Johnson: I think Poland Should Be Cautious About Everything
Like many Americans from his generation, Nicholas Johnson firmly believes that public service is a noble profession. He began his career as a law clerk to Supreme Court Justice Hugo Black and remained in the public eye until President Lyndon Johnson appointed him commissioner of the U.S. Federal Communications Commission (FCC) in 1966. During his seven-year term, he earned a reputation as a vigorous opponent of AT&T's monopoly over long-distance connections. His frequent dissenting opinions irked President Richard Nixon, who twice tried (unsuccessfully) to have him removed as FCC commissioner. Ultimately, AT&T lost its favored status and Johnson continued to pursue his passion for public service. In addition to teaching law at the University of Iowa, Johnson lectures for the Leigh Lecture Bureau, is a fellow of the World Academy of Art and Science, was co-director of a public health policy institute, wrote numerous books and established a long-time friendship with consumer advocate Ralph Nader. Last month, Johnson was in Warsaw to deliver a lecture on free speech and government regulation in cyberspace. The WJB's Christopher Serres took the opportunity to meet with Johnson to discuss the role of government regulation in the telecom sector and the future of state operator Telekomunikacja Polska SA (TPSA). The following is an edited version of their conversation. [-Ed., WBJ]
Q [Christopher Serres]: During your seven years as an FCC commissioner, you were labeled as an iconoclast. How so?
A [Nicholas Johnson]: Mostly I spent seven years writing dissenting opinions. In fact, to make the point that everything the FCC had done was wrong, I selected one week and wrote "A Day in the Life" that went through every single decision the FCC made for a week and explained why every single one of them was wrong.
Q: Could you give an example in which you differed from your FCC colleagues?
A: In the broadcasting area, for example, I felt that since the law required us to regulate in the "public interest and necessity," that was presumably a requirement that we should insist on behavior that was more than mere profit maximizing. Presumably what the law required was that (broadcasters) should put out more news and public affairs than they would otherwise do in a profit-maximizing mode. For example, they had an obligation to put on programming for children, who because they are not active members of the market are not necessarily desired by advertisers but are nonetheless an important population to serve.
Q: Did you believe in this same ideal when it came to regulating telecoms?
A: I think there is no industry that can contribute more potentially to a society than the telecommunications infrastructure. And I think there is a good argument to be made that it should not be a profit center at all. There is an argument that the more you can drive those costs and the prices charged for telecoms service down to the lowest possible level, the more you will see the benefits in terms of social relationships between people.
Q: Do you really need a government regulator to reduce those charges?
A: There are some elements of any nation's infrastructure that are so fundamental to the operation of the rest of that society that I think one needs to look very carefully at the price the entire society pays for inefficiencies, high prices and so forth. We should all ask,"How would Poland function differently if telecommunications were free?" And then, what happens as you gradually raise those prices: what phone calls are not made, what e-mails are not sent, what faxes do not get delivered, and what are the economic consequences? So if you discourage communications because you don't have the cables, because you're charging too much, because you can't get an outside line, then you're going to pay many times what vou should.
Q: Should we assume greater competition will lower prices for everyone?
A: Well, I don't think that one engages in privatization like a mantra, that you repeat it unthinkingly and apply it to everything regardless of the circumstances. I think you have to take a pragmatic approach and define what is it you are trying to accomplish with your policies. And my only argument is that a nation suffers if the telecommunications infrastructure is looked upon as a cash cow, if it is perceived as something so essential and necessary that people will pay whatever they are asked. Maybe if telecommunications were free in Poland people would waste too much time talking to their friends.
Q: Are the reduced calling rates around the world the result of greater government regulation or more competition?
A: I'm not sure all the data are in on that yet. For example, one of the consequences of having three major long-distance carriers in the United States instead of one is that an enormous amount of money is spent on advertising and marketing. Now, obviously there is an enormous cost associated with that. And it is not necessarily clear that there has been a reduction in price that has been brought about by all this competition.
Q: Are you concerned that the rash of recent telecom mergers will make the world telecom market less competitive?
A: Let me say one thing about competition: I have never met a member of the business community that did not advocate competition or (did not) stand up and applaud at its mention at the club. I have also never met a member of the business community that actually wanted to practice it. The same thing I tried to do with telecommunications, opening it up to competition and marketplace forces, was what I tried to do as United States Maritime Administrator. What do (industry members) come to Washington for? They're not coming to Washington asking for competition. So when our Telecommunications Act of 1996 went through, in the name of "competition," I was skeptical that competition was genuinely desired by these major players. My skepticism was born out immediately thereafter when we had this rash of mergers, which were presumably designed to eliminate the possibility of competition.
Q: Should the (Polish) government be cautious about letting these telecom companies enter this country?
A: I think Poland should be cautious about everything. Poland is one of the most exciting nations on earth, in terms of the market potential. People aren't afraid to change from a waltz to a two-step. But yes, I would advocate some caution . . . with regards to immediately privatizing (Telekomunikacja Polska SA) TPSA. I would advocate caution with regard to bringing in outside firms, with regard to not re-evaluating and rationalizing TPSA. I certainly would have caution in regard to bringing in commercial broadcasting to a nation that has pride in its culture.
Q: But is there anything to be feared by a company like France Telecom or British Telecom buying a share of TPSA?
A: I think we're living in an age when the nation-state as a concept is eroding. Most of these corporations that you're talking about don't really have much by way of nationality. So I don't think I would oppose external capital, or an external company, because the name of that company has some other country associated with it. But I would look at developing the capacity of Polish people as managers, scientists and engineers, as people who are running these companies.
Q: Does it make sense to have a lot of small companies competing against TPSA or one or two major competitors?
A: If TPSA is going to retain the political and regulatory power that it now has, then you need a major player to take them on toe-to-toe. You need one or more powerful competitors to build the political base of support, the public opinion base of support.
Q: Rural Poles have about one-third as many phone lines as urban residents. How should (the government) address this?
A: The first issue is political will. To the extent that the mantra of the marketplace is dominant, then you're not willing to address the issue. You have to feel it in your heart and gut that rural telephone services is something that a society does. I think also that one can make an economic argument. Anyone in rural Poland that doesn't have access to a home computer, the Internet, or access to a telephone, is obviously not going to be ordering any goods that are for sale over the Internet or by telephone out of a catalog.
Q: Should the Polish government require new private operators to build a minimum number of lines in rural areas?
A: There you have a number of options. One of the ways to do it is to say to the public corporation, like TPSA, that part of your obligation is to provide universal service and you charge whatever is necessary to have equal access for everyone. Or you require that a private corporation build those (rural) lines. The difficulty with requiring that is that there is such an uneven playing field (between private and public) operators. Another way to go is what we do with food stamps in the United States. We give people a kind of currency that they can use to buy food. So you could provide information stamps directly to a consumer. Ironically, that is kind of a marketplace solution. This is someone in Warsaw saying we are going to make this much available to you in telecommunications dollars, but you can contract with any private carrier you want.
Q: Should Poland establish an FCC?
A: Whether an independent regulatory body makes sense for Poland is a decision that has to be made here. But it is certainly is a model that is worth looking at. I think it is terribly important that any country start by having an independent group of individuals think about what is the wisest telecommunications policy in the best interests of that nation. Then compromises will have to be made between political forces, corporate forces, trade union forces and so forth.
Q: Have you had phone problems since you arrived in Warsaw?
A: (Laugh) I make notes about what I do when I'm in a place and I've made a lot of notes about my frustrations that I've had here with the Internet. They have problems over at the Holiday Inn. And one of the employees there said she could not call the hotel from her home. Frankly, I don't think that a nation can prosper with these kinds of (connection) problems.
[19971201]
var sc_project=11993352;
var sc_invisible=1;
var sc_security="dbb95d95";