SPEECH OF CHAIRMAN REED E. HUNDT COMNET 1995 WASHINGTON, DC JANUARY 26, 1995 ACKNOWLEDGEMENTS: Thank you, Bill, for that kind introduction and I note that Dick Wiley is here. It's also good to see that my friend Eli Noam and my Chief of Staff, Blair Levin, are here today. What a great convention! 40,000 network professionals have come to Washington from 25 countries around the world. The industries represented here had almost $300 billion dollars revenue in the last year and you are creating thousands of new jobs in our country. Of course, I'm so old that I remember when networking meant exchanging business cards at a convention. This was back in the era of disco and a half-decent Washington Redskins football team. But now every business in the country knows that getting on a network is the precondition to success. For the first time in ten years the United States ranks number 1 in productivity. A month ago I went to the Harvard Business School and asked them how this happened. They said the answer was simple: Competitive, cheap, high-quality networks. Networks have changed the way Americans work. More than half of all American workers use a computer hooked up to a network in order to do their jobs. In fact, networks helped us all discover how to use computers productively. Because of networks, we found out that computers are doorways to the information highway - portals to higher productivity - pathways to the 21st century economy. Because of networks, the information sector of our economy will be as much as 1/6th of the GNP by the year 1997. And by the year 2000 it will be the world's single largest industry, with revenues exceeding $2 trillion. Let me tell you about how networks can not only change today's economy; they can change our society. I think every parent knows there is no bigger problem in the country than education. A long time ago, I was a school teacher. I can tell you that our education system was then and is now stuck in the 19th century. What you do every day in your business is as remote to education in America as ancient Greek was to the 7th grade social studies class I used to teach. But I have seen the future of education -- it consists of networking the classrooms. I have seen this future, and it works. In May of last year, I saw a vision of this future in the Ralph Bunche Elementary school -- P.S. 125 -- in Harlem, New York. Two classrooms there are connected to the phone networks in a project sponsored by Apple computer, Bolt, Beranek and Newman, and the National Science Foundation. I watched fifth and sixth graders share a lesson with kids in Nova Scotia and Hawaii. They use the CIA World Fact Book to conduct science projects. They trade E-mail with researchers in Australia. The Ralph Bunche school built the first elementary school web server. It is experimenting with other Internet tools including CUSeeMe video compression and Maven. They have connected their system to an inner-city high school. They are sharing Internet functions with that school. Networks carry those kids out of their classroom, beyond the walls of P.S. 125, outside of Harlem, and around the globe. Networks show them the way to a brighter future. Networks bring them education resources that no school district could otherwise import. I'm not talking about the glitter and glitz of interactive games, or witty E-mail humor. I'm talking about real learning. Social scientists have repeatedly proved that education over networks captures students' imaginations and calls forth a greater willingness to learn. Test scores go up when learning occurs over networks. Self esteem rises. Fluency in self expression increases. With computers hooked to networks, we could even revitalize notions of community in our neighborhoods and towns. When the kids leave the Ralph Bunche school at 3 o'clock, parents come in to ride the network. They teach themselves computer skills. And they also look for jobs, seek new training, send letters to friends and family. These are some of the virtues that attract people to the Internet. As I suspect you all know, this computer network was first created by the Defense Advanced Research Projects Agency at DoD. The purpose was to safeguard communications lines in the event of a nuclear attack. One of the original proponents was a young congressman from Tennessee called Al Gore, Jr. Now Internet is a communications web that survives everything from commercial advertising by lawyers to earthquakes in Japan. It is one of the strands of the information superhighway. The Internet shows all how private market forces can build networks. Promoting competition is one of our main purposes at the FCC. Our name really should be the FCCC. The ultimate competition in the information age is for the eyes and ears of the user -- human beings, at home, at work and at play. One study performed by a scientist at Los Alamos National Laboratories suggested that the maximum bandwidth of human vision is 3 Gigabits per second. I suppose that networks in some optimal state need deliver no more information than that. I'll settle for data rates, much lower than that. I'm sure competition will deliver hundreds of such applications over networks in the future. The various products are often labelled multimedia. The eye and ear -- these portals of the soul -- will interface with the basic telephone handset, the personal computer, television, untethered devices for both voice and data, or new forms of these familiar objects. Each of these devices will connect at varying speeds to communications networks through a local access point. Information will be carried over wireline or wireless transports through switches or routers in the Metropolitan Area Network (MAN) or Wide Area Network (WAN) to other interactive users or content providers. This is, of course, the information highway. It is almost certainly going to be a network of networks. The private market will build it to almost every nook and cranny of the country. And the private market should determine how much bandwidth should reach every home; what sort of interfaces consumers will prefer; the content that will be drawn down the different pipes. Much of this is inevitable. But the biggest concern for all of us is the possibility that bottlenecks will stymie the growth of networks. At this time, the communications industry is chockablock with bottlenecks. We've got constrictions in the local telephone booth. We have bottlenecks in the coaxial cable networks. We have a potential bottleneck in the set top box. The job of government is to do for people as a group the right thing that none of them can accomplish on their own. Our job, as the networks spread like kudzu down the channels of commerce, is to make sure that unfair anti-competitive bottlenecks don't choke off the natural growth driven by market forces. No one on their own can deal with this kind of problem. It is a right job for government. Historically, government has played a vital role in eliminating bottlenecks for transporting America's wealth. In the 19th century, America's economy depended on the creation of a national transportation system -- the railroads. In public-private partnership, government and industry laid the foundation for America's dream to come true by spreading a railroad network across the country. But bottleneck monopolies often threatened access to the railroad lines. For example, in 1881, Gustavus Swift realized that it was inefficient to ship livestock all the way from the stockyards of the midwest to the slaughterhouses of New York. Instead, he proposed to move the meat preparation process to Chicago, which had not yet become Carl Sandburg's Hog Butcher to the World. But the American railroad cartel was afraid to accept Swift's prepared meat because it might undercut their profits on shipping livestock. Even after Swift invented his own refrigerated cars to carry his product, the cartel wouldn't accept the cars or the product. So Swift had to find a different railroad outside the cartel, one that took his products into Michigan and a long way around the cartel's territory through Canada and down to the restaurants and stores of the East. The Sherman Antitrust Act of 1890 was passed in part to insure that businesses would not have to leave America in order to reach American customers. I don't know who will invent the information highway's equivalent of refrigerated meat and I'm not sure if anyone knows how to send a McDonald's hamburger over a network -- yet. But, I think everyone in business and all consumers want to make sure that bottlenecks don't keep the new products of the information age from the consumers. On the other hand, points of interface are also potential battlegrounds for vigorous competition. If the computer is the receiver, fields of competition or potential bottlenecks include: þ competing operating systems (DOS, Windows or Mac today) þ video conferencing systems (H.261 or Intel's Pro-share to cite just two) þ data buses (parallel, like RS232 or serial, such as P1394) The digital video transceiver of the future living room (tomorrow's TV), include all these areas of competition, or bottlenecks: þ access control systems (Digicipher, NRSS or some other scrambling) þ compression schemes (for example, MPEG2 or Digicipher) þ the physical interconnection (cable ready interface, analog or digital) þ modulation schemes (VSB for broadcast, QAM for cable or QPSK for satellite) Back behind the computer on the TV -- up the network at other battlegrounds or bottlenecks are: þ transmission media (coax, twisted pair, fiber), þ packetization definitions þ more compression schemes (H.261 or Intel's Pro-share) Once the message gets to the local carrier, to be transferred to the long haul carrier, it must contend with: þ number portability þ universal addressing schemes þ ATM protocols þ co-location issues Ideally, we don't want the government to set network interface standards at all. Rather, we want to see competition make these design decisions, with consumers making the final judgement. We need to be extremely careful not to select as a matter of law or practice some interface standard that freezes out technological innovation and, in the long run, hurts the development of the digital communications revolution by inhibiting innovation. But all the firms represented here today have a stake in the principle of open access to the consumer. Long distance companies, software companies, computer companies -- all will be weighing the benefits of proprietary systems against industry developed open standards against the risk of government-set standards. Our job at the FCC should be to make sure competition generates choice at all the points of interface. And where bottlenecks exist, we should take reasonable action to break them up, or permit bypass, or at least guarantee low pricing by the bottleneck proprietor. If together we are successful at creating a truly free and competitive market up and down the information highway, the communications revolution will generate opportunities for millions of Americans to find better jobs, be more productive at work, and reverse the decline in real wages that has plagued working Americans over the past decade and a half. But competition and freedom from bottlenecks won't necessarily bring the communications revolution to all Americans. In particular, it won't reach all our kids -- unless we do something specific to make this happen. Sure, the Ralph Bunche school is on the network. But that's just an experiment that is being funded by some large corporations who see a benefit in expanding the network, but also by the National Science Foundation. But for almost every other school in America there's no benefactor who's ready to bring education into the 21st century by providing the tools of communication to the teachers and students. For almost every school, there aren't even telephone lines into the classrooms. Market forces have not even put telephone lines into classrooms. It's not realistic to think that market forces on their own will build networks into classrooms. Yet all of us should agree that this market failure can and should be corrected. To build local area networks in every classroom and library in the country would cost something less than $10 billion dollars -- far less than the networking expenses that the private sector is incurring today. I suspect that when networks tie together all teachers and all classrooms, numerous businesses will make big profits from selling education software, learning games, information, to these users. But education networks in classrooms somehow must get jumpstarted. In the case of the Internet, the government provided external subsidies to jumpstart the network. Just as public money planted the seed of Internet, shouldn't public money be used to create incentives for networks to spread into our education community? There are many ways to meet this goal: we could use the revenues from the sale of spectrum in our current auctions. We could develop tax schemes. We could use the consumer productivity dividend from the local exchange company price cap system. That is the specific idea of a coalition made up of millions of teachers and parents that visited me just two weeks ago. I don't know the right way to accomplish this goal. There are probably many acceptable solutions. But we all should agree that making the power of networks available to kids is a crucial, immediate, pressing national goal. This past January, President Clinton and Vice President Gore highlighted the urgency of this national need by calling upon the telecommunications industry to connect every classroom, every library and every hospital in America to the national information superhighway by the year 2000. And two weeks ago House Speaker Newt Gingrich said that we must give all children equal access to the Internet. I don't think it's a coincidence that this is an issue both Democrats and Republicans have made a top priority. And in doing so that they all have recognized that it is not the job of the federal government to build these networks. This is why the President issued his challenge to the private sector. Each school should be tied into local area networks, honeycombed with information pathways, accessible by teachers and filled with information for students. Networking the classrooms will be invaluable in reforming our flawed education system. Kids will be able to do research in the Library of Congress without leaving their schools. Teachers will be able to send their homework assignments over the networks to parents because we'll never reform education without bringing the parents into the process. Today we are far from this goal. The Ralph Bunche school is an exception. Although half of the nation's classrooms contain a computer, only 1/8 of all classrooms have a telephone line and only four percent have a modem. Yet, knowledge of computers will be vital to our children as they reach the workforce. In 1984, 25 percent of workers used computers on the job. Last year 47 percent did. Sixty percent of the new jobs in the year 2000 will require skills possessed by only 22 percent of workers. If we don't give our children these skills of the information age, how can we explain our failure? Will we say we didn't have the money, when we had the money to develop and buy teleconferencing, mobile phones and voicepagers for business, direct broadcast satellite dishes for our homes, and mobile faxes for our cars? Will we tell them we had the money to include our kids in the communications revolution, but we forgot? After all the hype and hoopla surrounding the NII, we cannot let ourselves be satisfied to create nothing more than an electronic arcade -- available only to those who can afford to play. In the State of the Union speech the other night, the President talked about a new covenant, a social compact consisting of obligations, opportunities, and responsibilities. Surely all of us want the vision of the Ralph Bunche school, located in Harlem but plugged into the world, to be part of that covenant. Surely everyone in this room would be privileged to revolutionize education by bringing your networks to every teacher and every classroom in the country. This is something none of us could do alone. This is what we can all do together. This is what you ought to demand government to do. I hope to hear from all of you early and often. Thank you very much.