Policing the information highway.

The Clinton administration wants to be sure everyone will have access to the information superhighway. The states want to have some say in its regulation.

Vice President Gore and U.S. Secretary of Commerce Ron Brown traveled around the country this past winter to help promote private investment in advanced telecommunications and to ensure that all levels of society can use the resulting "information highway." One of the Clinton administration's most ambitious goals is to make sure that all the classrooms, libraries, hospitals and clinics in the country are connected by the year 2000.

Here's what the Clinton administration promises:

* People can live almost anywhere they want without foregoing opportunities for useful and fulfilling employment telecommuting to their offices through an electronic highway.

* The best schools, teachers and courses will be available to all students, without regard to geography, distance, resources or disability.

* Services that improve America's health-care system and respond to other important societal needs could be available on-line, without waiting in line, when and where you need them.

* Individual government agencies, businesses and other entities can exchange information electronically--reducing paperwork and improving service.

Practically every major periodical during the past 12 months has carried a cover story about "riding the information highway" and the many economic and societal benefits that road promises. What the glossy magazines fail to mention is that while many states--including California, Kansas, North Carolina, New York and Wisconsin--have been at the forefront of promoting competition in local telecommunications markets and developing modern, reliable and low-cost state information infrastructures, much of that progress is being ignored by the federal government.

Pre-empting States' Authority

Pending federal legislation would shift what historically has been under state authority to the Federal Communications Commission (FCC). In writing the rules for competition on the information superhighway, the federal government may end up barring states as equal partners.

State legislators have already expanded the number of ways information technology can be used to cut costs and improve the efficiency of government. States are using:

* Electronic benefits transfer for food stamps and other assistance programs.

* Stronger law enforcement and public safety through multimedia networks to facilitate arraignments, parole activities and the transfer of criminal data.

* Citizens access to government services through electronic kiosks such as "Info/California" that provide citizens a "single face to government" through touch-screen computers in grocery stores and shopping malls.

Since federal, state and local governments act as both regulators and major users of telecommunications services, government has a vested interest in the development of the national information infrastructure (NII). The Clinton administration's vision for the NII contains nine goals, including promoting private investment, extending the concept of "universal service" to ensure that information resources are available to all individuals at affordable rates, and coordinating with state and local governments.

Keep an Eye on Congress

Since September, the goal of "coordinating with state and local governments" seems to have turned into a movement to "pre-empt the jurisdiction of state and local governments." State legislators need to keep an eye on four proposals being advanced by the administration and Congress that could drastically alter the current legal and regulatory structure of the communications industry--at the expense of state authority.

In January, the administration proposed its "Communications Act Reforms" to promote local competition, encourage investment in the NII, preserve universal service, and adopt a new regulatory framework for advanced communications and information services. The administration's white paper builds upon H.R. 3636 (Markey/Fields) and H.R. 3626 (Brooks/Dingell), which are currently being considered by Congress. The administration's proposal and H.R. 3636 would pre-empt state authority and shift significant new and existing authority to the FCC.

The bills are moving on a fast track and amendments are sure to be introduced. But, as this article went to press, the bills contained many provisions of concern to states. H.R. 3636 would:

* Pre-empt state laws and regulations that limit entry into the local telephone business (20 states have laws or regulatory commission rules prohibiting competition in the local exchange).

* Require that state regulatory commissions adopt flexible pricing procedures that comply with FCC-defined competition criteria.

* Strike state rules that are inconsistent with FCC regulations on universal service.

During a recent hearing on H.R. 3636, the new chairman of the FCC, Reed Hundt, criticized the current regulatory structure of shared federal, state and local authority. "The regulations are out of date," he said. "They threaten to preserve monopolies and deter efficient investment."

When Congressman Edward Markey of Massachusetts, who chairs the House Telecommunications and Finance Subcommittee, asked Hundt what he thought about the pre-emption of state law contained in the bill, Hundt replied, "The bill achieves an appropriate balance between state and federal concerns."

"Appropriate balance?" exclaims a senior state legislative staffer, "Clearly, this demonstrates that the federal idea of balance is equal to vertigo!"

States Know Citizen Needs

In a letter to Markey, California Assemblywoman Gwen Moore expressed her view that "the states, and not the federal government, know the needs of their citizens and are the best positioned to get those needs met."

"The states," she said, "must retain authority to protect ratepayer interests and ensure fair competition, for it is the states that are held accountable by the public."

The administration's proposal goes further than H.R. 3636 and would pre-empt state and local rate regulation for companies that the FCC finds lack "market power." In addition, a new Title VII would be added to the Communications Act of 1934 that would allow certain firms offering advanced services to elect "streamlined" FCC regulation instead of existing state or local rate regulation.

Senator Bill Schroeder of Colorado warns that unnecessarily broad pre-emption language could bar the ability of states "to protect legitimate public interests." States should be able "to examine the financial fitness of new local exchange providers to ensure that customers are not left without service by the financial collapse of the provider," according to Schroeder. He asks: "Should Washington determine whether sufficient competition exists in the rural, urban and suburban areas of Colorado to allow market forces to dictate prices? Is an information highway designed in Washington, D.C., and operated under an inflexible, central plan likely to be user-friendly and user-driven? What happens if federal pre-emption in its broadest sense under these bills is invoked and most consumers don't want what is prescribed by federal law?"

Baby Bell Markets

The other bill being considered, H.R. 3626 (Brooks/Dingell), would establish standards, limits and procedures for the regional Bell operating companies to enter into markets where they are currently forbidden from competing. H.R. 3626 would allow the companies to enter the long-distance business and to offer information services, as well as to manufacture equipment. Until the breakup of AT&T, intrastate long-distance service was regulated by the states. H.R. 3626 would allow the states to permit regional companies to offer in-state long-distance service (without going through the hoops of getting the approval of the FCC and the Justice Department and without the waiting periods designated in the bill). There is a movement, however, for an amendment to the bill that would deny states this authority.

As this article went to press, the Senate had just introduced S. 1822, (the Hollings bill) that shares many of the same goals as the other legislative proposals. Although it contains some areas of concern, such as the provision that grants regulatory flexibility to "competitive services," the bill attempts to treat states as equal partners where possible. For instance, the states would have the primary responsibility for defining and ensuring universal service, yet the FCC would have the authority to intervene if they failed to achieve these objectives. S. 1822 also would allow time to manage the transition to competition before pre-empting state and local entry barriers.

Avenue Opens

One avenue for legislators to influence developments is through the 27-member U.S. Advisory Council on the NII, which is helping a federal interagency task force develop policy recommendations. Hawaii Senator Carol Fukunaga, chair of NCSL's Communications Committee of the State-Federal Assembly, is a member of the council along with others who represent state and local governments, private industry, academia and public interest groups.

The advisory council will address a full range of issues this spring, and universal service will certainly be at the top of the agenda. The concept of "universal service" was first articulated, in general terms, in the Communications Act of 1934: "To make available, so far as possible, to all people in the United States rapid, efficient, nationwide and worldwide wire and radio communications service with adequate facilities at reasonable charges."

Today, universal service is usually referred to as the requirement that local phone companies make a minimum level of basic service widely available at an affordable price. States play a major role in ensuring that customers in poor or rural areas are served. During the next decade, as companies offer advanced communications services, states will have to find ways to close the gap between the "information haves" and the "information have nots."

Redlining 

The federal government has been trying to develop a flexible definition of universal service that will adjust to accommodate rapid changes in technology. Will it be possible to develop a broad, modern concept of universal service to give all Americans who desire it easy, affordable access to advanced communications and information services, regardless of income, disability or location? Perhaps a more thorny question--Do all Americans have the right to the latest voice, text and video services?

Referring to the threat of "electronic redlining," Gore said in December, "If we allow the information superhighway to bypass the less fortunate sectors of our society--even for an interim period--we will find that the information rich will get richer while the information poor get poorer with no guarantee that everyone will be on the network at some future date."

Some argue that the federal government should not be concerned with defining universal service because fast-paced changes in technology will bring services to everyone without government intervention. However, many industry experts recognize that the cost of ensuring that every home has access to the latest technological advances will be astronomical. Many consumer groups do not want to see the cost of basic service jeopardized as a result.

According to Bradley Stillman of the Consumer Federation of America, "To keep basic service affordable, it is crucial to ensure that those people who use the advanced features of the information highway must pay their fair share. I don't want to be forced to pay for the interactive video games or movies on demand of my neighbor down the street."

Join the Debate

The National Association of Regulatory Utility Commissioners is currently exploring the evolving definition of universal service. It distributed a questionnaire to state commissions and a variety of industries, trade associations and nonprofit organizations to identify and rank aspects of universal service. The results will be reported at the group's meeting in July. Some questions include: Is a definition of universal service necessary? Should the market define basic service? Should income and unemployment levels within various geographic areas be considered in developing a universal service definition? Should direct monetary payments be made to individuals for universal service assistance?

Senator Schroeder urges state lawmakers to join in the debate before the outcome is decided by the federal government. He asks, "Does it make sense to have the meaning of universal service for Colorado consumers determined in Washington, D.C.?"

Legislators Should Attend Hearings

A federal interagency task force is gathering information through a series of public hearings that will be used to write a flexible definition of universal service. Flexible so it can adjust to the rapid changes in technology.

State lawmakers will want to participate in the hearings scheduled for their area--either by attending or submitting written testimony. The task force will use the comments expressed during the hearings in working with the advisory council and state regulatory commissions to determine how the universal service concept should be applied in the 21st century.

Hearings have already been conducted in New Mexico and Los Angeles. To find out if a hearing is planned for your area call Laurie Itkin in NCSL's Washington office at [phone].

NCSL's Policy on Telecommunications

The National Conference of State Legislatures has a policy on telecommunications that was adopted at the 1993 Annual Meeting in San Diego. It states:

"Since states share regulatory responsibilities with the federal government, a cooperative approach is necessary if the following goals are to be met: preserving universal service, promoting effective competition in telecommunications, fostering the development of a national infrastructure policy and encouraging positive economic impact. While investments in telecommunications infrastructure have received considerable national attention, the federal government must recognize that states have unique priorities that require state- and regional-specific solutions."

Technology Explosion

Major changes are transforming the communications landscape. Unprecedented telecommunications company alliances, buy-outs, joint ventures and mergers proceed at breakneck speeds. Internet (the computer network that links education and research community networks) traffic has exploded, and public interest groups have aligned to bring the "information highway" and "universal service" debates down to the grass-roots level.

The development of the national information infrastructure (NII) in the '90s has been compared to the development of the interstate highway system in the '50s. But instead of transporting people or cargo, the NII will transport information in a wide variety of ways--fiber optics, coaxial cable and even wireless. It will link homes, businesses, hospitals, schools and libraries and will allow individual access to both public and private information resources. It will transmit voice, video, text, data and images and will allow for two-way, interactive, multimedia communication.

A major misconception is that the government will build the NII. But the construction of an ultimately international, seamless, interoperable and interconnected network will continue to be led by business. During the past year, several major telecommunications companies announced plans to charge into the "Information Age." MCI unveiled in January its long-range vision to build "the nation's first transcontinental information superhighway." MCI will invest $2 billion in fiber rings and local switching equipment to form the "digital on/off ramps" to the highway.

Many of the physical components of the national information system already exist. It will use the wide range of current and future telecommunications and information hardware such as telephones, fax machines, scanners, keyboards, printers, monitors and switches. The system will be developed by a variety of service providers--local telephone companies, long-distance carriers, cable operators, broadcasters, cellular carriers, satellite companies and power companies. Soon to be seen are personal communications services that will include everything from low-cost pocket telephones the size of an eyeglass case to electronic notepads and wireless fax machines.

As the FCC begins conducting competitive bidding auctions for the radio spectrum late this spring, new wireless carriers are expected to proliferate, enabling individuals to access the NII while traveling and, ultimately, from anywhere in the world. Investments will continue to be made in upgrading existing copper and coaxial wires to fiber optics, hair-thin strands of cable capable of carrying enormous amounts of data at high speeds. Investments in education and training will have to be made to enable individuals, like teachers, doctors and police officers, to navigate on the information highway.

The growing information industry is expected to spur economic growth, create jobs and promote U.S. world leadership in technology. More than half of U.S. workers are in information-based jobs, Vice President Gore told the National Press Club in December, and the telecommunications and information sector of the economy, with annual revenue exceeding $700 billion, accounts for more than 12 percent of the gross domestic product. It is growing faster than any other part of the economy, the vice president said.

Laurie Itkin tracks telecommunications issues for NCSL's Washington, D.C., office.