Oral-History:Lionel Van Deerlin and Charles Jackson

About Lionel Van Deerlin and Charles Jackson

Democratic Representative Lionel Van Deerlin of California and his aide, electrical engineer Charles Jackson, helped create the proposed Communications Act of 1980. This bill was a Congressional attempt to alter the regulation guidelines set forth in the 1934 Communications Act. The new bill addresses nearly fifty years of change in the telecommunications industry, including the advent of computers, lasers, and fiber optics. At the time of this interview, the bill was still in committee, not yet in final form or made into law. The bill was not enacted, but some of its goals were achieved with the court-ordered breakup of the Bell Telephone System in 1982, along with several regulatory decisions of the Federal Communications Commission. United States Communications law was not rewritten until 1996.

The interview addresses Van Deerlin’s views on the proposed Communications Act of 1980. Van Deerlin and Jackson argue the importance of opening long distance telephone service to competition and letting the marketplace (rather than the Federal Communications Commission) determine rates. They also address the duties and services Bell Telephone subsidiaries would provide under the proposed legislation. They maintain that passage of the 1980 Communication Act will encourage telecommunications innovations, low customer rates, and industrial productivity in the long run.

About the Interview

Charles Jackson and Lionel Van Deerlin: An Interview Conducted by Carol Lof, IEEE History Center, February 19, 1980

Interview # 039 for the IEEE History Center, The Institute of Electrical and Electronics Engineers, Inc. and Rutgers, The State University of New Jersey

Copyright Statement

This manuscript is being made available for research purposes only. All literary rights in the manuscript, including the right to publish, are reserved to the IEEE History Center. No part of the manuscript may be quoted for publication without the written permission of the Director of IEEE History Center.

Request for permission to quote for publication should be addressed to the IEEE History Center Oral History Program, Rutgers - the State University, 39 Union Street, New Brunswick, NJ 08901-8538 USA. It should include identification of the specific passages to be quoted, anticipated use of the passages, and identification of the user.

It is recommended that this oral history be cited as follows:

Charles Jackson and Lionel Van Deerlin, an oral history conducted in 1980 by Carol Lof, IEEE History Center, Rutgers University, New Brunswick, NJ, USA.

Interview

Interview: Charles Jackson and Lionel Van Deerlin

Interviewer: Carol Lof Date: February 19, 1980

Quick Implementation of Communications Act

Lof:

Why are you proceeding so swiftly with this legislation?

Van Deerlin:

This is one of those years when good landmark legislation is likely to get swallowed up in the political campaign. We've spent three years on it and found a need which Henry Geller, Assistant Secretary of Commerce for Communications, finds urgent. I just don't want to see it go over to another Congress. We've brought competing interests to a point where, while none of them likes what he sees as well as he would have liked something else; almost all of them agree that they've got to have some new legislative guidelines.

Lof:

What services do you foresee a Bell separate subsidiary providing?

Van Deerlin:

One of the principal reasons for the need for legislation is the blurring of capabilities that has been brought about quite apart from what the law requires. The law requires that if a service is described as communications, then it must be tariffed and regulated. If it is not communications then Bell cannot get into it at all. We come up with combinations of technologies such as communications and computers, and provide all kinds of new services that blend in a way that make it totally impossible for a national commission to determine whether they are communications or computer services. The upshot is that in many instances, the commission tries to regulate too soon, and thereby stifles innovation.

R&D Rules

Lof:

Is there not also a provision that the personnel cannot work in both places, that they must have separate R&D for subsidiaries?

Van Deerlin:

The R&D arm of Bell, of course, if its product is to be made available to any of the Bell companies or AT&T, has to be offered under the same terms as to any other company.

Jackson:

The R&D issue is a confusing one because the separate subsidiary would not be allowed to have any preferential dealings with the telephone operating company. This also foresees a world where Western Electric and Bell Labs provide services and equipment to both the operating companies and the separate subsidiary, but they will have to be fully paid for. Western Electric is building equipment for the competitive marketplace. Some of the cost that goes into the research and design is being borne not by the customer for that equipment, but rather by the customer of the regulated monopoly. The bill says that Western Electric can build things for the separate subsidiary, but all the costs including R&D must be paid for by the separate subsidiary.

Hollings' Plan

Lof:

Bell Labs, therefore, will not be broken up as long as they sell their thinking to anyone who wants to buy it. Would you care to comment on Senator Hollings' idea of separation of exchanges and inter exchanges?<ref> The Bill which Senator Hollings has introduced would require AT&T to put all intercity operations in a separate subsidiary so that cross subsidization of rates could easily be detected by competing carriers. HR6121 seeks to accomplish the same goal through accounting safeguards.</ref>

Van Deerlin:

He wants Long Lines taken out. This is a totally understandable point with which I can have some sympathy. However, the more we looked at it, the more we decided that there was no place where you could determine that the property and function of a member company of the Bell System ends and Long Lines begins. Try as you will, if you went out and attempted to identify what belongs to whom, you'd give the Commission a chore that might be absolutely impossible. This is also one of those areas where you might get a bit antsy as a politician hearing the comment, "Why start messing around with something that's working as well as this system is?"

If engineers themselves couldn't tell you twenty-five years ago where all this was going, how could seven politically appointed commissioners or 535 members of Congress? Of course we can't. But what we can do is bring to bear whatever gifts God gave us to provide the environment in which these can and should be brought in. If there is a monopoly service and the public interest needs some protection, we should provide the framework for regulation and tariffing. But if it's not, for heaven's sake, get out of the way and let innovation take over.

Competition vs. Regulation

Lof:

This bill is then an example of government backing off and letting industry run itself?

Van Deerlin:

The catchword in this Congress is deregulation. Look at the airlines.... Well, you've got to provide mechanisms for dealing with the exceptions to the rule. But if you establish regulatory commissions and give them a turf in which to operate, operate they will. Where the marketplace can make these determinations for us, we're going to be a lot better off letting it do so.

Lof:

An overwhelming number of long distance calls are between relatively few cities in the U.S. Competing carriers concentrate their offices in these cities.

Van Deerlin:

Well, the very first one was St. Louis to Chicago and that's where the Commission (FCC) in about 1971 or '72 first said, “Okay, you can do this outside the Bell System.” Now in addition to the Bell's Long Lines and microwave system, you have this independent microwave system. There are all kinds of added service companies that are using Bell lines and satellites and microwave and picking their own routes. Obviously they're going to go for the big traffic.

Lof:

As opposed to Bell?

Van Deerlin:

Which is required to provide service wherever anyone wants it.

Lof:

That's what Bell is required to do, right?

Van Deerlin:

And they will continue to be required to do so under the legislation.

Lof:

Will they be allowed to reduce their rates on the popular routes?

Van Deerlin:

I certainly hope so.

Encouragement of Innovation

Lof:

What do you think of this bill from an engineer's point of view, since its main thrust is economic and sociological?

Jackson:

The biggest impact it has for the engineering community is that it makes clear that a bunch of important markets, communications markets, data terminal markets, become competitive markets. The Congress intends them to be that way. If somebody develops some new form of computer communications network, they can go out, hook their computer up, and start offering service tomorrow and the Commission can't shut them down. Now that's not the case today. If I were to offer an advanced computer communications system and the FCC decides that the service I'm offering is too close to communications, they'll send me a little letter saying either file the forms with them, which may cost legal fees that will put me out of business if I'm a small company, or quit doing it. The ability of that power is a threat to a lot of little innovative firms. I know firms that have spent substantial amounts of money preparing for the eventuality that the Commission will exert jurisdiction over the service they are providing. If the Commission gives them a thirty-day deadline to file forms that take ninety days to prepare, they've already got them prepared. The law says that if you have an idea, which falls between communications and computers, you can't use it.

Lof:

But with this legislation they can use it.

Jackson:

There'll be no question it will open up a lot of innovation on computer applications. A lot of it's going on anyway. The Bell System, when it builds a PBX, for example, can only provide a limited range of functions in a PBX or data terminal because if it provides too many functions it runs into the consent decree problem. This bill says they can build those terminals to house as wide a range of functions as they want. They just have to be sure that those terminals aren't being improperly subsidized either in research and development or production or sales effort. So it seems to me as an engineer that the bill opens it up for everyone. It takes away limits. It gets politicians out of the business of running communication systems and turns it back over to the engineers. Deregulation is a big buzzword these days, but in this case it’s a lot more than a buzzword. It's a way to free up some innovative talent. So as an engineer, I'm proud to be associated with the bill.

Inclusiveness of Term, Telecomunications

Lof:

Would I be correct in saying that this bill is redefining the word telecommunications and is broadening it to include computers and the other technological advances that did not exist in 1934?

Jackson:

Better yet, I think it is trying to shrink the core of regulated activity down to basic telephone service. The services and facilities can be provided to the consumer without the government getting deeply involved in decisions.

Lof:

What effects will the legislation have on the pending antitrust suit in Justice?

Van Deerlin:

We hope none. I hope it (the bill) will help protect the public interest that antitrust suits are aimed at protecting. It is interesting that as recently as six or eight months ago, AT&T was saying that it couldn't support legislation that didn't specifically deal with the antitrust issue with language stipulating that all steps having to do with the restructuring of the telecommunications industry should stem from Congress, and not from the courts. At that time I was hopeful we might remain silent on the issue. The passage of time has made that impossible, so I guess we have said it about as explicitly as it can be said. In fact, if you were a sensitive AT&T executive, you might almost say it invites antitrust actions. Bigness is going to be dealt with as bigness. What we want to ensure is that past mistakes, such as that portion of the 1956 consent decree, which forever bars AT&T from getting into data transmission, be corrected. This is no favor to consumers or anybody.

Swift Amendment

Lof:

Would you like to comment on the Swift Amendment, which provides $750,000 for little companies to come to DC and express their views?

Van Deerlin:

I think it’s bucking the popular opinion of the moment in Congress, but I'm not sure it’s bucking the popular opinion of people out there who recognize that it’s very hard to compete with the lawyers and legal staff of an AT&T, IBM, or ITT. You're not going to have much of a shake as a consumer or as a small company. The amendment is carefully crafted. It will not make use of these funds frivolously. It specifically bars them from being used in license challenges. It would limit them to common carriers. No doubt it will be fought.

Competition Among Large Companies

Lof:

Some people have said that instead of deregulating, this bill gets AT&T into the computer field and it's just going to make it bigger and bigger.

Van Deerlin:

There was no data processing or computer industry twenty-five years ago, so anything that's done is bigger. The question in my mind is not whether these companies will get bigger, but whether they'll be so big as to be unfair and to stop competition. If they do, the bill has its own triggering mechanism for getting them back under the regulatory tent. All we're doing is opening the doors and windows and letting some fresh air in where it's never been before. This isn't written in stone, and if it doesn't work out, we're going to have ways of stepping back in. In the main, these big competitors of AT&T are not afraid of their inability to compete. As a matter of fact, some of them have some built-in advantages that you hear very little talk about. One of these is the inordinately long time that local P.U.C.'s have insisted upon for depreciation of Bell equipment. In most states this is around forty years. There is no way they could be competitive with outfits like IBM who can depreciate their equipment in six or eight years. This is a fact that isn't even taken up in our bill, but it's one of the ways in which the Bell system will always be handicapped as AT&T. A subsidiary would not be bound by those tariff procedures in the various states and would be able to become competitive in this way too. What we're determined to prevent is the use of profits from regulated tariffed parts of the activity to compete unfairly with the competitive area.

Lof:

How long will the transition take?

Van Deerlin:

The bill anticipates two years to transition.

Opposition to 1976 Bell Bill

Lof:

You were actively against the Bell Bill, weren't you?

Van Deerlin:

There are new members around here who don't remember anything about what happened then and aren't even aware of who stopped the Bell Bill. If that Subcommittee had had leadership on it, which wanted to see that bill pass, it could have probably gone sailing.

Lof:

Which bill?

Van Deerlin:

The Consumer Communication Reform Bill of 1976, also known as the Bell Bill. It had about 189 sponsors in the House and it made beautiful logic. If you want to save that low-cost home telephone, you better get aboard this bill. Among the people who helped stop it are some of us here who now are being accused of being too easy on Bell.

Jackson:

There were basically three elements of the Bell Bill. Two primary ones were the intercity monopoly and state regulation of terminal equipment. HR6121 has no regulation of terminal equipment and expressly prohibits state regulation of terminals and opens up all intercity markets to competitors. Every proposition that was in the Bell Bill is stood on its head in HR6121.

Lof:

Do you think HR6121 will pass?

Van Deerlin:

Well, it certainly should, and we'll thank you to help us do it.

Lof:

Thank you, Mr. Van Deerlin, Mr. Jackson.