Tech Industry

All roads lead to the FCC

Palo Alto, California--In any other age, FCC chairman Reed Hundt would likely have been a faceless bureaucrat.

CNET Newsmakers
March 17, 1997, Reed Hundt
All roads lead to the FCC
By Margie Wylie
Staff Writer, CNET NEWS.COM

Palo Alto, California--In any other age, FCC chairman Reed Hundt would likely have been a faceless bureaucrat.

No offense to the chairman, but Hundt's high media profile doesn't derive from the lanky lawyer's considerable personal charm. Hundt is guiding the $189 million a year, 2,000 employee Federal Communications Commission through the birthing pains of the information economy.

The agency, charged with regulating interstate and international communications by radio, television, telephone, satellite, and cable, has become the crashing point for media convergence, as phone companies look to sell video, cable companies enter the Internet market, and Internet companies start taking nibbles out of both TV and phone company's profits.

In his role as arbiter, Hundt hasn't always been popular; speculation has surfaced more than once that the chairman wouldn't serve his entire five-year term. Four years into the fray, the 48 year-old is not only still there, but he has a string of successes under his belt.

Perhaps his greatest achievement has been turning the behemoth agency on a dime to implement a complex 1996 law that begins deregulating communications. In other words, Hundt has been charged with being the instrument of his agency's own destruction. Strangely enough, he's taken the task with gusto, and persuaded his staff to do the same. Equally comfortable in front of a TV camera or discussing complex technical details, Hundt inspires. Once unreachable after 4:30 p.m. on the dot, FCC staff can now be found in their offices after hours and on weekends.

A great deal of the credit is due Hundt, who's responsible for turning the sleepy, legalese-plagued, insular agency, into a wide-awake, still legalese-plagued, but far more open forum. The FCC was possibly the first government agency to accept comments from the public by email. And the public has shown its interest. The agency received a record 400,000 email in less than a week opposing phone companies' recent proposals to levy per-minute local access charges on Internet service providers. And not only Internet nuts use the service. The second most popular issue for email has been children's TV programming.

Probably the most notable success for Internet watchers, however, is what Hundt hasn't done. He has repeatedly resisted attempts to regulate the Internet, taking a hands-off attitude to the fledgling network. He's also repeatedly opposed levying telecom taxes on the Net, as well as any attempt to bring it under new regulations. Still, Hundt admits, the FCC may be the right agency to perform the Net's only real regulatory function right now: passing out Internet domain names and numbers. And he won't entirely rule out the possibility of regulating Internet content, if pushed.

An ex-school teacher himself, Hundt has also gone to the mat to see that libraries and schools get subsidies to fund Internet connections from the telecom reform bill. He, however, recently compromised away almost half those subsidies.

NEWS.COM chatted with Chairman Hundt in his hotel on a trip to California earlier this month about the future of the Internet: its regulation, whether it can really help our schools, and how the FCC can help encourage more bandwidth.

NEWS.COM: The Internet has been essentially free of regulation. How long can that last?
Hundt: Well it certainly can last as long as I have my job.

A lot of folks would like to see the Internet regulated, especially the telephone companies which are looking for the FCC to levy per-minute charges on Internet access. How long can you resist that sort of pressure?
It's certainly true that the telephone companies would like to have per-minute charges for all interstate communications and that means all Internet communications. In fact, if we took today's system of interstate charges for long distance calls and applied it to the Internet, it would mean on average 6-cents-a-minute tax on Internet communication: I'm against that.

NEXT: Regulating the Internet


Age: 48

Claim to fame: Reinventing the FCC

Former lives: School teacher, antitrust lawyer, advisor to then-Senator Al Gore

Computing preference: No comment

CNET Newsmakers
March 17, 1997, Reed Hundt
Regulating the Internet

But that doesn't necessarily mean it won't happen.
It means that I won't vote for it. There are three other commissioners at the FCC.

Why are you against the "Internet tax"?
Well, I think that right now the access charges are a tax on long distance traffic: You make a long distance call, it costs you on average 12.3 cents a minute. Half of that is a charge paid to the local telephone company by the long distance company for access, for terminating the call on one line, for taking it up on the other line. Half of your long distance bill--6 cents a minute. That's a lot of money.

Now that's a tax or subsidy that you're paying to keep the basic dial-tone service low. You're not aware of that, but you're paying a lot of money for that. Everyone in America is.

Do you think that Internet traffic ought to pay that same tax or that same subsidy? My view is absolutely not. What we ought to do is get away from the subsidized idea, get away from the idea that we need to take money on a penny-per-minute basis from a business user and give it to a residential user, or take money from New York and give it to some other state.

We don't need to have a subsidy-prone, subsidy-rich attitude toward the Internet world. We can say, "Look, pay the real cost of the telephone line for Internet access." And after that let the technology drive the costs lower and lower and lower every year, the same way that it drives the cost of memory lower and lower every year, the same way it drives the cost of computers lower and lower every year.

And is that part of the reason that the telephone companies' requests on this have been turned down repeatedly by the FCC?
Well we're looking at it again because they've asked the question again. And all I can tell you is where I stand on it, which is I'm just going to say no. But there are three other commissioners and I don't know what they'll do.

What about the telephone companies' argument that they have to replace the switches because the average voice call is only three minutes and Internet users are logging on forever?
Well I think that if they would get with the program and provide essentially a data network that overlays the existing phone network, and if they didn't have subsidies, they could charge what the real cost was for that data network.

But they say "We can't afford that!"
Oh everybody says that to me on many, many issues and sometimes they're right and sometimes they're wrong, but on this particular issue I think the key is to adopt a very different approach, which is a deregulated, nonsubsidized approach and let the consumer pay the real cost, not some artificially high price that represents a hidden tax.

There have been some criticisms about the way that the National Science Foundation hands Internet names and numbers. Why is a private company handing out what many consider to be a public resource, the same as radio spectrum? Why isn't the FCC handing those out?
I think that's a good question. I think there ought to be a public debate about that. I think it makes a lot of sense to at least consider having the FCC take on this particular job.

The particular job of?
The job of making sure that domain names are available and accessible and that copyright, for example, is respected. I don't think that I ought to be able to get "," it seems to me that there's a copyright issue there. It seems to me that it ought to be the case that domain names are like mailboxes or addresses, right? Anywhere there's a relationship between the name, the email address, and the location of the person. And that is not the case now and I'm not sure that we've really got a good system at work.

What about the portability of IP addresses? For example if I buy my IP address through an Internet service provider right now, I really can't move it because big networks wouldn't route my traffic, even if I could take my IP number with me.
Yes, this is a non-trivial issue technologically, but it is very, very similar to the number portability problem of telephones. Right now you've got a phone number, you put it on a business card, you've memorized it, you've told other people about it. And if you want to switch telephone companies, because you like the competition and you get a better deal from somebody else, you don't want to have to switch your phone number. You want it to be portable.

When you switch long distance companies from AT&T and MCI and they send you a check and they treat you nicely, they take you out to dinner, they get you a car, they do whatever they need to get you to switch long distance companies, they don't tell you to change your phone number. So we have put in place a number of portability rules that are going to require that the local telephone companies rig their software to allow you to carry your phone number to a different telephone company. That's exactly what needs to be invented and put into place with respect to email addresses.

And maybe IP addresses and domain names?

NEXT: Seven dirty words and the Net

CNET Newsmakers
March 17, 1997, Reed Hundt
Seven dirty words and the Net

With the almost sure defeat of the Communications Decency Act of 1996, the American Civil Liberties Union has said that it hopes the Internet can bring wider First Amendment rights to other media that haven't traditionally enjoyed full freedom of speech. As the media starts to converge and the Internet looks like TV and looks like broadcast radio, how do you regulate that?
Well I don't think you need to start with the proposition that if we don't understand it, we need to regulate it. I think the Internet can really be the most democratic way of communicating that has ever been seen in the history of humanity--that really can happen.

The problem of course is that not everybody really has access to the Internet because not everybody has the tools. That's really at the core of why we ought to make sure that every library in the country is a computer gateway for any citizen who just wants to walk in. Shouldn't it be the case that every single child in this country who wants a email address ought to be able to go to the library with their parent, get a library card and along with the library card, get an email address if they don't want to have one at home or can't have one at home because they don't have the money to pay for a computer?

But right now the FCC does put some restrictions on what can be broadcast. What happens when Hustler decides to stream video over the Internet? The FCC has spoken out on what's appropriate for children and what's not.
Well, broadcast is a medium that is not the same as the Internet. Broadcast comes into your home, you turn the TV on, and you never know what's going to come next, right? They don't tell you in advance whether a show is or isn't going to be appropriate for kids except for now, just recently, they started to give ratings that give at least a little bit of information. But fundamentally you never know what's going to hit you with television. This is not the same as the Internet where you do have the power of choice and the power of selection.

Should the FCC have anything to say about content on the Internet? Any restrictions at all?
Well you could ask me what I really like to see on the Internet on a personal level and you could applaud our FCC Web site, but I don't think we need to be involved in content censorship on the Internet.

NEXT: Education and universal access

CNET Newsmakers
March 17, 1997, Reed Hundt
Education and universal access

Even if we can wire every child to the Internet, can that really solve our educational problems?
Well I used to be a school teacher before I was a lawyer. It was a long, long time ago, but I remember this very, very clearly: We did not have any resources for the kids in the classroom. We didn't have books, we didn't have modern maps, we did not even have audio-visual equipment.

If you had Internet access in every classroom in this country, you would automatically have the greatest step forward in terms of improving the quality and the equality of education that has ever been seen in the public schools in the United States because the Internet is, as everybody knows, a world of resources available without significant expense. So that's why we want to connect every classroom. The very first day I got this job three-and-one-half years ago, I said that was our No. 1 goal--and it still is.

Let's talk a little bit about universal access. When telecommunications reform passed there was some language in the bill that led people to believe that as part of universal access, lifeline access--the program for low-income households?would include some sort of basic Internet access. That's not turning out to be the case. Why?
Well I think that if you can spend $2,000 on a computer you do not need a dollar or two dollars a month to give you a special subsidy to have access to a telephone line.

But you can spend $350 on a WebTV. In the poorest parts of cities, where less than 50 percent of people have telephones, over 60 percent have cable TV, that seems to make sense.
True. What's your drift here?

Why not include minimum Internet access to give the poor, as you say, the educational opportunities and the resources of the Internet because it's possible now to get on the Internet with less than a $2,000 computer?
People who are truly of low income already do get lifeline service, and that's a perfectly good idea and that will connect them to telephone lines. But if you're suggesting that in addition we should subsidize providing personal computers to everybody in the home or WebTVs, this is not something that I think is a good idea in the country.

I think that if you're very, very poor, to get onto the Internet what you ought to be able to do is walk down to the public school or go to the library, and then register your name, get your library card, enroll your kid in the school. That's the way that you ought to have guaranteed access to the Internet.

I know what you're saying, but it seems to me that a very, very workable solution is to have libraries and schools become community centers where anybody can get a computer, not a WebTV, but a real personal computer that will give them the vehicle to ride the information highway.

Now this is very, very inexpensive and easily achievable. And I have to tell you that on March 11 I'm going to be at a Senate hearing where I imagine a lot of people are going to say, "No we shouldn't even do that." And I anticipate that there will be a lot of controversy because I think all telecommunications providers ought to pay to make libraries and schools community centers for everyone in the neighborhood. I think that's what the law says. I think that's good for the country, but boy, I'm getting a lot of heat about it.

NEXT: Bandwidth, spectrum, and competition

CNET Newsmakers
March 17, 1997, Reed Hundt
Bandwidth, spectrum, and competition

The FCC held a bandwidth forum earlier this year: Is there a bandwidth problem on the Internet?
Sure. The Internet is like building a freeway and as soon as it's built everybody drives on it and the next thing you know you have a big traffic jam at the cloverleaf. And there's a number of different points of congestion. Now a lot of these points of congestion can be solved by simply adding more routers. And that's why Cisco and 3Com make a lot of money.

But some of these congestion points are because we have very, very skinny pipes, very narrow pathways. I'm talking about the connections from the home to the first switch, the so-called last mile or local loop, which is basically the telephone line. This is not a computer-friendly means of communication.

It's not the big bandwidth, fat pipes that anybody really wants. That's why we're so busy trying to promote competition in the local exchange or telephone market because we would like competitors to be able to come in and be able to provide big, fat bandwidth, big pipes right to the home. I think bandwidth ought to be like pizza: You should pick up the phone and order it and say "I'd like a lot of bandwidth please" and maybe they will give you a pizza along with it.

So what the FCC can do to accommodate bandwidth is to encourage competition?
That's exactly right.

What about some of the alternatives for fattening up skinny lines, what part can the FCC play in encouraging ADSL, ISDN, or maybe cable modems?
Well I think that with respect to ADSL for example it's probably going to be necessary to have a rule that allows an ADSL provider, particularly an unswitched ADSL provider, to come in and lease or rent the last mile or the local loop, disconnect it so to speak from the first switch, and then route it differently into the public switched network.

What does that mean in English?
It means that if you want to compete you ought to be able to borrow or rent the last mile from the existing telephone company. Now that's why you have an FCC, to write rules that make that possible so that the incumbent monopolists can't just say no.

What about options like the @Home cable network?
I guess the answer is I really don't know yet. You know, cable is in a period of uncertainty right now and all of us would like the industry to be more successful because it's a big force for competition.

You've recently proposed that radio spectrum for wireless services should be like private property; that it should be allowed to be resold, whereas right now it's licensed as a public resource. Is that a little bit like selling an acre of Yellowstone Park and saying, "Now you can resell it and use it for anything you want"?
I don't think spectrum should be like private property--it's public property. I think it ought to be leased to people for private use, but I think that every time we lease the public property for private use we ought to ask ourselves what is the public interest.

So what I would do is I would say if you want spectrum to use for digital television, set aside five percent of the programming time for public purposes. And then you might say to me "Well, like what for example?" And I would say "Well, for starters give a billion dollars of advertising time from this public slice of the spectrum to political campaigns so that it would not be necessary for them to raise that money. Then we would have the major part of a solution to the campaign finance problem."

But it would still remain in the public domain?
Yes, it would be a lease of public property for commercial purposes in the same way that you lease a piece of Yellowstone for the concession stand.

What about opening up new bandwidth spectrum for wireless communications?
Let's get more bandwidth out there. Let's let people have lots of leases to select, to buy at auction, to use for private purposes. Let's let the wireless communications' economy grow, grow, grow. Let's just make sure that as we do this, we reserve slices of the spectrum and chunks of time for public purposes where we don't think the market will give us everything that we might want.

What about the new very high-spectrum wireless services, those that go above 40 MHz?
It is part of the solution. I think that with respect to the very high bandwidth, to frequencies that characteristically have not been able to be used for commercial purposes, we ought to have an anything-goes attitude and let people invent and use the spectrum in ways that right now we really can't imagine.