FEBRUARY 8, 1996
JIM LEHRER: Now, to the man who has much responsibility for making all of this work. He's the chairman of the Federal Communications Commission, Reed Hundt. Mr. Chairman, welcome.
REED HUNDT: Thank you very much.
JIM LEHRER: Many words have been used today and before to describe what this bill or this law means to telecommunications in this country. Tell us in your words in an overview what this means.
MR. HUNDT: I'd call it the "Invest in America Act," because the purpose of this bill is to open all communications markets to competition and all the businesses as a result of that will be investing even more in our communications sector. The second investment we'll be making is in job creation, because that competition will cause overall a growth in jobs. And the third investment that this new law makes is in our children because this new law makes real the promise that the President asked us to all arise to in the State of the Union in '94 and again in '96, specifically the promise to put communications technology in every classroom of every school of every county in this country.
JIM LEHRER: So this--the words--the sweeping words are justified?
MR. HUNDT: The sweeping words are justified. The communications sector is the big driver of our economy right now. It makes productive all of our businesses. It's a seventh of the economy going to a sixth, going to a fifth, to get right our policies in this part of the economy is crucial to the country's success in the 21st century.
JIM LEHRER: All right. Let's go through some of the specifics and, for instance, the first one, long distance, local phone companies can get into each other's business. They can just go do that tomorrow?
MR. HUNDT: No. As you can well imagine, it's necessary for the FCC to write detailed rules of competition in order to give people a chance to compete in the currently monopolized Bell Company markets. That's a big job we have to do at the FCC in the next six months.
JIM LEHRER: Six months?
MR. HUNDT: Six months for writing the rules of competition in the local telephone market.
JIM LEHRER: So if somebody wants to--is interested in the possibility, not necessarily the reality but the possibility of their being able to choose between two local phone companies, the one that's there now and another one that's coming in, how long--conceivably how long could that be in the best scenario?
MR. HUNDT: Businesses can go into these markets right away, and you're going to see some people get started right away, but to really be successful in competing with the Bells, any business, whether it's a long distance company or cable company is going to need us to write rules of competition that allow the new entrant to connect to the existing networks, to allow the new entrant a real chance to compete.
JIM LEHRER: The key to it is there's not going to be a--there's still only going to be one line coming into your house, right?
MR. HUNDT: No.
JIM LEHRER: No?
MR. HUNDT: No. There's no telling how many lines there will be.
JIM LEHRER: Is that right?
MR. HUNDT: There aren't going to be any rules on these things. We're all going to have to get used to the fact that the future is not going to be predictable, and it isn't going to be set by the big government model anymore.
JIM LEHRER: In other words, you could have a telephone line for long distance calls, you could have a telephone line for local calls?
MR. HUNDT: You could. It's probably not likely. I think what's more likely in some homes is that you'll see different companies come to you and offer bundled products. They'll say, try me, I'll sell you your cable service and your local phone service and your mobile phone service and your long distance and I'll give you the whole package at a real nice price, and then somebody else will say, no, no, try me, I'll give you the same package, and I'll give you a coupon for VCR tapes as well. I mean, that's the kind of competition we're likely to see. There's no telling how many actual wires or connections people will extend to your house. The first thing you'll see when the rules really get written and people really get started is that there will be different kinds of product offerings presented to customers.
JIM LEHRER: Now, the second thing is that they can also use their telephone line for video. Is that--is that ability already there in the telephone line? Is this going to require something new as well?
MR. HUNDT: Well, lots of invention is necessary before it's economically practical to use a cable line and the telephone line to deliver the opposite service, but what this bill says, I guess what this law says, is go ahead and invent, there are not going to be any legal prohibitions on what you can do with your invention.
JIM LEHRER: So a cable company that wants to go into the telephone business, they--let's say in a city, a particular cable company has already wired this city for cable, and what's involved in their going into the telephone business as well?
MR. HUNDT: Well, of course, today's cable line isn't going to deliver a telephone call because it wasn't built to do that. So they would have to rebuild that line, or the cable company would have to go out and contract with a wireless company and offer you wireless service. Now, you're going to see all of these things happening. You're going to see cable companies in alliances with wireless companies and offering you wireless and cable. You're also going to see cable companies knocking on your door saying, buy this little box, it's called a two-way modem, it'll give you Internet access over your cable line. That's going to be a big hot product that you're going to see.
JIM LEHRER: Why? Why is that going to be such a big deal?
MR. HUNDT: Because Internet access is a booming market, because--
JIM LEHRER: That's already been proven. That's already there.
MR. HUNDT: Well, we're finding it out right now.
JIM LEHRER: Yeah.
MR. HUNDT: We didn't know it a year ago, but we're finding it out right now, and the main thing about this law is that it permits us at last to open the doors to uncertainty, but also to invention and creativity, so it isn't going to be government that's going to be answering the questions you're asking me. It's going to be competition in the marketplace that's going to answer these questions.
JIM LEHRER: But you still have to write all these regulations. Isn't that kind of a--isn't it an oxymoron, we're going to deregulate this industry but nothing can happen until you all write the regulations?
MR. HUNDT: Here's the change. For 60 years, the FCC and its counterparts at the state level have been the supervisors of monopolies. We've been regulating the prices. We've been looking at the books. We've been telling them what they could do and what they couldn't do, and that era is over. It's just like what the President said in the State of the Union when he said the era of big government is over. Our role now is not to be the supervisors but to be sort of the judges of competition, to write some simple, fair, clear rules that'll make competition real and not just rhetoric, but, otherwise, to get out of the supervisory role and let businessmen and businesswomen make the decisions they need to make in competition in the marketplace.
JIM LEHRER: What's the single most difficult and important rule that you must write and assume?
MR. HUNDT: Can I give you two?
JIM LEHRER: Sure. Give me--
MR. HUNDT: The first is this. Over the next six months, we need to get right the country's policies for allowing different companies to connect to each other's networks.
JIM LEHRER: Explain what that means.
MR. HUNDT: All right. For example, Bell Atlantic, great company, has this huge network all over this region around Washington and a bunch of other states.
JIM LEHRER: But it's still--it's local, mostly local telephone, right?
MR. HUNDT: It's all local telephone.
JIM LEHRER: Okay.
MR. HUNDT: It reaches essentially 100 percent of all homes, and they make and receive 99 percent of all the telephone calls made in this area. Now, if I want to go into the telephone business against Bell Atlantic, I might be able to sell that service to you, but you want to be able to connect the line I just sold you to the Bell Atlantic network, so that you could make the call but have it go to a Bell Atlantic customer. You don't want to say, well, you can't call anyone, because you're the only customer--because you're on my phone company.
JIM LEHRER: You're on one company and I'm on another.
MR. HUNDT: Yeah.
JIM LEHRER: But I want to call you.
MR. HUNDT: So you need to have the lines connect. You need to have two competing networks connect. Everybody knows that you need to do it.
JIM LEHRER: So you have to come up with a rule that doesn't hurt Bell Atlantic, at the same time helps the competitor compete against 'em?
MR. HUNDT: That's exactly the challenge.
JIM LEHRER: How in the world are you going to do that?
MR. HUNDT: Well, we're going to ask everybody their views, we're going to force 'em all to debate it in front of us, and we're going to make a fair call within six months.
JIM LEHRER: So the idea, though, is that Bell Atlantic will take a hit. We're using Bell Atlantic as an example, but Bell Atlantic takes a hit, because they have to share that, and, and potentially be competed against--but they have free--if they want to go and go into the long distance business, but that's a whole different ball game--how in the world are they going to go into the long distance business overnight?
MR. HUNDT: Long distance is a different challenge here. Now, what we're saying is, Bell Atlantic, you have a monopoly network, and you need to open it so people can connect to it. That's a narrow market.
JIM LEHRER: Okay.
MR. HUNDT: As to long distance, we're saying, Bell Atlantic, as soon as you comply with these fair rules that open your own market, then we'll consider letting you into the long distance business. Now, that was the basic compromise that the law reached. That's what got the big votes in the House and the Senate, and that's what we have to implement.
JIM LEHRER: But as a practical matter then, let's move on to say AT&T--
MR. HUNDT: Sure.
JIM LEHRER: Or Sprint, or one of the long distance companies. What do they get in exchange for letting say Bell Atlantic--do they have to let Bell Atlantic come in and use some of their lines and some of their switches and networks and stuff?
MR. HUNDT: When Bell Atlantic or any telephone company demonstrates that it's complied with the basic rules of opening themselves to competition, then they get to go into long distance. What the long distance companies get out of this is the chance to compete in the local phone markets where they have been prohibited over the last ten years.
JIM LEHRER: But how does, as a practical matter, how does Bell Atlantic get into the long distance business without going into business with one of the existing long distance companies, without having to wire the whole country?
MR. HUNDT: Well, lines run everywhere so you can make alliances, you can build your own systems, you can partner up. Finding potential opportunities to build networks is not really going to be the problem here.
JIM LEHRER: Partner up. All right. Is it possible say for a Bell Atlantic to partner up with an MCI, partner up with a large cable company, or a local cable company, and maybe a, an online company and do it all one big deal?
MR. HUNDT: What you're asking here is the question of the moment. All the different businesses are trying to figure out which alliances are best for them in the competition that is exploding as of about five hours ago. And it is definitely occupying everybody's late-night hours in the headquarters of the companies and the Wall Street financiers are trying to figure out which venture is the best one to bankroll, and this is the excitement and the exhaustion of competition.
JIM LEHRER: But what, the question--there is nothing, no rule that you're going to write that's going to prevent that from happening, is that right? In other words, this law says that such, that these partner up things under any combinations are possible?
MR. HUNDT: Well, the Department of Justice and the FCC are going to do their darnedest to make sure that we don't let monopolies get re-constituted. But having several different, lots of different businesses compete to build national or regional networks and compete against each other, that's a good thing. That's more choice, and that gets back to what I was saying before, that's investment, that's jobs, and then the second thing you let me say I can tell you was the most important part was the part of the law that gives us the ability for the very first time to create incentives that will guarantee that communications technology is in every classroom of every school in the country. Now--
JIM LEHRER: How do you do that?
MR. HUNDT: Well, we haven't developed all the techniques yet, but the law gives us a range of different tools. This is a very important provision. Credit needs to go to Senators Rockefeller and Snowe and Kerrey and Exon who authored it on the Senate side. Acknowledgements need to go to the President who asked for it in the State of the Union and if you let me say so, we need to hark all the way back to Sen. Gore, now our Vice President, who talked 20 years ago about building the information highway from Carthage, Tennessee, to the Library of Congress. For the very first time, we have a law that permits us to create incentive schemes that will give companies a financial motivation to put their networks right into classrooms.
JIM LEHRER: Wow! We've just scratched the surface here, but before we go, the V-chip thing, this is something that, all right, the law requires all new television sets to have V-chips. Let's say that I have a TV set and I have small children, I don't want 'em to watch violence tomorrow, can I go out and buy a V-chip and put it in my TV?
MR. HUNDT: Well--
JIM LEHRER: My existing TV?
MR. HUNDT: You can go and do that, but what's missing right now is a commitment from broadcasters to give us ratings about their shows. It's still necessary for somebody to describe the show in this cyberspace world of transmissions so that the chip in your TV can identify it as inappropriate for kids. Now, that's one of the--
JIM LEHRER: The chip is actually--oh, oh, this is dirty, boom, turn it off?
MR. HUNDT: The chip will read whatever information is sent to it, so if the broadcaster says this show is inappropriate for kids, too much violence, then the chip would turn it off. Now, what we're talking about here is very simply let's give parents the power to choose and something to choose.
JIM LEHRER: But do those chips exist now?
MR. HUNDT: Yeah. The chips exist.
JIM LEHRER: And so what does not exist is the stuff that the chip has to--bad word--that the information that the chip has to read in order to react.
MR. HUNDT: Exactly right.
JIM LEHRER: Is the chip expensive?
MR. HUNDT: No. The chip isn't expensive, but it really will only be truly affordable when it is in every television so that the economies of scale will lower the price to a dollar or two. But, as I said, the missing element here is the country needs broadcasters to say, yeah, if the technology is there, we will give you the information, we will voluntarily describe our shows the same way the movie industry describes the movies.
JIM LEHRER: Mr. Chairman, thank you, and good luck. MR. HUNDT: Thanks a lot.