REMARKS OF CHAIRMAN REED HUNDT
                    FEDERAL COMMUNICATIONS COMMISSION
                                TOWN HALL
                             LOS ANGELES, CA
                          TUESDAY, MAY 1, 1996
                                    
                         "Communication is King"
     

     Good afternoon.

     It's an honor to speak to you. You have such a great tradition of speakers.

     I am quite flattered to be invited.

     Even if it is only because Don Imus cancelled.     

     Many years ago, when the world was young, I came from my hometown of
Washington,  DC,  by way of gray and grimy  New Haven, Connecticut, to begin my legal
practice here at the fine firm of Latham & Watkins, down on Flower Street in what were then
called the ARCO Towers.

     For reasons that time has obscured it came to pass that the young lawyers in the firm
had a contest in writing the opening line of a hypothetical novel in L.A.

     This was before Steve Bochco. Today we would have competed for the first line in a
script or the opening shot in a movie.

     In any event the winning opening was this: "You'll find that things are quite a bit
different out here, Lieutenant."

     So true, isn't it.

     Things are quite a bit different out here. And I learned to love LA --even before the
song -- but only after  I learned the basic rules of life out here:

     --Everything is 20 minutes on the freeway from anything else.

     --There is a downtown here that can be used anytime but hardly anybody ever does.

     --Mr. Chairman is a common title in Washington; we have chairmen of dozens of
committees and agencies; here it is the name of a discount furniture store near Pico and
Sepulveda.

     --All locations in LA are described by the movie in which they appeared.  In the
movie Blue Thunder a helicopter crashed into my office in the Arco Towers.  I came in from
the airport on a freeway seen in the movie Speed. When I came to LA to wire classrooms on
Netday with the Superintendent of the LA Unified School District I stayed in a hotel here that
you'll see in Dan Ackroyd's next movie Grosse Pointe Blank. And so forth.

     --More recently locations are described by reference to evidence submitted in criminal
trials. . 

     --However they are described, all locations are 20 minutes from Pico or Sepulveda.

     --And the last rule I learned while here is that everybody in LA is always threatening
to be something different tomorrow from what they were yesterday.

     In LA all lawyers want to be screenwriters; all writers want to be actors; all actors
want to be real people; and of course all real people want to move either here or Washington
in order to put reality behind them.

      I know what I'm talking about. Like everyone else here I was born in Michigan. But
I have spent my professional career in the two entertainment capitals of the U.S.: LA and
Washington.

     The secret I can share with you today is that I now have the best job in Washington
you don't have to get elected to.

     At the FCC we are pursuing the country's twin goals in communications policy:
promoting competition in communications and providing public benefits from
communications.

     That's the purpose of the momentous Telecommunications Act of 1996.

     The new law turns the 1934 Communications Act upside down. 

     Before we encouraged monopolies. Now we are for competition.

     At the same time the new law extends the public benefits of communications. For the
first time this new law gives us  a national policy of making modern communications
available, accessible and affordable to absolutely everyone -- including especially people with
disabilities and children and teachers in every one of our two million classrooms. And this
same law begins a new era in the history of broadcast TV with the V chip.

     The new law passed with bipartisan support. This means that Democrats and
Republicans each get to claim 100% credit.

     Now for us at the FCC the fun  begins. We have to write the rules that either will or
won't succeed in giving real meaning to the Congressional intent.

     Now is when we have a chance to prove that sometimes words matter.

     This is the principal difference between Washington and other towns: LA is visual,
Seattle is digital; NY is numerical; and Washington is verbal.

     That is why Washington is a lawyer's town. Lawyers and poet are the only people left
who think words matter.

     Now Microsoft is probably doing software called "Sue You Sue Me" and Disney is
making the animation "The Lawyer King." So soon only the poets will  remain.

     This sort of joke is why I'm the only person in Washington never invited on the Imus
Show.

     But at least for now, at the FCC when  you ask us what we are reading and what we
should be writing, we answer, as Hamlet did, "words, words, words."

     There don't have to be too many, but they have to work, and they have to be finished
in the next few months.

     Some say that these words in our rules are supposed to make sure that the price of
every consumer communications product goes down and the profits of every company  go up.

     You remember the old joke about the Greek restaurant where they break a plate to
celebrate every meal and lose a dollar per customer. They make it up on volume.

     Is that the idea here? Well, this is, more or less, what happened when AT&T was
broken up and real competition took hold in the long distance market. From 1984 to the
present AT&T has made increasing operating profits even while its market share and prices
went down. Volume, or usage, soared as it turned out that demand for long distance telephony
was not price inelastic.

     If competitive prices and increased innovation drive increased usage of the local
exchange networks, of the cable networks, of the wireless networks, then the new law will be
a big commercial success. That increased usage will drive the development of a true
broadband infrastructure that is both packet and circuit switched. That will be the information
highway.

     But first we have to see competition, particularly in the largest monopolized market in
the American history since the Standard Oil trust -- the local telephone monopolies. We have
to find thee magic words -- the rulewriting equivalent to open sesame -- that open the local
telephone company monopolies to competition, even as we assure universal service, including
but not limited to networking every classroom in the country, and continued high quality
service by our world-leading phone industry.

     Our rules ought to be an invitation to new entrants. But what will lead the way?

     Some say content will be king. The idea here is that in selecting from competing
communications providers consumers will look for the video programs with the brand names
they prefer.    

     Maybe.

     TV  programming certainly gets better all the time. For example, my wife is a
professional psychologist who uses her maiden name. In what I have told her is a blatant and
welcome effort to curry favor with the chairman of the FCC the Comedy Channel has a new
show about a shrink called -- what else --  Dr. Katz. This is a truly funny show. Has anyone
here seen it? If not, I assume it is broadcast just to my wife and me. That's what's called
niche programming. 

      But putting Dr. Katz aside (the show of course) let me say that Elvis was king;
Charles may or may not become king; but content is not really going to be king of the info
way.

     It will be part of the royalty, but not king.

     The reason is volume.

     The cable business does about $30 billion a year; broadcast TV about the same;
newspapers, about $20;  film, $15;  recording, less than $10;  radio, less than $10.  If that's
the content side of the communications revolution, the total is $85 billion. 

     Local telephone and long distance are more than twice that, at $200 billion. Moreover,
they rely on sunk cost investment also north of $200 billion. And their only content is what 
you create: that's called communication.

     So content is a crown prince. But communication is king.

     Yet what is crucially important in the king's court is the royal navigator.

      Navigation is the set of techniques for the consumer to find a way through the 
myriad choices coming his or her way. Navigation will be provided by advertising, by
software screens, by Internet browsers, by v-chips and education chips and other chips that
intermediate between the content and the viewer. And navigation will still be done, as it is
now, by word of mouth.  

     Navigation may turn out to be the long sought offering of all communications services
in one package. I am referring to the Holy Grail of one stop shopping.

     For example, in my house we have two cell phones, a fax, two PCS, one ISDN line,
two analog telephone lines,  a pager, and two Internet access services.

      As a result my wife and our three kids all get to work all the time.

     How can you beat that? 

     Many consumers would like to buy all that stuff in just one place, with just one place
to go to figure out how to make it work; and just one place to call with questions and
complaints.

     In short, many of us want just to go to the Wal-Mart of communications and fill up
the shopping cart -- instead of comparison buying from different suppliers.

     Incidentally, if I knew a single vendor that would clean a fish tank, change the rabbit
litter, rotate the car tires, keep the cellphone batteries fresh, give me just one password for all
telcom things, and pour me a Starbuck's skim latte, I'd pay a premium on every component
of that bundle.

     And I am not alone.

     But whether navigators over the cybersea take us to the home port of a single seller or
through an archipelago of different offerings, the key to innovation and deregulation is
competition in and among all communications sectors.

     If competition takes hold, we are gong to see the elimination of the distinction
between local and long distance. We are going to see cable packages and satellite video and
wireless cable video and VCRs vigorously challenge each other. 

     With competition, we are going to see still unknown communications services; there
was a day not long ago when caller id and all waiting were unheard of. Even now only a few
have heard of PC's that permit  you to connect to a handful of other people for real time
video conferencing. But Intel is launching that product momentarily.

     Now hardly anyone receives movies from the Internet into a storage facility that lets
you play back your selection your PC or your tv when you want. Soon that will be common.

     The goal of competition requires rules from the FCC or the states. For instance, we
must find a way to require telephone companies to sell their services to new entrants at
wholesale prices, to sell discrete elements of their networks, to allow interconnection by their
rivals.

     In  these rules the FCC must answer in the next few months two critical questions:

     First, are we going to set a pro-competition policy in our rules that is uniform across
the country or will we bless 50 different statewide variations?

     Second, will we write specific rules that can be easily enforced or will we issue
general guidelines that can be debated and litigated in tough inter-competitor battles for  years
to come?   

     I don't know which way the four commissioners, including myself, will come out on
these questions. But I do know that we must decide by August.

     In addition to promoting competition we must protect and extend universal service.
This is the public interest.

     This concept translates generally to ensuring that modern media help us develop a
sense of community.  This community or these communities can be formed by voluntary
interest and ease of access,  whether they are groups of graduates of musty eastern schools or
the local PTA or just people who live down a certain  street.

     Free broadcast tv and ubiquitous  affordably priced access to computer networks are
the two keys ways for us to build those communities. 

     Free broadcast TV is a wildly successful information-age version of the old town
square. 

     A town square is a place where everyone can come and go freely.  It has entertainment
and sports.  The library and the proverbial soap box are there.  Ads, flea markets, concession
stands are permitted.

     Not only the FCC should be focussing on the words that will preserve the TV town
square. I believe that the 21st century social compact between broadcasters and the American
people will succeed if and only if broadcasters develop a tough, specific, written code of
voluntary ethical behavior.

     That sort of code, called for by Barry Diller and Rich Frank and others, would start 
with focussing on the needs of kids.

     Repeatedly, research has shown that TV can be a tremendously effective educational
tool for children. 

      But it can have tremendously negative effects as well.  It desensitizes children to
violence and encourages violent behavior. 

     The 21st century ethic for TV should give communities, parents and other supervising
adults to power to choose the TV that reaches their kids and they need something to choose
that is appropriate for kids.

     The power to choose comes from ratings and technologies like the V-chip.

     As Vice President Gore said a few weeks ago, the V-chip is pro-child, pro-parent, pro-
information, and pro-First Amendment.  It is fundamentally pro-public interest and pro-
broadcaster.

     Even if parents have the power to choose, they still need something to choose.  And
that brings us to educational children's television. 

     Why can't we find a way to guarantee a minimum amount of free educational TV for
kids?  Most broadcasters do three hours -- and wouldn't want to short-change your
communities by doing less.  Three hours a week is truly a modest amount, as over 100
Members of Congress observed in a letter endorsing that minimum.  So wouldn't it be good
ethics and good business for broadcasters to ask for -- or at least accept -- a floor of three
hours of truly educational TV?  

     Another, complementary way to build communities of interest is by permitting all
Americans to tie together in cyberspace, over  networks. These are already being built through
corporate America, most upper income residences, and many colleges. These networks should
be accessible to every American through classrooms and libraries, as President Clinton called
for in his 1994 and 1996 State of the Union speeches.
      
     The Telecommunications Reform Act of 1996  says that all teachers, all librarians, and
all children in every classroom in this country have a right to access to advanced technology.

      The elementary and secondary school classrooms  are the crucial testing grounds for
the survival of the American dream. But in those rooms our children are trapped in the 19th
century.  Today in America, more than 90% of the classrooms are for American children
battered rooms with scratched slate and broken chalk, a few books, almost none published in
the 90s, and none of the trappings of the networked world.  Nationally, fewer than 10% of
schools have local area networks, or LANs, connecting computers to all classrooms.

       Computers on networks are not just tools, they are tickets to a world of opportunity.
Every child in this country  has a right to that passage.
     
     This imbalance of opportunity is made worse by the fact that while over 50% of
children from high-income families have computers at home, fewer than 5% of children from
low-income families do.

     To quote Education Secretary Riley, "Learning on-line must not become a new fault
line in American education."

     You would want everyone in your family to have the opportunities opened up by the
communications revolution. So, because we Americans are fundamentally defined by our
belief in fairness, we should also want all American children to have these opportunities.
              
      You can make sure that the great dream of equal opportunity in education comes true
through the gift of equal communications technology in every classroom.
     
     Its been a pleasure returning to LA to share this time with you. 

     Things are going to be quite a bit different in the communications future that is
unrolling.  But with a little luck, and the help and advice of many, we hope to write the few
words in our simple rules that open communications markets to competition and open the 21st
century to our children.

     Many thanks.