THE INFORMATION SUPERHIGHWAY : This Road Will Be Tough One to Pave

So where’s Ross Perot when you need him?

Alas, Perot was one of the few Information Age billionaires not in Los Angeles for Vice President Al Gore’s gala premiere of the Administration’s information superhighway plans. Too bad. Gore could have used a bit of the edge he displayed in battling Perot over NAFTA as he outlined the nation’s telecommunications future.

The stakes are far bigger than a mere trade deal: While U.S. trade with Mexico runs close to $81 billion a year, its domestic telecommunications market alone is more than twice as large at $172.5 billion--and that doesn’t even include the $14-billion-a-year cable TV market, the $13-billion home video market or the $25-billion software market.

In fact, the United States’ domestic media economy is larger than Mexico’s entire $372-billion annual gross domestic product. By any meaningful measure, this Administration’s information infrastructure initiatives could have--for better or worse--a far greater impact on the U.S. economy and employment than even the craziest of NAFTA scenarios. So much for giant sucking sounds. . . .

As articulated by Gore, the Administration’s telecommunications reforms offer a genuine departure from the more rigid regulatory regimes of the recent past. There is a clear push for more competition, greater network access, more federal flexibility and more coherent technical standards to enable seemingly disparate networks to readily interconnect. For example, the proposed Title VII provisions to let telecommunications companies choose the option to free themselves from certain regulatory burdens in exchange for providing non-discriminatory access to their networks certainly qualifies as an innovative administrative gambit. These are admirable ideas.

Unfortunately, the Administration’s ambitious vision of America’s telecommunications future is tainted by a disturbingly revisionist interpretation of its past. It’s an interpretation that cheats the real history of the telecommunications marketplace in ways that can distort future policies. During his speech, the vice president relentlessly hammered on the theme of “universal access” to telecommunications services as the cornerstone of Administration policy.

“After all,” he said, “governmental action to assure universal service has been part of American history since the days of Ben Franklin’s post office.”

In truth, the vice president told only half the story. “Universal service” in telecommunications has always been part of a sweetheart deal cut with private industry. The deal was: In exchange for providing universal access, telephone companies like AT&T; and Pac Bell were assured a cozy rate of return on their investment. The same held true for cable television: In exchange for providing “low-cost” television access for the community, cable operators were granted a monopoly franchise with guaranteed, regulated returns.

In other words, universal access was explicitly subsidized by guaranteed profits. (And we all know what happened in the mid-1980s when the cable monopolies were mindlessly freed by Congress from the burden of rate regulation: Cable charges skyrocketed. That’s literally the price of monopoly without regulation.)

Now the Administration asserts that it wants to encourage increased telecommunications investment and competition even as it insists it wants to preserve and extend universal service into the new Media Age.

“It used to be that universal service was the party line; now it’s dial tone,” says a White House source. “No one really knows what the successor of the dial tone will be.”

But, as Ross Perot wouldn’t say, “It’s just not that simple.”

What should universal service mean in the context of competition? Who pays for it? In a truly competitive environment, of course, the profits that subsidize universal service aren’t guaranteed. Just ask the airlines.

Indeed, it will be fascinating to see if the results of the Administration’s efforts to deregulate local telephone and cable services will more closely resemble the perpetual tumult, confusion, bankruptcies--and cheap rates--of airline deregulation; the venal financial abuses of S&L; deregulation, or the relatively predictable paths of AT&T;, MCI and the long-distance market. No one can know.

Real competition inevitably leads to widening disparities in the breadth and quality of service in any marketplace.

“What constitutes the floor for universal service is going to rise over time,” insists the White House staffer, but he acknowledges that “the way that service is delivered, however, may turn out to be different in other parts of the country.”

But perhaps the most disgraceful--but revealing--moment in Gore’s talk was when he praised TCI/Bell Atlantic’s announcement that they would eventually--for free--wire classrooms in their service areas as an example of universal service. “That’s leadership,” Gore declared.

That’s leadership?

Seldom has the mantle of leadership been so misplaced. More accurately, Gore was publicly praising a shameless act of pandering. The cost of wiring classrooms is marginal, and you can be sure that accessing the networks will eventually come at a price.

Does anybody remember the scandalous rent-a-citizen practices the cable companies pulled in the 1970s and 1980s to get their monopoly franchises in key communities? Well, in the 1990s, it’s going to be “Fiber-a-School,” “Wire-a-Clinic,” “Cable-a-Hosptial.”

A real act of leadership would be TCI’s John Malone and Bell Atlantic’s Ray Smith publicly endorsing Gore’s call for non-discriminatory access to their networks.

The real problem with the Administration’s telecommunications vision isn’t that it’s vague, it’s that the Administration doesn’t have the courage to acknowledge that genuine deregulation produces confusion and conflicts that often can’t be anticipated.

The key to credibility and success is being flexible enough to learn from the mistakes you will inevitably make. The true test of this telecommunications reform effort will be how fast this Administration learns.

* PROBLEMS AT THE TOP: Vice president faces bumpy going on info highway. D3