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CONTENTS

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Responses to questions submitted by Hon. Edward J. Markey

Association of Telemessaging Service International, Inc.:

455

Responses to questions submitted by Hon. Edward J. Markey

413

71

Material submitted for the record by-Continued

McGraw-Hill, Inc.:

Letter dated July 12, 1989, from Richard H. Shriver to Hon. Edward
J. Markey

...........

Responses to questions submitted by Hon. Edward J. Markey
NYNEX, responses to questions submitted by Hon. Edward J. Markey......
Pacific Bell, letter dated June 30, 1989, from Lee G. Camp to Hon.
Edward J. Markey..

Page

77

428

464

112

Phone Programs, Inc., responses to questions submitted by Hon. Edward
J. Markey.

380

Prodigy Services Co., letter dated July 12, 1989, from George M. Perry to
Hon. Edward J. Markey..

124

Regional Holding Companies, responses to questions submitted by Hon.
Edward J. Markey..

482

24

Southwestern Bell Corp., letter dated June 12, 1989, from Robert H.
Glaser to Hon. Edward J. Markey

Telecommunications and Finance Subcommittee: Statements submitted
at the meeting of May 31, 1989:

Association of Telemessaging Services International, Joseph Laseau,
executive vice president....

BellSouth Corp., John R. Gunter, vice president, information services
and market planning.

McGraw-Hill, Inc., Richard H. Shriver, senior vice president, infor-
mation systems and technology

47

63

Prodigy Services Co., George M. Perry, vice president and general
counsel

Pacific Bell, Lee G. Camp, vice president and general manager, infor-
mation services group.

71

103

116

Telecommunications Industries Association, responses to questions submitted by Hon. Edward J. Markey

409

United Telecommunications, Inc., responses to questions submitted by
Hon. Edward J. Markey

371

MODIFIED FINAL JUDGMENT

WEDNESDAY, JUNE 7, 1989

HOUSE OF REPRESENTATIVES,

COMMITTEE ON ENERGY AND COMMERCE,
SUBCOMMITTEE ON TELECOMMUNICATIONS AND FINANCE,

Washington, DC.

The subcommittee met, pursuant to notice, at 2:05 p.m., in room 2322, Rayburn House Office Building, Hon. Edward J. Markey [chairman] presiding.

Mr. MARKEY. We are conducting these sessions in a less formal manner in that we are waiving members' opening statements. Without objection, I will introduce the witnesses and let them briefly outline what their major points are and then we can get quickly to the point of asking questions.

Today we have Mr. A. Gray Collins, Jr., senior vice president of external affairs, Bell Atlantic; Mr. Robert Glaser, vice president, strategic planning, Southwestern Bell Corp.; Mr. Warren Prince, chairman, Tymnet-McDonnell Douglas Network Systems Co., from San Jose, CA; Mr. Bruce Fogel, chairman, Phone Programs, Inc., from New York City; and Mr. Warner Sinback, manager for telecommunications policy, General Electric Information Services, General Electric Co., Rockville, MD.

Let us begin with Mr. Fogel. We will go from my left to right. Each one of you will have no more than 5 minutes, which we will very strictly enforce, to lay out your major points, and then we will turn to the subcommittee members for questions.

Mr. Fogel.

STATEMENTS OF BRUCE J. FOGEL, CHAIRMAN, PHONE PROGRAMS, INC.; A. GRAY COLLINS, JR., SENIOR VICE PRESIDENT, EXTERNAL AFFAIRS, BELL ATLANTIC; WARREN F. PRINCE, CHAIRMAN, TYMNET-MCDONNELL DOUGLAS NETWORK SYSTEMS CO., WARNER SINBACK, ON BEHALF OF ADAPSO; AND ROBERT H. GLASER, VICE PRESIDENT, STRATEGIC PLANNING, SOUTHWESTERN BELL CORP.

Mr. FOGEL. Thank you. I am appearing before you today in my role as chairman of Phone Programs, which is an information provider of short duration programs made available over the telephone around the United States.

I only have a few minutes. Therefore, would you please refer to my submitted written testimony as to who we are and what our function is?

Contrary to the hopes and expectations of Congressmen who may have been persuaded by the BOC's, the direct entry of the domi

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nant telcos into the content provision will predictably stifle competition and diversity in the fledgling audiotex industry.

Prior to the dovetailed regulatory and antitrust prohibitions against the BOC's there were no information providers in mass announcement services as we know them today. That's right. None. Zero. Just no information providers.

Prior to 1983, the old Bell System was responsible for all telephonic mass announcement programming and its content.

Until 1983 mass announcement, 976 or dial-it services had crept along in development at a snail's pace. Thus, for over 50 years, since the first such programming in the late 1920's, the Bell system permitted relatively few types of services and programs to reach the public through plain old telephone service.

For our company, Phone Programs, the rules which went into effect in 1983 seemed simple and straightforward. The dominant telephone companies of America were to be limited in my business to their traditional roles as common carriers. For presumably reasonable and nondiscriminatory fees, they would provide the transport of our programs through their telecommunications networks and perform billing services in conjunction with their existing facilities for billing local consumers. We the providers would be responsible for all programming content. We would take the risks inherent in free enterprise and reap the rewards of success or suffer the consequences of business failure.

Looking back upon what I viewed in 1983, I now see that I was extremely naive. In practice, the BOC's have stunted the growth of the kinds of information services with which Phone Programs is familiar. I make this point and emphasize it for a couple of reasons. First, since 1983 a lack of development in mass announcement services of which the BOC's complain is directly attributable to their own repressive and monopoly induced actions.

Second, inasmuch as the BOC's have not played by existing rules, I ask rhetorically, how can the Congress believe that the BOC's would adhere in good faith to any future rules, especially where they would be direct competitors of information providers utilizing their own network facilities along with and in competition with us? I can state categorically that the local exchanges still enjoy a natural meaningful monopoly in the provision of local mass announcement services. It is this monopoly power that enables them in various jurisdictions to control the number of information providers, to manipulate or veto the content of local programming, to dictate advertising guidelines, to share in the revenues of providers while sharing none of the risks, to create various arbitrary requirements upon providers who have no competitive choices on the local level.

Please bear in mind that I refer to current, ongoing facts. This is not something that may happen in the future. It is not my speculation.

Let me give you a few examples.

Look at New Jersey Bell's local 976 service. Today if one of your staff were to telephone the marketing section of New Jersey Bell which deals with mass announcement services to ask for information about becoming an information provider of that system, the New Jersey Bell representative would explain that New Jersey per

mits only a single provider. The winning provider, as we call him, is predictably the one who will accept the least revenue so that the BOC can garner the lion's share. It has been my understanding that the existing sole New Jersey provider receives approximately one cent per call while New Jersey keeps the other 12 cents of a total of 13 cents.

A myriad of other examples of abuses abound, abuses which could not survive in a true competitive environment.

Mr. MARKEY. Sir, I am going to have to interrupt you there. You will be given plenty of opportunity in the questioning to give further examples.

[The prepared statement of Mr. Fogel follows:]

PREPARED STATEMENT OF BRUCE FOGEL, CHAIRMAN OF THE BOARD, PHONE PROGRAMS,

INC.

Good afternoon, my name is Bruce Fogel.

I am appearing before you today in my role as chairman of the board of Phone Programs, Inc. which is an information provider on many local mass announcement or dial-it networks around the United States. My presentation today is thus limited in scope to this segment of the information services industry.

I am extremely grateful to the committee for affording me this opportunity to present certain facts and views from the perspective of a relatively small player when compared to the seven giant regional holding companies and their respective operating companies. On a day-to-day basis my company sees first hand how the bell operating companies—or BOCs—are able to control and manipulate the marketplace in my business.

It is the position of my company, as well as my own personal and professional conviction, that any legislative proposal which would permit the BOCs to enter the marketplace as content providers on mass announcement networks would, if enacted, cause an abrupt and negative turn-around in the development of this infant industry. I believe that my company is particularly well qualified to identify the facts and circumstances which have led us-as well as Judge Greene-to this inescapable conclusion.

An initial word about Phone Programs. Phone Programs and its affiliates are closely held companies, owned by three individual businessmen including myself. We have operated continuously since 1972, and thus our experience both predates and spans across the effective dates of the FCC's second computer inquiry as well as AT&T's divestiture under the antitrust court's modified final judgment or MFJ.

The essence-the bread and butter-of our business is the creation of short prerecorded audiotex programs which are delivered to the public for a fee through the local telephone exchange monopolies, which, in the main, are the BOCs. Our oldest program, Sports Phone, originated with us at the inception of our business in 1972. We also offer weather, financial, time of day, racing and other programs. On local dial-it or 976 networks throughout America, we provide approximately one hundred programs spread across almost twenty markets. To my knowledge, these kinds of audiotex programs are unique in their universal accessibility by the general public. Phone Programs has been described by others as a responsible citizen in this business, and the professionals in our company take great pride in what we believe has been our responsible approach. We have not ever provided, nor will we ever provide dial-a-porn programming. Phone Programs has been a leader in seeking ways to lawfully limit access to obscene or indecent program offerings. We have also avoided so-called gab or chat or live programming because of the evidence of widespread abuses in that type of service. In some regions, our advertising has become a model of full disclosure for other providers. I have personally taken an active leadership role in the industry, speaking at national conferences sponsored by the United States Telephone Association, the Information Industry Association and others. Currently, I am the chairman of the voice information services division of the IIA.

With this brief background in mind, what have Phone Programs and I witnessed over the past several years to cause me-or, better said, to require me-to seek to be heard by you, the lawmakers of our nation?

In short, contrary to the hopes and expectations of Congressmen who may have been persuaded by the BOCs, the direct entry of the dominant telcos into content

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