Keeping them out of info services is ‘the fight of our lives’

Cathleen Black is president and chief executive officer of the
American Newspaper Publishers Association (ANPA). This article was adapted from a speech she gave on October 7, 1991, to the National Press Club in Washington, DC.

It’s not much of an exaggeration to say that none of us could live without our telephones. Our banking system, our communications system, our transportation system — just about every aspect of modern life — relies upon the phone system.

A GROWING DEPENDENCY

Any way you look at it, the phone is incredibly important. How it is used — or abused — is going to affect the quality of our lives. What’s more, our dependency on the phone is going to grow.

During the 1990s, experts expect a tenfold increase in the power and capacity of technology to distribute and receive information. A great deal of this new technology is going to rely upon the phone.

Some people don’t realize that the newspaper business is a full participant in this dazzling march of new technology. A few cynics might even call newspaper technology an oxymoron. But they’d be wrong. As an industry, we are experimenting with new products –both print and electronic — that will allow us to stay at the forefront of the communications revolution.

Right here, right now. This is not something we’re talking about in the future. This is something that is right here, right now. For example, more than 75 newspapers now provide free interactive voice services that offer up-to-the-minute stock quotes and sports scores, the latest news and weather and other services. Many newspapers offer classified advertisers voice mailboxes to post their ads and retrieve responses. These are especially popular with personal ads. More than 500 newspapers are offering 900 numbers or other pay telephone services.

And it isn’t just newspapers that are embracing this new technology. There are some 12,000 other information services offering everything from complex electronic legal libraries to reports on local surfing conditions. These information services are run by cable-TV companies, broadcasters, database services and start-up entrepreneurs.

THE UMBILICAL CORD

As amazing and wonderful as this all sounds, there is one important point to remember: This technology depends upon some sort of communications line. And for right now, that means the phone system is the umbilical cord of electronic information. That is why it is essential to the newspaper business — and to all of the other businesses that are providing these information services — to keep access to the phone lines fair and equal.

This equal access is being threatened. On July 25, U.S. District Court Judge Harold H. Greene ruled — reluctantly, I might add — that the regional Bell telephone companies could produce information themselves and sell it over the lines they control.

An historical ruling. This ruling marked the first time in the history of our country — or any country — that local telephone companies were allowed to be anything other than common carriers of other people’s voice and data communications.

Since their creation with the breakup of AT&T in 1984, the Bells have been specifically barred from owning or controlling the information sent over their lines. And for good reason. The Bell Operating Companies have a monopoly over local telephone service. If these huge, protected companies are allowed control over both the transmission lines and the information sent, they will be able to take advantage of this monopoly position to hamper other information services. Maybe even drive them out of business.

The Bells have the ability — and the incentive — to make sure it’s their information service messages that reach consumers. How could they do this? In many subtle, but effective ways. In fact, they are already doing it. They deny competitors the latest technological advances. They delay adding features to the phone network until it is in their own best interest. They could use predatory pricing to undercut competitors and drive them out of business.

They know when you’re awake. Telephone companies have a huge reservoir of information about their potential competitors. They know who calls information services and how often. They can even tell when an information service is about to expand by monitoring the new lines and features ordered.

The question, of course, is this: Will the Bell companies make the most of these competitive advantages? They do, and they will. It’s a fact of life — at least of the business life. Some companies that have an edge over their competition, even an unfair edge, sooner or later are going to use it.

It’s for this reason that our legal system works hard to prevent monopolies and to regulate the few monopolies that are allowed to exist. No one, and I do mean no one, should have complete control over anything as essential as the phone system.

Abusing a unique position. If you’re not convinced that the Bells would engage in unfair practices, let’s look at what has already happened. Every one of these seven companies has abused its unique position. Let me give you just a couple of examples.

The Georgia Public Service Commission found that Bell South had abused its position in promoting its voice mail system called MemoryCall. Operators would try to sell Bell South’s MemoryCall system when the competitors’ customers called for service. Likewise, when repair personnel were on service calls, they would try to sell MemoryCall. Bell South even used competitors’ orders for network features as sales leads to steal customers.

No dispute. Bell South also delayed the introduction of network features crucial to voice mail until it was ready to introduce its MemoryCall system. This is despite the fact that these features had been available for years and had been requested by customers.

Bell South’s response? It has not disputed any of these findings.

A $10 million fine. Last February, U.S. West admitted it had violated the law by providing prohibited information services, by designing and selling telecommunications equipment and by discriminating against a competitor. The Justice Department imposed a $10 million fine — 10 times larger than the largest fine imposed in any previous anti-trust division contempt case.

ARE THEY BAD BABY BELLS?

Does this mean the Bells are evil? Of course not. But it means they are behaving the way some companies might behave. If it’s to their advantage to try to get away with something, chances are pretty good that sooner or later some of them are going to try. If the Bell companies have already abused their position before they get into information services, just imagine what they’ll do if they are allowed to provide these services.

U.S. leads in information. The United States has 56 percent of all the world’s databases, and it is running a handsome surplus in the international balance of trade in information. Revenues from information services are around $9 billion a year. What’s more, the demand for this type of information is expected to increase at an annual growth rate of 20 percent through 1995. And all this happened without the Bells being involved — except, of course, for providing the lines the information is carried on.

It has happened because, since the passage of the Communications Act of 1934, Congress has encouraged diversity in the information marketplace as one of the pillars of communications policy on this country.

To stand 60 years of sound public policy on its head — to suddenly say it’s all right for the biggest monopolies in the history of the world to “compete” with rivals it could crush in a week — is to invite a concentration of media power perhaps exceeded only in North Korea … where there is one radio station in the whole country, and all you know is what it decides to tell you.

WHO YOU ARE AND WHO YOU CALL

There is one more important issue I feel I have to mention: Privacy.

It’s a startling fact, one we don’t like to think about, but the plain truth is that phone conversations you have in the privacy of your own home are not necessarily private. When you call for car repair service, the phone company knows it. It knows how often you call your mother. How long your conversations last. That time you called the 976-LUST line — just that once to see what it was all about — the phone company knows it.

In fact, I think it is fair to say that the Bells know more about you than the IRS and the entire federal government. And if this doesn’t scare you, it should.

Regulation can’t stop them. Up until now, the Bells have had no incentive to fully exploit this information. But the very second they get into the content end of the information business, you can bet that they’ll take advantage of every fact they know.

There is no limit to how far the Bell operating companies can take this. Regulation could never stop them. With all due respect to the FCC and the state public utility commissions, there isn’t a regulatory agency large enough to keep track of the billions of pieces of information that are transported through the phone lines every day.

Not so comforting a tool. By dialing a few numbers, you can pretty much reach anybody, anywhere in the world … virtually instantaneously. Think of all the faxes you send, the computer databases you call, the horoscopes and sports reports you hear. Think what all this means to you. It’s a comforting tool, this telephone.

Now think what it would mean if every time you picked it up, whether making a call or answering it, the phone was revealing something about you to someone who could take advantage of that information.

All of a sudden, that phone doesn’t seem so familiar and comforting. All of a sudden, our whole concept of what a phone is and how we should use it has changed. I don’t know about you personally, but this new phone doesn’t appeal to me.

A BATTLE OF ENORMOUS IMPORTANCE

If we don’t fight the fight of our lives to keep that phone line that runs into almost every American home free and open to everyone, then we are doing a grave injustice to the American public.

An unwilling judge. Judge Greene did not want to unleash the RBOCs. He had ruled earlier that they should not be allowed into information services because they posed too much of a threat to fair competition. But a federal appeals court disagreed. It sent the decision back saying he had to lift the ban unless he could find, as a certainty, that unfair competition would result. Since nothing in life is a certainty, there was no way Judge Greene could meet that legal standard.

The best he could do was put a stay on his order until appeals have been pursued. I’d like to tell you that I’m confident the appeals court will heed his words and rethink its position on this issue, or that the Supreme Court will reverse it. But the fact is that there’s not a lot of room for optimism.

Public policy, however, is set by Congress, and that is our target. While the appeals the ANPA and 20 others have filed wind their way through the court system, we must use the time to make our argument to the House and Senate.

KEEP COMPETITION ALIVE

Fortunately, we are not alone in this fight. This is not just newspapers versus the Bells. We are being joined by consumer groups, cable companies, computer information services and more. Because this is the type of situation in which nobody stands to win — except the Bells.

What we want is a law keeping the Bells out of information services until a truly competitive, local telephone marketplace develops. A competitive marketplace will develop with time. It did with long distance service, and now the consumer has about 130 long distance companies to choose from. And when that competition developed, newspapers dropped their opposition to allowing AT&T into electronic publishing.

$21 million for lobbying. But it will take some time for that to happen in this case, because the Bells are huge, powerful companies. The seven Bells have annual revenues of almost $80 billion — roughly twice those of the entire newspaper business. They reportedly employ 175 people in their DC lobbying and regulatory offices alone, as well as 50 more in a joint lobbying operation. So they have more people making the rounds in Washington than ANPA has on its entire staff. And their $21 million fund created just to lobby this issue is larger than ANPA’s entire budget.

The magnitude of our challenge here should encourage, not discourage, efforts to bring this matter to the attention of every member of Congress without delay. Congress needs to make sure the lines of communication are kept open. Congress needs to ensure that we will all be able to enjoy a competitive communications system. Congress needs to protect the privacy of consumers.

But if we let the Bells use their power to monopolize information through the phone lines, even an optimistic person like me can’t help but be a little frightened. What we do, right now, starting today, can make all the difference. The American public, starting today, must give the message strong and clear — don’t baby the Bells. Keep competition alive.