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FCC and CATO Debate Universal Service to the Internet and the Schools & Libraries Corp.

(May 13, 1998)  FCC Chief of Staff John Nakahata and CATO Institute VP David Boaz presented sharply contrasting visions of the government's role in providing universal service and Internet access for schools and libraries at the Policy 98 Conference in Washington on Tuesday.

The discussion took place at a three day conference hosted by the Association for Computing Machinery, which brought together academics, IT professionals, government officials, and elected representatives to discuss electronic commerce, intellectual property, Y2K conversion, online learning, universal service, and other policies affecting the computer and Internet industry.

Nakahata and Boaz were members of a panel discussing universal service, the e-rate, and access to information technology.  The other panelists were Tora Bikson (RAND behavioral scientist), Dave Farber (U. Penn. Telecom Professor), and David Ellis (SIGGRAPH).

Boaz and Nakahata presented opposite opinions about how to make information technology widely available.  John Nakahata, who is Chief of Staff at the Federal Communications Commission, wants the government to subsidize it.  Boaz wants the free market to provide it.  Nakahata would graft a vast new program for subsidized information technology at schools and libraries onto the ancient FCC universal service program for subsidizing voice telephone services in rural and poor areas.

I think we want a universal access information system, and a universal access Internet.   John Nakahata, FCC.


We'll see technology revolutionizing the delivery of education.  But when that happens, it will be delivered by free enterprise, not politics.   David Boaz, CATO

Section 254 of the Telecommunications Act of 1996 instructs the FCC to add to its universal service program "telecommunications services" for "schools and libraries."  For decades the FCC and Courts have ruled that "telecommunications" services are different from "information" services, and the FCC only has authority over the former.  Yet, the FCC and Nakahata would have the FCC subsidize both.  The FCC is currently in the process of implementing such a program through its Schools and Libraries Corporation.

In contrast, Boaz alluded to the statute as an "unwise policy", and apparently would have the FCC subsidize neither telecommunications, nor information services.  The statute is "probably unconstitutional," and the creation of the SLC may be "illegal," said Boaz.

Nakahata explained that universal service started long ago as the notion that people should have access to a voice phone.  It was important in the early days of telephones and universal service that every town or neighborhood have "a phone in the corner drugstore in town" that people could use.

However, Nakahata believes that with the development of new information technologies, the concept of universal service ought to be expanded.  The FCC has created the Schools and Libraies Corporation for this purpose, according to Nakahata, to provide "community access points" where anyone can go to use the Internet; it is the modern equivalent of the old drug store telephone.


Chairman William Kennard named John Nakahata to be his Chief of Staff on November 3, 1997. Nakahata had been Acting Deputy Chief of the FCC's Common Carrier Bureau since September 1997. He came to the Commission in April 1995 to serve as Special Assistant to then Chairman Reed Hundt. In May 1996 he was named Hundt's Senior Legal Advisor. From January to September 1997 he was Associate General Counsel, heading the Competition Division. Before coming to the FCC he was staff director of the Subcommittee on Regulation and Government Information, Senate Committee on Government Affairs. Senator Joseph   Lieberman (D-CT) chaired the subcommittee. In that position the issues he worked on included labeling of violent content in video games, liability reform and investigation of government waste. He also advised Senator Lieberman, who was an original cosponsor of the Cable Television Consumer Protection Act of 1992, on telecommunications issues. Prior to his position with Senator Lieberman, Nakahata was with the law firm of Jenner & Block in Washington, DC. He was also a law clerk for the late Judge John Pratt, U.S. District Court for the District of Columbia. Nakahata holds a B.A. from Wesleyan University and a J.D., cum laude, from Harvard Law School.  (Source: ACM.)

Nakahata repeatedly stressed this notion of "community access points."   "What Congress put in the law was the idea of 'community access points,'" says Nakahata.  And, "What we are now talking about as 'community access points' is high speed Internet access."  Finally, "the schools and libraries are our community access points."

But universal service is important for education also, said Nakahata.  Electronic technology captures the imagination of kids, so it is very important to education.   "If you really want to improve education, you should turn education over to the people at Nintendo."

In contrast, Boaz argued that the value of computers to schools is overrated.

"Schools need to teach children to read and write -- they don't need Internet access for that -- they'd be better off if we bought McGuffey's Readers for every school.  Internet access won't help children who can't read and calculate.  But the Education Establishment is short-sighted and overly responsive to fads and politics, so this is the latest demand: how can you expect us to teach kids if we don't have the latest technology?

If you really want to improve education, you should turn education over to the people at Nintendo.   John Nakahata


Schools need to teach children to read and write.   David Boaz

Moreover, subsidizing schools is not the answer, said Boaz.  It is patronizing.   "Why not just give them money and let them decide how to spend it?  It's awfully paternalistic to say 'we don't trust you to spend your money wisely.'"

But Boaz also argued that money is not the problem.  "Inner-city schools in poor neighborhoods already spend lots of money; money isn't their problem."   He cited as an example the District of Columbia schools, which spend 10 to 12 thousand dollars per student per year.  He blamed poor schools on other social policies, such as those that encourage fatherless children, and the war on drugs.

Boaz also argued that subsidies are unnecessary.  Internet access will become widely available without government intervention:

"The newer the technology, the more rapidly it spreads.  It took 46 years for a quarter of the population to get electricity, 35 a telephone; but only 16 years for a quarter to get a PC, and only 7 for Internet access.  People competing to make money in a market economy is the most effective system for spreading technology in a useful and efficient way."


Executive Vice President David Boaz has played a key role at the Cato Institute since the days when the organization was getting its start in San Francisco. He moved east with the Institute when Cato took up residence in the nation's capital in 1981 and has subsequently helped to guide the Institute's development into one of the nation's leading public policy research organizations. Boaz is the author of Libertarianism: A Primer and editor of The Libertarian Reader, both published by the Free Press in 1997. He is an articulate and provocative commentator on a broad range of political and cultural issues. He has spoken widely throughout the United States and around the world on baby-boom politics, the failure of drug prohibition, the benefits of educational choice, the problems of the inner city, the record of the Clinton administration, the costs of government regulation, and the growth of big government. His articles on these and other topics appear frequently in major U.S. newspapers and journals--including the Wall Street Journal, the New York Times, and the Washington Post.   (Source: ACM.)

"The education establishment is short-sighted and overly responsive to fads and politics," Boaz continued.  "Congress has already created a big politicized pork barrel.  We're already getting gold-plated requests for ineligible products and services from schools."

Moreover, according to Boaz, government subsidies and regulation create economic problems.  They "discourage investment and impede the development and expansion of technology."  Also, they favor certain technologies.

"Subsidies inherently go to existing technologies, not to the next generation of technology; and the subsidies give the existing technology a financial advantage over new technologies seeking investment; new technologies tend to be cheaper and better, but subsidies may encourage development of earlier and less efficient technologies"

Of course, Nakahata conveyed a much rosier view of the benefits of universal service subsides.  It goes to America's world leadership in technology.

"It was in the United States that the computer was invented, and it was this county that pioneered the Internet.  We have led the information revolution around the world.   We will continue to lead the information revolution around the world.  And this universal service is about continuing to lead that revolution to distribute those benefits widely across our country so that all Americans have access."

Congress has already created a big politicized pork barrel.  We're already getting gold-plated requests for ineligible products and services from schools.   David Boaz


We will continue to lead the information revolution around the world.  And this universal service is about continuing to lead that revolution.   John Nakahata


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