems can act as monopolists. Many small cable systems are the sole providers of multichannel video programming in rural areas and small towns, and are likely to be bought out or enter into joint ventures under the exceptions to the anti-buyout provision in H.R. 1555 (see next section). The combination of these provisions, therefore, would leave consumers in rural areas and small towns with no rate protection in most cases and with no foreseeable expectation of competition.

III. Telco/Cable Provisions

The Administration supports the provisions in H.R. 1555 that promptly lift the telco/cable crossownership ban; impose a restriction on certain in-region anti-competitive buyouts; promote the establishment of video platforms to provide video programming; and require telephone companies to establish a separate affiliate to provide video programming. These provisions are critically important and we commend the Committee for its work in these areas. The Administration is concerned, however, that other provisions in the bill could undermine these important policies by allowing: 1) broad exceptions to the anti-buyout rule; 2) an exception for to the video platform requirement for "overbuilt" cable systems; and 3) the separate affiliate requirement to sunset in the year 2000.

Broad Exceptions to the Anti-Buyout Restriction:

The Administration commends the Committee for recognizing that limits must be imposed on the ability of a telephone company to buy out a cable company in the telco's local service area. Without an anti-buyout rule, competition in both the video and telephony markets could be eliminated before it begins, resulting in higher prices and less choice for consumers. The Administration is, however, concerned by two aspects of the anti-buyout rule as currently drafted.

First, the Administration is troubled that an exception in H.R. 1555 to the anti-buyout rule would apply when, in the aggregate, the area served by the purchased cable system does not exceed 10 percent of the households served by the telco, and the purchased system does not serve a franchise area with more than 35,000 inhabitants, or 50,000 if the system is unaffiliated with a contiguous system. This exception is overbroad; it assumes that two-wire based competition is impossible in communities with fewer than 35,000 people. In fact, the opposite may be true. Some of the current VDT applications, for example, include proposals to provide service to areas with populations between 20,000 and 30,000. The legislation therefore should be encouraging competition in these areas, rather than assuming that buyouts are necessary. Also, the anti-buyout rule is too narrow in that it focuses only on telco buyouts of cable systems rather than on prohibiting buyouts between or among both entities. The concerns about monopolistic behavior apply regardless of which entity gains complete control of all telecommunications distribution facilities in a given area.

The Administration has consistently recommended that Congress adopt a strong in-region anti-buyout restriction on acquisitions and joint ventures between telephone companies and cable systems, with a limited exception for rural areas of, for example, 10,000 inhabitants or less, since such areas truly may not be able to support two-wire based competitors. In addition, the FCC should be granted authority to review the ban after a certain number of years, and such acquisitions will continue to be subject to the antitrust laws. Broad exceptions to the anti-buyout rule, however, invite consolidation of power by multimedia monopolies and discourage critical competition in the video services and local telephone markets.

Video Programming Concerns:

Concerns regarding concentration of ownership also are increasingly important where a "gatekeeper" controls both the distribution facilities as well as the programming over those facilities. H.R. 1555 appears to recognize this problem by requiring telephone companies in most cases to offer video programming through a video platform that provides access to programmers on just, reasonable, and nondiscriminatory terms. In addition, H.R. 1555 seeks to encourage cable operators to open up their platforms as they begin to upgrade their networks to provide interactive services.

The exception to the video platform requirement in the bill, however, for "overbuilt" video distribution systems owned by telephone companies seems inconsistent with the attempt to address the "gatekeeper" problem noted above. Rather than allowing this exception, the better approach is to continue to encourage open systems in the provision of video programming services by both telephone companies and cable operators. This would ensure that unaffiliated programmers have ample opportunities to market services directly to subscribers, with the related benefits of lower prices for consumers, more programming choices, and improved customer service.

Need for Separate Affiliate Requirement:

Under the bill, the requirement that telephone companies establish a separate affiliate to provide video programming sunsets in the year 2000. This is less than five years from now. Considering that VDT deployment schedules range from two to twenty years, it is unlikely that many telephone companies will even have their video programming affiliates up and running by that time. Rather than eliminating this important requirement in the year 2000, we recommend that the FCC be given the authority to review the provision at that time to determine whether it should be continued, discontinued, or modified. This approach will ensure that the appropriate steps are taken to guard against cross- subsidization between the provision of video programming and regulated telecommunications services.

IV. MFJ/Long-Distance Relief

The bill allows the Bell Operating Companies (BOCs) to enter the long-distance market before real opportunities for local competition exist and under circumstances where entry might impede competition in adjacent and more competitive markets. This could endanger competition in those other markets and would represent a lost opportunity to create appropriate incentives to open monopolized markets. As currently drafted, the bill relies almost entirely on one pre-entry safeguard -- the checklist in Section 242. The Administration welcomes inclusion of the checklist in the bill; in fact, the items in the checklist may well be necessary for competition to develop. There is no way to know, and little reason to believe, however, that these conditions alone will be sufficient to facilitate competition. The Administration supports an approach that requires the Department of Justice (DOJ) to apply its expertise in competition and monopolies to assess overall marketplace conditions and determine that there is no substantial possibility of impeding competition in the long distance and manufacturing markets prior to BOC entry. The regulators can continue to be required to certify, as the bill provides, whether the checklist of interconnection requirements has been implemented.

DOJ Role; Entry via the Checklist:

The technical and economic issues associated with opening local telephone service to competition are extraordinarily complex, and the United States has little experience with the specific elements necessary to ensure the development of local competition. Given these factors and the rapid pace of technological change, the Administration is concerned that the checklist may not and could not include all factors relevant to producing and encouraging competition. For example, the approach taken by individual states to these and other related issues may affect whether and when competition emerges. Also, there are ways that telephone monopolies may elude interconnection and unbundling requirements necessary to facilitate real competition, since technically feasible interconnection is required only if it is "economically reasonable;" indeed, there may be economically reasonable ways to satisfy the checklist that would still not promote competition, given the various qualifications attached to most of the obligations created under the bill. Such terms are necessarily vague to some extent, and it cannot be expected that legislation could possibly specify particular answers for all situations.

This is why a role for DOJ to assess the overall marketplace is so important. The requirement that DOJ make such an overall marketplace assessment would increase BOC incentives to interconnect and unbundle in a procompetitive manner. DOJ should be required to assess the overall market situation and determine that BOC entry into adjacent markets would not endanger the progress already achieved in enabling adjacent markets to become competitive. This entry test could be applied at the same time and by the same date as the FCC's verification proceedings so as to ensure no delay. DOJ is the federal agency that has the greatest expertise to make these determinations. Throughout this century, DOJ has played a major role in promoting telecommunications competition. DOJ expertise in this area has particularly been enhanced in the last 25 years through DOJ's involvement in investigating, litigating, and providing oversight of the AT&T divestiture.

Absence of a Separate Affiliate Requirement:

While separate affiliates are required in the bill for some business activities undertaken by the local telephone monopolies, the bill does not require a separate affiliate for long distance or manufacturing. It is particularly important that BOCs operate these businesses through a separate affiliate because these companies will continue to maintain very substantial market power in the local exchanges after securing long distance and manufacturing entry and may have the incentive and ability to use that power to the detriment of their competitors and consumers. Separate affiliates make cross subsidization and discrimination easier to detect after entry. Separate affiliates are particularly important given the enormous complexity and difficulty of detecting cross-subsidization and discrimination, and given the limited resources of regulators charged with doing so. When the forces of competition sufficiently reduce these incentives to cross- subsidize, this kind of protection may no longer be necessary. The BOC should not be required to operate all of its individually competitive businesses out of separate subsidiaries -- rather, one subsidiary for competitive ventures would be adequate to ensure that these endeavors are separated from the monopoly bottleneck business. Along the same lines, the Administration is concerned about eliminating the separate subsidiary provision of the GTE consent decree upon enactment.

Manufacturing Issues:

The Department of Justice should assess overall marketplace conditions in advance of any BOC entry into manufacturing. The Administration has concerns about the provision of the bill that would allow "close collaboration" between the BOCs and manufacturers upon enactment, a provision that might, under some circumstances, facilitate undetected prohibited behavior. The Administration is also concerned that there be some protection to assure that research and development activities, which the bill would otherwise allow upon enactment, and which constitute a large portion of the costs of manufacturing, are not cross-subsidized by higher telephone rates charged to captive local customers.

V. Local Competition/Interconnection Requirements

While the Administration supports those provisions of H.R. 1555 that seek to open the local loop, the terms in the legislation are necessarily vague and, as such, may not set the stage for effective local competition or ensure that opportunities for local competition will be available to all in a rapid time frame. The vagueness of these terms is particularly troublesome in the absence of a significant DOJ oversight role.

The Bill Does not Adequately Promote Number Portability:

Because customers are reluctant to switch local service providers if they must change their phone number, number portability is an important element to foster local competition. The Administration is concerned that the provisions in the bill do not do enough to speed implementation of the number portability required to facilitate competition. Provisions are needed that would mandate the implementation of interim number portability in advance of a permanent solution, and direct the FCC to require number portability by a specific date or promote its emergence at the first technically feasible opportunity.

Negotiation of "Economically Reasonable" Unbundling and Interconnection:

At the heart of the bill's effort to facilitate local competition are requirements that local exchange carriers negotiate with competitors to interconnect and unbundle their networks. The Administration believes that these provisions are important, but is concerned that the bill's intentions may not be achieved in a timely fashion due to language that allows local exchange carriers to refuse requests for interconnection or unbundling that, while technically feasible, are claimed to be not "economically reasonable." The Administration recognizes the need to promote economic efficiencies in the telecommunications arena and to charge an appropriately derived price for unbundled elements, but believes that the bill's qualification on the obligation to interconnect could provide monopolists with undue leverage to refuse technically feasible interconnection in the negotiations provided for in the bill, and may weaken any ability to enforce the requirement that local telephone monopolies negotiate in good faith. (This is particularly important in the context of legislation that does not provide any overall assessment of marketplace facts by the DOJ in advance of BOC entry into the long-distance and manufacturing arenas). In addition, the language would invite time-consuming litigation that could delay competitive entry.

Resale:

Resale competition should provide benefits to consumers and a limited choice to competitors who otherwise would be entirely dependent on the monopolist to reach local customers. Resale competition will be particularly important to long distance carriers and others who want to provide comprehensive service, including one-stop shopping, on a competitive basis, until facilities-based competition flourishes. The bill, however, establishes only a qualified obligation for local monopolists not to prohibit or "impose unreasonable or discriminatory conditions or limitations" on resale of their network elements. While some limitations on resale are appropriate, the Administration believes that this provision does not ensure that resale will be permitted on terms that actually enable resale competition in the provision of local service. The vague language in the provision gives monopolists unfair bargaining power and weakens any ability to enforce the obligation to negotiate in good faith. Increased rates to consumers may result, as well as damage to adjacent markets, particularly in the absence of any assessment by DOJ of overall marketplace conditions in advance of BOC entry into the manufacturing and long distance markets. Again, the language may generate costly and time-consuming litigation over the meaning of the qualified terms, rather than encouraging resale competition.

Facilities-Based Competition:

In lieu of a meaningful DOJ entry test to ensure that there is no substantial possibility that entry will impede competition, the bill purports to move in the direction of requiring facilities- based local competition prior to BOC entry into the long distance and manufacturing markets. The language of the bill, however, is vague and does not specifically require that the competitor have its own facilities -- it directs only that a competitor have an agreement to interconnect with the BOC's network. It thus does nothing to ensure that competitors with whom agreements have been reached have not, in fact, been selected by the local telephone monopolist for their inability to compete effectively. In addition, the bill says nothing about what type of facilities are contemplated or the magnitude or reach of such competition. Without such clarification, a "facilities-based competitor" could exist, but the vast majority of customers still may not have any real choice of local carrier or the protection that would result from greater competition in the long- distance market.

The Potential for Price Squeezes:

The bill provides little protection against price squeezes by local telephone monopolists, which could significantly damage both local and long distance competition. While a monopolist would be required to "pay" or impute the cost of its inputs, the nominal amount it "pays" for these inputs is relatively unimportant, since in reality such amount could be just a transfer payment from one part of the company to another. Thus the monopoly could inflate its rates for local service inputs. For competitors, however, such inflation could be devastating. They would have to pay the monopolist the inflated prices for local service inputs, but would be unable to match the competitive retail rates offered by such a monopolist, since its costs are recovered elsewhere in the company. In this way, a monopolist would have the capability to drive competitors from the market.

Rate Regulation:

H.R. 1555 prohibits the FCC or the States from adopting rate-of-return regulation for any carrier that has complied with the access and interconnection requirements in the bill. As noted above, however, many of the terms in the bill are vague and may not ensure effective competition, particularly in the absence of a DOJ role. The FCC and the States, therefore, should continue to have the flexibility to adopt rate regulation that best serves consumers in markets that are not yet fully competitive. The provisions in the bill that would deprive the FCC and the States of this flexibility should be removed. Mandating that certain rate regulation schemes cannot be applied irrespective of the extent of competition in the marketplace could lead to increased telephone rates for consumers.

VI. Foreign Ownership

H.R. 514, which is also pending before the Committee, would repeal current limitations in Section 310(b) of the Communications Act on foreign ownership in broadcast, common carrier, and certain aeronautical radio station licenses. While the Administration agrees with the Subcommittee's interest in reexamining these foreign ownership limitations, we disagree with the unilateral repeal of Section 310(b) as proposed by H.R. 514. The Administration supports amendments to Section 310(b) for common carrier licenses that would: 1) require a multilateral agreement or comparable market opportunities in other countries; 2) involve Executive Branch agencies in such market access determinations; and 3) retain limitations on broadcast licenses.

Comparable Market Access:

The Administration feels very strongly that current limitations on foreign ownership in the United States should only be lifted in two instances -- if a multilateral agreement is reached or for countries that have also opened their telecommunications markets to U.S. companies. This approach recognizes that while many countries are in the process of further liberalization, such progress will be varied among countries and will evolve over time.

Executive Branch Involvement:

In addition, a determination of whether a country has sufficiently opened its telecommunications markets to U.S. companies should be made by the FCC, based upon deference to the appropriate Executive Branch agencies who have broad statutory authority and expertise in matters relating to U.S. national security, foreign relations, the interpretation of international agreements, and trade (as well as direct investment as it relates to international trade policy). The determination also should take into account the Executive Branch's views and decisions with respect to antitrust and telecommunications and information policies.

The role of the Executive Branch is critical because, among other things, the Administration is engaged in ongoing bilateral and multilateral negotiations and efforts to develop the Global Information Infrastructure (GII). The Administration is heavily involved, for example, in the Negotiating Group on Basic Telecommunications (NGBT), which was established to achieve progressive liberalization of trade in basic telecommunications facilities and services within the framework of the General Agreement on Trade in Services. The deadline for the NGBT negotiations is April 30, 1996.

Retain Limitations on Broadcast Licenses:

Finally, the Administration would not move to lift the current 25 percent limitation on foreign ownership with respect to broadcasting at this time. Broadcast licenses are fundamentally different from common carrier radio licenses. Broadcasters are the principal source of news and information for most Americans and have broad discretion in determining the content of their transmissions. They also have public interest obligations to serve local communities. Finally, U.S. broadcasters are required to participate in the Emergency Alert System, which alerts the public to emergency information. Through the ubiquitous national coverage of their signals, citizens are assured of receiving emergency news and information relating to U.S. national security, natural disasters, and other critical matters.

Holders of radio-based common carrier licenses, in contrast, typically control only the underlying facilities rather than the content of messages transmitted over those facilities. It is therefore reasonable to adopt different ownership rules for these distinct categories of licenses. In addition, the current 25 percent foreign ownership limitation under U.S. law for broadcast licenses is either more liberal or comparable to foreign ownership limitations in most other countries. Moreover, while the U.S. has limitations on foreign investment in broadcast facilities, it does not impose quantitative restrictions on creative content, as many other countries do, including several of our key trading partners.

VII. Broadcasting

The Administration is concerned that H.R. 1555 and H.R. 1556, legislation also pending before the Committee, would permit greater concentration in the broadcast industry and less rigorous and timely oversight of broadcast licensees by the FCC. The provisions relaxing limits on local and national ownership concentration and limiting license review would impede competition and diversity of voices by enabling existing owners to concentrate control over expanding broadcast capacity. The Administration supports the ongoing review of ownership regulations being conducted by the FCC that would allow for a complete review of competition in these markets before relaxing ownership limits. Any review of local and national ownership structures should continue to ensure that the principles upon which the Communications Act is based -- universal service, diversity, and localism -- remain steadfast.

Media Concentration:

H.R. 1556 would allow for a dramatic increase in concentration of ownership of the mass media. This bill would eliminate national ownership, local ownership, and cross-ownership limitations on the mass media. The result would be a dramatic consolidation of ownership in media outlets at the national level and a shift in local media markets from a situation with multiple owners and multiple voices to one in which a single entity could own a large share of the mass media outlets in a community. An increase in media concentration could also limit opportunities for minorities to become owners of mass media facilities, which would, in turn, undermine the important goal of encouraging diversity of viewpoints.

The Administration is particularly concerned with proposals that would reduce the number of independent voices in local markets. The repercussions to businesses operating in local markets dominated by a few media owners could be severe. Reduced competition for the advertising dollar could increase the prices local businesses pay for access to television and radio commercial airtime as well as space in print media. These smaller firms would find themselves at a competitive disadvantage to larger, national firms better positioned to pay these higher rates. Concentration of national power in the television marketplace would also affect the program production industry. Local broadcasters affiliated with networks now provide their communities with a mix of locally produced, syndicated, and network programming. By strengthening the networks and increasing their leverage with affiliates, the bill could lead to a decrease in locally-produced and independently-produced programming.

License Terms:

The Administration is concerned that provisions in H.R. 1555 would extend the term of broadcast licenses while also limiting license review by the FCC. These provisions weaken the FCC's ability to enforce a broadcaster's obligation to provide service in the public interest. In particular, the provisions deprive the FCC of its traditional authority to consider applications from competing entities who argue that they will do a better job of serving the public. The importance of timely license review is particularly important as broadcasters begin to provide non-broadcast services or pay-television services using digital compression and flexibility on their new spectrum.

Broadcast Spectrum Flexibility:

The Administration generally agrees with the concept of providing broadcasters greater spectrum flexibility on their new spectrum for advanced television, while ensuring that such flexibility is consistent with serving the public interest. The Administration concurs with the Committee that no legislation or regulation should be adopted that would result in a broadcast licensee retaining use of both 6 Mhz channels after the transition period. We also agree that fees should be charged for the provision of nonbroadcast services that would otherwise have been subject to competitive bidding under Section 309(j) of the Communications Act. Flexible use of the spectrum should not cause substantial expense or inconvenience to television viewers. Nor should additional nonbroadcast services be permitted to reduce the current level of broadcast services provided.

VIII. Universal Service and Public Access Issues

One of the main principles of the Administration's National Information Infrastructure initiative is to preserve and advance universal service to avoid creating a society of information "haves" and "have nots." For this reason, the Administration supports the goal of universal service, including access for classrooms, libraries, hospitals, and clinics to the National Information Infrastructure, including in rural areas.