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International communications
International communications Issues in the USA
John M. Richardson
The author reviews aspects of the current regulatory environment for international communications in the USA. He then contrasts that environment with a possible future. The contrast throws into relief critical shortcomings in the current situation. He concludes by suggesting legislative goals and framework for proposing a regulation. The author
is Director
Telecommunications, of Commerce. Washington,
of the Office of US Department
1325
G Street,
DC 20005,
USA.
NW,
This article is based on testimony presented to the House Subcommittee on Communications, US Congress. The author is indebted to Jack E. Cole, Donald M. Malone, and Charles K. Wilk of the Office of Telecommunications for invaluable assistance in the preparation of the testimony.
’ A thoughtful and detailed exploration of this defect may be found in an article by Professor James Freedman entitled ‘Crisis and legitimacy in the administrative process’, Stanford Law Review, Vol 27, April 1975, p 1041. Freedman states that ‘broad delegations of legislative power (have made) administrative agencies, rather than Congress, the arena for debate and decision on complex policy questions of fundamental importance to our democracy’ (ibid, p 1054). In response to the sharp criticisms which are often directed at administrative agencies, he notes that ‘when Congress has failed continued
on page 390
TELECOMMUNICATIONS
The inadequacies of the present conditions in the international communications may be grouped into two The first concerns defects in statutory law, principally munications Act of 1934. The second concerns problems current regulatory process has not adequately resolved.
USA for categories. the Comwhich the
The Communications Act of 1934 Of course, the Communications Act, as it was enacted in 1934, was a planned, coherent statute. Title II of the Act provided the Federal Communications Commission (FCC) with strong and elaborate procedural authority to engage in the regulation of communications common carriers. However, it followed the thinking of the mid 193Os, which is still reflected in many regulatory statutes, in using broad general phrases such as ‘the public interest, convenience and necessity’ as the substantive criteria by which the Commission was to regulate. In retrospect, the use of such criteria in regulatory statutes has proven to be a significant defect, underlying or contributing to many regulatory problems.’ Some important legislation enacted since 1934 relating to international communications common carriage clearly goes to the other extreme: instead of being too general, it is so detailed that it seriously hampers the Commission’s ability to adapt its regulation of carriers to changes that have occurred in both the technology and the demand for services.2 There is one very important respect in which the procedural provisions of the Communications Act are not adequate for today’s needs. There are only two entities for the purposes of Title II of the Act: those which are regulated, and those which are not. Those which are regulated are subject to full traditional regulation, even though this is to occur only at the state level for most regulation of certain carriers known as ‘connecting carriers’. The rest are not subject to any regulation under Title II. This distinction is increasingly hard to apply because of the convergence of communications technology with computer
POLICY December
1977
389
Interrlational
communications
- issues in the USA
technology. The FCC has been authoritatively informed that there is no natural technical boundary between the two technologies. The Commission nevertheless must struggle to draw a legal boundary in order to establish its jurisdictional boundary under the Act as now written. Were it not for the Act’s provisions, jurisdictional determinations would not have to be made on such a tenuous basis.
Current international issues
continued
from page 389
to adopt a set of social preferences an administrative agency, itself now exposed to the conflicting political forces that led Congress to shrink from a decisive response in the first instance, can hardly be expected to do better.’ for example, the many 2 Consider, restrictive effects of Section 222, which authorized merger of domestic telegraph systems. It also required that international telegraph carrier service be provided by separate organizations. In the process, its detailed definitions have, for example, fixed Hawaii, Guam, Puerto Rico and the US Virgin Islands as areas which may not receive record communications service from the mainland directly from the domestic telegraph common carriers. At the same time, the international telegraph carriers may not provide direct service from Hawaii, Guam, Puerto Rico or the US Virgin Islands to most parts of the continental USA. The restrictive effects of these provisions on new service offerings are now being determined by the courts. the further example As Commznications Satellite Act df 1962 requires that satellite communications channels be leased from the Communications Satellite Corporation. While permitted Commission has the the carriers to share international investment and risk associated with the US interest in submarine cables since same authorized, the TAT4 was approach to sharing the investment and risk associated with the US interest in INTELSAT would appear to be foreclosed by detailed specific language in the Communications Satellite Act.
390
The US regulatory process has left key problems unsolved. Three current problems are described below to illustrate the point. First, there is no effective coordinated long-term. planning of submarine cable and communications satellite facilities for international communications. These two major transmission facilities are planned independently of each other. COMSAT submits applications for new satellites to the Commission for Section 214 authorization, in accord with INTELSAT plans. AT&T and the international record carriers do the same for new submarine cable systems, which are planned jointly with various foreign telephone and telegraph administrations. Although both US cable and satellite proponents have some knowledge of each other’s plans, genuinely coordinated US planning does not occur. Thus there has been untimely introduction of highcapacity cable and satellite systems without adequate concern for the total facilities needed to satisfy aggregate demand. The cost of any resulting excess capacity is ultimately borne by the ratepayer. The need for comprehensive plans has been recognized recently by the FCC as an essential prerequisite to the authorization of future facilities. Consequently, the Commission has already requested the carriers to develop coordinated plans. This is a step in the right directidn, but it does not obviate the need for legislation requiring comprehensive and open long-term planning by industry. Second, the relative use of submarine cable and satellite facilities is determined in an arbitrary manner involving government allocation of circuits on specific facilities. Of course, a satellite market was essentially guaranteed by the Communications Satellite Act of 1962. However, a preferable approach would be the use of a definitive cost effectiveness and operational process which maximize efficiency. Both cable and satellite technologies have essentially enjoyed significant and arbitrarily allocated shares of the market without a sound basis for such shares. The FCC has struggled with the problem of licensing transmission facilities for the past seven years. During this time it has steadfastly opposed the use of fill ratios or formulae as general policy, but due to the lack of a more credible criterion, has had to use such ratios. Third, it should be recognized that the terrestrial carriers are able to own and therefore capitalize their cable investments, while the lease payments to COMSAT for satellite circuits must be expensed (that is, the lease charges cannot be included in the carriers’ rate base). It is true that, as of last year, the international carriers used cable and satellite facilities about equally worldwide despite this problem. However, this is not a valid indication of what the relative usage would have been without government-imposed fill requirements.
TELECOMMUNICATIONS
POLICY
December
1977
International communications - issues in the USA
Diversity requirements and lack of available cable facilities may also have contributed to past patterns of utilization. One solution may be to allow the carriers to capitalize their lease payments. However, it would seem appropriate that the associated rate of return for lease charges would be less than that allowed for their cable investment, because the carriers would not have to raise capital or incur a risk for these satellite circuits. Another solution may be to allow a variable overall rate of return, depending on the extent to which the carrier’s total service requirements are satisfied by satellite circuits.
Evolving international issues A new type of international issue is arising. Worldwide attention is rapidly focusing on transborder data movements. The ability to communicate an entire data base and the software necessary to manipulate it is essentially a difference in kind rather than degree when compared with the ability to communicate a single spoken or written message. Accordingly, the consequences of unauthorized use or disclosure in the country of destination are also different in kind and could reach very serious proportions. International concerns are diverse, ranging over privacy and security of personal information (race, religion, political views, mental, medical, legal, or financial condition); economic and defence data sensitive to national sovereignty; fear of the establishment of foreign data sanctuaries; and fear of costly and discriminatory barriers to the flow of information essential to commerce and trade.3 The present law does not deal with such data flow services, nor does it make connection with related domestic and foreign laws that regulate data. The main message is that the USA is confronted with an issue that already has considerable international attention. The trend towards restrictions on international data flow is not yet clear. The pessimistic extreme perceives a multitude of incompatible restrictions on transnational data flow, while the opposite view perceives harmonized and minimal restrictions. It is the kind of issue that the USA cannot treat in isolation but must deal with as a member of the world community. This issue warrants continued attention and early decisions on a US national position.
The information economy
’ Other
countries have been pursuing this issue since about 1970. For example, active investigations have been underway the Organization for Economic at Cooperation - and Development, the United Nations, the Council of Europe, the European Economic Community, and the Nordic Council.
TELECOMMUNICATIONS
The USA is now an information economy. In 1967, almost one-half of the GNP was attributable to the information activities necessary to the total economy, and this sector contributed over 53% of all labour income. What this means is that a large and increasing proportion of the job market and GNP depends on information flow - on communications, computers, the print media, and on those technologies that produce, process, transmit and store information. Although comparative research on this effect is still in its infancy, I am convinced that the same post-industrial phenomenon is occurring throughout the entire developed world. These trends indicate that the fewer the restrictions on information flow the better. I emphasize the point that the US economy is already
POLICY December
1977
lnternarional communications - issues in the USA
vitally dependent on information flow, in ways that are just beginning to be understood, and that that dependence is increasing. Less is known about the nation’s economic dependence on international flow, but I am confident that significant restrictions on that flow would have serious, unforeseeable economic consequences on international commerce. To date, there has not been much concern with restrictions, but some of the emerging international issues will undoubtedly lead to the proposal of restrictive remedies. US international cable and satellite technologies have made remarkable progress in bandwidth, in voice channel capacity, and in lowered cost. Based on the record of progress, it seems that technology will continue to advance. Perhaps we will see, some decades hence, even broader economic, social and cultural benefits from information technologies. Although few can claim to know just what new services will evolve, one can speculate that these may include extensive worldwide information services for medical data base sharing; discovering and managing scarce resources; data base reference services; technical consultations; electronic libraries and mail; and crisis management. The future environment may contain fully compatible, shared world networks for efficient transmission, storage and processing of data, and broadband services for specialized needs. They would broaden the opportunities to develop all kinds of markets, and also to serve them, and they would facilitate the cultural exchange that is important to world understanding. One can imagine the US or the North American Continent as a major node in the new world networks. One can envisage continued rapid technological advances, unhindered in their prompt application to market demand, and continued declines in the cost of common services. That scenario may become a reality three decades from now, but the benefits for the USA and for the world will not come about automatically. Realization of the vast potential benefits from information technologies will require considerable foresight and perspective in legislation, regulation and policy. It will require a much better appreciation of the nature of the dependence on information technologies. It will require confidence that all nations will benefit from expanded international information services. And, it will require vastly broadened attention to the international scene by the USA.
Key directions The comparison of this rather idealized future with the present environment points to some particularly critical factors that must be taken into account in directing and controlling developments in information technologies. Goals:Jexible framework It is already apparent from current technological trends that the future will be more challenging for regulation. The convergence of communications and computer technologies, for instance, is outdating some aspects of traditional regulation, and the power of these technologies in combination has raised problems, such as privacy, which are outside the scope of that traditional regulation. With continued world economic growth, there will also be significant growth of demand for international communication services, and
392
TELECOMMUNICATIONS
POLICY
December
1977
Ittterttatiotlal
communications
- issues in the USA
rising expectations as to their quality and variety, and the level of prices. As it addresses the task of re-examining the Communications Act, the Congress should endeavour to express the substantive criteria upon which regulation is to be based in a way which avoids the extremes of ‘too broad’ and ‘too narrow’. Such expression would provide guidance for regulation in the form of goals or statements of value which include some sense of their priorities, and which go beyond the vagueness of ‘the public interest, convenience, and necessity’. Admittedly, this is a difficult task, both in drafting such guidance, and in securing sufficient support for it to obtain its enactment. Nevertheless, this type of legislative guidance will better serve the needs of a dynamically changing world than either of the two extremes. The overall regulatory stresses would be significantly eased because the scope of controversies before the FCC and the Courts would be narrower, and thus more manageable. Further, the congress should consider the problem of procedural adaptability. The jurisdictional basis for FCC regulation needs to be more flexible and adaptable to change. The most flexible approach would be to authorize the Commission to establish several categories of entities subject to differing types or degrees of regulation. If the Congress prefers to establish the categories in statutory terms, it should endeavour to allow the Commission some leeway to adapt the categories to changing technologies or other changes in circumstance.4
Direct substitution of a more general statute for the highly specific provisions of current statutes (such as Section 222 of the Communications Act) could cause confusion and uncertainty. I have a which suggestion I believe would minimize this potential effect. The repealer of current statutes could contain a savings clause continuing specified sections (eg Section 222) with the force and effect of a commission regulation. Such an approach would enable the Commission to arrange the new Act, and give the affected industries a better chance to plan and prepare for such transitions. 5 Further Statemenf of Policy and Guidelines, Docket No 18875, Federal Communications Commission, Washington, DC, November 1976. l
TELECOMMUNICATIONS
Regulation Most of the difficulties in international telecommunications are not attributable to deficiencies in the industry structure. Rather, they appear to be largely the result of a regulatory process which has been outpaced by technological progress, growing market size, expanding service categories, and varying degrees of competition. The complexity of international telecommunications has placed extraordinary requirements upon the regulator. What is sorely needed is a more systematic approach, involving the use of new procedures and analytical tools. The aim should be to enable the Commission to protect the public interest while simultaneously reducing its involvement with the details of carrier operations. Coordinated long-term planning of transmission facilities on the part of the carriers is not only desirable, but is required for the efficient and timely introduction of new transmission facilities. Without it, the Commission cannot properly put short-term applications into a longterm perspective. The Commission has stated that An essential prerequisite to the authorization of future facilities must be the development of a comprehensive plan, including appropriate commitments, regarding the overall deployment and use of future cable and satellite facilities . . .s
I agree with this general approach, which would be accomplished by cable and satellite carriers in cooperation with overseas telephone and telegraph administrations. I recognize that it will be difficult for carriers supplying competing transmission facilities to develop a costeffective plan instead of exclusively promoting their individual technologies. However, a strong incentive towards developing costeffective proposals would be the knowledge that the Commission is equipped to evaluate such proposals fully on their merits.
POLICY
December 1977
393
International
communications
-issues
in the USA
In the area of the licensing of transmission facilities, including the relative use of submarine cable and satellite facilities, the Commission must require the development of improved traffic forecasts, costcomparison methodologies, and operational requirements on the part of industry. This may be most effectively developed through a combined industry/government approach by experts in the three specific fields. Failing that, the government must develop the capability itself. The Commission states Our primary policy objective has been and remains the achievement and efficient utilization of the lowest cost contribution of facilities which can satisfy valid traffic needs and service objectives, irrespective of technology or supplier.6
Again, I agree with this approach. The industry should be advised that these criteria will be used to approve applications for new facilities. But, here again incentives should be provided for the carriers to apply the criteria in their internal planning. Finally, on the matter of carrier rate base, one area which must be addressed concerns the terrestrial carriers’ incentive to use satellite circuits, over and beyond their use for purposes of diversity. Nature of various services
6 ibid. ‘One
sees, for example, the emerging services electronic funds transfer providing bank clearing house functions. Regulation in this case is not motivated by concern over matters such as the potential impact of the new service on the existing bank structure and on state laws which regulate the banking industry.
394
I suggest above that computer/communications technology has provided services essentially different in nature from those available when the Act of 1934 was drafted. These data communications services go far beyond matters internal to telecommunications. They impact horizontally - on personal privacy, relative competitive positions, law enforcement, medical care, education, technological advances; indeed, on national cultures themselves. Because of these impacts, the conditions under which such services are offered are becoming the subject of national laws. In short, they are becoming subject to regulation for reasons other than those that underlie the regulation of common carriers.’ Although the details of applicable legislation are not yet clearly seen, some key directions do emerge. US law will both influence and be influenced by comparable laws in other countries. Provision for the security and privacy aspects of some communications services will be necessary. Ideally, protection could be realized against unintended uses of data where there is a clear threat and excessive risk of abuse, such as to personal privacy rights, to the economy, or to national security - while avoiding unnecessary restrictions on the general flow of information and innovation.
TELECOMMUNICATIONS
POLICY
December
1977
John M. Richardson
The author reviews aspects of the current regulatory environment for international communications in the USA. He then contrasts that environment with a possible future. The contrast throws into relief critical shortcomings in the current situation. He concludes by suggesting legislative goals and framework for proposing a regulation. The author
is Director
Telecommunications, of Commerce. Washington,
of the Office of US Department
1325
G Street,
DC 20005,
USA.
NW,
This article is based on testimony presented to the House Subcommittee on Communications, US Congress. The author is indebted to Jack E. Cole, Donald M. Malone, and Charles K. Wilk of the Office of Telecommunications for invaluable assistance in the preparation of the testimony.
’ A thoughtful and detailed exploration of this defect may be found in an article by Professor James Freedman entitled ‘Crisis and legitimacy in the administrative process’, Stanford Law Review, Vol 27, April 1975, p 1041. Freedman states that ‘broad delegations of legislative power (have made) administrative agencies, rather than Congress, the arena for debate and decision on complex policy questions of fundamental importance to our democracy’ (ibid, p 1054). In response to the sharp criticisms which are often directed at administrative agencies, he notes that ‘when Congress has failed continued
on page 390
TELECOMMUNICATIONS
The inadequacies of the present conditions in the international communications may be grouped into two The first concerns defects in statutory law, principally munications Act of 1934. The second concerns problems current regulatory process has not adequately resolved.
USA for categories. the Comwhich the
The Communications Act of 1934 Of course, the Communications Act, as it was enacted in 1934, was a planned, coherent statute. Title II of the Act provided the Federal Communications Commission (FCC) with strong and elaborate procedural authority to engage in the regulation of communications common carriers. However, it followed the thinking of the mid 193Os, which is still reflected in many regulatory statutes, in using broad general phrases such as ‘the public interest, convenience and necessity’ as the substantive criteria by which the Commission was to regulate. In retrospect, the use of such criteria in regulatory statutes has proven to be a significant defect, underlying or contributing to many regulatory problems.’ Some important legislation enacted since 1934 relating to international communications common carriage clearly goes to the other extreme: instead of being too general, it is so detailed that it seriously hampers the Commission’s ability to adapt its regulation of carriers to changes that have occurred in both the technology and the demand for services.2 There is one very important respect in which the procedural provisions of the Communications Act are not adequate for today’s needs. There are only two entities for the purposes of Title II of the Act: those which are regulated, and those which are not. Those which are regulated are subject to full traditional regulation, even though this is to occur only at the state level for most regulation of certain carriers known as ‘connecting carriers’. The rest are not subject to any regulation under Title II. This distinction is increasingly hard to apply because of the convergence of communications technology with computer
POLICY December
1977
389
Interrlational
communications
- issues in the USA
technology. The FCC has been authoritatively informed that there is no natural technical boundary between the two technologies. The Commission nevertheless must struggle to draw a legal boundary in order to establish its jurisdictional boundary under the Act as now written. Were it not for the Act’s provisions, jurisdictional determinations would not have to be made on such a tenuous basis.
Current international issues
continued
from page 389
to adopt a set of social preferences an administrative agency, itself now exposed to the conflicting political forces that led Congress to shrink from a decisive response in the first instance, can hardly be expected to do better.’ for example, the many 2 Consider, restrictive effects of Section 222, which authorized merger of domestic telegraph systems. It also required that international telegraph carrier service be provided by separate organizations. In the process, its detailed definitions have, for example, fixed Hawaii, Guam, Puerto Rico and the US Virgin Islands as areas which may not receive record communications service from the mainland directly from the domestic telegraph common carriers. At the same time, the international telegraph carriers may not provide direct service from Hawaii, Guam, Puerto Rico or the US Virgin Islands to most parts of the continental USA. The restrictive effects of these provisions on new service offerings are now being determined by the courts. the further example As Commznications Satellite Act df 1962 requires that satellite communications channels be leased from the Communications Satellite Corporation. While permitted Commission has the the carriers to share international investment and risk associated with the US interest in submarine cables since same authorized, the TAT4 was approach to sharing the investment and risk associated with the US interest in INTELSAT would appear to be foreclosed by detailed specific language in the Communications Satellite Act.
390
The US regulatory process has left key problems unsolved. Three current problems are described below to illustrate the point. First, there is no effective coordinated long-term. planning of submarine cable and communications satellite facilities for international communications. These two major transmission facilities are planned independently of each other. COMSAT submits applications for new satellites to the Commission for Section 214 authorization, in accord with INTELSAT plans. AT&T and the international record carriers do the same for new submarine cable systems, which are planned jointly with various foreign telephone and telegraph administrations. Although both US cable and satellite proponents have some knowledge of each other’s plans, genuinely coordinated US planning does not occur. Thus there has been untimely introduction of highcapacity cable and satellite systems without adequate concern for the total facilities needed to satisfy aggregate demand. The cost of any resulting excess capacity is ultimately borne by the ratepayer. The need for comprehensive plans has been recognized recently by the FCC as an essential prerequisite to the authorization of future facilities. Consequently, the Commission has already requested the carriers to develop coordinated plans. This is a step in the right directidn, but it does not obviate the need for legislation requiring comprehensive and open long-term planning by industry. Second, the relative use of submarine cable and satellite facilities is determined in an arbitrary manner involving government allocation of circuits on specific facilities. Of course, a satellite market was essentially guaranteed by the Communications Satellite Act of 1962. However, a preferable approach would be the use of a definitive cost effectiveness and operational process which maximize efficiency. Both cable and satellite technologies have essentially enjoyed significant and arbitrarily allocated shares of the market without a sound basis for such shares. The FCC has struggled with the problem of licensing transmission facilities for the past seven years. During this time it has steadfastly opposed the use of fill ratios or formulae as general policy, but due to the lack of a more credible criterion, has had to use such ratios. Third, it should be recognized that the terrestrial carriers are able to own and therefore capitalize their cable investments, while the lease payments to COMSAT for satellite circuits must be expensed (that is, the lease charges cannot be included in the carriers’ rate base). It is true that, as of last year, the international carriers used cable and satellite facilities about equally worldwide despite this problem. However, this is not a valid indication of what the relative usage would have been without government-imposed fill requirements.
TELECOMMUNICATIONS
POLICY
December
1977
International communications - issues in the USA
Diversity requirements and lack of available cable facilities may also have contributed to past patterns of utilization. One solution may be to allow the carriers to capitalize their lease payments. However, it would seem appropriate that the associated rate of return for lease charges would be less than that allowed for their cable investment, because the carriers would not have to raise capital or incur a risk for these satellite circuits. Another solution may be to allow a variable overall rate of return, depending on the extent to which the carrier’s total service requirements are satisfied by satellite circuits.
Evolving international issues A new type of international issue is arising. Worldwide attention is rapidly focusing on transborder data movements. The ability to communicate an entire data base and the software necessary to manipulate it is essentially a difference in kind rather than degree when compared with the ability to communicate a single spoken or written message. Accordingly, the consequences of unauthorized use or disclosure in the country of destination are also different in kind and could reach very serious proportions. International concerns are diverse, ranging over privacy and security of personal information (race, religion, political views, mental, medical, legal, or financial condition); economic and defence data sensitive to national sovereignty; fear of the establishment of foreign data sanctuaries; and fear of costly and discriminatory barriers to the flow of information essential to commerce and trade.3 The present law does not deal with such data flow services, nor does it make connection with related domestic and foreign laws that regulate data. The main message is that the USA is confronted with an issue that already has considerable international attention. The trend towards restrictions on international data flow is not yet clear. The pessimistic extreme perceives a multitude of incompatible restrictions on transnational data flow, while the opposite view perceives harmonized and minimal restrictions. It is the kind of issue that the USA cannot treat in isolation but must deal with as a member of the world community. This issue warrants continued attention and early decisions on a US national position.
The information economy
’ Other
countries have been pursuing this issue since about 1970. For example, active investigations have been underway the Organization for Economic at Cooperation - and Development, the United Nations, the Council of Europe, the European Economic Community, and the Nordic Council.
TELECOMMUNICATIONS
The USA is now an information economy. In 1967, almost one-half of the GNP was attributable to the information activities necessary to the total economy, and this sector contributed over 53% of all labour income. What this means is that a large and increasing proportion of the job market and GNP depends on information flow - on communications, computers, the print media, and on those technologies that produce, process, transmit and store information. Although comparative research on this effect is still in its infancy, I am convinced that the same post-industrial phenomenon is occurring throughout the entire developed world. These trends indicate that the fewer the restrictions on information flow the better. I emphasize the point that the US economy is already
POLICY December
1977
lnternarional communications - issues in the USA
vitally dependent on information flow, in ways that are just beginning to be understood, and that that dependence is increasing. Less is known about the nation’s economic dependence on international flow, but I am confident that significant restrictions on that flow would have serious, unforeseeable economic consequences on international commerce. To date, there has not been much concern with restrictions, but some of the emerging international issues will undoubtedly lead to the proposal of restrictive remedies. US international cable and satellite technologies have made remarkable progress in bandwidth, in voice channel capacity, and in lowered cost. Based on the record of progress, it seems that technology will continue to advance. Perhaps we will see, some decades hence, even broader economic, social and cultural benefits from information technologies. Although few can claim to know just what new services will evolve, one can speculate that these may include extensive worldwide information services for medical data base sharing; discovering and managing scarce resources; data base reference services; technical consultations; electronic libraries and mail; and crisis management. The future environment may contain fully compatible, shared world networks for efficient transmission, storage and processing of data, and broadband services for specialized needs. They would broaden the opportunities to develop all kinds of markets, and also to serve them, and they would facilitate the cultural exchange that is important to world understanding. One can imagine the US or the North American Continent as a major node in the new world networks. One can envisage continued rapid technological advances, unhindered in their prompt application to market demand, and continued declines in the cost of common services. That scenario may become a reality three decades from now, but the benefits for the USA and for the world will not come about automatically. Realization of the vast potential benefits from information technologies will require considerable foresight and perspective in legislation, regulation and policy. It will require a much better appreciation of the nature of the dependence on information technologies. It will require confidence that all nations will benefit from expanded international information services. And, it will require vastly broadened attention to the international scene by the USA.
Key directions The comparison of this rather idealized future with the present environment points to some particularly critical factors that must be taken into account in directing and controlling developments in information technologies. Goals:Jexible framework It is already apparent from current technological trends that the future will be more challenging for regulation. The convergence of communications and computer technologies, for instance, is outdating some aspects of traditional regulation, and the power of these technologies in combination has raised problems, such as privacy, which are outside the scope of that traditional regulation. With continued world economic growth, there will also be significant growth of demand for international communication services, and
392
TELECOMMUNICATIONS
POLICY
December
1977
Ittterttatiotlal
communications
- issues in the USA
rising expectations as to their quality and variety, and the level of prices. As it addresses the task of re-examining the Communications Act, the Congress should endeavour to express the substantive criteria upon which regulation is to be based in a way which avoids the extremes of ‘too broad’ and ‘too narrow’. Such expression would provide guidance for regulation in the form of goals or statements of value which include some sense of their priorities, and which go beyond the vagueness of ‘the public interest, convenience, and necessity’. Admittedly, this is a difficult task, both in drafting such guidance, and in securing sufficient support for it to obtain its enactment. Nevertheless, this type of legislative guidance will better serve the needs of a dynamically changing world than either of the two extremes. The overall regulatory stresses would be significantly eased because the scope of controversies before the FCC and the Courts would be narrower, and thus more manageable. Further, the congress should consider the problem of procedural adaptability. The jurisdictional basis for FCC regulation needs to be more flexible and adaptable to change. The most flexible approach would be to authorize the Commission to establish several categories of entities subject to differing types or degrees of regulation. If the Congress prefers to establish the categories in statutory terms, it should endeavour to allow the Commission some leeway to adapt the categories to changing technologies or other changes in circumstance.4
Direct substitution of a more general statute for the highly specific provisions of current statutes (such as Section 222 of the Communications Act) could cause confusion and uncertainty. I have a which suggestion I believe would minimize this potential effect. The repealer of current statutes could contain a savings clause continuing specified sections (eg Section 222) with the force and effect of a commission regulation. Such an approach would enable the Commission to arrange the new Act, and give the affected industries a better chance to plan and prepare for such transitions. 5 Further Statemenf of Policy and Guidelines, Docket No 18875, Federal Communications Commission, Washington, DC, November 1976. l
TELECOMMUNICATIONS
Regulation Most of the difficulties in international telecommunications are not attributable to deficiencies in the industry structure. Rather, they appear to be largely the result of a regulatory process which has been outpaced by technological progress, growing market size, expanding service categories, and varying degrees of competition. The complexity of international telecommunications has placed extraordinary requirements upon the regulator. What is sorely needed is a more systematic approach, involving the use of new procedures and analytical tools. The aim should be to enable the Commission to protect the public interest while simultaneously reducing its involvement with the details of carrier operations. Coordinated long-term planning of transmission facilities on the part of the carriers is not only desirable, but is required for the efficient and timely introduction of new transmission facilities. Without it, the Commission cannot properly put short-term applications into a longterm perspective. The Commission has stated that An essential prerequisite to the authorization of future facilities must be the development of a comprehensive plan, including appropriate commitments, regarding the overall deployment and use of future cable and satellite facilities . . .s
I agree with this general approach, which would be accomplished by cable and satellite carriers in cooperation with overseas telephone and telegraph administrations. I recognize that it will be difficult for carriers supplying competing transmission facilities to develop a costeffective plan instead of exclusively promoting their individual technologies. However, a strong incentive towards developing costeffective proposals would be the knowledge that the Commission is equipped to evaluate such proposals fully on their merits.
POLICY
December 1977
393
International
communications
-issues
in the USA
In the area of the licensing of transmission facilities, including the relative use of submarine cable and satellite facilities, the Commission must require the development of improved traffic forecasts, costcomparison methodologies, and operational requirements on the part of industry. This may be most effectively developed through a combined industry/government approach by experts in the three specific fields. Failing that, the government must develop the capability itself. The Commission states Our primary policy objective has been and remains the achievement and efficient utilization of the lowest cost contribution of facilities which can satisfy valid traffic needs and service objectives, irrespective of technology or supplier.6
Again, I agree with this approach. The industry should be advised that these criteria will be used to approve applications for new facilities. But, here again incentives should be provided for the carriers to apply the criteria in their internal planning. Finally, on the matter of carrier rate base, one area which must be addressed concerns the terrestrial carriers’ incentive to use satellite circuits, over and beyond their use for purposes of diversity. Nature of various services
6 ibid. ‘One
sees, for example, the emerging services electronic funds transfer providing bank clearing house functions. Regulation in this case is not motivated by concern over matters such as the potential impact of the new service on the existing bank structure and on state laws which regulate the banking industry.
394
I suggest above that computer/communications technology has provided services essentially different in nature from those available when the Act of 1934 was drafted. These data communications services go far beyond matters internal to telecommunications. They impact horizontally - on personal privacy, relative competitive positions, law enforcement, medical care, education, technological advances; indeed, on national cultures themselves. Because of these impacts, the conditions under which such services are offered are becoming the subject of national laws. In short, they are becoming subject to regulation for reasons other than those that underlie the regulation of common carriers.’ Although the details of applicable legislation are not yet clearly seen, some key directions do emerge. US law will both influence and be influenced by comparable laws in other countries. Provision for the security and privacy aspects of some communications services will be necessary. Ideally, protection could be realized against unintended uses of data where there is a clear threat and excessive risk of abuse, such as to personal privacy rights, to the economy, or to national security - while avoiding unnecessary restrictions on the general flow of information and innovation.
TELECOMMUNICATIONS
POLICY
December
1977