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Mr. BROOKS. The subcommittee will come to order.

Members of this panel, welcome. We are glad to see you again. Mr. Sam Ginn, chief executive officer of Pacific Telesis; Mr. Alan C. Hasselwander, chairman of the United States Telephone Association, president and chief executive officer of Rochester Telephone Corp.; Mr. Lee Camp, vice president of marketing, Pacific Telesis Group; and Mr. Casimir Skrzypczak, vice president, science and technology, NYNEX Corp.

Gentlemen, I appreciate your being here this afternoon. I hope you will summarize your statements. We'll accept all the statements for the record, and we will start off with Mr. Ginn. Would you proceed, sir. We are delighted to have you. STATEMENT OF SAM GINN, CHAIRMAN AND CHIEF EXECUTIVE

OFFICER, PACIFIC TELESIS GROUP Mr. GINN. Thank you, Mr. Chairman.

It is my pleasure to be here, and with some sympathy with the time constraints that you face, I have shortened my testimony, but when you have a spare moment, I urge you to read it in its entirety.

Clearly this subcommittee faces extremely tough questions, and you know, this morning we heard a lot about antitrust theory. I am concerned if the debate continues on such a narrow focus. You know, I don't think I heard one time this morning where serving customers and meeting customers' needs was discussed by those in the previous panel.

With that kind of oversight, I think we begin to understand why Congressman Mazzoli experiences the kind of reactions he does when he goes back and talks to his constituents about the state of the telecommunications industry.

Clearly, on one side, we have antitrust concerns, but on the other side, there is a need for vision, there is a need for the vision of the future in telecommunications, and it is real. There is a need to satisfy the needs of consumers, now and in the future, and it is real. And there is a need to develop a telecommunications infrastructure in this country that ensures that our businesses are world-competitive, and that need is real.

Now on the antitrust side, and there are antitrust concerns-we understand that-but the whole issue of safeguards is well known and well discussed, and we will accept reasonable safeguards on our participation in this industry.

Beyond that, we have 50 public utility commissions who oversee us; we have 50 State attorneys general; we have the FCC; we have the Department of Justice; and we have our customers. And our customers are quick to point out when they think that they are not being treated fairly.

Beyond that, and we have stated this publicly, that in the interest of reaching an agreement that we would support the imposition of an independent audit on the information services or gateway piece of the consent decree to ensure that a level playing field was maintained.

Beyond that, and beyond the antitrust concerns, it seems to me it would be an appropriate time in the evolution of this industry to rethink the vision. You know, we all value the telephone service that we have today, but my sense is that 20 years from today that if we manage it properly, information services available to our consumers will be just as valuable as our telecommunications telephone service system is today.

Now as a manager who has been involved many years in this industry, I would like to give you some practical concerns and issues that I try to manage as a result of the core restrictions of the MFJ being in place.

Let's take information services. I was talking to a service rep in Pacific Bell several months ago, and she said to me, “You know, I had a fishermen association come to me and say, what we'd really like to do is to radio our catch into a data base before we even return to port, and we'd like the restaurants in San Francisco to be able to access that data base so they can purchase the fish, make arrangements for delivery, and plan their evening menu before the ships even get back to port."

Our answer to that customer was that we can't do that, Mr. Customer, without permission from the court.

Fire departments come to us and they say, “Look, moments are precious when we get a call, and we don't have nearly enough information. We'd like to know how many children in the house; we'd like to know which rooms they are typically found in; we'd like to know if hazardous waste is in the vicinity; the number of entrances and exits in the building or home,” and our answer to the fire department, Mr. Chairman, is we can't do that, Mr. Customer, without seeking permission from the Federal court.

Beyond all that, what we will unleash, if we can put this infrastructure in place, you will have thousands of examples of the fishermen, you will have thousands of examples of the fire department; because then we will be calling on the creative ingenuity of our people, and they will arrive at needs and opportunities that will make life much better for our citizens and much more productive for business.

Now let me take manufacturing. You know, there was a lot of conversation going on this morning about why we shouldn't be in manufacturing because we could manufacture the central office switch. The fact is, Mr. Chairman, the R&D expense, the volumes that you have to sell, are so large that I think many economists in the world agree that only five in the world will succeed.

Now there is just no practical way that a regional operating company, based on those economies of scale, would ever find itself in the position of manufacturing central office switchers.

But let me tell you what the MFJ does do to us. It's not an issue of simple manufacturing. We can't even design and develop.

If you design and develop, the only way you can justify that is to be able to either get royalties or license fees from the manufacturer or the manufacture itself. It's not even clear, under the current consent decree as a matter of fact, the judge has not ruled that we can even get licenses and royalties from our own ideas.

What we are practically doing here, you've got 80 percent of the industry that's interacting with customers every day. Our ideas, our thoughts cannot make their way back through the manufacturing process and produce new products. And then we wonder why our balance of payments in communications is as negative as it is.

In terms of interexchange, it is clear to me as a CEO of one of the major companies in this industry that it would not be in our interest to take AT&T and MCI and Sprint head-on. Facility-based competition is tremendously expensive, and I think we would look at that issue long and hard before we ever attempted that move.

But let me tell you about the complexities. We wanted to extend our cellular service from Los Angeles to Palm Springs. It took us 400 days, it took us 400 days to get permission to do that from the court. We denied customers the ability to use our system from one end to the other.

Mr. BROOKS. You said 705 in the statement.
Mr. GINN. Pardon?
Mr. BROOKS. You say it took you 705 days in the statement.
Mr. GINN. Seven hundred five days. I'm sorry. In the statement.
Mr. BROOKS. It's in the statement.

Mr. GINN. Yes, it is. It was the dismantling of the Detroit system, I believe, that was over 400 days—in fact, 642. We acquired a cellular system in Detroit. As a result of that, we had to discontinue service to customers because the system, as it was then constructed, did not comport with the decree.

On the Japanese cable, it took us many, many months to get permission to invest in the Japanese West Coast cable, and the permission came only 2 days before our option expired. So I point all of this out to you to let you know that there are two sides to this issue. Sure, we have to be concerned about the antitrust issues, but on the other side, we have to be concerned that we have a policy to put in place a telecommunications infrastructure that's going to enrich the lives of our consumers, and it's going to make our businesses world-competitive.

I thank you for the time.
Mr. BROOKS. Thank you.
[Mr. Ginn's prepared statement follows:]

Testimony of Sam Ginn
Chairman and Chief Executive Officer

Pacific Telesis Group

Mr. Chairman:

Thank you for the opportunity to appear before your

Subcommittee today to discuss what I believe is one of the

most important long term public policy issues which are facing

this country:

the need for a forward looking national

telecommunications policy.

Let me start by saying that for many years the United States

has enjoyed the most advanced, the very best telecommunications

system in the world.

It has been a source of pride for the

entire nation, and one of the things that set us apart from the

rest of the world.

Recently, though, that situation has changed, and the change

has been for the worse.

The change has been as swift as it has

been sure;

although our core network functions very well, the

United States can no longer boast that we are in the vanguard

of new features, new services, new advantages for our

In terms of innovation, which is critical to the

customers.

future success of our economy, we are losing our edge. We have been surpassed not only by one nation, but by several, and the situation appears to be getting worse, not better.

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