A highlight of Freedom2Connect’s final afternoon was an appearance by Reed Hundt.
Hundt was chairman of the FCC from 1993-1997, when the Web was first being spun. Under Hundt the 1997 Telecommunications Act was passed, the e-rate was passed, and All You Can Eat (AYCE) Internet service became the norm, because Hundt’s FCC refused to approve Bell attempts to impose per-minute rates on local calls.
Reed Hundt
Reed Hundt is the former chair of the FCC, now working with McKinsey & Co. and on corporate boards like those of Intel and Tropos
(Introduced as the father of All You Can Eat (AYCE) pricing on the Internet, because his FCC resisted access charges and per-minute local calling prices from phone companies. Hundt wore a suit, but quickly noted that his right arm was in a sling, due to an accident.)
I’m a pure left winger now.
People ask me how I broke my bone. I was on a hunting trip with the Vice President, and I ducked. So he just winged me.
(Looking behind at the Wiki conference.) I admire how you elevated classroom muttering to bathroom scrawling.
My amusing remarks come from the Wall Street Journal, a March 2006 article, “How France became the leader in offering fast broadband.”
I sent the author a note, “I praise your article but note that in French “deregulation” equals “enforceable unbundling” She wrote, “You’re right. Deregulation was a bad choice. Opening the phone lines to competition would have been preferable.” In other words deregulation should have been understood to be regulation.
With this little adjustment you can read the Wall Street Journal, and understand government policy in the US Senate and House. You can also understand why a part of the fix we’re in as a country is that we don’t have an intelligible discussion in real honest candid terms on matters of importance. We don’t have a concept of objectivity, even truth, which ought to be the basis of any discussion on net neutrality and openness.
This is, in fact, an old story.
It is the story of distributoin and transportation systems since the beginning of time. It is the battle between distributors and content. Whether we’re speaking of the railroads, the fight for an ICC in the late 19th century, it is the same as the discussion between theater owners and theatrical exhibition leading to the Paramount case.
The purpose of competition is to create a bottleneck and extract rents.
This is part of the nature of competition.
But as JK Galbraith said 50 years, the US has always been a country of private welath and public poverty.
What we’ve seen in the last 20 years is new ways to obtain private wealth without public property. We see it in Iraq, where to an astonishing degree, we have a war financed and operated by private sources. We have an untold number of private contractors involved in combat-like operations there. We have in health care a move to convert virtually everything that might have been and is part of the public system elsewhere into a private system. The President is sayhing “buy more insurance” to assure more private access to health care, not to replicate the VA.
We have in education more and more money paid, it costs more to get a so-called public education at the college level than anywhere else. UC Santa Barbara now costs over $20,000/year, in-state. Charter schools and private schools are all part of it.
We saw TV go to a pay medium, and now we’re seeing frequencies historically designated for non-commercial networks auctioned, and turned into a private paid broadcast medium, one to many.
It should come as no surprise whatsoever that the battle within the telephone industry is one where the proprietors assert a property interest in the network, they wish to create a private Internet, they wish to sell access and bundle on top of it content and conduit.
What’s important is it be recognized as not the only way to organize an economy or society, and we’re not even close to talking about it in a way that reflects the importance of the debate.
We’re debating whether or not it would be the case that if a carrier had an extra dollar would it put it into a better network. That’s the nature of the debate. The assumption of all policies is that the answer is, “of course.”
This is the same approach the Administration has taken to the eocnomy across the board.
At the height of the 1990s boom corporate profits were $800 billion. Theyu’re now $1.4 trillion. It’s the fastest profit increase in the history of capitalism. This has not been an accident. It is the function of a combination of tax policy changes, and industry structure changes. It is a function of taking a hard look at the increases of commodity prices, and deciding the profits will go to producers, not consumers.
Economists tell you it’s arbitrary whether those profits go to producers or consumers. But it makes a great deal of difference to the consumers.
This is a profit-less economy for workers, productivity gains have meant not hiring new workers.
This $1.4 trillion in profits has largely gone uninvested in the U.S.. It is being distributed in dividends, invested in other countries, and American corporations in general have more cash than in a generation.
None of these things are an accident, and they are not morally unsound. They’re only to be judged for their effects. Do they align with your goals?
The question begged by network neutrality is, what are the society’s goals?
There should be productivity gains, but those gains have to be translated into a higher standard of living.. That might not be what you purchase, but the access you have to public property.
The brave new creation of public property, of course is the Web.
It’s the greatest new creation of public property in the last 30 years, maybe ever.
Susan Crawford says the core of the problem with the debate is that the
real advocates don’t have any lawyers, so they don’t have any names.
They are the nameless and uncounted millions of us who enjoy expanded
freedom of choice, association, action, creativity and the ability to
obtain knowledge form the public property of the web. Access builders
are not the proprietors of the Web, or the creators of the Web. They
are just creators of pathways.
The debate we ought to have is this. From the perspective of the right
national goal do we want low cost very robust high speed access to this
public property or a very expensive limited toll booth?
Access builders say it’s private property, and they can charge high
prices to the public park of the Internet. And maybe I should make it
less appealing to participate in the public commons and more appealing
to particiapte in the private commons I will create. It’s a less robust
version of the public property and more robust version of the private
property.
It’s the same debate happening everywhere else. The only thing that is
a little surprising is the astonishing abandonment of the field of
discourse by the institutions you would have thought should talk about
these things.
How can the FCC be empowered when a House subcommittee says you should pass no rules?
All the rules we wrote about telecomm in the 1990s were shorter, in the
aggregate, than the rules of Little League Baseball. They were
criticized in great volume, but the words did emerge and they were
sustained in the Supreme Court. Theyh were sustained but aren’t
advocated any longer.
The rules and process were meant to empower users, to create a
user-centric network where start-ups were subsidized by things like
reciprical compensation, and the Internet was placed under the
jurisdiction of common carriers.
To the 1990s libertarians, well, God bless your naïve judgement. I
forgive you for knowing what you did not know but I don’t forgive you
for not knowing those paradigms existed and were important.
Harvard Business School found a 10% rate of return of all the dot-coms
for the 1990s. That’s not too bad. That’s better than any service
provider record in that time.
The open net created by regulation and adjudicatory decisions was a
revolution in society and a huge contributor to economic growth and
rising wages.
We have things now going in the other direction.
Would an open net jump start entrepreneurship and productivity gains? I don’t know.
I recently wrote a book, “In China’s Shadow: The Crisis of American
Entrepreneurship.”
It’s a poor
man’s version of Tom Friedman’s book.
Whatever China becomes in terms of an information society in the next
20 years has an enormous impact on the U.S. in ways we have not begun
to imagine. It is China’s version of the Inernet that will be as large
or larger than the American and Western version in a generation.
How would we like it if China had a non-neutral network? How would we
enjoy it if China Telecom were to decide a highly discrimiantory
approach was the right paradigm and American firms were not to get
equal access, in China or other places under its influence
In all times past there would have been an absolute congruence between
our fight for free trade and our battle for open networks in China. We
could have counted on that.
If we decide to adopt in the next several years, in pursuit of the
extra dollar, a closed network model, we have no basis to stand on if
we assert a preference for open networks in other countries and open
access by our sellers on those highways to consumers and users in other
countries.
The WTO treaty of 1997 has the exact same provisions as our 1996 Act.
It is not an accident the the principles of the WTO treaty have been
followed in Japan, Korea, France and other countries to produce an open
network paradigm where it’s routine everyone has access to 100 Mbps and
that’s so much throughput that it’s trivial to talk about whether a
fracition of those bits might be aligned to create a VPN.
But in the U.S. where we have a thin trickle of bits, and limited
access to the Net, for us it is a clear and present issue of great
performance whether that will be open or a VPN system.
We’re not discussing any of the core facts. We’re not talking about the impacts of free speech and free associaton.
We have the four principles, but they are a palsied, weak, shadow
compared to rules. They are not in substance addressing the issues.
they do not provide guides or signs, they do not provide a program, and
they’re issued in the context of the House subcommittee saying no
rules, do everything case by case.
That means all decisions are about what happened 5-7 years ago. They
mean any company can avoid an adjudication until it’s irrelvant. That
does not impact capital planning, strategy or how networks are built.
It’s a rear view window look.
Having no rules means we have no plan.
We’re the only country in the world that doesn’t see broadband as not being everywhere for everyone.
Does this make us more efficient? In terms of reaching everyone and
wrapping everyone into one intelligence with a social fabric that can
be a low cost distriubtion mechanism, in that respect we’re a failure.
We’re not committed to creating a high and rising standard of living with the single most important tool available, the Web.
Everyone should have access. Upstream is vital. There’s no discussion of price, quality, mobile access.
The protocols need to be open. We need open protocols.
All networks should be able to connect at almost no price.
And competition? is that one firm or two firms?
It makes all the difference to have 5-6 competitors and ease of entry.
Let people win after something like March Madness with a new tournament
around the corner.
It’s a valiant fight to attach vague principles to sort of conditions.
But it’s a sad day when you pass a law saying you can’t even have the
discussion.
What should be the paradigm?
- The public ought to createa public thoroughfare to the Internet, by
regulation, just like in France, Japan and Korea. It ought to be fast.
Every year it ought to be faster. If that means a phone company wants
$100,000 per household from taxpayers, that’s less than 1% of what’s
budgeted for an anti-missile defense system that doesn’t work. We have
committed $1 trillion to Iraq, and we’re talking about basing our
information economy on an investment that is maybe $20 billion, for
Fiber to the Home . If you had that it would be the work of a moment to
allocate it. I’d write that check in a heartbeat -
This network is for everyone, everywhere, all the time, every day.
It has to be wireless and wired. To say that in Washington today is to
be crazy. It only happens to be the dominant paradigm everywhere else.
And it can’t be said here. - This public space to which the public thoroughfare must take us is where democracy will be defined.
Q – If you want the government to take it over
I didn’t say take it over. Write a check
Q- You’re talking socialism
Then I didn’t say it well enough. I’m happy to write a check. I’m happy
to have Warren Bufett write it. What I’m trying to say how staggeringly
small the amount is compared to the value. When you ask what people are
willing to pay and see what’s left over, my estimate is it’s about $20
billion. In an economy of $10 trilllion this is nothing. We’re not
having this debate not because the cost is so high, we’re not having it
because those who are shaping it see the possibility of profit
maximization and find no real rebuttal. That only means the reason why
we created the open narrow band Internet was to deal with the reaction.
Q – (Dave Hughes) There was a school library fund of $2.2 billion. I
said, don’t let the rule come in to make all the connections to schools
be a service, with the only service being by the telco. What we lobbied
for, going back to wireless, was that if money could be spent by the
school to connect their buildings, billions would have been saved and
we would have gotten broadband in school districts. Not only did the
rule prevent that, and it was never changed, but today still a school
cannot with school library funds cross a right of way with fiber to one
of their own schools. Would you fight for that? That inhibited 15 years
for schools being connected, and then the home, until 100% were
connected.
H – I could never get lawyers at the FCC to tell me anything either.
You’re talking about the e-rate. Let me make a couple of concessions.
There’s never been a reasonably good government rule that was perfect.
There are always defects. If we wrote a $25 billion check to create the
public thoroughfare, 4 million homes would get degraded service,
everyone would whine about getting 72 Mbps instead of 100 Mbps. But
here’s the big story. The big story is that, as a country, with a
unanimous FCC vote, we were able to create $4 billion – spent every
year on Internet access – and today 85% of kids 6-20 have used and
learned about the Internet at school. They’ve become the constituency
of the information society of the future. A lot of things had to be
accepted to get that vote. They can’t contract fiber networks. They
can’t buy PCs. Right now we have it overwhemingly not right on basic
policy. That’s not true on e-rate.
ISDN – Investments Still Doing Nothing
Q – How can we expedite rulemaking in legislation? What if we saw
wireless as a way to license the user, make it open source and let
people build on top of it
H- LMDS and many other stories are of lobbying business plans, and
process defeating business vision. They are disappointing stories.
The wireless spectrum in fact has the potential to contribute more to
very low cost high producitivtiy access to the public space than any
topic we can address. Michael Calabrese has told us many ways in which
this is true. At this time we have it largely wrong. We are slowly
meting out spectrum, putting it into private hands in ways that
maximize the price of access, minimize the penetration, reduce
entrepreneurship. It’s largely wrong. It may happen that enough
spectrum leaks out to create a different environment. But it hasn’t
happened yet. You actually have language in Rep. Barton’s bill about
municipal WiFi. He’d make less use of unlicensed spectrum. It should be
unlimited use and there should be more of it. At least now, today,
wireless is seen as a national asset that is ever-renewing, unlike any
other asset we know, and if we lok at it on that basis is can
contribute to a high rising standard of living.
Q- Gary Arlen—Did you say $25 billion or $20 billion
H – $20-25 billlion is the difference betweent he amount people would
pay for extrmeely high speed broadband and what it would cost.
Q – Arlen — Even in your day, and even today, we’re hearing more about
convergence, and the point about regulating mass media and telecom
under some unified system. Can you talk abou that? A lot of what we’ve
talked about is telecom companies, and the world is being impacted more
by media companies that are unregulated.
H – In pursuit of harmony we’ve picked the worst of the paradigms and
imposed them on everyone. There’s not a huge difference between how any
network builder or content company is created. They’re all part of a
movement to a privitized system. I’d have auctions, and give the lowest
cost provider the money. Then the business paradigm changes. When
you’ve built an all fiber network you’re looking for traffic, and
that’s the difference between where we are and could be.
Q – Subsidy is prone to gaming. Spectrum is sitting idle. What’s the right answer?
H – There are good public purposes served by some expenditures, and
there are special interest claims by other expenditures. When you look
at a Congress that has expanded pork to make a pig farmer blush, you
begin to wonder if there’s anything like legitimate public spending.
However, I believe thre is such a thing as public property and I don’t
believe the Constitution allows us to seize private property and turn
it public. There are very miniscule public expenditures that can create
very substantial public property. The fact universal service subsidizes
voice doesn’t mean you just give up.
