We all know why we are here, the new Telecommunications Act of 1996 is likely to be signed into law this week; after ten or so years of legislative efforts it seems to be completed. And so now considering the importance of this step we are gathered to discuss it. I am pleased to be the moderator. I have never moderated a larger panel in my life and the reason of course is that so many of the different groups and interests are involved in this bill, which, of course, is the reason why it was also so complicated. Let me avoid the introductions because you do have the sheets with the individuals' bios, so we can save ten minutes or so from introducing those extremely distinguished gentlemen and ladies too. One or two people, Mario Gabelli is on his way, and so is Paddy Link, so we'll get started now.

I would like to, in a way, provoke this discussion by a bit of an early observation which is: Does it really make any difference? And I can kind of see how the different people on this panel feel about this. So, let me say the following: politics, of course, is the art of the possible and by that standard Congress deserves a pat on the back by passing last week the Telecommunications Act. The new law to me seems to be a step in the right direction but it is quite another matter to declare it as a victory bulletin emanating from Washington as a revolution, a breakthrough, a D-Day. And I just have kind of here on the "New York Times" front page for representative Bliley is quoted as saying: "Today we have broken up two of the biggest government monopolies left, the monopolies of local telephone service and in cable television." Now much of this viewer think is steeped in the belief that reality in the information sector is shaped by Washington legislation rather than the other way around and I think it is necessary to prick this balloon. Much of what the law claims to accomplish is happening anyway. Take for example, competition in local telephone service, the keystone of this act because everything in a way emanates from it. The fact is that local telephone competition has already been instituted around the country by most of the more important states, in some instances, several years ago. In with many of the other states well in the way of doing so, the new act merely extends competition to the some of the slower moving states which is hardly a revolution. And with local competition happening anyway the end of the court administered restrictions on the baby bell companies is also in sight without the monopoly bottleneck. With safeguards in place similar to those now set by the act, the bell companies would have been left into long distance, video, and full service provision, act or no act. Even with a new law, the bell companies are not as home free as they imagine. Their rivals will try to tie them up for years in courts and regulatory commissions arguing that they have not met the elaborate checklist of pro-competitive steps. Now, similar stories can be told about other aspects of the act whether it is in broadcasting cable, telephony, and while of course there are instances which is necessary for Congress to speak. In most cases the Federal Communications Commission, the State Commissions, and the Anti-trust courts could have or should have or have accomplished much of the same job and often more expertly. For that is the strength of the American system of decentralized communications regulation, for its untidiness of process it got the job done of transforming monopoly into competition much faster than, for example, the centralized systems in other countries such as in Europe, where every change becomes an affair of state. In America, in contrast, telecommunications reform was a struggle with many small skirmishes rather than with one central or consuming battle, until this act. It's a small wonder that it took Congress years and years to draft a passable bill because it had to bring so many interest groups under the tent. All of them including public interest advocates got something that they wanted together with something that they didn't like with lots and lots of safeguards in one grand but lengthy bargain. The result is a 180 double spaced or single spaced or 280 spaced pages of rules and conditions interlocking in a complexity that stumps the expert but that has been described, nevertheless, as deregulatory. And that is the problem with this act, that its legacy might come to haunt us in coming years even if most of its provisions make sense today, and I think that they do, and even as they accelerate from trends and bit as it does. As certain as the sun will be rising tomorrow, it is clear that in this dynamic field, these rules will soon become obsolete, and then become a drag to change. Just look at the dramatic change in internet Cybercommunications and its already inadequate treatment in the new law. But by then we will be stuck with hundreds of pages of legal provisions that will be extremely hard to change because each clause will be protected by the entrenched interest that have grown around it. Now, yes, the law will unleash some business frenzy, but that has less to do with the tangible difference this law makes, and much more with heard psychology.

A few good speeches by Al Gore, by Newt Gingrich and FCC chairman Reed Hundt could affect the atmospherics just as much and probably much more cheaply than the expenditure of congressional efforts that has been taking place. So therefore to conclude instead of micromanaging deregulation of the future, Congress should set reasonable concrete principles, principles for an increasingly competitive media environment, principles about competition, access, interconnection, concentration, economic development, international reciprocity, universal service, free flow of information, privacy, and so on. And this would give courts and commissions a framework for adjustment in the future to the inevitably changing circumstances. In the present it would also permit some national debate over those principles and issues instead of the impenetrable discussion that took place in public view, yes, but certainly beyond public comprehension. So therefore, the new reform has been a useful step, but now let's start reforming the reform. Thank you, and I will now pass the microphone to our first speaker, Rick Cotton of NBC.

Richard Cotton:

Thank you Eli, I guess I find myself in complete agreement with everything that Eli said about the bill, and I guess I'd make the overall philosophical observation that I think that the enormous problem with regulation, and I do not count myself just an opponent of regulation but of government policy generally, is precisely the difficulty of keeping up. And particularly in the world of private enterprise where private interests do fight vigorously to protect existing provisions of law, it is an enormously difficult challenge. I guess what I, the observation I would make, and I'll play my role here since I work for NBC and represent a company that is heavily committed to broadcasting although it is -- we have tried to change with the world and now have deep interests in cable and overseas satellite delivered programming -- fundamentally this is a bill which creates huge competitive opportunities for the cable industry and the telephone companies. The broadcasting provisions that are in the bill were largely added as an afterthought. Interestingly they've generated enormous amount of controversy and, but I guess the main point I would make about the bill and the future after the bill is that the entry of the telephone companies into video broadcasting, the freeing up of cable rates from regulation will tilt dramatically if you look out five or ten years, the general private enterprise delivery of video to Americans toward a pay system. And that broadcasting is going to be fighting, I mean in terms of the system that most people in this country grew up with, will be fighting rear guard action in the sense that the pay services will have enormous advantages and this bill granting telephone the right to get into video will tilt the field substantially in that direction. And I would say one of the issues that the country will face is whether we collectively care about that anymore. I mean telephone is a system where every time you pick up the telephone you pay for it. It may be that gradually people will get used to the idea that in terms of their news, entertainment, sports, everything from premium entertainment to the network nightly newscast to local broadcast to the Superbowl, to Olympics, that all those simply become pay programming. And I think that in terms of the debate of the next five to ten years it will have its most immediate impact over the next year in terms of the debate in Washington over whether broadcasters are going to be allowed to upgrade to digital signals, which has gotten cast as a discussion about whether to auction off spectrum to raise some additional money in terms of balancing the budget, but that one of the unanswered questions that the legislation leaves open is will we move totally to a pay television system in this country.

Eli Noam:

Thank you. Henry Geller, the Markle foundation.

Henry Geller:

In the interest of robust wide open debate, I will differ from Eli. There isn't any question that we were moving toward competition in the states, the telcos had already received the right to go into video programming in the courts, even aside from the bill, and I think over time there isn't any question that the modified final judgments restrictions on them would have fallen apart. But unlike Eli, it would have taken years, I would point out, many, many years. To get rid of the information service restriction took seven years. It's been twelve years on one of, for interexchange long distance and for manufacturing and if you look at the way Judge Green was going, it could have been an additional five to ten years because he wanted significant competition out there before letting the bells go. If you wait for significant competition, you can wait a long time because the opponents never find it, never. In the case of AT&T, it got down to sixty percent and the opponents were still saying don't deregulate, keep rate regulation. They've only got it now, eleven years later. So this would have festered for another five, ten years a decade and we can't really afford that. We want telecommunications to make a maximum contribution to quality of life, to efficiency; to get that we can't keep parking out half the telecommunications industry, the RBOCs and limiting them to something as artificial as called a lata. But it just, it makes no sense, it has no relation to the way people operate, we had to get rid of it. And if you didn't get rid of it, what you would have had is that the RBOCs, I shouldn't use acronyms, the Vested Bell Operating Companies would have resisted like mad. Every time Gail's company would come around and want something, they would say if we give it to you, you're going to pile in and compete with us, and we're going to be stuck in this latum, we can't offer one stop shopping, and we're losing out, we're losing our shirt, so they would never reach an agreement. They were very arbitrary on what they call reciprocal agreements, resale, all the things on, what is on this checklist in here. And what the bill does, it cuts through that. It gives them a carrot. It says you're not going to get out until you let in. So they really for the first time, because they want to be let in, have a desire to go forward. And second, it doesn't even depend on that. The bill sets out very pragmatically a checklist of fourteen things they have to meet before they get out, and then it specifies deadlines. For example, the way it's going to go is that if there exists a competing residential business competitor, who's using its own facilities or primarily, predominantly, its own facility, and has entered into an agreement with MFS or with Teleport, some competitor, then it can get out. And it has to show, get the approval of the state that it has met all of those 14 conditions in the FCC. And be here in order not just to rely on the carrot, it says if there is a dispute, the state settles it in 9 months. So that you are going to get action; and throughout this bill you've got 60 days, 9 months, 6 months, 15 months, 10 months: there are 80 rule-makings in there, and there are dates on virtually all of them. Then now Eli is right: that's lousy legislation. Normally you write laws is to set out a general principle, give people accessibility, very dynamic field. It hasn't worked in this field. It just dragged on and on. And so it isn't a matter of trust verify with oversight: there is no trust here at all. They don't trust the parties to reach agreement, they don't trust the FCC, which has allowed the thing to drag on, they don't trust the states, and that's the reason for it. All I would say to Eli is it's true, it's a miserable legislation. It is so detailed. But it is to manage a transition. That transition is now being forced so it will be over in a few years. When its over, they give the FCC the power to forebear. And to make them act again on any petition to forbear, they say "in every even numbered years you've got to look at all your regulations to see whether they are needed." And to exercise oversight, I think we'll get rid of what's there over time, but I believe it was necessary for you to break this courier now. And some other points: Rick mentioned there is a section called Broadcast Reform. In my opinion it's not reform at all, it's nothing but broadcast giveaway. But the real problem that I have with it that Rick can answer is that we are going into the 21st century. The we have for 70 years used something called Public Trustee Regulation. We are given voluntarily, you have to show the FCC you serve the public interest and you look at the content of program to do it. It's been a total failure, a charade, and why would we keep that going into the next century? We are going to reform it, we should have gotten rid of it, and made the regulation of the table and of over there television the same: have no asymmetric regulation, no public interest requirement on content; all you have to do is to take the money from them. In cable you take 5%, here you could have taken 2 to 3 percent giving it to public broadcasting, 1% in the case of radio, we have the structure work for you. It seems we will be a lot better off. Finally, I'd like to say that there are rate flaws in the bill. The universal service provision isn't consistent with the real reform. The idea of it was to hear, to, to have something that was targeted, explicit, justified. Instead of that, because of the Senate and the Constitution, and the emphasis on rural, we kept the same(?)mainly subsidies came: we are subsidizing high-cost carriers, no vouchers people really needed, we subsidize ski resorts. If you want to get in a rural area, you have to go and ask: "Mother, may I do that to the state?" So we ban it you have to show it is in the public interest. That's not what I call reform, and I could go on in a number of other ways where it just hasn't worked. There are also Constitutional blemishes here; I don't want to take too much of my time. I think the Exxon amendment is totally unconstitutional, and there are very difficult questions that Rick knows better than anybody on the V-chip which I assume we'll discuss later. I'll stop here, Eli.

Eli Noam:

Thank you very much. We'll have Dan Gold from Century Communications cable company. And I am sorry to be willing to disrupt his break.

Dan Gold:

I am sorry to have come late and I take it I've missed the opening remarks of several of the panelists and I've only heard those comments from my friend Henry Geller. I've known Henry for 35 years, I've rarely found myself as much in agreement with him as I did during the last 5 minutes. Much of what he said preempted the comments that I had hurriedly prepared this afternoon as I was thinking about what I would say. Obviously, my remarks should be, I think, directed primarily at the impact on the cable television industry in particular, and I will try to, I hope, really to do that. I think we feel generally that the approach taken was modest, but positive, and certainly one which we welcome, or a set of comments, a set of changes which we welcome. The deregulatory impact on the rate side for our industry, clearly, at least removes a great deal of uncertainty, which has hovered over the industry now since about 1992. And from the point of view of the ability of the industry to obtain the necessary financing for the necessary rebuild, which are increasingly foisted upon us by overly zealous local regulators. We, I think we'll find that the capital markets are somewhat more assured about the revenue streams of the cable industry. And I look over at my friend Mr. Gabelli, who is probably understanding quickly where I am going with this. And we believe that will be very positive and very helpful to all the cable industry. Certainly, as we look a little further down the road past the three-year transition of the deregulation on the rates, it's clear that there will be an increasing group of modest competitors, whether that be wireless or DBS, or ultimately possibly the telephone industry, should they really decide that video is an area that they want to frontally assault as they worry somewhat more about those of us who may nibble away at their major businesses from the other side. But nevertheless, the competitive issues will continue to impinge upon us, and as they do so, I think the ability to raise capital and be in the market place for the additional services that we should provide and will provide, will be a little bit easier to come by as a result of this legislation. But I would emphasize again that its a very modest step. It's not a change of kind, it's a change of degree. Our businesses have been healthy and will continue to be healthy, we think. And that's not an arrogant statement, I think that's just a statement of fact, that we'd like to thank for providing the useful and necessary service and we think we can do an even better job under this legislation and I think that I'll stop there and perhaps comment on the other folks' comments as we go along.

Mario Gabelli:

Again, I am privileged to be included on this panel and chat about the bill though I must admit the three columns I started reading it on Friday night, Saturday night, Sunday night, and again last night, so I haven't gone through it in its entirety. But to me it's very simple. It's consumerism, globalism, and how does the U.S. compete on a global basis and does this help us? How do we create jobs in a global environment? How do we have the highest standard of capability of giving video, data, voice, and so on? The standard I always like to give is Bill Gates. Bill Gates thought he had a juggernaut and he missed the boat. And so too here we are dealing with a new dynamic of legislation and I still see people talking about the marginal line of competition, talking about PBS, for example. What we need to do is compete globally and in the last twenty years the US telephone industry has become a joke on a global standard in relationship to what the French or the Japanese are offering and the same thing in cable. I mean the people in Amsterdam are going to probably have a better system than we have in parts of the world, and so you need to create an environment in which capital flows to its highest use, and we haven't had that. And from my point of view I'll give you five numbers four, seven, eleven, thirteen, and fifteen. And I want you to play them 4,7,11, 13, and 15. What are those numbers? That's not what the Pittsburgh was able to do on defense against the opposition last week. It's basically the multiples of [] earnings before interest taxing, depreciation, that these various franchises sell for. Four times for the LECs; seven times for the local telephone companies in rural America; eleven times for cable; thirteen times for newspaper; and fifteen times for broadcasting. And what does that look like on a global basis? And from my point of view, I think these numbers will start coming closer together and creating enormous opportunities. Again, I am very parochial. I speak for my church. I suffer from a great deal of narrow tunnel visions, so that's what I am looking as the impact it has on the capital markets? What does it mean for the communications industry? What does it mean for the consumer? And what does the year 2010 look like and so far the winner is Bill Gates. (pause) I have nothing else, sorry. And it goes to show you what you do when you don't read the homework. I didn't read the bill in its entirety, I mean I read a lot of it three months ago and a month ago really, so....