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(The documents referred to follow:)

[Before the Federal Communications Commission, Washington, D.C.]

[In the matter of regulatory and policy problems presented by the interdependence of

computer and communication services and facilities: Docket No. 16979]

NOTICE OF INQUIRY

By the Commission : Commissioner Wadsworth absent.

I. PRELIMINARY STATEMENT

1. The modern-day electronic computer is capable of being programmed to furnish a wide variety of services, including the processing of all kinds of data and the gathering, storage, forwarding, and retrieval of information-technical, statistical, medical, cultural, among numerous other classes. With its huge capacity and versitility, the computers is capable of providing its services to a multiplicity of users at locations remote from the computer. Effective use of the computer is therefore becoming increasingly dependent upon communication common carrier facilities and services by which the computers and the user are given instantaneous access to each other.

2. It is the statutory purpose and responsibility of the Commission to properly regulate interstate and foreign commerce in communications so as to make avail. able to all the people of the United States a rapid, efficient, nationwide and worldwide communications service with adequate facilities at reasonable charges (See Section 1 of the Communications Act of 1934, as amended). Thus, the Commission must keep fully informed of developments and improvements in, and applications of, the technology of communications and of related fields. (See Section 218). Moreover, the growing convergence of computers and communications has given rise to a number of regulatory and policy questions within the purview of the Communications Act. These questions require timely and informed resolution by the Commission in order to facilitiate the orderly development of the computer industry and promote the application of its technologies in such fashion as to serve the needs of the public effectively, efficiently and economically. To this end, the Commission is undertaking this inquiry as a means of obtaining information, views and recommendations from the computer industry, the common carriers, present and potential users, as well as members of the interested public. The Commission will then be in a position to evaluate the adequacy and efficacy of existing relevant policies and the need, if any, for revisions in such policies, including such legislative measures that may be required. It will also enable the Commission to ascertain whether the services and facilities offered by common carriers are compatible with the present and anticipated communications requirements of computer users. The Commission will then be in a position to determine what action, if any, may be required in order to insure that the tariff terms and conditions of such offerings are just and reasonable and otherwise lawful under the Communications Act. (See Section 201 (b) and Section 202(a).)

II. EMERGING COMPUTER ENTERPRISES

3. A brief review of the more important types of computer enterprises now emerging will serve to illustrate the growing convergence and interdependence of communication and data processing technologies.

4. First of all, there is the so-called in-house use of computers. Banks, aircraft manufacturers, universities and other types of institutions frequently own or lease computers primarily for their own use. In the past the batch processing technique has generally been employed to satisfy the needs of the in-house users. Recently, however, time-sharing systems have been installed, particularly at universities and hospitals following the example of pilot Project MAC at the Massachusetts Institute of Technology. Because more than enough capacity exists to satisfy normal in-house needs, be they mathematical computation, data processing, simulation, or storage and retrieval, the idle or excess capacity is readily saleable to others. Banks and aircraft manufacturers have already made such time available to persons outside the enterprise. Economies of scale may well lead to larger and larger machines with consequent incentive for in-house computer owners to sell computer time to the general public. Efficient utilization of these computers implies organization of time-sharing systems. It likewise implies increased use of communication channels obtained for the most part from communications common carriers pursuant to tariffs filed with this Commission or state regulatory commissions, depending upon the intrastate or interstate nature of the channel.

5. Secondly, several of the major computer manufacturers maintain computer service bureaus. They sell computer time to customers and usually operate on a batch process basis. However, conversion to time-sharing is proceeding rapidly. The potential for providing the computer with general economic data to compliment specific company or industry data, has led to the establishment of data banks which can be used for such purposes as economic forecasting, product marketing analysis, and more specialized uses such as legal and medical reference library services. Multiple access to such data banks is again dependent on communications links obtained from common carriers under applicable tariffs.

6. Additionally, there are hundreds of non-manufacturing firms which offer a wide range of data processing and specialized information services. These services may be provided on either a batch processing or time-sharing basis. Many of these concerns are local in scope, but others are equipped with multiple access computers and are endeavoring to develop national time-sharing systems of which communication channels will be an integral part.

7. Finally, there are some very highly specialized computer services currently being offered. An example is the stock quotation service. For a number of years, brokers and financial institutions throughout the country have been supplied with up-to-the-minute prices and quotations on securities and commodities through central real-time computers. The service enables a broker to query the computer's store of market data and receive the information on a print-out or visual display device. It has been proposed that the computers be programmed to provide capability for storing and processing buy and sell orders between individual brokers. In both instances, private line circuits leased from common carriers under applicable tariffs supply the connecting link between the computer and the brokers.

8. Other specialized computer services combining data processing and communications include a hospital information service, a coordinated law enforcement service utilizing computers to tie together the law enforcement efforts of a number of local authorities, and various kinds of reservation services.

9. Most, if not all, of the major computer manufacturers offer for sale or lease computers which can be programmed for message and circuit switching in addi. tion to their data processing functions. There are a number of operational computerized message switching systems owned by large corporations in diverse fields. Most of these systems replaced electro-mechanical switching units provided by the communications common carriers. Motivations of increased business efficiency anf maximization of the capabilities of the computer are apparently leading toward the acquisition by large corporations of computer systems. These systems permit data processing and message switching to be effectively combined with communication chanels linking remote locations to form a real-time data processing and communications system.

III. COMPUTERS AND THE COMMON CARRIERS

10. The communications common carriers are rapidly becoming equipped to enter into the “data processing" field. Common carriers, as part of the natural evolution of the developing communications art, are making increased use of computers for their conventional services to perform message and circuit switching functions. These computers can likewise be programmed to perform data processing functions. For example, Western Union is establishing computer centers, not only for its public message and Telex systems, but eventually to provide as well a variety of data processing, storage and retrieval services for the public. The first such computer centers, planned by the company as part of its "national information utility" program, was opened March 16 of this year in New York City. This center, and others to be established in key cities, will be programmed to offer time-sharing, information processing and data-bank services. Western Union's planning looks to the establishment, through a national, regional and local network of computers, of a gigantic real-time computer utility service which would gather, store, process, program, retrieve and distribute information on a broad scale. This company will also arrange to design, procure and install all necessary hardware for fully integrated data processing and communications systems for individual customers, and provide the total management service for such systems.

11. The Bell System has not yet indicated any plan to provide a similar information service, or to offer local data processing services to the public. However, it is implementing a program to convert all central offices from electromechanical switching systems to electronic switching. Similar conversion programs are being undertaken by other carriers in the industry. Interface, terminal and outstation equipments are being developed by the industry to match computer systems with communication channels. It might be observed here, that the Touch-Tone telephone instrument has significant potential as a computer input device, utilizing the telephone switched network. After a connection to a multiple access computer is completed in the regular manner, the same buttons can be pressed to enter information into the computer or to query the computer and get back a voice answer. A number of systems of this type are now in service.

12. International carriers have recently proposed new computer message switching and data processing services. One such carrier offers a service to air lines under which it switches messages between and among the various leased circuits connected to its computer. In addition, it plans to employ the same computer to store and supply up-to-the-minute seat inventory information with respect to flights of those air lines subscribing to this additional service, through communication facilities connected to air line offices and agencies on an on-line real-time basis. Other carriers plan to introduce similar service offerings.

IV. DISCUSSION OF THE PROBLEMS

13. The above review, although by no means exhaustive, is illustrative of the convergence and growing interdependence of the computer and communications. This convergence takes a variety of different forms and applications thereby making it difficult to sort them into simple discrete categories. It is impossible at this time to anticipate fully the nature of all of the policy and regulatory problems that future developments may generate. Nevertheless, it is desirable to focus on those problems that are presently definable within the existing state of this burgeoning industry.

14. Communication common carriers, whose rates and services are subject to governmental regulation, are employing computers as a circuit and message switching device in furtherance of their undertakings to provide communication channels and services to the general public. There is now evidence of a trend am ong several of the major domestic and international carriers to program their computers not only for switching services, but also for the storage, processing and retrieval of various types of business and management data of entities desiring to subscribe therefor in lieu of such industries providing this service to themselves on an in-house basis or contracting with computer firms for the service.

15. Accordingly, we find communication common carriers grafting on to their conventional undertaking of providing communication channels and services to the public various types of data processing and information services. One such carrier has, in fact, committed its future to using its combined resources of computers and communication channels to meet the information requirements of the business community and other professional and institutional segments of our society by the establishment of a national and regional centralized information system. As a consequence, common carriers, in offering these services, are, or will be, in many instances, competitive with services sold by computer manufacturers and service bureau firms. At the same time, such firms will be dependent upon common carriers for reasonably priced communication facilities and services.

16. As previously indicated, a large number of non-regulated entities are employing computers to provide various types of data processing and specialized information services. The excess capacity of the in-house computer is made available for a charge to others; in other instances computer service bureaus sell computer time to a number of subscribers, on a shared-time basis; and in still other instances, highly specialized information and data bank services are provided. At an ever increasing rate, with the development of time-sharing techniques, remote input and output devices of the users are linked to the computer by communication channels obtained from common carriers. The users located at the remote terminals are served so rapidly that each is under the illusion that he alone has access to the central processor. The flexibility of the computer makes possible, in addition to data processing services, message switching between various locations of the same customer, or between several different customers. This allows the data processing industry to engage in what heretofore has been an activity limited to the communications common carrier.

17. Common carriers have thus far taken different approaches to the question of the applicability of the regulatory provisions of the Communications Act to their computer service offerings. Notwithstanding that various aspects of such offerings appear to involve activities, such as message switching, which historically have been regarded as common carrier activities subject to regulation, no consistent policy is established and followed with respect to the filing of tariffs by carriers to cover those offerings. This is understandable considering the competitive activities of a similar nature by non-regulated entities as well as the apparent difficulties in classifying the various elements of a computer service into discrete communications and non-communication compartments.

18. From the common carriers' standpoint, regulation should extend to all entities offering like services or to none. It is urged that the ability to compete successfully depends on the flexibility required to meet the competition; and that the carriers would be deprived of this flexibility if they alone were restricted in their pricing practices and marketing efforts by the rigidities of a tariff schedule. Thus, we are confronted with determining under what circumstances data processing, computer information and message switching services, or any particular combination thereof-whether engaged in by established common carriers or other entities—are or should be subject to the provisions of the Communications Act. We expect this inquiry to be of assistance to the Commission in evaluating the policy and legal considerations involved in arriving at this determination.

V. COMMUNICATION TARIFFS AND PRACTICES

19. The interdependence between data processing and communication channels is bound to continue under the impetus of remote processing in combination with the growth of time-shared computer systems and services. In the past, the relationship between the relative cost of the two segments was of little concern. Data processing was expensive and in a relative sense higher than its communication counterpart. The trend toward lower EDP costs resulting from larger computer systems, has tended to shift the relative cost positions. Indeed, there is some indication that in the near future communication costs will dominate the EDPcommunications circuit package. It is natural, then, that the computer industry finds its attention devoted increasingly to communication tariffs and regulations, in its search to optimize the communication segment of the package. In fact, fears are expressed that the cost of communications may prove to be the limiting factor in the future growth of the industry.

20. While the charges of the carriers are of prime importance, including the question of minimum periods of use, other tariff provisions and restrictions should also be scrutinized. Such tariff provisions as those relating to shared use and authorized use may well be in need of revision in light of the new advanced technology. Likewise, any restriction on the use of customer owned or provided equipment, including multiplexing equipment, must be reviewed for their effects on a burgeoning industry.

21. This then is another area of concern. Are the service offering of the common carriers, as well as their tariffs and practices, keeping pace with the quickened developments in digital technology ? Does a gap exist between computer industry needs and requirements, on the one side, and communications technology and tariff rates and practices on the other?

VI. THE PROBLEM OF INFORMATION PRIVACY

22. The modern application of computer technology has brought about a trend toward concentrating commercial and personal data at computer centers. This concentration, resulting in the ready availability in one place of detailed personal and business data, raises serious problems of how this information can be kept from unauthorized persons or unauthorized use.

23. Privacy, particularly in the area of communications, is a well established policy and objective of the Communications Act. Thus, any threatened or potential invasion of privacy is cause for concern by the Commission and the industry. In the past, the invasion of information privacy was rendered difficult by the scattered and random nature of individual data. Now the fragmentary nature of information is becoming a relic of the past. Data centers and common memory drums housing competitive sales, inventory and credit information and untold amounts of personal information, are becoming common. This personal and proprietary information must remain free from unauthorized

invasion or disclosure, whether at the computer, the terminal station, or the interconnecting communication link.

24. Both the developing industry and the Commission must be prepared to deal with the problems promptly so that they may be resolved in an effective manner before technological advances render solution more difficult. The Commission is interested not only in promoting the development of technology, but it is at the same time concerned that in the process technology does not erode fundamental values.

VII. ITEMS OF INQUIRY

25. In view of the foregoing, it is incumbent upon the Commission to obtain information, views and recommendations from interested members of the public in order to assist the Commission in resolving the regulatory and policy questions presented by this new technology. Accordingly, such information, views and recommendations are requested in response to the following items of inquiry :

A. Describe the uses that are being made currently and the uses that are anticipated in the next decade of computers and communication channels and facilities for :

1. Message or circuit switching (including the storage and forwarding of data);

2. Data processing;
3. General or special information services;

4. Any combination of the foregoing. B. Describe the basis for and structure of charges to the customers for the services listed in A above.

C. The circumstances, if any, under which any of the aforementioned services should be deemed subject to regulation pursuant to the provisions of Title II of the Communications Act.

1. When involving the use of communication facilities and services; 2. When furnished by established communication common carriers;

3. When furnished by entities other than established communication common carriers. D. Assuming that any or all of such services are subject to regulation under the Communications Act, whether the policies and objectives of the Communications Act will be served better by such regulation or by such services evolving in a free, competitive market, and if the latter, whether changes in existing provisions or law or regulations are needed.

E. Assuming that any and all of such services are not subject to regulation under the Communications Act, whether public policy dictates that legislation be enacted bringing such services under regulation by an appropriate governmental authority, and the nature of such legislation.

F. Whether existing rate-making, accounting and other regulatory procedures of the Commission are consistent with insuring fair and effective competition between communications common carriers and other entities (whether or not subject to regulation) in the sale of computer services involving the use of communications facilities; and, if not, what changes are required in those procedures.

G. Whether the rate structure, regulations and practices contained in the existing tariff schedules of communications common carriers are compatible with present and anticipated requirements of the computer industry and its customers. In this connection, specific reference may be made to those tariff provisions relating to:

1. Interconnection of customer-provided facilities (owned or leased) with common carrier facilities, including prohibitions against use of foreign attachments; 2. Time and distance as a basis for constructing charges for services; 3. Shared use of equipment and services offered by common carriers;

4. Restrictions on use of services offered, including prohibitions against resale thereof. H. What new common carrier tariff offerings or services are or will be required to meet the present and anticipated needs of the computer industry and its customers.

I. The respects in which present-day transmission facilities of common carriers are inadequate to meet the requirements of computer technology, including those for accuracy and speed.

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