American Enterprise Institute

February 8, 2006

[Unedited transcript from webcast]

9:45 a.m.	Registration
10:00	Introduction:	KEVIN MARTIN, FCC chairman
10:15	Panelists:	LARRY PRESSLER, former senator (R-S.D.)
	Moderator:	THOMAS BLILEY, former representative (R-Va.)   KARLYN BOWMAN, AEI
11:15	Conclusion:	HAROLD FURCHTGOTT-ROTH, former FCC commissioner,
		author of  A Tough Act to Follow:  The Telecommunications Act of 1996 and the Separation of Powers

Proceedings:

MS. BOWMAN:  Good morning.  My name is Karlyn Bowman and I'm here a Senior Fellow here at AEI, and I'd like to welcome all of you to AEI today as well mark the tenth anniversary of the passage of the Telecommunications Act of 1996.

We're very fortunate to have the FCC Chairman Kevin Martin with us today, as well as the primary architects of the Act, Senator Larry Pressler and Congressman Tom Bliley.  Their bios are in your kits, but I'm sure as you well know, they were the primary sponsors, floor managers and the Conference Chairs who guided this legislation through Congress 10 years ago, and they've watched its progress ever since.

But this event today has a second purpose, and that is to celebrate the publication of the new AEI Press book by Harold Furchtgott-Roth, A Tough Act to Follow: The Telecommunications Act of 1996 and the Separation of Powers.  For all of our C-SPAN viewers, you can purchase the book by contacting www.aei.org.  I've been very fortunate in my years here at AEI to work with both Diana and Harold Furchtgott-Roth.  Both are passionate about the work and their convictions.  This is one of the many reasons that I'm honored today to be able to say a few words about Harold's book. 

This is not a city where there is much time for reflection.  Harold's book is designed to get us off the policy-political treadmill and back to the basics to thinking about first principles.  Harold brings to this task real-world experience from the Hill and from the FCC, but as important as his practical experience is, he has thought deeply about the structural issues that affect the performance of government agencies such as the FCC.  It is for this reason that Congressman Bliley, and one of the blurbs on the book jacket says that, and I'm quoting him directly, "Any member of Congress who thinks that communications law should be rewritten should first read A Tough Act to Follow."

Ten years ago today, many of you in this room gathered in the magnificent Great Reading Room of the Library of Congress with Vice President Gore and Lily Tomlin, a/k/a Ernestine the Telephone Operator, to watch President Clinton sign the Telecommunications Act.  As Harold said in the op-ed piece in The New York Sun yesterday, from 2996 to 2000, when the value of publicly traded telecommunications securities were soaring, everyone loved the Act.  Since 2001, as the communications sector has sagged, so has the Act's reputation. 

Many explanations have been offered for its problems.  Some say that the FCC's budget needs to be increased, others, that the law needs to be rewritten to incorporate different policies.  Still others say that the problems stem from advances in technology that have outpaced the Act's provision.  But Harold does not find these explanations satisfactory.  His own explanation is unique and compelling.  Because we have not been attentive to the issue of separation of powers, the FCC is in a no-win position of having no one but itself to review and to balance its decisions.  This is the reason that the Telecommunications Act of 1996 did not fix the problems with the Telecommunications Act of 1934.  It's been a tough Act to follow.  We are all the poorer, Harold says, when government does a poor job of implementing its own laws.

Today we're going to turn first to Chairman Martin and he will speak for a few minutes, and then he has agreed to take your questions.  Then we'll turn to Senator Pressler and Congressman Bliley and later to Harold, and then to your questions overall.  Thank you so much.  Commissioner?

MR. MARTIN:  First, let me say what a privilege it is for me to be here for the unveiling of Harold's book.  I had the opportunity when I first went to the Commission to work for Harold as his legal adviser on many of the complex common-carrier issues back in 1997 during the initial phase of the implementation of the 1996 Act, and I can tell you how much I learned from his insights both from his bringing a rigor of economic analysis to many of the issues that we ended up facing, to his appreciation for and dedication to trying to implement the Act with the vision that the congressional leaders that had passed the Act had at the time, his willingness to articulate those views and hold firm to them often times when they were and we were writing minority or dissenting opinions but holding firm to them despite that fact, and his willingness to articulate those views regardless of whether they were in the majority or not; I think our testament to both, like I said, the rigor of his analysis and his willingness to speak what he actually thinks is the truth. 

I'll tell you, whenever you talk about someone saying that the FCC is in a no-win situation, I always will end up being able to support that view, of saying that the Commission always feel like that, so will always second that view.  The Commission's role and the implementation will continue I'm sure to end up being debated and I can only say that I've certainly benefited both from the past insights that Harold had when I was working for him, the tutelage that he provided when I was working for him, the appreciation that I think he tried to impart to me about trying to implement the Act in the way that Congress had originally envisioned, and even more importantly, the willingness to speak your mind and hold firm to what your views are despite any criticism that that might engender.  So I couldn't have asked for someone who had been a better mentor or instructor for me when I was first trying to learn about the Telecommunications Act, so I'm sure we're all going to end up benefiting from his book today.  He didn't let me have an early advanced copy of it, so I haven't seen it until today either.  I'm not sure what that means.  I hope the chapters stop sometime before I got there, but I'm sure that it won't for the very reasons that I've already articulated.  So I'm sure we'll all benefit from the wisdom of it today.

MS. BOWMAN:  Chairman Martin, I think you've agreed to take some questions.

MR. MARTIN:  Sure thing. 

MS. BOWMAN:  I can't believe that you all don't have questions for Chairman Martin. 

MR. SHIELDS:  Hello, Mr. Chairman.  Good morning.  Todd Shields with Mediaweek magazine.  The easy part of this question is why is the FCC meeting in Keller, Texas, this week?  But more broadly, can you talk about the net neutrality issue and what are the next steps at the FCC on net neutrality?

MR. MARTIN:  First let me answer the first question.  The Commission is going down to Texas this week to try to take a look at some of the different technologies that are developing to provide additional platforms and additional competitive alternatives for consumers today so that all of the Commissioners are going to go down and be able to see a demonstration of broadband over power lines and some of the ways that that technology is increasingly providing an alternative for high-speed Internet access and often times video services for consumers.  We're going to see the deployment of that technology in Dallas.

We're also going to take a look at one of Alcatel's facilities there and some of their deployment of technologies that will enable people to be providing, again, high-speed Internet access and video services over their DSL lines.  And then also going to Keller, Texas, where they have deployed a fiber to a home system there and see some of the services that are being deployed there and see how that's working.

So the purpose of the Commission's visit is just to see what's actually going on with the deployment of some of these technologies and the alternatives that they are providing consumers and to get a chance and opportunity to see that.  I think the Commissioners will all benefit from it and I think it will be helpful for us all to actually see that together, the short answer, that's just the purpose of the trip there.

The second question I think was in regards to net neutrality.  The Commission has already demonstrated its commitment to those principles of network neutrality in its adopting of a policy statement last August in the context of the Commission's determination that we would treat DSL services in the same deregulated or less-regulated manner that we'll treat cable modem services, trying to make sure that we are creating a level playing field for competition to occur among platforms in the marketplace rather than in the halls of the Commission.  So we want to make sure that we are providing for a regulatory framework that treats technologies the same when they are trying to deploy the same kinds of services to end user consumers. 

In that context last summer, the Commission had already provided for a ruling that said cable modem services would not be treated as either a cable service or a more regulated service but, rather, an information service.  That had gone through the courts and the Supreme Court ruled on that last summer upholding that decision, and when that happened, the Commission acted very quickly to try to make sure that telephone companies that were deploying their own version of high-speed Internet access, DSL services, were treated in a similar manner.  I think that that was important, like I said, both from a competitive standpoint and from trying to ensure that companies have the opportunity to make investments and compete in the marketplace rather than at the Commission.

In that context we did though adopt what would be so-called network neutrality principles of talking about how consumers should be able to access whatever content they desire on the Internet and trying to make sure that we continue to have a free flow of information on the Internet across these various networks, whether it's cable modem or DSL networks.

Then in addition to that in the context of some of the mergers last fall, I think the Commission embodied some of those in the context of the mergers as well.  So I think the Commission has taken steps in the past to demonstrate its commitment to those kind of principles and I think that the Commission will continue to do so.

MR. PARK:  Good morning.  Drew Park with National Journal's Congress Daily and Technology Daily.  I wanted to follow-up, Mr. Chairman, on two items from last year, the E911 order and the report on "a la carte" pricing and packaging.  What kinds of actions are you expecting the Commission to take against VOIP providers, particularly nomadic VOIP providers, that have not been able to meet full compliance with that E911 requirement? 

Secondly, on the al la carte report, you described the previous report as flawed.  How extensively do you expect your Media Bureau to revise that, and when can we expect to see the revised report?

MR. MARTIN:  First of all, aren't there questions from the people and not reporters that are out there?

[Laughter.]

MR. MARTIN:  The reporters are people, too.

[Laughter.]

MR. MARTIN:  In relation to the E911 obligations, the Commission in the context of recognizing that there is going to be an increasing opportunity for people to take advantage of new technologies to provide the telecommunications and voice services, the Commission recognized that there was an increasing problem with people using IP-enabled technologies to provide a voice alternative and that they were selling those services but that many consumers were actually purchasing those services that were either unaware or insufficiently aware of the limitations of those services in connecting to public safety.  There were instances in which people were picking up the phone and dialing 911 when there was an emergency, and that was occurring in Texas, in Connecticut and in Florida, and they were getting voice mail, weren't being corrected or all or were getting busy signals.

So there were several tragedies that ended up occurring and I think that the Commission acted quickly to say that you are providing telephone services and people have an expectation that they're going to be able to pick up the phone and dial 911 and get connected to the police, the fire department or an ambulance, and I think that the Commission will continue standing by that.

There are obviously challenges whenever you talk about the nomadic capability, in other words, the telephones that are using IP technology can be moved from one place to another.  Of course, the same thing is true with cell phones today, that people carry cell phones around and those services have been able to figure out a way from a technological perspective to make sure that when you dial 911 on your cell phone you're still able to get through to the emergency services.  So I think the Commission will continue to end up  urging that all of the people that are selling these kinds of voice services are being required to comply and deliver those emergency calls to the emergency personnel that are there.

The Commission has taken some very specific actions as far as requiring the companies that have already signed up consumers to notify their consumers about the limitations of their services, and then they've also take some very specific actions in saying that companies that are selling services in a particular geographic area have to make sure that in that geographic area that they are able to connect those calls to the 911 call centers.  Then the limitations or the challenges involved with nomadic capabilities are important enough that the Commission will continue to work with the companies to address that issue, just like it worked with the cell providers, too.  I think that the basic requirements that if you're selling a telephone service whether it's being delivered over copper wires or over a broadband pipe, that when the consumer picks up the phone and dials 911 they should be able be connected to the emergency services.  I think the Commission will continue to be committed to making sure that public safety need is met.

On the a la carte report, the Commission had in November-December 2004 released a report that had said that a la carte would be bad for consumers based in large measure upon an economic analysis that was submitted to them by the cable industry and that had been done under contract by them.  There were several flaws and several assumptions that were not substantially supported in both the report and in the reliance on the submission.

I testified up on the Hill before that the Commission has reexamined that report and has identified flaws in that study and several assumptions that were not supported, for example, that the two that I think I discussed previously were that in determining an average price per cable channel they had not netted out the costs of the broadcast channels that were included in that study, that there was an underlying assumption that people would watch over 2 hours less television per day if people got to choose the channels that they wanted to buy rather than buying the entire cable package and that that assumption was not supported by anything that had been submitted into the record.  Those were the kinds of problems that the Commission identified with the previous study and that we'll be releasing an additional study that talks about the potential flaws that we had seen in the Commission's previous study, and I think that will be coming out shortly.

MS. BOWMAN:  Let's take two more questions.

MR. SNYDER:  James Snyder [ph] from New America Foundation.  My question is for Larry Pressler.  You were the last personal seriously--

MS. BOWMAN:  Could we just have the questions for Chairman Martin first?

MR. SNYDER:  Broadcaster's digital--revolutionary proceeding changing the architecture of broadcast site based licensing [off mike] with a major expansion--white space beyond the Grade B contours, within the Grade B contours, have a huge opportunity because other industries could used that spectrum.  Do you endorse the basic premise of that proceeding?  What is your thought?  Have you ever looked at it?  There is no press attention, but it's really a fundamental transformation of the whole broadcasting industry.  Your thoughts on that proceeding would be welcome.

MR. MARTIN:  First, as you said, comments are due on the proceedings so the Commission has just asked about what the rule changes should be to reflect the fact that we might move to a different means of recognizing that those signals would be distributed within a geographic area.  But the issues that are similar to that that arise, as you mentioned, several in other kinds of proceedings as well, for example, the Commission has an open proceedings talking about how we could better utilize the white spaces in the broadcast spectrum.  The issue also arises in some of the other technologies and other services that have purchased some of the broadcaster's spectrum in the 700 megahertz spectrum allocation in which the broadcasters will eventually vacate at the end of the digital transition.  The Commission has already auctioned off several pieces of that spectrum for services to the extent they can coordinate with broadcasters, and one of the issues that arises in that context is that many of those services will be mobile services, and how they can coordinate when they are moving around with a broadcaster who has a centralized tower antenna structure raises the same kind of interference issues as the broadcasters would if they moved to a distributed so-called technology use as opposed to a single antenna at one place in a geographic area. 

So the issues as it relates to how you try to move away from a single site to multiple sites within a geographic area arises not just in the context of broadcasters, but in the context of white spaces and in the context of some of the other petitions we have in front of us.  For example, I think Qualcomm has filed a petition to allow for 2 percent interference that they deploy their mobile video service in the 700 megahertz spectrum which raises the same kinds of technical issues.

So I think the Commission is trying to find a way that we would address those issues comprehensively or at least consistently across those different technologies.  It's not that the Commission has made any decision on any of them, but I do think that we're trying to make sure that we are treating in a consistent manner the broadcasters' use of their distribution technology along with these other service providers who may end up being in that same broadcast spectrum.

MS. BOWMAN:  One final question here in the front.

MS. TRISTANI:  Gloria Tristani with the Office of Communication of the United Church of Christ, and in the interests of full disclosure, a former FCC Commissioner.

Chairman Martin, we're going to hear after you finish here about the Telecom Act, and I haven't read Harold's book either, although I look forward to that, but can you tell us if there were one area where Congress needs to legislate to help the FCC do its job better in this new world of constantly changing technologies and constant convergence what area that would be?  Could you tell us a little bit about that?

MR. MARTIN:  I think that certainly the challenges that are presented by the movement or transition to IP-based technology which allows for all of these services to begin competing across platforms and so that you have increasingly one set of companies that have been regulated one way competing with another set of companies that have been traditionally or historically regulated in another and the challenges that presents from both the technical perspective or from a regulatory perspective are daunting.  But I'm hesitant, and maybe this also a reflection of one of the things that I actually learned from my time in Harold's office, to tell Congress that they need to legislate in any particular area, rather, the Commission is supposed to be trying to implement the laws that are passed by Congress when Congress determines that they need a policy change. 

One of the things that I think Harold always emphasized when I was in his office is that the Commission is supposed to be implementing Congress's policy view, not vice versa, and as a result I think it's not my place to tell Congress that they need to do something, rather, traditionally they're the ones that are passing laws and telling the Commission that this is how they should be implemented.

MS. BOWMAN:  Chairman Martin, thank you so much for joining is this morning. 

MR. MARTIN:  Thank you.

MS. BOWMAN:  We at AEI want to make sure you have a copy of this book, and I'm sure you'll be able to get it autographed by the author at another time.

[Applause.]

MS. BOWMAN:  Now we'll turn to Senator Pressler for his comments.  I've asked Senator Pressler and Congressman Bliley to speak for about 10 minutes and then we'll turn once again to your questions.  Senator Pressler?

MR. PRESSLER:  There are many familiar faces, some of us a little grayer than last time we saw each other, but I want to thank all the staff who are present here and lobbyists who lobbied on the bill because that is a good part of our system.  I now teach part-time in certain universities where I get invited, and my main function is serving on boards of directors.  I do not lobby for anybody in telecommunications at this moment, but I'm always available.

[Laughter.]

MR. PRESSLER:  But in any event, I'm very glad to be here.  Let me say I'm particularly glad to be here with Congressman Bliley who is always such a gentleman to me, and he made the bill pass sin terms of cooperation between the House and Senate.  I've never told him this, but I always felt badly because there was some issue at the beginning over which bill we'd work off of and so forth, and my guys over in the Senate, the guys and gals and so forth, felt strongly one way and the House people felt strongly the other, and he worked that out very, very well and skillfully.  He is a master legislator and I'm honored to be on this platform with him.  And he's also a good guy.

I also am sorry that Senator Hollings is not here this morning because one of the colleges I'm going to this fall is The Citadel organized by my friend Phil Lader who invited me to speak down there for a few days or a week or whatever pro bono.  But in any event, Senator Hollings is such a great example of a graduate of The Citadel, and I was going to get some advice from him, but I understand he was detailed.  Congressman Dingle was also a key player as were many, many others. 

I think that the 1996 Act was an example of good legislating under very difficult terms and it was a bipartisan bill and it was a bill which had input from hundreds of members of Congress, and this led to certain awkward phrasing.  I remember I sat over in the Supreme Court listening to the Court arguing about the Iowa case back a few years after the bill was passed and Justice Scalia whom I admire was talking about how badly they write over in Congress.  He read this sentence out from the bill that contradicted itself four times before it got to the end of the sentence, and he said, don't they have any good writers over there?  I almost jumped out of seat to say, do you realize that that took negotiating between at least six Congressman, and one just wanted an adverb added, and so forth?

So it was a complex bill and it required real legislating, and it took a long time.  That bill was around; Congressman Van Deerlin and others had done options papers back in the 1970s and it had passed the Senate thanks to Jack Danforth and lots of other people in the time before.  We spent 2 years of our lives on it and our staff spent weekends and I tried to be there.  Many of those staff members are here today, and if I started naming them I would get into trouble.  But also there were a lot of very responsible lobbyists, and I know right now in Washington the word lobby is a bad word, but this bill was supposedly the most lobbied bill in congressional history and there were two sides to that.  We'd read in the paper that some group was really influencing the Telecommunications Bill and we'd never seen or heard of him, but there were a lot of very responsible lobbyists on that bill representing groups.

I spoke at six Chinese universities last spring explaining the American system and they would ask about the corruption of lobbyists and so forth.  It's a very necessary part particularly on a detailed bill like this.  I wish the public were better informed and were interested in things like the allocation of the spectrum and so forth, but they are not, and so this bill was basically an insider's bill, you might say.  But people would go out to their constituencies and get the input and we could work things out and that's the way our system works.  Maybe there's a better system, but I don't know what it is.  There are even some lobbyists and groups that showed up at the last minute.  I've been trying and trying to think.  Patty, can you help me here?  At the very last minute, Senator Harkin had a group of small businessmen who came in to Washington from all over the country, the Harkin Amendment at the very end.  Do you remember what group of people that was?

MS.          :  The alarm industry.

MR. PRESSLER:  The alarm industry at the very last.  We hadn't heard from them the whole time of the bill.  They've got a local guy in every town in America.  They came in by the bus loads to lobby for the Harkin Amendment, and it was an addition and we lived with it.  But the point I'm making is that this was the most lobbied bill in history, I believe, and in a healthy way we finally got it passed. 

There is a great danger for old former Senators going around giving speeches, and it's well summarized in a short story that I shall tell about a former Senator who had depended very much on his staff throughout his lifetime to give his speeches.  He would just read the speeches off because he had such a good staff.  But there was one secretly disgruntled staff member who was about to leave who didn't like the Senator very well, didn't get his pay raise or something.  But in any event, he wrote the speech for the Senator and the Senator was reading along and reading the speech and it was great, and he finally came to a part of the speech that said, and now I'm going to propose to this audience a solution to all of your problems.  I have an economic plan that I'm going to reveal at this moment, and he turned the page and it was blank and scrawled, "You're on your own, big shot."

[Laughter.]

MR. PRESSLER:  So I'm on my own this morning.  Nobody wrote me a speech.  I'm doing the best I can.

I think the Telecom Act has been an immense economic developer.  It's been called the most important stimulus to our economic upsurge.  I personally believe we're in sort of a technological stall the last 5 or 6 years, but that's another story.  But it has been successful, perhaps not as successful as all of us would have liked.  I very frankly feel that the cable industry has not entirely lived up the standard.  We deregulated cable.  I think the cable industry has raised rates too much and hasn't offered enough a la carte services and hasn't really gotten competition yet from satellite.  I serve on five corporate boards myself, and I know you have to enhance shareholder value, but I think shareholder value in the cable industry would be served better in the long-run by providing more services before government regulates or whatever else.  So even I feel that there are some areas that need improvement.

At that time there were a lot of proposals about an instant start competition and so forth, the shot clock, et cetera, but the problem of legislating in this area as a practical matter, in telecommunications, is that almost everybody has to use somebody else's wire or terminal or something, or at least that was true at that time, so some regulation is necessary.  We were trying to deregulate, but we really reregulated, and we hope reregulated in a better way.  Those companies that have been honest and that have taken advantage of the bill have done very well. 

The other day, Reed Hunt whom I don't always agree with said that, for example, had MCI been honest and gotten into wireless quicker, they might have been like Sprint now, for example.  Sprint is a great example of an honest company, in my opinion, that hasn't done all these pricing things that some companies do to get the consumers and then can't serve them.  And I might say by way of disclosure that my daughter sells data services for Sprint in Boston, so even I have conflicts of interest.

I could go on and on.  I think the old war stories about how the bill was passed are obsolete today, but I do look forward to your questions during the question and answer period because I want to talk about what you want to talk about and I want to hear from my colleagues.  Thank you very much.

[Applause.]

MS. BOWMAN:  Thank you, Senator Pressler.  Congressman Bliley?

MR. BLILEY:  Thank you very much for arranging this this morning, and it's great to be here with my friend Larry Pressler.  I too am sorry that our colleagues John Dingle who was my Ranking Member and Fritz Hollings who was Larry's Ranking Member couldn't be with us.  I'm very happy that my former economist on the Commerce Committee, Harold Furchtgott-Roth is here, and I look forward to his book.  I think the title says it all.

It took 62 years, from 1934 until 1996, to pass the original Act.  I'll never forget, it was December 1995 that my Chief of Staff came to me and said the staff who had been working day and night and we've got low-hanging fruit, we've taken care of that and got some agreement, but these are the list of issues that you the members have got to resolve.  I said, all right, and I called my friend Trent Lott, and I said, Trent, I want to use your hideaway tomorrow afternoon.  I said,I don't want you.  I just want your room.  I contacted Larry and Fritz and John and we sat in the room and we went down the whole list.  I didn't get everything I wanted, Larry certainly didn't get everything he wanted, and neither did John nor Fritz, but that's legislation.  That's how you put a bill together, and there's some give and take.

Of course, we've had some criticism.  Some said you deregulated too much.  On the other hand, you had others that said you didn't deregulate enough.  I think they both have a point because you do have to have some give and take.  But I think over all, people would say that the Act has opened up business in a tremendous say.  No less than Alan Greenspan said that it was the greatest economic push of the 1990s, the Act. 

When you look at it, 10 years ago the Bells could not offer bundled local service and long-distance service, and much less broadband service.  They're doing it now because of the Act.  Verizon can and is offering that service.  Comcast couldn't offer 10 years ago telephone for their customers, but they can now because of the Act.  SBC couldn't offer services that they now can, so all in all the Act has worked.

Obviously, in 2001 there was a glitch and as a result you had some companies that had been too aggressive in their investment, and part of the problem I think was the confusing signals coming from the FCC, and the courts contributed to that.

But Congress meets every year and now we have a push to change the Act.  My good friend and former colleague Joe Barton is hard at work on it in the House, and the Senate is having a bunch of hearings and they're not as far along.  But my advice to my good friend is, Joe, be patient.  These things, complicated issues, they take time.  I don't think it will take 62 years to get a new Act, but I wouldn't be surprised if it took ten because it is complex.  There are a lot of interests to be considered and there is going to have to be some regulation, just like Larry said.  You take like the railroads, they've been deregulated, but you still have regulation so that you can ship from one carrier to another and they share the same rails and they've worked out a payment formula, and it's the same for natural gas and fuel oils, and the same with airlines.  So as long as you're principally having 90 percent of the homes, maybe not 90 percent of the homes, but certainly 90 percent of the business, there's only one wire that comes into the building and so you're going to have to have some kind of mechanism in my opinion to share this and require some kind of equitable sharing.  Otherwise, you're going to have tremendous disruption.

I thank you again for having me and I look forward to your questions.  Or as I used to say when I was Mayor Richmond, I'll either answer them or dodge them as best I can.

[Laughter.]

MS. BOWMAN:  Senator Pressler?

MR. PRESSLER:  I forgot to say one thing, and that is that we didn't try to regulate the Internet in the bill and some people said that was because you were afraid to, others said it was because you didn't understand how big it was going to be.  But I think instinctively we wanted to lave the Internet alone, and it's proved to be the right decision because the Internet has expanded so much now.  The Washington Post had an article the other day saying that much of the driving force of the economy and the development of a lot of things on the Internet has come from pornography.  If it's regulated and if there is not child pornography and if it's encrypted and so forth, but they're talking about legal pornography, but aside from that, there has been just an immense development probably in the Internet has been the most amazing thing in world history and I think that our bill only mentioned it a couple of times.

So by design or by luck, I think we made the right decision in not trying to regulate the Internet or tax it.  There was a proposal offered in committee from my colleague from North Dakota to impose taxes from the beginning, and in my state that would have been popular, but for good reasons or providence guiding us or good instincts, we did not try to regulate the Internet and that was a correct decision.

MS. BOWMAN:  Thank you, Senator, and thank you Congress.  Now it's with great pleasure that I turn to the author.  Harold?

MR. FURCHTGOTT-ROTH:  Thank you very much, Senator Pressler and Chairman Bliley.  It's an extraordinary honor that you've come today, and I can't tell you how grateful I am that you came, and I'm very pleased that Chairman Martin was here today.  His words were just much too kind, and I think we all could tell from the depth of knowledge that he has about even what some people might have thought were fairly obscure issues that Chairman Martin is on top of a great deal of what's going on in communications policy today and we're all very fortunate to have him there.

I would like to thank all of you for coming today.  I see just an awful lot of familiar faces, friends from Capitol Hill, from the FCC, from other walks of life, and it's a great honor to have you come today to discuss the book. 

Chairman Bliley has just been a great friend and mentor over the years.  As he mentioned, I was sort of a new staffer and he assigned me to work on the Telecom Act, and for doing a bad job on that he spent a lot of political capital to help me get on the FCC.  Having done a very bad job on that, I came over here to AEI and wrote a book.  And having done probably a pretty bad job on that, he still indulges me to come over to AEI and say a few kind words about me.  And Mr. Chairman, I'm sure in a few years I'm sure I'll call you up and ask you to bail me out again.

[Laughter.]

MR. FURCHTGOTT-ROTH:  As others have mentioned, Mr. Dingle and Senator Hollings had been invited and it would have been nice to have the four leading sponsors and advocates of the Telecom Act to be here.  I was very much looking forward to that, and I just have been sitting back and enjoying hearing Senator Pressler and Mr. Bliley discuss the Act.  They worked on it enormously over several years, it was an act of just great personal investment on their parts, and had been a work in progress for many decades.

I want to thank AEI for publishing this book. I particularly wanted to thank Karlyn, Sam Thernstrom, Drew Hulane [ph], Lisa Fara Parmolie [ph].  I don't know if Lisa is here or not.  Drew is.  And I want to thank my colleagues here at AEI, Chris DeMuth, Bob Hahn, Greg Sinek [ph] and Tom Hazlet [ph] and many others.  It was a very enriching experience to have spent some time after being at the FCC here to reflect about communications policy and to think about what went right and what might not have gone right.

I wrote this book a few years ago in the 2001 through the end of 2002 time period.  As Chairman Martin said, he hopes it doesn't go up to the current time, and he can rest assured, there is no mention of Chairman Martin.  I think more to the point, the book doesn't say anything bad about anybody because I don't really have anything bad to say about anybody. 

It's actually a very hopeful book, and it's a hopeful book in the following way.  I think one of the great things about America is throughout our history it's been learning lessons of what might not be going right and trying to figure out ways to make things go better.  That was very much I think the American experience of the 18th century.  It's very interesting to go back and read the writings of the Founding Fathers, and one of the consistent themes that comes out of their writings in their personal diaries and in their letters and just many of their personal commentaries and concern about the British government was a repeated theme about concentration of powers, about dealing with royal governors who were appointed by the King who really were greater than the legislature, that were greater than the King himself, that governments in which one person embodied all of the powers of government, to write rules, to enforce the rules, to resolve disputes that arose under those rules, this was very troubling.  In fact, even more troubling than what we often learn about today about problems of taxation without representation.

When one reads many of the political writings of the time, including the French writers, the English writers and the American writers, again this very common theme keeps coming up, the problems of concentration of powers.  Montesquieu, Locke, the great political philosophers of the time, were very focused on setting up governments that separated powers.  This wasn't just pure abstraction.  It was based on a reaction to perceived problems that developed at the time. 

Over the past two centuries our government which was originally founded on strict lines of separation of powers, we've had the encroachment of many government agencies over the past two centuries that began to have combinations of power.  This is not a new phenomenon, it's not even a 20th century phenomenon, going back to the late 19th century, the development of independent agencies which combined the various powers of into one.  A common thread for a lot of these agencies was what might be called industry expertise, that somehow there was something different about railroad law, somehow there something different about securities law, somehow there was something different about banking law, that required great individuals with enormous expertise and that this was really beyond the capacity of ordinary folks to understand.

Ironically, the one President who tried to stop this consolidation of power in direct agencies was Franklin Roosevelt, and he had some of his staff work in trying to, frankly, pull some of these agencies into the Executive Branch.  Congress resisted mightily, and the net result was that no President since has ever tried to do anything to stop independent agencies.  In fact, FDR went the opposite way and set up probably more independent agencies than anyone has ever since.

Thus we have the FCC.  As Senator Pressler and Chairman Bliley mentioned, the organic law for the FCC was set up in the 1930s.  It was one of the great experiments of the New Deal, an independent agency that combined all of the powers of government, and it worked sort of well.  There weren't any great disasters.  But if one went back and looked at the 1932 law and then looked at the rules that the Commission had subsequently, there was often a great disconnect between the two.  This lack of correspondence between what Congress would write and what government agencies would do was at times trouble and I think that animated a lot of the congressional debate in the 1970s, 1980s and 1990s.  Not only was the law outdated in terms of technology, but I think there was a great deal of concern that the agency was acting somewhat on its own.

That brings us up to 20 years of debate, and finally under the leadership of Senator Pressler, Chairman Bliley, Senator Hollings and Mr. Dingle, the 1996 Act was passed.  I think it's also very telling the exact moment that it was passed.  If we go back 10 years to the day to the minute, many of the people in this room were sitting, as Karlyn mentioned, over in the Great Reading Room of the Library of Congress.  February 8, 1996, was almost 15 months to the day after the 1994 elections that brought Republican majorities to both Houses of Congress for the first time in decades.  It was 3 months not quite to the day, but roughly 3 months after Congress passed legislation substantially changing the budget of the United States.  President Clinton vetoed those bills and there was consequently a government shutdown.  It was only about 2 weeks to the day after President Clinton delivered his 1996 State of the Union Address in which he uttered what I think are the most famous words of his administration in which he said, "The era of big government is over."

These were very contentious times, February 8, 1996, highly charged times, and there was a meeting at the Library of Congress that was an oasis in the midst of a desert, a political storm.  It was an amazing meeting.  It was not just President Clinton and Vice President Gore signing a bill, it was they signed a bill on Capitol Hill.  I don't know when that happened before or since, but the symbolism of the President of the United States always signs bills in the White House and here he came to Capitol Hill.  I think it was a reflection of, frankly, the power that Congress had at the time, and it was probably the only time in the 2 years before and the 2 years after that you had a lot of very well-known people all saying lots of only nice things about each other.  We had Senator Dole was there, and Dave Wilson here today, Newt Gingrich was there, and they all gave speeches.  Senator Pressler gave a speech, Chairman Bliley gave a speech, Senator Hollings, Mr. Dingle, and they all were saying one thing.  They were saying how great the 1996 Act was.

It was a reflection not just of the law itself, but I think it was a reflection of how bad everyone realized the current state of law had gotten to be under the 1934 Act.  People will say what was congressional intent, what did people think, I think we have the leading experts on that here today, a lot of what has happened probably was consistent with what had been expected, but I think it would be impossible to say that everything is what people might have thought.

Which brings us here today, and that's sort of why I wrote this book, A Tough Act to Follow, and it focuses on, as Karlyn said, a first principles issue about separation of powers, about what I think as a government it places individuals in a very awkward situation, and I'm very, very honored that two of my former colleagues are here, Commissioner Tristani and Commissioner Barrett, and Commissioners of the FCC are put in the position of having to write rules as a legislative body which is very affirmatively trying to understand the politics of the situation, trying to understand broader concepts, if you will, enforce those rules which is a very detail-oriented responsibility having to understand the details of individual companies and what they're doing, and then adjudicate disputes under them which is a very detached, procedurally precise issue, all involving the same companies all at the same time.  That I think didn't work in the 18th century, and I'm unsure it worked in the 19th or the 20th century.

Ultimately, it leads to problems I think about writing rules that are predictable, that predictably follow the law and that courts will be able to interpret clearly, and that to me is a problem that I think exists at the FCC, but at other independent agencies, and, frankly, at many agencies within the Executive Branch as well.  I think if one looks at the incentives of the agencies to write rules that will undeniably pass court review, I think that that incentive is a little different when that agency is also enforcing those rules and also adjudicating disputes under those rules, and the ability of agencies to enforce rules is very different when they wrote those very rules and when they're going to be sitting back later on.

But I think the story of American government is a very hopeful story, it's a very optimistic story.  It's a story of learning from the past and always trying to improve the situation.  There are other countries around the world where governments are very much wed to a long history of having done things in a certain way, and I don't think that's necessarily how things work in the United States. 

It's very interesting to read the court decisions that overturned rules of the FCC.  A lot of times people have focused on some of the dicta of judges saying not necessarily flattering things about the language of the Act, but in no instance did a judge or a court actually reverse the language of the Act except for in one case which the Internet pornography case. 

Courts have upheld the language of the Act.  The problem wasn't the language of the Act.  The problem wasn't the policies of the Act.  The problem wasn't the technology of the Act.  The problem was who was actually going to implement the Act, and that's the story of the book.  I have no suggestions to Congress.  As Chairman Martin very properly said, I think the role of government officials to tell Congress what to do is probably wrong.  And as a former Commissioner, I don't have any specific suggestions, but I think it would be, having seem that experience up close to have that experience go by without commenting on it in some way, also improper. 

So I thank you all very much for coming today and I'm very honored to be on the same platform with Senator Pressler, Mr. Bliley and Chairman Martin.  Thank you very much.

[Applause.]

MS. BOWMAN:  Harold, thank you very much for those very generous and thoughtful remarks and for taking us back to first principles, something that I think doesn't happen very often in this city, but what I think ultimately makes this book so worthwhile.

Now it's your turn, and I'd like to turn to your questions for any of the members of the panel.  Please identify yourself when the mike comes to you.

If I could begin, I'd like to know from each of the panelists what has surprised you most in the last 10 years about the implementation of the Telecommunications Act.

MR. BLILEY:  I guess right off the bat I would say that if somebody had told me that AT&T and SBC were going to get together and that MCI and Verizon, I would have said, what are you smoking?  You're obviously smoking something that's not made by one of the tobacco companies.

[Laughter.]

MR. BLILEY:  I would have been dumbfounded, and that's just one.  There are a lot of others in there, too, but that to me just jumps out as the biggest surprise.

MR. PRESSLER:  I think a surprise to me is how well Snowe-Rockefeller Amendment has worked out, and I say that is a part of the bill we can be proud of.  The Snowe-Rockefeller Amendment provided monies to libraries, schools, and to get the Internet out to lower-income people and in rural areas.  We also have in this complex bill the universal service fees of which there are some horrendous examples of abuses, and then there's the fraction of a cent that goes to help the deaf people have centers in each state that they can call into.  So even though this was a "deregulation" bill, as I pointed out, there is still a lot of "regulation" in it.  But Senators Snowe, Rockefeller and others, myself included and I'm sure in the House, wrote into the bill provisions to get the Internet out to poor people, to libraries and to schools, and I think that's worked pretty well.

The tragedy is that some people are still not getting on the computer when they're in grade school or high school.  They'll sort of be lost forever because if you're not on the Internet, you really can't be a player in almost field that I know of, and that is a tragedy.  I think we have recognized that fact through this bill and other efforts, and I would say as best I've heard, those efforts have worked out well.  That would be considered more regulation I suppose, and I'm always wanting to say this was a deregulatory bill, and it was, but those efforts have worked, I believe, quite well, better than I thought that they would.

MS. BOWMAN:  Harold?

MR. FURCHTGOTT-ROTH:  I just want to follow-up on Senator Pressler's remarks.  I know that Senator Pressler has done enormously good work in the State of South Dakota for the School for the Deaf there and it's just been very commendable, your work in that area. 

In terms of surprises, I guess I've got them in the book here, so I've done that.

[Laughter.]

MS. BOWMAN:  Now are there some questions from the audience?  Could you please identify yourself?

MR. MANISHIN:  I'm Glen Manishin with Kelley, Drye & Warren.  With all due respect to the alarm industry, Senator Pressler, you might recall me as coming in even after them with an amendment that Senator McCain decided not to offer and we got through conference, the SU Amendment [?].  But in any event, some have described the Act in slightly more critical terms than Commissioner Furchtgott-Roth used in his book, and some might say that the legal paradigms set up in the Act were meant to solve the problems of the 1980s and the 1970s and didn't really look ahead enough to the kind of convergence between technologies that we see now.  Without meaning to be critical, the question also for Congressman Bliley, is that something that's really within Congress's competence?  Without a crystal ball, would it be possible to write a legislative paradigm that would govern in an industry where technology changes so fast?  You wrote the bill in 1993 or 1994 several times, and there basically was no Internet then.  The Internet has changed a lot.

The question is, given the pace of technological change, can even Congress write a comprehensive statute that is broad enough but specific enough to govern in an industry like this?

MR. BLILEY:  I think, frankly, to answer that, the answer would have to be no.  It has moved so fast, there was no way to anticipate that back in 1994 and 1995 when we were working on it.  Fortunately, we adopted sort of the Hippocratic Oath in regard to the Internet to do no harm because I think if we got too specific, we might have done serious harm.  As a result, it has blossomed like a thousand flowers.  I'm sure now when they're working to rewrite the Act or to make changes that of course they will look more at the Internet, but they have experience to go with, none of which we had back in 1995 and 1995.

MR. PRESSLER:  I think that's a very good point, and as Congressman Bliley said, I think the Internet has blossomed like a thousand flowers, and we didn't regulate it.  Sometimes what you don't do, those decisions can create great development.

But I think your question is a good one because it goes to the core of something that I've come to believe as my political philosophy keeps evolving as I get older, I believe that most things happen in this country in spite of the government.  You say the governor of the state runs the state.  He really doesn't.  It's the activities collectively of all the people there, the business people, the teachers, everybody, they make the society go.  Does the President of the United States or the Congress run the country?  The country runs itself.  A lot of things happen in spite of the government, and we have a wonderful country where a lot of good things have happened.

I spent some time last semester with Chinese graduate students, good ones, at Fudan University.  They speak English well and they read The New York Times.  They discuss comparative government openly and so forth.  They acknowledge problems in their government and they see problems in our system.  When I teach these graduate classes in government, we really don't argue about politics, but how things get done.

For example, in telecommunications, they have endless hearings in Congress, in the Senate at  least.  The Telecommunications Bill of 1996 was really a very rare moment when a piece of legislation on telecommunications actually passed.  It was just a combination of personalities or the moment or something that it did pass.  For the most part, Congress will not act on telecommunications issues because there is very little political benefit to legislating in this area, there are electoral penalties that can be imposed for legislating in this area, but it's not a subject that Congress is likely to pass very many bills.  As a result, the regulators take over.

For example, we had a judge who ran telecommunications for many years because Congress didn't act, and everybody complained about it.  In the 1980s, a federal judge ran communications, and the FCC maybe does more things than some people want it to do or maybe as many as others would.  The point is, right now Congress is holding hearings and hearings and hearings and there's all this tough talk and bills are introduced and lobbyists are called for, but nothing passes.  All the great talkers who criticized the 1996 Act--they're there.  It's 10 years.

The point I'm making is that this area where the public is not engaged, and the public is really not engaged in the details of it however you slice it or the broadcaster's spectrum would have been auctioned long ago, with all due respect to the broadcaster's.  They've done a great job hanging on to that spectrum and I wonder if they'll finally last gasp give up some of it here in a few years.  Every time your cell phone bleeps off in the United States and you wonder why they have so much better cell service in other countries, it's because the public has not been interested in getting the spectrum out there, the good spectrum, and nobody understands the issue.  The press doesn't write very much about it because most of the press owns part of the spectrum somewhere somehow, and that issue is just not dealt with.

I introduced a comprehensive spectrum reform bill in Congress and I got a great review from the Heritage Foundation, somebody is finally trying to deal with this issue.  But I couldn't get any co-sponsors even though people had made speeches on it and held hearings and so on and so forth.  The broadcasters didn't like me very much from that day forward and probably paid me back in different ways.  Anyway, we won't go into that.

The point is, this is such a good question because it leads to two conclusions.  First, I think most happen in telecommunications happen because of business activities and so forth.  I, too, have been bothered by all of the consolidations.  I pick up the newspaper and every day there's a new merger.  That seems to be the only result of the 1996 Act.  I was in one of these conferences several years ago and the title of it was What Has Happened Besides a Lot of Consolidations and a Lot of CEOs Getting Paid Exit Pay and so forth?  That's the way we reallocate capital here, and in China they still reallocate it by government decision.  They're struggling to get a stock market.  The great Chinese leader, he said that whatever color the cat is, if it catches the mouse, it's okay, so we'll have capitalism, and with that great reasoning, China lunged forward.

The point of the whole matter is that this is a very difficult area to legislate in, Congress is having all these hearings now and they're not going to pass a bill.  It's almost impossible to pass a bill because there are enough checks and vetoes and so froth.  The regulators get stronger, and that's what worries me because I'd rather Congress would pass bills than being deadlocked so long.  Congress is almost paralyzed in this area except for the Telecommunications Act of 1996, and that was a rare moment.

MR. FURCHTGOTT-ROTH:  I just wanted to add a couple comments on this.  One is I'm not sure I would agree with the thesis that every time technology changes, laws need to change.  I think one measure of a good law is in fact that the property rights, the contract rights, the processes are in place to accommodate any sort of technology.  Technological change goes on all the time, laws don't always change all the time, and sometimes that leads to problems and sometimes it doesn't.  The general structure of real estate property in the country, for example, the laws have been around for a very long time, but the nature of real estate has changed pretty radically over that period of time.

The other point I would make also, and I've seen a lot of accounts about how Congress didn't know anything about the Internet in 1996 and I'm sure that Chairman Bliley could speak to this better than I, but there were a lot of bills involving the Internet in 1996 and 1995, and there was even an entire committee of Congress, the House Science Committee, and Chairman Bliley's good friend, I believe it was Mr. Walker, was the Chairman over there.  He was very busy and I wouldn't want to have to send more bills over there.  So we changed a lot of the language from Internet to advanced telecommunications services, but we left Internet in on a couple of important places. 

I think the notion that the 1996 Act somehow is written in a pre-Internet time frame is only partly true.  I think there was certainly a great deal of awareness of it at the time.

MS. BOWMAN:  A question over here?

MR. NELSON:  Mike Nelson with the Internet Society.  I was working at the White House 10 years ago when the Telecom Act was passed.  I remember the story that Ron Plesser told about the day after the Telecom Act.  He called up three of his friends.  First he called up a friend at AT&T and he said, How did you do?  His friend said, We got everything we wanted.  Then he called up his friend at one the Auerbachs and he asked the same question, and he got the same answer, We got everything we wanted.  And he got the same answer when he called his friend at the cable industry, and they were all telling the truth.  They had all gotten what they wanted in the legislation which why there are parts of the legislation that are quite inconsistent and contradictory and which is why it took the FCC 800 pages to try and reconcile these inconsistencies. 

Do you think that the fact that there has been so much reinterpretation and so many court cases because of some of the inconsistencies in the 1996 Act has slowed down the U.S., and do you think it has anything to do with the fact that some other countries in the 10 years since 1996 made more progress in deploying the Internet and have moved past us, quite frankly, in broadband deployment?

MR. PRESSLER:  The day that Congressman Bliley called that meeting, he talked about it and he called me and he said let's get this thing settled or not settled, and he did a great job of chairing that meeting where the four of us settled the things.  But we had to strip a lot of stuff out of the Act to make it pass, and there are still lobbyists mad at me, I don't know if they had success fees riding on it or what, but we let everything almost go into the Senate bill over on the Senate side to keep all the Senators happy.  Then we had to strip all that out and a lot of people got angry.

The same thing was true of the Exon Amendment regarding pornography and so forth.  We let over on the Senate side at least put everything into it that they wanted to including myself so we all had our amendments to take home and talk about.  But we also put in the bill that there would be expedited consideration before a three judge court and it would go to the Supreme Court fairly quickly and that the whole bill would not be declared unconstitutional if the Exon Amendment were declared unconstitutional.  So that made a lot of people very upset.  But with this bill, we had to pull together something that would pass, and it was very fragile.  In fact, we could have had a filibuster at the last minute from anywhere.  Senator Kerrey of Nebraska came to the Senate floor three nights in a row and started to filibuster and I just stayed up and patiently answered his questions.  When he went to the bathroom I'd talk and protect his time and keep the Senate going, and finally he went away.  But his staff member had been involved in the whole development of the bill and we tried to accommodate him and we thought he was on board.  That's how fragile it was.  If somebody would have filibustered, this is the kind of bill that the leadership won't use up national artillery on, and it was just very fragile.

Your point about other countries moving ahead of us in some areas is true.  Another compliment to this bill is that this is the most copied bill in world history.  You might think this is a feed my ego, narcissistic, self-centered former Senator and his colleagues up here, but it's a compliment to us.  Eli Noam of the Columbia Institute of Communications told me or nodded his head or provided me information that over 30 countries have copied this bill almost verbatim, or sections of it, for their countries, and they've improved on some of it.  But also they don't have the same problems with the spectrum, for example.  There are certain things we have to deal with.  The broadcasters think they've owned the spectrum since the 1934 Act, and they essentially have, but I still think it should be auctioned to get that out there for everybody to use with the new technologies.

You have to play with the cards you're dealt.  Also in our system, every state and city wants to have an input and they want to tax it.  It's reached a point that all the taxes put on telecommunications are just out right absurd.  I wish we had found a way that we could have prevented all the taxes that have been added on to telecommunications. 

We played with the cards we were dealt, it's not perfect, but it is true, and I travel a great deal, both the airlines and the cell phones work better in some countries.  China East and China South Airlines are all brand new planes, absolutely brand new airports.  They didn't have to worry about their broadcasters, they just took the spectrum.  But the countries that are further ahead of us are usually either dictatorships or countries where the state has the power to step in and push things aside and make things happen.  So we played with the cards we had, but bottom line as has been said before, we're lucky we didn't try to regulate the Internet because that has flowered forth as Congressman Bliley said so eloquently.

MS. BOWMAN:  One final question in the front.

MR. HEARN:  Ted Hearn with Multichannel News.  Senator Pressler, if broadcast spectrum is auctioned, how am I going to watch television?

MR. PRESSLER:  You'll watch it in some kind of compressed spectrum.  There are technologies to do that.  You'll watch it on cable.  Most people get their television over cable.  But there are ways that the broadcasters don't need all that spectrum, they can still have some, or they can buy it and pay for it like everybody else does.  The broadcasters have always said, this God bless them, that we take care of the little old lady who needs the tornado warning.  That's really not true, but they could still do that.  They could buy that spectrum themselves, they can bid at the auction, and there are plenty of technologies that we can let the little old lady know about the tornado that's coming, and she probably has not got her TV that time of the day anyway.

MS. BOWMAN:  Senator Pressler and Congressman Bliley, I'd like to thank you for coming and for joining us today, thank you for your thoughtful reflections on the Act.  And I'd especially like to congratulate Harold on the publication of A Tough Act to Follow, and I'm sure he'd be willing to sign copies for any of you if you'd like to do that.  Thank you.

[Applause.]
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