POLICY PERSPECTIVES

 7              MR. AYLWARD:  Thank you, Joe.  Thank you for
 8    having me.
 9              We are going to do four presentations.  I am not
10    going to do one.  I will just make a few remarks at the
11    beginning and hopefully have a lot of time for people to
12    interact and ask questions.
13              I am an amateur student of history, particularly
14    in communications.  And one of the things I was thinking
15    about and particularly reminded of as I looked across the
16    room and saw Dale Hatfield for the first time in a long
17    time is that when, 20 years ago, 25 years ago, a few
18    people in government thought -- and outside of
19    government -- thought it would be a good idea to have
20    competition in long distance, they started a process.  And
21    while at the time, in going through it, it certainly
22    appeared, on a day-to-day basis, there was not a grand
23    plan, and there were forward steps and backward steps,
24    indeed there was, in some senses, a grand plan or a grand
25    vision.   And that was  the achievement of  competition in

 1    long distance.
 2              And the Federal Communications Commission, led
 3    originally by people like Dean Burch and Dick Wiley and
 4    Dale Hatfield and Phil Verveer and a variety of others --
 5    and I apologize if I have left somebody really important
 6    out -- led that charge, and said, this is going to have to
 7    happen, and for it to happen there are a series of
 8    barriers that have to be knocked down.  And the next 10-15
 9    years was a process of knocking those barriers down.
10              And what we are really talking about here when
11    we look at local loop is kind of the same issues arising,
12    or many of the same issues arising, now that this last
13    monopoly island in what is becoming an interesting sea of
14    competition around it faces these same kind of questions.
15              And you would like to think it would happen
16    because the marketplace demanded it, either from an
17    economic point of view or from a political point of view. 
18    But go back in long distance, when Bill McGowan was trying
19    to sell his wares in the mid- to late-seventies, when he
20    first squeezed into my cubbyhole in the Cannon House
21    Office Building and tried to teach me what long distance
22    was all about, there were not any pro-competitive forces. 
23    People did not know what they did not have.
24              And there were a few computer companies that
25    came in  and said,  you know,  our main  frames are  being

 1    slowed down by these slow long distance lines, we need
 2    competition.  But there was no political force to really
 3    make this happen.  And I think that is exactly the case
 4    today.  You do not see consumers rising up in arms and
 5    say, give me my Maypo; give me my local competition.  They
 6    do not know what they do not have.  So that force is
 7    absent.
 8              There is a very large and successful wireless
 9    industry, which I am privileged to represent, CTIA, but
10    they do not care very much about wireless local loop.  You
11    do not see CMRS companies, particularly the established
12    cellular companies, saying, We want to do this; we have a
13    business plan and we are going to do it now.  There are a
14    few wireless startups, like WinStar and Teligent and
15    others that are interested, but that is basically the
16    equivalent of McGowan back then.
17              And there are certainly entrenched interests
18    who, if I were a LEC, I do not want wireless local loop
19    competition.  I would have to be an idiot not to want to
20    have competition, with a nice, $90 billion market to
21    myself and my colleagues.
22              So it really kind of comes back to, if it going
23    to happen, who is going to knock down the barriers?  And
24    that is going to be government, if it happens.  And it is
25    either going to be 51  State governments, which it may  be

 1    in some instances, or it is going to be the FCC.  It is
 2    not going to be Congress.  Congress thinks it already did
 3    it.
 4              So maybe some people in Congress will push, but
 5    the fact is that my experience when I was on the Hill, and
 6    I think it is still true now, is that congressmen are in
 7    favor of competition until it changes something.  And as
 8    soon as it threatens to change something, like your bill
 9    going up or you adding 75 cents on your bill in order for
10    another bill to go down, then they get very upset and they
11    do not want to see things change.  So I do not think
12    Congress is going to make it happen.
13              So it is really going to be the government.  And
14    I think it is fair to say that neither the current
15    Commission -- the current Commission has not said that,
16    has not adopted that approach yet, and it would be
17    interesting to see whether they do or not.
18              But in trying to think about these issues, the
19    way issues in communications tend to come up is in
20    dockets -- a piece over here, a piece over there, an issue
21    over here.  And it is hard to kind of see that forest. 
22    And if you are Bill Kennard or his new colleagues or Susan
23    Ness or Dale Hatfield or any of these other folks -- I
24    insulted you once before, Dale, then you came in, so I had
25    to do it again --

 1              (Laughter.)
 2              MR. AYLWARD:  -- trying to get a grip on the
 3    forest.  I have tried to organize the issues into five
 4    areas.  And let me just try to describe five clumps of
 5    issues, and then hopefully the speakers will take on some
 6    of the pieces of those when we get into the rest of the
 7    matter.
 8              Authority issues.  As a parent, I am always
 9    interested in authority issues.  And I think here, there
10    is kind of, Who is in charge?  Is it the FCC or is it the
11    States?  And the answer may be different, depending on
12    whether you are moving when you are on the wireless phone
13    or whether you are not moving on the wireless phone.  Or
14    whether, as I said in a speech at PCIA a couple of months
15    ago, if you go into wireless local loop, make sure you
16    have a CMRS component to it.
17              So, question one:  Who is in charge, both on the
18    front end and on the back end?
19              Section 332 gives a special status to CMRS,
20    which the Commission may or may not want to exercise. 
21    That is one question.  But it also gives -- turns CMRS
22    carriers into LEC's at some point down the road, and
23    therefore, presumably, gives local folks the authority
24    down the road, whenever that is.
25              There is  some economic  issues which  I do  not

 1    think have been addressed at all.  We tend to address
 2    economic issues by themselves, in little pieces. 
 3    Universal service we will address as an issue.  We have
 4    spent a lot of time in our company looking at a wireless
 5    local loop business plan.  And we would like to go into
 6    this market with a start-up company.  And one of the
 7    things that we have been looking at is, what are the
 8    aggregate effects on investment of the various mandates,
 9    fees and taxes that various entities of government are
10    starting to look at?
11              And I would suggest that the FCC and NTIA ought
12    to be taking a look at this, because that is the only
13    place I know that it can be done in the aggregate.
14              If you add all of these up, you are starting to
15    look at 20 to 30 percent on gross revenues.  That is a
16    huge burden to throw on any company or any group of
17    companies that you want to do something new.  You are
18    saying, come on down, let's start -- saying to CMRS
19    carriers, hey, why don't you get out of this comfortable
20    wireless business you are in and go compete with the local
21    monopoly.  Which is kind of a tough thing to do to begin
22    with.  And, by the way, here is a burden of 20 to 30
23    percent we are going to add to your bills.
24              Now, government is having trouble thinking about
25    that, because the universal service people say, I only put

 1    3.75 percent on your bill.  Yes, but what about the State
 2    version of that?
 3              The local tax people say, what is wrong with my
 4    7 percent, 10 percent special wireless tax?  The City of
 5    Dallas says, what is wrong with my franchise fee of 5
 6    percent or so on new wireless providers?  I do it to the
 7    phone company.  It is a right-of-way fee.  I am sorry you
 8    are wireless, you do not use the rights-of-way, but you
 9    would if you needed to, or maybe you do not, but I want
10    your money anyway.
11              If you add all of these up -- and you look at
12    number portability and CALEA -- just the general clump of
13    taxes, it is a significant economic issue.  And I would
14    argue, one that any economist will tell you is going to
15    reduce investment.  Or it is going to cut demand, which
16    will then reduce investment.  And neither is a good thing
17    if you are trying to get new companies into a market or
18    old companies to do something different.
19              Access issues.  There is a whole series of
20    issues under this, whether it is siting of antenna or what
21    I would argue is probably maybe a bigger issue, access to
22    premises -- or equal to that.  We fought this issue 20
23    years ago with supers in New York, who did not want to let
24    cable into their buildings.  Congress has legislated on
25    this, saying you cannot be prevented from having a dish.

 1              Well, what is the difference between a flat
 2    panel and a dish?  One is curved.  One is flat.  One says
 3    "telephone, video and data," one does video.  Can building
 4    owners be a barrier?
 5              Rights-of-way.  Interconnection agreements.  I
 6    mean there are a series of access issues.
 7              There are some consumer issues.  If wireless is
 8    really going to compete, it is going to have to do things
 9    that wire line companies do today, like E911, calling
10    party pays, service issues, time of service, directory
11    assistance, voice quality, that kind of stuff.
12              And, finally, universal service, which I guess
13    is an economic issue.  I am thinking of it more as a
14    flat-out barrier to entry.  In the business plan we
15    developed to do wireless local loop, if somebody says the
16    LEC is going to get 10 bucks a subscriber subsidy, and
17    then another 5 bucks a subscriber from a State fund, and I
18    want to go compete with them, unless I am going to get the
19    10 bucks and the 5 bucks, I am not going to compete with
20    them.
21              And I am sorry I missed the discussion this
22    morning, but unless there is a flat equality of treatment
23    per subscriber there, universal service will become a
24    barrier to entry.
25              So there are lots of  issues.  I think the  real

 1    issue is whether the government decisionmakers are going
 2    to look at this and say, we want to achieve that goal, so
 3    let's start walking down the road and knocking down these
 4    barriers.
 5              And we have got four people here today to talk
 6    about these issues.  We have appropriate quota
 7    representation, since this is a Democratic administration.
 9    We have two former NTIA people.  We have two current or
10    former FCC people.  We have two Hill people.  There are
11    only five us, so you can tell there is a little overlap. 
12    That is called two-fers, by the way.
13              Michele Farquhar I think most of you know.  She
14    last served as Chief of the Wireless Bureau at the FCC. 
15    She was at NTIA before that in two very senior positions. 
16    She was at CTIA before that, when I first met her.  And
17    she is now a Partner at Hogan & Hartson, making an ungodly
18    amount of money for the first time in her life, which I
19    congratulate you, and continuing her expertise in wireless
20    and a whole bunch of other issues.
21              So, Michele, why don't you go first.
22                   MICHELE C. FARQUHAR, PARTNER,
23                          HOGAN & HARTSON
24              MS. FARQUHAR:  Thanks, David.
25              Good afternoon.  It is great to be here.

 1              My remarks today are focused on three primary
 2    areas:  First, the current wireless market growth trends. 
 3    Second, regulatory and other obstacles, both overt and
 4    covert, to wireless competition in the local exchange
 5    marketplace.  And, third, several suggestions for how both
 6    regulators and the wireless industry can foster increased
 7    wireless/wire line competition.
 8              In particular, I believe that incremental and
 9    docket-by-docket efforts may not be sufficient to prompt
10    wireless entry in the local market in the near term. 
11    Indeed, both regulators and industry advocates need to
12    take a comprehensive look at this issue and develop and
13    overarching policy framework for jump-starting wireless
14    facilities-based competition.
15              The wireless marketplace continues to boom, with
16    both cellular and PCS subcribership now exceeding 50
17    million.  The number of subscribers has almost doubled in
18    the last 2 years, from about 25 million when I first
19    joined the FCC's Wireless Bureau in 1995.
20              Another trend is that subscribers increasingly
21    use their phones for personal rather than business use. 
22    Cellular subscribers usage is 58 percent personal versus
23    25 percent business.  And PCS subscribers slightly less. 
24    Their usage is 49 percent personal compared to 30 percent
25    business.

 1              Moreover, an increasing percentage of customers
 2    are buying a second, third or fourth wireless phone for
 3    their households.  Thirty-four percent of all wireless
 4    users indicated that they had more than one wireless phone
 5    in their household in March of 1996, whereas the number
 6    had climbed to 44 percent for PCS and 39 percent of
 7    cellular users by early 1997.
 8              Already about 1 in 6 cellular and PCS users have
 9    said that they have three or more wireless phones.  And
10    for those of you who heard Assistant Secretary Irving's
11    remarks this morning, his household is certainly one of
12    those, with about four wireless phones.
13              In addition, the entry of PCS into many markets
14    has had a positive impact on subscriber rates, generally
15    leading to a price reduction of about 25 percent in these
16    markets.  In the Washington, D.C. market, for example, the
17    launch of APC-Sprint Spectrum led to a 35 to 55 percent
18    decrease in cellular rates.  And the average monthly bill
19    in the U.S. has fallen to below $50.
20              Already wireless revenues are more than 10
21    percent of wire line revenues, although wireless minutes
22    constitute only 3 percent of the minutes of wire line
23    communication.  The Yankee Group predicts that by 2004, 20
24    percent of voice calls will be wireless.
25              These trends --  rapid growth, declining prices,

 1    increasing personal use, and more wireless phones per
 2    household -- may suggest greater consumer willingness to
 3    view wireless as a substitute rather than a complement to
 4    their existing residential wire line service.  The FCC's
 5    second annual report to Congress on competition in the
 6    commercial mobile services, released in March of this
 7    year, indicates that 13 percent of Americans are using
 8    wireless telephony as a complement to their wire line
 9    communications, with some possibly using wireless as an
10    alternative to a second line.
11              The report indicates that the primary obstacle
12    to classifying wireless as a true or potential substitute
13    for wire line remains the permanent charge, despite the
14    recent price reductions.  On the other hand, the report
15    notes that several PCS carriers are not charging for the
16    first minute of incoming calls, and their subscribers are
17    more likely to use their phones as a general
18    communications device and not just for special or
19    emergency communications.
20              Another important development is that more
21    wireless services will be deployed in the business and
22    consumer market as the FCC prepares to auction spectrum at
23    28 gigahertz, 39 gigahertz and possibly 24 gigahertz in
24    the coming year.  Many potential providers in these bands
25    are targeting  the  business rather  than the  residential

 1    markets, at least initially, often for a wireless fiber
 2    access service rather than a true wireless local loop
 3    service.
 4              Nevertheless, new fixed wireless services, as
 5    well as the eventual buildout of the PCS C, D and F bands
 6    and the wireless communications service at 2.3 gigahertz,
 7    may contribute to what one Deloitte & Touche economist
 8    recently described as the coming spectrum glut, at which
 9    point carriers will have to take any warm body as a
10    customer, even a land line caller.
11              Despite these trends, when policymakers evaluate
12    the success of the Telecom Act of 1996, particularly the
13    state of local competition in residential markets, the
14    picture looks grim.  Wireless still remains a potential
15    success story in U.S. local consumer markets.
16              Several factors are usually identified -- I will
17    call these overt barriers -- which tend to operate at the
18    customer level.  And these include current wireless
19    billing practices under which consumers pay for incoming
20    as well as outgoing calls, number portability, consumer
21    concerns about service quality, and, perhaps most
22    importantly, cost.  While some of these obstacles affect
23    all competitive local exchange carriers, or CLEC's, such
24    as number portability, many are unique or loom far larger
25    in the wireless arena.

 1              Wireless carriers' profits, for example, are
 2    increasingly nibbled by State and local taxes, new
 3    universal service payments, higher than cost
 4    interconnection rates, and regulatory mandates for new
 5    location technology, leaving little cushion for aggressive
 6    buildout or drastic rate reduction that would help them
 7    compete better with the low wire line charges.  Wire line
 8    subsidies that keep the cost of local service artificially
 9    low may also set a high bar for the wireless industry to
10    meet.
11              The FCC's pending proceedings on calling party
12    pays billing mechanism, as well as its ongoing efforts on
13    the LEC-CMRS interconnection rules, could offer some
14    relief as soon as next year.
15              Other factors, which I will refer to as covert
16    obstacles, include the threat of increased State and local
17    regulation, tower siting and other capacity issues, and
18    general regulatory uncertainty.  The threat of increased
19    State and local regulation and taxation could actually
20    serve as a disincentive for many wireless carriers seeking
21    to enter the residential market, especially given the
22    additional infrastructure investment needed to deploy
23    these services.
24              Likewise, carriers' requests for many additional
25    tower and  antenna  sites, especially  important  for  the

 1    fixed wireless services at the higher gigahertz
 2    frequencies, could languish in the hands of local zoning
 3    authorities.  These issues, in conjunction with the
 4    regulatory profit nibbling that I mentioned earlier, could
 5    affect carriers' willingness and ability to provide
 6    residential services.  So that the consumer may really
 7    never have a choice between technologies.
 8              It is also worth noting that wireless revenues
 9    remain a major source of profit for many wire line
10    companies, perhaps encouraging these particular carriers
11    to continue to view mobile service as more of a
12    complementary service than as a substitute to their own
13    residential service.
14              Commission action on pending preemption
15    petitions as well as its ongoing proceedings to determine
16    State regulatory authority over fixed wireless services --
17    commonly referred to as the CMRS flex proceeding -- and
18    the full extent of local authority over tower siting
19    issues, which was raised in its recent notice in the RF
20    proceeding, could help alleviate some of the current
21    uncertainty.
22              Finally, how can government and industry
23    encourage greater deployment of wireless local loop?  As I
24    suggested earlier, a critical first step for government
25    policymakers  is  to work  with  the wireless  industry to

 1    identify obstacles and plan a comprehensive, pro-consumer
 2    policy framework to address the issue.  Incremental,
 3    docket-by-docket efforts may not be sufficient to prompt
 4    wireless entry into the local market.
 5              In addition, it may be time to reevaluate
 6    whether a strict technology-neutral framework is helping
 7    or hurting wireless/wire line competition, at least in the
 8    short term.  Inherent differences between wireless and
 9    wire line technologies and networks, differing regulatory
10    frameworks, and differences among the wireless
11    technologies themselves may suggest the need for a new
12    interim model, or a greater effort to remove any inherent
13    bias against wireless providers.
14              Indeed, short-term incentives to encourage
15    wireless local loop may produce a legion of pro-consumer,
16    pro-competition and pro-universal service benefits, as
17    well as more economic development.
18              Policymakers should also study international
19    wireless local loop deployment for successful models, and
20    ensure that spectrum policy, local competition policy and
21    Federal preemption policy are all moving in the same
22    direction.  Most importantly, recognition of the need to
23    avoid a death by 1,000 cuts at the Federal, State and
24    local level could fuel wireless deployment in the same way
25    that  regulatory forbearance  has fostered  the tremendous

 1    growth of the Internet.
 2              Internet service providers, for example, have
 3    garnered congressional interest in a short-term national
 4    moratorium on State and local taxes of electronic
 5    commerce.  In describing this effort, Senator Ron Wyden of
 6    Oregon notes that the growth of Internet taxes could kill
 7    the goose that lays the golden eggs.
 8              Many wireless carriers advocate that the simple
 9    answer is suggested by the recent Eighth Circuit ruling on
10    interconnection:  broad Federal preemption of State and
11    local regulation, under Section 332.  Yet cities have
12    successfully argued that placement of towers and taxation
13    are uniquely local, and States are unlikely to relinquish
14    jurisdiction over intrastate telecom issues or services. 
15    Even if broad Federal preemption is legally possible, it
16    is unlikely to be politically sustainable in the long run.
17              Instead, carriers could seek short-term,
18    targeted preemption, or Section 332 relief, directly tied
19    to the FCC's desire to encourage facilities-based local
20    competition.  Carriers could begin competitive local entry
21    and the offering of full service bundles of telecom
22    service in specific test markets -- much like AT&T is
23    planning to do -- with or without such relief.
24              This would provide an opportunity to inventory
25    the necessary investment, the actual barriers to entry, as

 1    well as consumer acceptance.  The FCC still lacks data on
 2    all of these fronts.
 3              The industry could also undertake a
 4    comprehensive economic analysis of LEC/CMRS
 5    interconnection issues and the role of wireless in the
 6    local competition marketplace, particularly the types of
 7    stimuli or incentives necessary to encourage such entry.
 8              Finally, the wireless industry could take better
 9    advantage of the current government programs that might
10    leverage their infrastructure investment, such as NTIA's
11    Telecommunications Information Infrastructure Assistance
12    Program, or TIIAP.  According to TIIAP Director Steve
13    Downs, less than 10 percent of the grants during the first
14    3 years have gone to wireless projects.  This program
15    could serve as a real test bed for future schools,
16    libraries and health care projects, and even general
17    residential service initiatives, enabling wireless
18    carriers to develop projects to offset some of their
19    universal service contributions.
20              In sum, the Information Super Highway still has
21    many separate lanes for separate technologies:  wireless,
22    wire line, cable, broadcast, satellite, et cetera. 
23    Policymakers should work together at the Federal, State
24    and local levels to encourage greater convergence and
25    competition   between   the   wireless   and   wire   line

 1    technologies, particularly by removing any roadblocks.
 2              NTIA is well suited to play a key role in this
 3    effort, and I applaud its leadership in hosting today's
 4    forum.
 5              Thank you.
 6              (Applause.)
 7              MR. AYLWARD:  Tom Sugrue is our next speaker. 
 8    He is a partner in the Washington firm of Halperin,
 9    Temple, Goodman & Sugrue.  He specializes in
10    communications in a wide variety of areas.  I think many
11    of you know him.  He has served at the NTIA.  He has
12    practiced before the FCC, the Congress, the executive
13    branch in Federal courts, and lots of international
14    organizations.
15              He has represented folks on interconnection,
16    universal service, access charges, standards and
17    procedures for the Bell Company entry into the InterLATA
18    market, which some of you may have missed -- it is kind of
19    a small issue going on these days -- and is implementing
20    regulatory reform provisions of the Telecommunications
21    Act.
22              Prior to joining this firm, he was the Deputy
23    Assistant Secretary of Commerce, Deputy Administrator of
24    NTIA.  And he comes from Harvard Law School, the JFK
25    School at Harvard, and Boston College.

 1              Tom.
 2                      THOMAS SUGRUE, PARTNER,
 4              MR. SUGRUE:  Thank you, David.
 5              It is good to be here with such a large number
 6    of former colleagues and current friends, I hope, both on
 7    the panel and in the audience.
 8              Michele is always a tough act to follow.  I
 9    think we are, as speakers, going in descending order in
10    terms of preparation and organization.  She is very well
11    prepared and organized as always, if you know Michele.
12              I have an outline that I hope has a beginning, a
13    middle and an end.  I do not know if they all relate to
14    one another, but we will find out.
15              Salemme is writing his remarks right now, so
16    they will not be stale when he gets up here.  And Roz,
17    being from the government, can say whatever the hell she
18    likes and everyone will pay attention to it.  At least
19    that was my attitude when I was in government.
20              So I thought I would address one aspect of the
21    regulatory policy affecting the deployment of wireless
22    local loop that I think sometimes gets ignored.  And that
23    is that wireless local loop is part of -- it is one kind
24    of facilities-based competition in the local exchange
25    area.   And the rules that the Commission has adopted, the

 1    1996 Act, and the rules the Commission -- and the
 2    States -- have adopted to implement that Act will have an
 3    impact -- a direct impact on the incentives to use this
 4    particular technology.
 5              And while there are a lot of issues that are
 6    specialized to wireless local loop, having to do with
 7    spectrum allocations and tower siting and things like that
 8    that are very important, there is also a set of generic
 9    issues that directly affect the business and economic
10    incentives to invest in any local infrastructure on a
11    competitive basis.
12              And I would like to look at some of that, and to
13    provide just a brief background, a brief but somewhat,
14    admittedly biased and tendentious background, of the 1996
15    Act, in order to sort of set up these points.  And the
16    basic facts, I am sure, are familiar to everyone here,
17    although I will add, as I said, some editorial comments as
18    I go along to provoke either discussion, thought, or one
19    or the other.
20              Of course, the Act opened all telecom markets to
21    competition.  And I would not quarrel with hardly anything
22    David said in his opening remarks, although I would not
23    discount that particular declaration that Congress made. 
24    There is one part of the Act that is relatively clear: 
25    All markets, all barriers are down, and everyone should be

 1    able to offer any other service.
 2              Would that it had spoken with similar clarity in
 3    some other provisions as well.
 4              It preempted State and local barriers to entry,
 5    although there are a number of particular State and local
 6    regulations, obviously, that affect particularly wireless
 7    local loop deployment -- public rights-of-way, the taxing
 8    issues, the franchise fees, and so forth.  But I am going
 9    to focus on another part of what the Act did, which was to
10    establish three key obligations of incumbent local
11    exchange carriers and three key rights of new entrants.
12              And that is interconnection, access to unbundled
13    elements and resale.  And these are the three main
14    vehicles for entering the local market for any local
15    competitor, whether it be wireless, wired or otherwise.
16              One way to look at these three provisions is
17    that they provide a hierarchy of entry vehicles, in terms
18    of the extent to which a new competitor has or is planning
19    to deploy its own facilities as part of its competitive
20    strategy.  Interconnection is obviously a key.
21              You can have two competitors with their own
22    facilities, serving their own customers, but unless the
23    two can interexchange traffick, can interconnect, so that
24    a subscriber to one can call a subscriber on the other,
25    the things the economists call network  externalities take

 1    over and the local exchange goes back to being probably a
 2    natural monopoly.  But, again, interconnection is
 3    something that two facilities-based networks do vis-a-vis
 4    the other.
 5              At the other end of the spectrum there is a
 6    provision in the Act so that new entrants can come into
 7    the market without any facilities.  And that is called
 8    resale.  They have a right to purchase any service the
 9    incumbent provides on a retail basis, to get it at a
10    wholesale discount, and can offer it to subscribers of
11    their own on a resale basis.
12              In between, the Act creates the right to acquire
13    parts of the incumbent's network on an unbundled basis. 
14    And that is the UNE's, the unbundled network elements,
15    that have been the subject of great debate.  The policy
16    ground there, as I see it -- and, again, this is my
17    interpretation of it -- is building a full, complete
18    network is very expensive, very time consuming.  It
19    involves putting in place switches, loops, transport
20    networks, signalling and so forth.
21              And in order to facilitate competition and to
22    make it happen more rapidly, the law provides that the new
23    entrants can purchase parts of the incumbent's network,
24    match them up with its own facilities to provide an entire
25    network, and  then  invoke its  rights to  interconnection

 1    through the interconnection provisions of the Act and the
 2    regulations.  So I would interpret these three provisions,
 3    again, as providing this hierarchy between full facilities
 4    competitor, partial facilities and no facilities.
 5              Well, a number of actions the FCC and the States
 6    have taken in interpreting the Act and these provisions
 7    affect the ability and the incentives of competitors to
 8    invest in facilities that would provide a basis to provide
 9    what I would consider the most robust and most complete
10    form of competition in the local exchange.  The first has
11    to do with the pricing of unbundled network elements.  And
12    I am going to focus on -- for this purpose -- namely,
13    unbundled network elements.
14              The statute says the price must be based on
15    cost.  The FCC applied a pricing methodology known as
16    TELRIC, total element long-run incremental cost.  It is a
17    forward-looking cost methodology based on the most
18    efficient technology available.  I do not intend to get
19    into all the details of TELRIC.  I am not probably
20    competent to do so, or to debate them -- although I have
21    heard some people debate them who did not seem to be
22    competent to do so either.
23              (Laughter.)
24              MR. SUGRUE:  But suffice it to say it produces
25    low prices for unbundled network  elements.  I think there

 1    is general agreement on that.  Obviously, "low" is a
 2    relative term.  But I think the new entrants would largely
 3    say those are -- or many new entrants would say -- they
 4    are reasonably low, appropriately low.
 5              The incumbent providers say they are
 6    unreasonably -- indeed, unconscionably or even
 7    confiscatorially low.  And the FCC is fairly explicit
 8    about saying, yes, we want the rates for unbundled network
 9    elements to be low, to facilitate rapid entry by new
10    competitors and entry through unbundled elements, which
11    they view as a stronger form of competition than resale
12    entry.
13              A second set of issues has to do with the
14    availability of unbundled network elements.  Two key
15    issues there.  One could argue -- indeed, it was argued --
16    that unbundled network elements should be limited to those
17    parts of the local network that exhibit natural monopoly
18    characteristics, or are essential facilities in the
19    language of antitrust, and not that just a whole network
20    should be available.  You should look element by element
21    and say, can this be effectively supplied on an efficient
22    basis by competitive supply?
23              That was not done, basically.  The Commission
24    interpreted the law pretty much as saying that all parts
25    of the  network, at least at the  present time, have to be

 1    unbundled and provided on an unbundled basis.
 2              The second issue is who can take unbundled
 3    network elements.  Should it be limited to those
 4    competitors who have some of their own facilities, and so
 5    they need to lease loops here or a switch here or a
 6    transport there or a signalling there to sort of flesh out
 7    their network?  Or can a new entrant with no facilities at
 8    all lease a complete set of unbundled elements and put
 9    them together?  This is the network platform concept.  And
10    the Commission, as I think most of you know, said no, we
11    are not going to limit the availability of unbundled
12    network elements to competitors who have some of their own
13    facilities.
14              Now, fair enough, we should note that not all
15    these rules survive legal challenge.  The Eighth Circuit
16    reversed the FCC on jurisdictional grounds on the pricing
17    rules.  But I think the FCC's pricing rules have been very
18    influential.  Most States have adopted some version of
19    TELRIC for their own pricing.  And I think the FCC could
20    properly claim credit for a lot of that.  And in large
21    part, the FCC's approach, at least, is in place, despite
22    the Eighth Circuit's reversal.
23              As to the availability of unbundled network
24    elements, those rules, the court said, was within the
25    FCC's jurisdiction.  It upheld  the FCC on the point  that

 1    they are not limited to essential facilities, basically. 
 2    The FCC defined what elements have to be available.  And
 3    it upheld the Commission that a competitor does not have
 4    to have its own facilities.
 5              It did say, though, that the competitor has to
 6    combine those elements itself; that the incumbent carrier
 7    does not have to do that job for it.
 8              And I should also note that many of these issues
 9    are subject to petitions for review in the Supreme Court,
10    and so we may not have heard the last of this on the court
11    basis.
12              Well, what sort of impact does this have on the
13    deployment of wireless local loop or on competing
14    infrastructure generally?
15              And my concern is that unbundled network
16    elements really serve a dual role.  They are a way that a
17    new competitor can enter the market efficiently and
18    rapidly.  They provide more opportunities.  They are
19    cheaper than resale, at least for many purposes.  For
20    example, the most lucrative business customers.  They
21    provide more revenue opportunities because you get the
22    exchange access revenues.  But, at the same time, they are
23    a competing source of supply if you are an entrant that
24    has its own facilities or wants to offer competing
25    facilities.

 1              So unbundled local loops provided by the
 2    incumbent are a competing source of supply if you want to
 3    be in the wireless local loop business.  So there is a
 4    tradeoff here.  Rules and regulations that facilitate
 5    achievement of the first goal make unbundled elements
 6    freely available, as cheap as possible and so forth
 7    arguably could undermine the second goal.  That is, you
 8    are making one competitive source of supply too cheap, too
 9    available and too easy a means to enter the market.
10              And just to cite a couple of examples of
11    pricing -- and again, without getting into whether prices
12    are right, just as general matter, the cheaper the prices
13    of unbundled network elements local loops, the lower the
14    incentives, or the harder the business case to make to
15    deploy competing infrastructure to offer local loops,
16    whether they be wireless or otherwise.  And local loop
17    infrastructure is not inexpensive and it is not free of
18    risks.
19              And one risk now if you are going to make such
20    an investment, you have to take into account not only the
21    market risk or what the incumbent will do to its prices,
22    but that the regulator will come in and say, those prices
23    for those unbundled loops have to be lower and lower.
24              The availability of unbundled network elements
25    is a  similar  thing.   If you  are  limited to  essential

 1    facilities or you had to have some of your own facilities
 2    to acquire unbundled network elements, there would be
 3    stronger incentives, I suggest, for competing
 4    infrastructure.
 5              Other countries -- Canada, for example, does
 6    limit unbundled network elements to essential facilities. 
 7    Switches are not unbundled.  Local loops are unbundled in
 8    urban areas only for 5 years.  It is too early to tell. 
 9    These rules in Canada were just adopted a few months ago. 
10    But it will be interesting to see how infrastructure
11    investment in local exchange develops in Canada.
12              The U.K. even took a more extreme position. 
13    There is no unbundling at all.
14              Now, people argue with some degree of validity,
15    the U.K. had a special case.  The telephone plant was
16    being deployed with cable plant at the same time. 
17    Nevertheless, those decisions were made in both Canada and
18    the U.K. not as a favor to the incumbent carrier, but
19    really as to provide an incentive for the competing
20    providers to invest in their own infrastructure, and
21    arguably to reward the competing providers for taking
22    those risks when they make those investments.
23              So I would just suggest one thing to my friends
24    at the FCC or input to the States or in public policy is
25    that, as  we proceed along, the fight has often been about

 1    the new entrants on one side and there is the incumbent
 2    local exchange industry on the other.  Among the new
 3    entrants, not all interests are the same.  I would suggest
 4    to you that among those who want to compete by way of
 5    facilities, some of their entrants are really
 6    diametrically opposed with those who want rapid entry just
 7    by whatever means possible.
 8              The fault line on this seems to have been
 9    dividing -- that is, IXE's on one side and some
10    competitive LEC's on the other -- that may not always be
11    the case.  MFS and Brooks are being acquired by WorldCom,
12    which will be WorldCom and MCI.  So major IXE's and major
13    CLEC's are getting together.
14              The incentives may change somewhat; the
15    arguments may change somewhat.  But I have not seen
16    myself, in the regulatory discussions, enough of a sense
17    that by promoting one form of competition you really may
18    be cutting the legs out from under this other form of
19    competition.  And while you may say the Act -- and the
20    Commission does argue -- the Act is neutral as to
21    facilities or resale competition, I do not think it is
22    beyond the ken to make a judgment on that.
23              I would make a judgment on that and say I would
24    err on the side of trying to promote incentives for
25    investment in competing  facilities.  It is  a more robust

 1    form of competition.  It is a more real form of
 2    competition.  It provides a path out of regulation, so we
 3    can have a deregulated, fully competitive market.  A
 4    resale market does not do that.
 5              So I would hope as we move along -- there are
 6    some little drops along the way that indicate the
 7    Commission may be thinking along these lines -- Joe
 8    Farrell's, who is the Chief Economist, valedictory address
 9    last May, I thought was very thoughtful on some of these
10    points, and laid out some of the balance.  The Commission
11    has said it is going to look at the impact on incentives
12    for innovation on the ILEC side.  I would suggest they add
13    to that the incentives for innovation on the new entrant
14    side, for adding facilities and for trying to compete on
15    the basis of that investment.
16              So wireless local loop will look a lot better if
17    we create a stronger and more efficient set of incentives
18    for making those investments.
19              Thank you.
20              (Applause.)
21              MR. AYLWARD:  Gerry Salemme is the next speaker.
23    He is now Vice President for External Affairs and Industry
24    Relations for the NextLink Company, which is owned by a
25    variety of people, including Craig McCaw.  He has joined a

 1    team of his former friends and colleagues at AT&T in that
 2    activity, and he is directing issues and advocacy for
 3    them.
 4              Before joining NextLink, as I mentioned, he was
 5    AT&T's leading Federal regulatory person here in
 6    Washington.  And prior to that, worked for Ed Markey as
 7    his senior telecom policy analyst in the U.S. House of
 8    Representatives Telecom Subcommittee.  He received both
 9    his B.A. and M.A. in economics from Boston College.
10              He told me the other day that he is really not
11    doing wireless stuff.  He is doing wired competition.  And
12    knowing a little bit about Craig McCaw and Gerry, I think
13    if anybody in the room takes that seriously, you should
14    not be doing this kind of business.
15              Gerry.
16                  GERRY SALEMME, VICE PRESIDENT,
18                             NEXTLINK
19              MR. SALEMME:  Thank you, David.  I appreciate
20    the invitation to be here today, Joe, Kathy, the rest of
21    the group at NTIA.
22              And I think, as David just said, we are a wired
23    CLEC provider.  We are basically someone who tries to
24    string fiber and connect switches and directly goes to
25    buildings and compete against those incumbent  ILEC's that

 1    Tom Sugrue talked about.
 2              And I want to start by thanking Tom for lowering
 3    expectations.  As you will see, I am totally disorganized,
 4    and I will try to get through this and have a coherent
 5    point at the end.
 6              But we are really a wired company.  But, in my
 7    past, I have worked for McCaw Cellular and Craig McCaw. 
 8    During that time, we actually identified and purchased the
 9    initial rights and helped create that AT&T wireless fixed
10    solution that I think they discuss on the first panel. 
11    That was actually something that Craig McCaw and his team
12    had found prior to the merge with AT&T.  So that is
13    something that we know a little bit about.  I think it
14    demonstrates the bullishness that Craig and the former
15    McCaw team have on fixed wireless solutions.
16              And even though we are currently, at NextLink, a
17    provider of services using wired fiber facilities, we
18    really are technology agnostics, as Craig says.  And we
19    are out every day, looking at every potential spectrum
20    play, every wireless play, so that we can build out our
21    portfolio, so that we can have every possible arrow in
22    quiver to take on those entrenched incumbents in the local
23    exchange market.  And I think those are the type of things
24    that we will continue to do.
25              Beyond that,  we  also have  an  extended  McCaw

 1    family of his investments.  He has two other complete
 2    wireless plays.  One is Nextel, which I think people have
 3    heard a little bit about.  It is an enhanced SMRS
 4    provider, providing digital cellular service.
 5              Currently, right now, it has one unique feature
 6    that distinguishes it and differentiates it in the market
 7    from the traditional digital cellular providers, which are
 8    pretty pervasive right now -- up to five in a market.  It
 9    has a push to talk feature, which allows for a lower-cost
10    conferencing feature, so that you can have people on a
11    conference in a smaller network, and you can conference
12    them.  And it is something that has been used a lot by
13    businesses.
14              We are kind of excited about the fact that
15    technology, if it is good, will find the right market. 
16    And sometimes you do not even know where it is coming
17    from.  One of the things that we have realized with this
18    push to talk that Nextel has is that -- in Beverly Hills,
19    90210, those new little clique of rich kids want to take
20    Nextel phones instead of cellular phones to school. 
21    Because if you are in the right clique, you all get
22    conferenced immediately, and you can have a broadcast
23    message to where the party is, without having to dial
24    everyone's number.
25              And it is just one of those features that we see

 1    as being unique.  And it is one of the reasons we are
 2    bullish on wireless.  No matter what happens, you can use
 3    wireless technology to really find a personal solution, to
 4    find a unique solution.  And ultimately we do believe that
 5    fixed wireless is going to be a solution that is going to
 6    be very strong in the local market.
 7              And I see David Turetsky and Teligent, WinStar,
 8    we really do look at a lot of those wireless technologies
 9    to make it and to help drive competition.  But the real
10    question is, how do you get to the next level?  How do you
11    take the competition beyond where NextLink is right now,
12    which is to a small business market, beyond what is
13    probably the target market of our other CLEC competitors
14    right now?
15              How do we move down to that residential
16    provider?  Which is the real promise of that Telecom Act
17    that Tom just articulated, and Michele and David earlier. 
18    We need to be able to say, how do we get the real spirit
19    of competition in the local market to be pervasive beyond
20    the single target, down to that mass residential market?
21              And that is where it gets more difficult.  That
22    is where it gets a lot harder.  In McCaw's companies, we
23    think that the Teledesic fixed satellite service in the KA
24    band, which we are licensed in the FCC and also recently
25    had  our spectrum  at the  World Radio  Conference just  a

 1    couple of weeks ago approved for 500 megahertz of clear
 2    spectrum, we think that is a digital IP platform service
 3    that can provide broad band service right to the home.
 4              It is a $9 billion investment, 288-satellite
 5    constellation.  But what that constellation, we believe
 6    that we really can provide a broad pipe to the home.  And
 7    to do that on an international basis, to be able to
 8    amortize those costs over that full world market gives
 9    you, I think, an opportunity to be able to say $9 billion
10    is not a lot.  Think of how much money it costs right now
11    to rewire all of the United States and you will see that
12    that can really be a very cost-effective way to enter this
13    market and to provide service, especially in areas where
14    you are never going to get a wire.
15              And if you look at some of the places throughout
16    the world, we believe it is a market that is going to be
17    ripe for entry using a fixed-satellite wireless solution. 
18    So that is one of the things that we are continuing to
19    work on and promote.
20              But the real question is, can you get local
21    competition at all?  I mean I always want to step back and
22    say, is fixed wireless going to work?  Sure, it is going
23    to work.  The technology, the economics dictate that it
24    can work.  The question is not:  Is fixed wireless going
25    to be  a technology that is going  to succeed in the local

 1    market?  The question is:  Is local competition going to
 2    be viable for residents in the United States?  Is the
 3    potential of the Telecom Act going to be realized?
 4              And I just want to step back, before we get into
 5    the specifics of what you need to do to help the fix
 6    wireless local loop strategies become successful, to
 7    really look at where are we in local entry right now.  And
 8    I just want to go through a couple of quick things,
 9    because it gets back to the discussion of the 1996 Telecom
10    Act, the FCC implementation of Section 251, the States,
11    the courts, and where we sit right now, coming up on our
12    second anniversary of the Act.
13              And let me start by saying I cannot be more
14    bullish about NextLink and the potential for us to
15    continue to succeed and add on customers, on net, doing
16    everything we can on our own, occasionally buying an
17    unbundled loop to provide service to a business customer. 
18    It is a market that you can do.  The pricing is right. 
19    The technology is right off the shelf, and it is a matter
20    of logistics and putting it together and just spending
21    enough capital to make it happen.
22              The real question is:  How do you go downstream?
24    How do you go down market to meet those residential
25    customers?

 1              I think others have said in the past -- and I
 2    think Tom just said this -- resale to me is a real
 3    questionable strategy.  I have not seen the economics work
 4    out, at a 20 percent discount, to make resale work.  So if
 5    resale does not work, that leaves you the two other
 6    solutions -- the unbundled elements and facilities-based
 7    build.
 8              Unbundled elements can work in some situations. 
 9    I would agree with Tom to a certain extent that, though
10    they should be permitted and I think the Act allows you to
11    bundle them completely, unbundled elements work better in
12    piece parts.  And that if you can get two or three of
13    those unbundled elements, put them together, you are in
14    much better shape than trying to put all of them together
15    and buy that glue from the ILEC's and make that happen.
16              But the real issue here is, how do you provide
17    competition, then, to the local incumbent ILEC if you have
18    basically roadblocks that continue to be in your way?  And
19    most of the roadblocks that we have to navigate are really
20    regulatory roadblocks, not economic and not technology.
21              So, 251.  Tom starts by saying there is
22    absolutely no longer a barrier to entry.  That States can
23    no longer prevent you from entering the market.  Well,
24    technically, that is correct.  I am sure that, if you go
25    back to the Act, that  is the first line of the  Act.  The

 1    reality, though, is that you still have to go get
 2    certified.
 3              You are still often opposed, and there are
 4    intervenors by the ILEC when you do get certified in a
 5    local market.  You are still fighting every day to get a
 6    municipality to let you have a right-of-way, to take them
 7    to court not to pay a franchise fee of 5 or 7 percent when
 8    you are competing against an incumbent local exchange
 9    company that already has its facilities in place and they
10    are not paying and costs for it.
11              So one of the things you really have to look at,
12    and I think we really have to review again, is how we can
13    ensure that we have a streamlined process to be able to
14    enter the market and to make it work quickly.  One of the
15    points Michele made earlier -- number portability -- it is
16    essential for a local exchange competitor to have number
17    portability.  A person wants to keep their own number. 
18    That is even more essential in a local market.
19              If you want to have a wireless competitor or a
20    wired competitor, they have to be able to, transparently
21    to the customer, get that number changed.  We have no idea
22    how that is going to be implemented by the ILEC's right
23    now.  I think the recent filings by some of those
24    incumbent LEC's to delay the implementation of number
25    portability,  some of  the concerns  about what  a dip  is

 1    going to cost you as you get into the number portability
 2    database, really just threatens the ability to get some
 3    local competition underway.
 4              We have reciprocal compensation issues that we
 5    can go through.  Right-of-way issues, I would love to
 6    spend a few minutes on this.  We are trying to build, in
 7    San Francisco -- and you know, the Dunbarton Bridge is
 8    just one of those bridges you have to get across -- it
 9    would be very nice to be able to get across.  It seems
10    that one of the incumbent LEC's -- a big one -- has an
11    agreement with the State of California -- I would say it
12    is an illegal agreement with the State of California --
13    saying that they have the only right to build on that. 
14    And that if I want to get facilities, I have to lease from
15    that incumbent LEC.
16              Well, I can take them court and I can be
17    successful, because clearly the Act says that you cannot
18    have State rules and regulations that prohibit
19    competition.  I do not have enough time to do that and be
20    in the market in 6 months.  Those are the things that
21    happened on a wired and wireless basis.  Because I still
22    need facilities across that bridge, even if I build out a
23    wireless network.
24              So there are those issues.  There are the
25    right-of-way issues that  are just  inherent parts of  the

 1    251 and the Act.  And in the overlay of 271, the threat
 2    that if an ILEC is into the market before it really has
 3    any viable competition, we are going to be even less
 4    successful in being able to get entry in those markets and
 5    get interconnection agreements that work.
 6              But let me just get quickly -- because I already
 7    gave up all my time and I have bored people to death --
 8    what we can do in specific issues with regard to the
 9    wireless world.  And for me, there is an issue like access
10    to a NID.  And I do not know if people have paid any
11    attention to this and I do not know what the panel did
12    this morning.  But I do know that AT&T Wireless has a nice
13    little antenna you put on the side of your house, you
14    string a wire down, similar to what we do with our
15    Teledesic.  If you can come into the NID and not have to
16    drill another hole to pull that wire up, you are in much
17    better shape.
18              That is one of the issues that the FCC has half
19    got right but left half to the States.  Again, it is one
20    of the things that if you want to make it easy, if you
21    want to encourage a wireless provider to easily hook into
22    the customer premise equipment, the inside wiring that is
23    already in the house, access to that NID is very
24    important.  As you get to the unbundled elements, what are
25    you buying?  What is an unbundled element?

 1              I remember once advocating on behalf of AT&T, we
 2    wanted as many unbundled elements broken up as often as
 3    possible.  Now, I try to get a loop and someone tells me
 4    that a line card is separate from the loop.  So now there
 5    are two unbundled elements, you cannot combine them
 6    without paying twice as much.  Now, I do not know what
 7    position I want any more.
 8              But, I will tell you, we have got to make it
 9    easy so that you can get some access to some of those
10    elements -- I think Tom would agree -- that allow a
11    wireless competitor to get in and hook up into the
12    network.
13              The other thing I want to talk about is CMRS
14    flexibility.  The PCS providers, I think, with the help of
15    the FCC in October of 1996, were allowed to use PCS fixed
16    as a primary and as an NPRM, saying, how do they get
17    regulated -- are they CMRS or are they a local exchange
18    company?
19              I think it is very important to have them
20    continue to be classified as CMRS until they reach the
21    definition that is in Section 332 of the Act, which says
22    they are a substantial replacement for the local exchange
23    company throughout the State.  Those words were kind of
24    carefully -- I do not know -- who knows whether words are
25    ever carefully chosen in legislation.

 1              They seemed important at the time.  And they are
 2    words.  They must have some meaning.  So let's make sure
 3    that we use that, so we do not have the added pressure of
 4    having the CMRS services classified with State pricing
 5    regulation and entry barriers they potentially get there.
 6              The last thing is just USF.  And I am not going
 7    to hit the part David -- he already beat that.  I am going
 8    to hit eligibility.  And you have got to have a
 9    technology-neutral solution.  Everyone says that, but then
10    the States get involved and technology-neutral solutions
11    have got to deal with pricing.  Because somebody may have
12    a different price if you buy a wireless service, they have
13    to -- you know, the minutes of use in wireless may be a
14    little different, and they have to also deal with
15    geographic coverage.
16              Some States are asking you to cover such a broad
17    area that a good, economically viable wireless solution
18    that would be a lot more cost effective than any wired
19    technology that could possibly be thought of cannot meet
20    the coverage mechanisms.  And then they become uneconomic.
22    So those are a couple of things.
23              And I know I am all over.  But this one story. 
24    I have a friend in Montana who built his house in the
25    middle  of nowhere.   You know,  he has  got money  and he

 1    wants to build a nice house in the middle of nowhere. 
 2    That is great.  So he is trying to get electricity and
 3    phone service.  And the electricity charged him $40,000 to
 4    carry a line out there.  His phone service was $100.
 5              Now, I am very proud of USWest for being able to
 6    get a wire out there for $100.  I am not very proud that I
 7    am paying for his wire in my bill in BellAtlantic. 
 8    Something has got to be done to deal with that issue.  And
 9    that is a broader issue.  But it is something that does
10    actually, I believe, pervert the pricing system in
11    telecommunications, which makes it hard for anybody to
12    make an investment in a wired or a wireless environment.
13              (Applause.)
14              MR. AYLWARD:  Gerry is going to learn that he
15    advances himself faster by not attacking rich people who
16    own ranches in Montana.
17              (Laughter.)
18              MR. AYLWARD:  They will cut you in on the
19    buffalo herds.  It is kind of a neat deal.
20              Rosalind Allen is our last speaker.  She is
21    Deputy Chief of the Wireless Telecom Bureau at the FCC. 
22    She runs the Commercial Wireless/Private Wireless and
23    Enforcement Divisions and generally runs the place.
24              Previously, she served as Chief of the Wireless
25    Bureau's  Commercial  Wireless  Division,  where  she  was

 1    responsible for taking an awful lot of money out of the
 2    pockets of a lot of entrepreneurs in America.  And I hope
 3    you get it all, Rosalind.
 4              (Laughter.)
 5              MR. AYLWARD:  Prior to joining the FCC in 1987,
 6    she practiced telecom and intellectual property law at
 7    Reid, Smith, Shaw & McCloy.  And she holds degrees from
 8    Georgetown Law Center and Vassar College.
 9              Rosalind.
10                 ROSALIND K. ALLEN, DEPUTY CHIEF,
13              MS. ALLEN:  Thanks, David.
14              And thanks to my friends and colleagues at NTIA
15    for inviting me to participate.
16              And let me just be clear, I really do not run
17    the place.  Dan runs the place and Bill runs the place. 
18    But, anyway.
19              I kind of appreciate coming after Gerry,
20    because, in a way, he has kind stolen some of the thoughts
21    of I had.  And I will say, first of all, that these
22    thoughts are my thoughts.  They are not the thoughts of
23    anyone at the Agency or anything like that.  Because some
24    of them may be in the form of a little bit of a bomb
25    thrown out here sort of thing.

 1              But, in a way, I have always looked at wireless
 2    local loop as kind of being a fallacy.  It is an interim
 3    step towards something else.  Are we ever really going to
 4    have a totally wireless local loop?  No, we are not.  I
 5    mean, ultimately, people have made investments in a lot of
 6    things that are out there.  Technology is changing.  So 20
 7    years from now or 30 years from now, we are going to have
 8    something that mingles a lot of different elements.
 9              And wireless local loop, though, is a very good
10    paradigm for what you want.  Because when you think of it,
11    you think of competition that comes quickly at a
12    relatively low cost and with ubiquitous coverage.  So I
13    think it is just a useful thought, but I think it is good
14    to keep the long-term picture in mind.
15              And in that sense, I think that one way we like
16    to look at the wireless industry in general is that we are
17    at the tail end of the 271 process in the wireless world. 
18    In other words, let's look at the whole telecom process --
19    meaning the whole telecom industry -- as a whole, and the
20    RBOC's are over here and they are trying to get into
21    different areas and bundle different things, the wireless
22    folks are over here.  They already can get into all these
23    different things.  And the question is, how does that
24    happen and how do they bundle these things together?  And
25    what  kinds of  ground rules  are consumers  going to  see

 1    develop?
 2              So as we plan out a regulatory scheme for the
 3    wireless world, I think we should try to keep in mind what
 4    we want the wired side to ultimately look like.  Because I
 5    think that is kind of where we are going.
 6              When I talked to David yesterday about what
 7    should I talk about, I kind of threw out some softball
 8    topics, like maybe I can talk about calling party pays or
 9    something like that.  And David was very tough with me. 
10    And he said, no, you have got to talk about the
11    jurisdictional issues.  And that was exactly what I did
12    not want to talk about.  Because as most of you know,
13    these are real hot potatoes at the moment.  And we have
14    got them before us in a number of different contexts.
15              But I think what I will try to do is identify
16    where those issues are going to come up over the next few
17    months.  And just give you some thoughts about identifying
18    the kinds of things that are going to need to be decided. 
19    Because these are kind of difficult decisions.  And they
20    come up in a variety of contexts.  And all of them do have
21    implications for how do you fit the wireless regulatory
22    scheme into the larger competitive picture of the telecom
23    industry, or what do you want the whole telecom world to
24    look like 20 years from now -- or maybe 10 years from now.

 1    Let's hope it is sooner than 20 years from now.
 2              One area is obviously interconnection.  Very
 3    much on the minds of everyone.  Because if you do not get
 4    interconnection right, you can never have local
 5    competition.  And that is just a basic fact.
 6              The Eighth Circuit has kind of left our
 7    blueprint for local competition in a bit of limbo at this
 8    point.  And there are some jurisdictional issues to be
 9    pursued here.  I think I can safely say, because I have
10    heard a variety of representatives from other
11    commissioners' offices and the chairman's office say this,
12    that we will be looking at this -- the Commission will be
13    looking at this issue next year in some context --
14    probably the early part of next year.
15              We are going to be very interested in developing
16    a full record on these issues.  And I think you will find
17    that this will kind of be a kind of proceeding that will
18    seek a lot of specific arguments from folks on the
19    jurisdictional theories and also on some of the practical
20    implications of their jurisdictional theories.
21              And let me just leave some food for thought here
22    on the one hand.  And in this sense, I will describe the
23    extremes.  We have got a wide spectrum of views here, but
24    they tend to settle on some extremes.  And one extreme
25    would be  to say, well, you know,  332 really sets up CMRS

 1    as something completely different.  And the Eighth Circuit
 2    has sort of confirmed the view that this is completely
 3    federalized.
 4              And here, again, nothing is always that easy. 
 5    And we are asking people to talk about these
 6    jurisdictional theories, to think about them, to think of
 7    the practical implications of a totally Federal scheme. 
 8    Would this promote the speed of competition?  Would it
 9    impede it because we may have thousands of ratemaking
10    cases that need to be disposed of?
11              So I think we are looking for people to think
12    this through.  On the other extreme, I think perhaps some
13    people -- USTA and some other folks -- may also think
14    wireless has got to be treated exactly like the wire line
15    side for all purposes.  And maybe that is going too far
16    the other way.  Because there are some unique technical
17    characteristics and perhaps some unique competitive
18    characteristics here.
19              This is just defining either end of the spectrum
20    of the kinds of issues we are going to look at.  And I
21    think that all of you should start giving a lot of thought
22    to that right now, because we will be really interested in
23    hearing what you have to say.
24              And this is just kind of a broad comment on the
25    332 scheme  and the  whole "Is  wireless special  or not?"

 1    But, you know, of course wireless is special, but I think
 2    one thing that is kind of interesting to think about --
 3    and this is kind of in a way the seminal question of
 4    anything further we do in interconnection -- is let's say
 5    that the Eighth Circuit decision holds or let's say the
 6    Supreme Court turns down cert or whatever, is it incumbent
 7    upon us to try to push local competition with whatever
 8    tools we have got?
 9              I mean if we are left with 332, should we push
10    that to the max to get local competition?  The other side
11    of the question is, let's assume something different
12    happens.  Or let's assume nothing different happens.  I
13    mean let's assume that the Supreme Court takes this,
14    something gets changed, so that we kind of need to regroup
15    ourselves.  Or let's say, again, the Supreme Court does
16    not take this, the decision does not change at all.
17              Does it really make sense to have -- and here I
18    am maybe taking issue with 332 itself to some extent --
19    but does it really make sense to continue to have a
20    statutory scheme that takes one subset of the wireless
21    world, the cellular PCS folks and the mobile folks, and
22    treat them differently than, let's say, the 18 gigahertz
23    folks or the 28 gigahertz folks or the 39 gigahertz folks,
24    particularly when some of those other folks may actually
25    have a  lot more  potential to  be a  long-term competitor

 1    because of the capacity they have?
 2              I do not know.  I mean ideally I think it would
 3    be nice if we could have a statute that made distinctions
 4    on the basis of your competitive position and not on the
 5    basis of the technology you happen to use.  But that is
 6    not what the statute says right now.  And this is kind of
 7    the dilemma that I think the Commission is going to be
 8    presenting themselves as they look at this whole thing.
 9              We want competition, but what is the value to
10    treating one class of competitors different than someone
11    else who may be similarly situated?
12              So that is enough on interconnection.  Let me
13    move on, because I have a few other things that I want to
14    talk about where 332 will come up.
15              I do not know if any of you have been following
16    this, but we recently got a petition for declaratory
17    ruling from SBC that deals with some practices that are
18    very prevalent around the United States right now.  And
19    these are really class action suits that are being brought
20    the country.  And they look at the billing practices at
21    various carriers.
22              The arguments that are being made are that,
23    really, the little FTC laws of the various States are
24    calling certain billing practices of various wireless
25    carriers fraudulent.    They are  challenging things  like

 1    roaming charges, their hand-off at borders of different
 2    carriers, things of that sort.  They are also challenging
 3    rounding up to the next money -- things of that sort.
 4              And I think it is a very interesting question
 5    for the Commission, because one of the great benefits that
 6    consumers have right now in the wireless world, where they
 7    have five competitors in a market, is that they can choose
 8    and evaluate and compare the different plans.  And they
 9    are really living in the post-271 world here, because they
10    can pick that bundle of services that makes most sense for
11    them at that price.
12              On the other hand, if you kind of get the courts
13    involved in this, you could have a situation where they
14    are ratemaking basically, and they are dictating exactly
15    how these services ought to be provided.  So I think this
16    is a balance of the legitimate consumer protection powers
17    of States that want to ensure that consumers know what
18    they are getting and they are truthful and full
19    disclosures against getting too involved in exactly what
20    kinds of rates and what kinds of services folks are
21    getting.
22              Let me just very quickly touch on a final thing.
24    Universal service has come up, and I know it came up this
25    morning.  I will just bring it up again.

 1              I think that perhaps this is an unpopular view
 2    among this audience, but I think that with being a
 3    competitor comes certain responsibilities, as well.  And I
 4    think there are ways to balance those goals.
 5              I read with a lot of interest the other day the
 6    Washington Public Utility Commission decision, where there
 7    is really a move to make it much easier for wireless
 8    carriers to become eligible carriers and get subsidies as
 9    a result of that.  And I think that is a really good move.
11    And, frankly, every time -- and it happens very
12    frequently -- I have a lot of wireless folks come in with
13    these great ideas for doing things that will serve kind of
14    underserved or high-cost areas.  I kind of tell them,
15    look, you know, try to be an eligible carrier.  This is
16    great that you are doing this.
17              I recently talked to a company that, as a result
18    of a partitioning and disaggregation deal, is going to
19    provide an extremely high capacity mobile service
20    throughout the Southeastern United States.  That is great.
22    They seem to have a lot of the earmarkings of being able
23    to be an eligible carrier.  And I think that it would be
24    great if the Federal Government can work, together with
25    the States, on promoting those types of initiatives.

 1              Because absolutely we want things to be
 2    technology neutral.  And absolutely we want people to be
 3    compensated for their investment.  But, at the same time,
 4    we want people to understand their responsibilities.  If
 5    they want to be a competitor to the local exchange
 6    network, that does involve some responsibilities.
 7              And that is it.  I won't take up your time.
 8              (Applause.)
 9              MR. GATTUSO:  I would propose we go for about 15
10    minutes, followed by a 10-minute break.
11              MR. AYLWARD:  Since we used up most of the time
12    yakking at you, why don't we just not yak anymore and turn
13    it over to any of you that might have any questions.  And
14    if you do not, we will make up some to fill the time.
15              QUESTION:  Ms. Farquhar pointed out some of the
16    need for a comprehensive view of the obstacles to adoption
17    of wireless local loop widespread in the United States,
18    and saying that the docket-type approach, the incremental
19    approach, might not be the best way to do this.  Do you
20    see any impetus over at the Wireless Bureau to take this
21    kind of overarching view of sweeping away the regulatory
22    underbrush?
23              MS. ALLEN:  Well, here I will take off my policy
24    hat a moment and I will put on my practical hat.  Yes, in
25    the sense  of people are doing a lot  of talking and a lot

 1    of thinking within the Commission about a comprehensive
 2    game plan, and one that will get us to the place we want
 3    to be.  But the best way to do that really is through
 4    breaking out the issues and making sure that people
 5    understand the game plan by showing the relationship
 6    between those issues.
 7              But I think, in terms of some kind of a monster
 8    docket that tries to do this in one fell swoop, is
 9    probably not going to be the most productive way to do it.
11    So, yes, I think Michele, as a former Chief of the Bureau,
12    knows.  I think that is what she had in mind, and that is
13    really what we want to do.  We are doing a lot of thinking
14    about that right now.
15              And we hope, through the items that come out
16    over the next year from the Wireless Bureau, that that
17    will start to unfold -- how the various pieces of the
18    puzzle start to fit together.
19              MS. FARQUHAR:  Let me just add a side comment on
20    that.  I think it will take the Wireless Bureau and the
21    Common Carrier Bureau working closely together and
22    integrating the pieces more closely than they have in the
23    past.  I think they both Bureaus were so inundated by the
24    work from the Telecom Act, and that they tried as best
25    they  could, and  did, to work  together.   But I  think a

 1    closer level of coordination and input on both sides will
 2    help.
 3              And it is ironic that I think the spectrum
 4    policy is really fueled, some of the movement toward
 5    wireless loop, more than local competition policy has. 
 6    And I think that has got to change.
 7              Tom identified in particular some real barriers
 8    there.  And so did some of the earlier panelists this
 9    morning.  Talking about the exact cost of going out and
10    buying a local loop on the wire line side.
11              MS. ALLEN:  I agree with Michele there.  And I
12    just wanted to say, in terms of what are things, like
13    nowadays, you know, most of the crush, apart from the 271
14    applications that the Common Carrier Bureau has is kind of
15    over at this point.  And we have had an opportunity, over
16    the past few months, to cultivate a very close working
17    relationship with them.
18              And I should also add that Bill Kennard has made
19    very clear that it is a key priority of him to have the
20    Bureaus working in a coordinated fashion with each other
21    and to share their ideas about the same issues, so that we
22    can come to the best of all possible policies when we
23    finally make a decision.
24              So that is very much what is going on.  The
25    Common Carrier  Bureau  has almost  an entirely  brand-new

 1    front office of folks, with a lot of fresh ideas and a lot
 2    of preexisting relationships with folks in the Wireless
 3    Bureau front office.  So we really have done very well
 4    recently in developing that kind of relationship.
 5              MR. AYLWARD:  I will pose one to you, Roz.  I am
 6    sorry, did you have a question?  Go ahead.
 7              QUESTION:  Yes, I have got a question and I want
 8    to follow it up with a similar comment.
 9              We have heard two highly skilled advocates who I
10    think represent different sides of the picture, but it was
11    never made clear who exactly they are advocating for.  But
12    one can assume that they advocated for different sides of
13    the picture.  One side said we should encourage wireless
14    local loop and do all that we can to advocate.  Another
15    one said that we should not focus so much on wireless
16    local loop, because these unbundled network elements, with
17    this ridiculously low TELRIC pricing -- to quote -- that
18    is not my opinion, that was what was implied -- that
19    should take care of all of this business.
20              I would like to put out to the table for
21    comment:  What would be the thoughts about let's not
22    encourage either technology, let's just get the roadblocks
23    out of the way, let the market take it, and see which one
24    is the better technology, or is there a third technology,
25    or fourth or fifth or  sixth, that would provide what  the

 1    markets wants from a cost and technology and efficacy
 2    basis?
 3              MR. AYLWARD:  What do you mean by your question?
 5    Is your question that there should be no barriers, and
 6    anybody who can go set up a telephone system is allowed to
 7    do so?  Or, as Roz said, I do not think there is anybody
 8    in this room who believes if you do not have
 9    interconnection and you do not have it right it will not
10    happen.
11              QUESTION:  No, I am not saying anyone can set it
12    up.  I am saying different people on the panel stated
13    different barriers to entry and gave different solutions,
14    in terms of encourage this technology, encourage that
15    technology.
16              Now, how about --
17              MS. ALLEN:  I do not know, maybe I was not
18    paying as close attention as I should.  But I do not
19    really see that anything that any of these three folks
20    have said is inconsistent with each other.  I think that
21    you are not going to have -- you know, yes, pushing
22    wireless is a very good solution to getting competition in
23    there quickly.  But can you serve residential customers
24    effectively without UNE's?  Probably not.
25              It depends on what you want to do.  And  I think

 1    that the kind of paradigm you express is very much what
 2    the Commission has been doing over the past few years.  We
 3    are getting away from the central manager view of this is
 4    what you ought to provide and you cannot provide this
 5    here, you have got to do that.
 6              So we want to make people kind of as able to
 7    respond to market forces in their business plans as
 8    possible.  And we do not want to get in the way.
 9              So I kind of think what all three of these guys
10    are saying was completely consistent with each other.
11              MR. SUGRUE:  If I could just try to harmonize. 
12    One way you would let the marketplace work, arguably,
13    would be if you think these TELRIC prices are -- and I do
14    not use the word "ridiculous" -- but are low, or too low,
15    in a competitive market, if someone is charging prices
16    that are higher than it would cost you to provide a
17    competing service, either because they are earning
18    monopoly profits or they are inefficient and you can do it
19    better -- you have got a better technology or otherwise --
20    the way the market takes care of that is you can enter and
21    undercut their price.  And that is how prices are driven
22    toward TELRIC or any other economist's theoretical model.
23              One of my concerns is just -- you know, this
24    panel is very experienced.  We all go back a long ways. 
25    We have all probably dealt  with cost studies.  It  almost

 1    drove me out of this business for a while, because it is
 2    so daunting and artificial.  And we have spent a lot of
 3    time in the regulation of telecom moving away from
 4    detailed cost studies.  This is what incentive regulation
 5    and price caps and social contracts and competition is all
 6    about.
 7              And we have sort of now elevated cost studies. 
 8    Cost studies have come back with a vengeance.  I mean they
 9    are driving everything now.  And I would rather see -- I
10    would really like to see facilities-based competition.  I
11    am not speaking on behalf of my clients.  They probably
12    would not.  This is just me speaking.  But what I see is
13    somehow the Commission wanting to sort of jump-start that
14    competitive process.  It is actually sort of pulling the
15    wires off the sparkplugs for what would be long-run
16    competition.  And I think we are sacrificing long-term
17    gain for short-term benefit.
18              MR. AYLWARD:  But it is an absolute fact that
19    you will never have competition unless you have resale. 
20    If you look at the history -- and history is a good thing
21    to look at -- we never would have had long distance
22    competition if Bill McGowan had to get in the business to
23    build an entire national network everywhere before he
24    could really start serving.  You have got to have resale.
25              And I  agree -- I mean I  think, to the extent I

 1    represent any dog in this hunt, it is a facilities-based
 2    carrier.  And I agree with you -- or it is a bunch of
 3    carriers who have not decided to get in the market -- but
 4    you are going to have to have facilities and you are going
 5    to have build up over time.
 6              The cost of capital to get into this market,
 7    almost everybody that is coming in as a junk bond
 8    company -- the new ones.  They are paying 500 basis points
 9    more than the box.  So you have got to be able to build it
10    up over time or nobody is ever going to invest.
11              MR. SUGRUE:  And if I could just reply.  But we
12    never did require AT&T to unbundle its network.  There was
13    resale and there was interconnection to the local
14    exchange.
15              MR. AYLWARD:  We tried.
16              MR. SUGRUE:  I know.  The Commission twice
17    rejected that, once in the mid-eighties and once in
18    Computer 3.  Because it said no, what we want to do is
19    encourage MCI and Sprint and so forth to build their own
20    facilities.  This is the part of the network we think can
21    be competitive.  So I agree with you in part.  But I think
22    we have taken it one step a little too far.  That is just
23    my view.
24              QUESTION:  And I completely agree with what has
25    just been  said.  You  cannot have competition  unless you

 1    have both UNE's and competing facilities that can do it. 
 2    And I think that if we take the significant barriers out
 3    of the way and see, down the road, 5 years down the road,
 4    or 2 years down the road, does the comparative cost of
 5    wireless local loop -- how does that compare with the
 6    comparative cost of putting in physical loop versus the
 7    UNE's, buying an unbundled loop.
 8              And I would venture to guess that shortly we
 9    will see these, quote, quote, ridiculously low unbundled
10    loop prices come down even lower as competing technologies
11    shoot the market price below.  And we will see whether the
12    response is we cannot provide at this price or whether the
13    prices will drop to whatever the market is.  I hope you
14    are right.
15              MR. SALEMME:  Can I just make a point, just
16    because it is my only opportunity to do this so I am going
17    to play off what you said.
18              I think one of the things you said is let's let
19    the marketplace decide which technology, whether it is
20    wireless or wired or UNE's or resale, just let it decide. 
21    I mean that is not going to happen, because we do not have
22    a free market anywhere.  We have an incumbent local
23    exchange company that is monopolist, that controls
24    facilities.  You have to make interconnection agreements
25    with them, without any leverage in what you get.

 1              I can tell you, in some of the interconnection
 2    agreements that I have signed, that there are parts of
 3    them that I get something that says, I have the right to
 4    get reciprocal compensation on IP.  I was forced to sign
 5    something, because I had to get in the service, that said
 6    if that law changes any time, I will pay back money, I
 7    will pay rates that are outrageous.  There are just
 8    different things that you are forced to agree to.
 9              So we do not have a free market, so you cannot
10    do it.  So public policy has to take a position here.  And
11    on spectrum auctions, for instance, it is great to say --
12    and we love auctions and we think that you should have as
13    much flexibility in picking any services you want -- but
14    spectrum auctions were to assign spectrum, not to allocate
15    spectrum to services.
16              So right now, when you have a spectrum auction
17    and you just say you can provide any service with that
18    spectrum, people are all going to take mobility, because
19    that is what the banks want.  That is what is going to get
20    you the cheapest financing.  That is the sure bet.  People
21    are not encouraged to say, let's take more of a winger on
22    this thing economically and do local service.
23              You almost have to get back to having public
24    policy dictate what the real allocation of that spectrum
25    is for, and then only use the auctions for the assignment.

 1    And I think the role for public policy here is to help
 2    make the market competitive.
 3              MR. AYLWARD:  There is another paradigm here,
 4    too.  Which is the FCC did a lot of really good things
 5    with wireless.  From the beginning, it did things quite
 6    differently than wire line.  And it brought in
 7    competition.  It did not regulate rates.  The Congress and
 8    the FCC decided not to regulate rates.  And we are going
 9    in now to digital, all by themselves.  Nobody ordered them
10    to put in digital.
11              So there is an interesting model there of what
12    happens when government does not regulate within market.
13              MR. SALEMME:  And that is exactly what I am
14    saying.  With five of six wireless carriers in a market,
15    we have seen some tremendous competition that because of
16    entrenched positions we are not seeing yet on the local
17    telephone side.  Although there was actually a proposal
18    mentioned by someone -- and I do not remember who -- about
19    something that is on the table now to put regulation back
20    into the rate structure of wireless mobile, with the
21    calling party paying.
22              And my first thought is, as a cellular customer,
23    oh, that is a great thing; I no longer have to pay for
24    incoming calls.  But then I start thinking, well, as a
25    wire  line customer  or  as the  person  making the  call,

 1    especially with LNP, how am I going to know whether the
 2    call is to wireless or wire line, especially as we are
 3    talking now all day about the merging of these
 4    technologies?
 5              And as an amateur economist, I look at it and
 6    go, wait a second, the prices are already dropping down,
 7    and the way these five or six carriers in a market are
 8    going to differentiate themselves, someone is going to
 9    come up with something that is going to make each -- you
10    know, whether I want to pay more for outgoing or incoming
11    or whatever, the market -- let's see how the market
12    settles before we start thinking about putting another
13    piece of regulation back in.
14              MR. AYLWARD:  All right, we are at the end of
15    the panel.  We have resolved all the regulatory issues, so
16    you all enjoy whatever you do next.
17              (Laughter.)
18              MR. AYLWARD:  I am sorry, was there one more
19    question?
20              QUESTION:  I want to bring up the issue of roof
21    rights and inside wiring with regard to those wireless
22    CLEC's, like WinStar.  I have heard from trade reports
23    that many of them are having difficulties with these roof
24    rights, because the prices are getting astronomical, and
25    with inside wiring  also constituting  a major barrier  to

 1    entry into the local loop.
 2              I just want your views on what Federal
 3    policymakers can do to ease those barriers to entry. 
 4    Specifically, Gerry, since you work for NextLink and you
 5    are a CLEC yourself, but a wire line CLEC, but any views
 6    on the wireless side, and Tom as well.
 7              MR. SALEMME:  I think David mentioned in the
 8    beginning that you have Congress that has stepped up and
 9    said that if you put a dish on the roof, you have to be
10    allowed to do that.  But because it is an antenna
11    providing telephony and cable, Congress and the Federal
12    rules have not preempted that.
13              I want to make it as easy for David Turetsky and
14    Teligent to get on those roofs as possible so we can
15    compete.  We have a similar problem getting inside wiring.
17    I mean there are times when we need to be inside a
18    building and it is hard to get to the closet that has
19    those facilities to hook up to those customers.
20              So those are the type of barriers that are
21    latent, you know, remnants of the monopoly that are not
22    even controlled necessarily by the ILEC but are just out
23    there, which impede the market from acting as a truly
24    competitive market.  So you just cannot depend on the
25    market alone without  some type of intervention  by public

 1    policy and governments.
 2              I would say that you have got to get a new line
 3    of demarcation.
 4              MR. AYLWARD:  But it is not clear to me at all
 5    that the law does not cover it right now.  I mean if the
 6    FCC wants to interpret the law right now, why is it any
 7    different to get telephone and video and data as opposed
 8    to I Love Lucy?  There is a law that says you get access
 9    to this stuff.
10              MR. SALEMME:  At a reasonable price.
11              And there is a court case, Brooks Fiber brought
12    a case on a wired in I think San Diego.  And that is still
13    being litigated now -- to say that we do have the right to
14    access.  And there are a lot of State laws.  I think there
15    are 28 States that actually have laws in place.  But,
16    again, going through the process of making it happen is
17    just a delay in competition.
18              MR. AYLWARD:  It will not be an issue 5 years
19    from now.  Five years from now, 10 years from now, there
20    is no commercial tenant that would allow its landlord to
21    play the kind of games that some of them are now.  But
22    right now -- and I am not picking on landlords -- right
23    now, some are saying, gee, I just found out I can charge
24    the wireless guy 1,500 to 2,500 bucks a month to put a
25    tower on the  roof.  Here  comes WinStar and they  want to

 1    put a little thing on the roof; well, that is a tower and
 2    I will charge them 1,500 to 2,500 bucks.
 3              There is nothing wrong about that.  The ILEC's
 4    have nothing to do with it.  But, after a while, customers
 5    will demand access and the problem will take care of
 6    itself.  But it is an up-front investment issue today.
 7              MS. FARQUHAR:  And part of my message was why
 8    wait 5 years for that to happen?
 9              MR. AYLWARD:  I agree.
10              MS. FARQUHAR:  We should remove the roadblocks,
11    and identify them and make it a priority right now.  Not
12    so that wireless can be advantaged in any way, but so that
13    it will not be disadvantaged to the extent it is right
14    now.
15              MR. SUGRUE:  And I will just add, speaking a
16    little bit on behalf of my clients, that I am sure while
17    many of the competitors think this is a grand conspiracy
18    between the landlords and the incumbent providers, it is
19    generally not, from the things I have looked at.
20              MR. AYLWARD:  I agree.
21              MR. SUGRUE:  It is the landlord sees it as a
22    profit potential.  And it is rent that the landlord wants
23    to extract in almost the classic sense of the term.
24              MR. AYLWARD:  Since there are no real estate
25    interests, we are all safe saying whatever we want to do.

 1              (Laughter.)
 2              MR. AYLWARD:  Thank you all very much.
 3              MR. GATTUSO:  Thanks to our panelists and our
 4    moderator.  Why don't we get together again in exactly 10
 5    minutes, which would be just before 3:30.
 6              (Recess.)
 7              MR. GATTUSO:  I would actually like to be the
 8    warm-up act here and review where we are at this point in
 9    the program.
10              We're at three-quarters of the way through the
11    day and it actually probably feels like we're near the end
12    and in fact in some ways we are.  In this very short day
13    you may not have realized how much you've learned about
14    wireless loop, but if you recall we started the day
15    talking about the various technologies and in fact there's
16    not a single technology but several technologies,
17    different places in the spectrum, different ways of
18    looking at wireless local loop, understanding what we're
19    dealing with here.
20              We then had a session on universal service,
21    which is really both a way to look at what the potential
22    is for whatever wireless local loop is to serve lots of
23    customers.  That would be the residential customers, rural
24    areas, urban areas that have decaying copper, as we like
25    to say, and really that  very much involves the Government

 1    and Government policies for universal service.
 2              Speaking of Government, that's where we picked
 3    up after lunch, talking about all sorts of regulatory
 4    issues, and now we come to what I call the pay-off panel,
 5    the one that really gets into, I hope, the questions of
 6    whether this is going to be a competitive alternative, if
 7    it's going to be a competitive service, if it's going to
 8    bring competition to telephony markets, and if it's going
 9    to be economical, and that could be in general, or that
10    could be whether it's residential.
11              I'd also point out that as we've gone through
12    the day we've had one Government speaker on every panel. 
13    Earlier we started out having a moderator, Ken Allen, from
14    NTIA's own laboratories in Colorado.  The last two
15    sessions had Jeanine Poltronieri and Ros Allen from the
16    FCC's Wireless Bureau, and I was kind of in a fix for a
17    while on this panel.  I had no Government speaker.
18              I didn't really know what to do, so I called up
19    Dale Hatfield, and I'm so thankful -- Dale, thank you so
20    much.  He said, all right.
21              15 years of consulting -- I'll go back to the
22    FCC just for you.
23              So thank you, Dale, and that does segue really
24    nicely into Dale's biography.  Dale recently rejoined the
25    FCC and Government service after 15 years.

 1              During the time he was away he did have -- he
 2    had founded and operated a telecommunications consulting
 3    firm based on Boulder, Colorado.  He advised on a wide
 4    range of technology, economic, and policy and regulatory
 5    issues.
 6              He also served on the board of directors of a
 7    public station in Denver, KBDI, and before 1982 Dale was
 8    Acting Assistant Secretary of Commerce for Communications
 9    and Information.  In other words, he was head of NTIA for
10    a while.  He's an alumnus of our organization, and also
11    was chief of the Office of Plans and Policy at the FCC.
12              He also held positions at the Office of
13    Telecommunications Policy in the Executive Office of the
14    President.  He's taught courses in telecommunications
15    technology, and has taught a course in telecommunications
16    policy in the interdisciplinary telecommunications program
17    at the University of Colorado at Boulder.
18              He was a founding director of the
19    telecommunications program at the University College,
20    University of Denver.  He holds a BSEE from Case Institute
21    of Technology and an MS in industrial management from
22    Purdue University.
23              Dale, I introduced you to introduce the panel. 
24    Thank you.

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