(Knoxville, Tennessee)
TO THE PEOPLE OF KNOXVILLE
MR. MCCURRY: Ladies and gentlemen, I want to introduce to you -- you've heard from him before, Greg Simon, who is the Vice President's Chief Domestic Policy Advisor and has been very active with the Vice President, structuring some of the high technology, technology literacy computing efforts that we've put together. We may try to have Sumner Redstone drop by, too, but this will be a good opportunity for him to walk you through some of the initiatives, some of the issues that the President has just addressed.
Oh, and it is a great honor to have Secretary of Education Dick Riley here, too; didn't see you.
MR. SIMON: Questions?
Q Yes. Free Internet access. How does that work? Where does the money will come from?
MR. SIMON: Right now, we have the universal service fund that is also being restructured after the passage of the Telecommunications Reform Act. The group the President spoke of that involves state regulators is a federal-state joint board that is reviewing how to set up the universal service fund in light of the fact that more companies are going to be offering telecommunications and telephone services.
Telecommunications service providers pay into that fund now. That fund will change as more and more people compete for local phone service. That fund subsidizes now rural and low-income groups' telephone rates. In the Telecommunications Bill, the Congress said that the universal service fund should provide for discounted rates to schools and libraries for telecommunications services.
What the administration is filing today is a comment with the federal-state joint board, is a proposal that says there should be two levels of service. The basic level would guarantee that every school would be able to hook up to the Internet and have a minimum level of service so that they would be able to use on-line services without prohibitively expensive long distance charges in many cases. That would be a universal service fund subsidy that would go to every school.
The amount of that subsidy has not been set yet; it depends on the total plan adopted by the federal-state board. The second level would be that schools could take the subsidy for the basic service and add it to money they want to spend, and then put it out for bids for companies to offer telecommunications services to the schools. The schools will define the services they want, there will be a competitive process for people to bid to provide the services to the schools.
Q Well, the basic, free Internet access would be based on what is essentially a tax paid by communications companies?
MR. SIMON: This has never been a tax, this has always been -- the universal service fund has always been an industry-based fee that goes to the universal service fund to provide under state law subsidies to rural and low-income users.
Q So you're talking about increasing the amount in that fund?
MR. SIMON: No, we're not talking about adding any more fees. There will be more people paying in because more people are going to be competing.
Q The fact that the President is proposing this, does this mean it will happen? Is it likely that this commission will go along?
MR. SIMON: Well, first off, the legislation requires that there be discounted services to schools and libraries. What the President says is that the basic service should be no cost to the basic -- to the school.
Q (Inaudible.)
MR. SIMON: Yes, I do realize that we're dealing with the regulations of 50 states, and the federal-state board on November 8th will put out a proposal on what the universal service fund should cover for schools and libraries. And we believe, because we have worked very hard with the state-federal board that they will come up with a system very close to what the President proposed today.
Q Joe, just to -- as I understand it, so then it is up to every state regulatory agency to decide if they want to do it?
MR. SIMON: No, no. The way the universal service fund works is that certain principles are set up, and every state implements those principles under their own rate structure. The new telecommunications act says that because we're allowing -- we're taking down all the barriers between local phone companies and other companies that we have to have a new way of contributing to the universal service fund and a new way of using that fund to subsidize telephone services that we want to subsidize.
So what the federal-state board will do is, they will say that there will be some services that will be provided nationally through the universal service fund of every state and then each state's regulatory body will implement that in its own way, based on how they set up their rate structure right now.
Q And then, if this was already in the legislation, what's new here today?
MR. SIMON: The legislation said that we should provide discounted services for schools and libraries. The President is saying that we should provide basic services which would be strictly defined at no cost to the schools, and we should provide other services at a high discount.
Q Can you give us just an example of what basic services are?
MR. SIMON: Yes. Being able to call up the Internet at no charge instead of having to pay a long distance fee for the time you're on line, for instance; being able to have a certain level of connectivity, like the modem you use is a certain level of connectivity, providing a minimum level of connectivity that's appropriate for educational purposes, and providing for the wiring inside the classroom so that people can actually hook up to the service.
And many companies are going to compete to provide these services, and in fact, many companies offer these for free now for a year or two years to any school in the country. This is to make this permanent.
SECRETARY RILEY: Greg, let me say a word -- explain -- let me just say a word. I'm going to have to go and catch an airplane. I think it's interesting to look at what really, then, has happened. First of all, the telecommunications bill that was passed, a lot of leadership in that said that schools and libraries should be handled differently. And that was a major decision for this country's future.
So then we come in -- the framework of all of that is set up by the FCC, and then the local utility groups then have to put the local rates in place.
So that is now in process. The FCC is looking at the affordable rate, the discounted rate for schools and libraries -- what should they be, how should they define them. So they pulled together this joint board, which has people from the states to come sit with the FCC people and then they're analyzing all this -- how should they do in terms of affordable rates for schools and libraries.
What the President is proposing, and what I have proposed, the Vice President has proposed, is that, yes, this rate that would go to schools and libraries for teaching and learning should be one that a student or a teacher should not have to ponder about to use. It should be an open process. And to do that, it would be basically a free rate.
Then they're describing -- going through process of describing what is included in the base rate that the President is proposing be free. Then the advanced uses would -- there would be a fee -- telecommunications, interactive video, that kind of thing would have a fee, but it would have a discounted fee for rural and for poor areas. But every school under this proposal, every library would have the right to use the Internet, those basic services for nothing.
And I ask you to look at that not just in the eyes of a regulator or in the eyes of someone who is figuring how the payment will be made; but look at it in the eyes of a teacher, in the eyes of a student, in the eyes of a parent that can say, here we are into the future, as far as you can see, and that every school in America will have access to all of the information basically in the world, at its fingertip and the use of it will be virtually free. Now, that is a very, very exciting, educational concept and I invite you to think that out, and the President I thought said it in a beautiful way when he was closing his remarks.
Q Mr. Secretary, what do the regulators have to agree on when they meet in November for this to happen, across 50 states?
SECRETARY RILEY: Well, Greg might know a little bit more about that. The FCC draws the general framework, as I understand it, and then the specific rates will vary from state to state, who they do it. Is that basically --
MR. SIMON: That's right. The federal-state joint board sets the rules of the universal service fund mechanism, and that's implemented state by state, recognizing that the cost of services varies state by state, so that the universal service subsidy varies state by state.
Q So a state could decides that it doesn't want to give this basic level of service free?
MR. SIMON: No. That's what they could not do. Once they set the national rules -- but as an example, one of the principles of our proposal is that the ceiling of a service that a company would bid to provide for the advanced services, the ceiling would be the best commercial rate available in that area. So our schools can get the same best deals that our businesses get. So a state couldn't artificially jack up the cost of serving a school beyond the commercial rates that prevail in the market.
Q The President said that the government -- he proposed $100 million for this next generation Internet in Fiscal '98. Has that previously been announced that they would propose that? He said it's going to be paid for. How will it be paid for?
MR. SIMON: It was not previously announced, and it is going to be paid for through a reprogramming allocation, however you want to look at it, in the FY '98 budget. Seventy million from the Defense Department budget and $30 million from the domestic discretionary budget. It's a total of $100 million in FY'98 that will be allocated $70 million from the existing defense budget and $30 million from the discretionary budget across a number of different programs. Because the $100 million will be funded under the high-performance computing program. And the $100 million will be spread across a number of agencies -- National Science Foundation, the Defense Department, the Energy Department, and the Commerce Department, and the Education Department. Because they're all involved in the high-performance computing.
Q Has the government previously helped finance next-generation Internet?
MR. SIMON: As you know, the government started the Internet originally. And the President's science adviser had a committee review the next-generation Internet challenge. And they come up with a plan that said, the government needs to invest in upgrading the Internet for major universities and national laboratories to provide the next level of competence for high-speed collaborative research. This has not been announced before.
Q And who else helps develop this next-generation Internet?
MR. SIMON: Well, the universities and the national laboratories will work with all sorts of information service companies to design and implement the ultra-fast, high-speed fiber networks; will work with companies on the software for switching, and a variety of other issues that relate to the technology of the Internet.
Q What fraction of the overall cost of developing the next-generation Internet does this $100 million represent? Just estimate it.
MR. SIMON: You mean, the total Internet, not just the part that we're going to be -- the new research piece of it.
Q No, the next -- the Internet II.
MR. SIMON: Let me put it this way. The part that we are addressing is the part the private sector is not going to be addressing, which is upgrading the ability of universities and national laboratories to do high-speed collaborative research in real time with the best graphics and virtual reality technology.
Q Is this research money?
MR. SIMON: This will be research money and infrastructure money.
Q Well, what kind of infrastructure are you going to be buying with this money?
MR. SIMON: There will be upgrades to the fiber links between universities and laboratories, upgrades to the software, upgrades to the computers.
Q What fraction do you estimate this will be, first, of the research component or the component you talked about, the university component, and second, of the overall price?
MR. SIMON: The President's Science and Technology Council estimated that you would need between -- and they gave a range -- you would need between $350 million and I think $650 million to do the complete next-generation Internet over a period of five or six years. Today we are saying that in the next year we are going to have $100 million program and then we are going to evaluate as we go along what the next step ought to be.
Q Are you talking about the public money component of that, or the whole cost of it?
MR. SIMON: I'm talking about the public money.
Q So, what -- $600-some million in public money overall? I'm asking you about the overall cost of the whole thing -- public and private money and the whole nine yards.
MR. SIMON: The whole nine yards, I couldn't tell you an answer that would be correct today, because I don't yet know what the private sector part would be.
Q Isn't $100 million of very, very small fraction of what this is going to cost?
MR. SIMON: No. For instance, from the public standpoint, the initial investment in the original Internet was a very small amount of money that became highly leveraged by the private sector in the development of the Internet.
What we're saying is, this small amount of money is also going to be leveraged over time and, in fact, because people will be competing to help be part of this project, we expect the costs will come down. If you look at the $100 million as one-fifth of what the National Science and Technology Council recommended for the whole enchilada, then the private sector piece of that could be many times that. But I can't give you a figure today that would be accurate.
Q -- small fraction and you said no. If it's going to be many times that, then it is a small fraction.
MR. SIMON: It could be anywhere from one-tenth, which I don't know if you call that a small fraction, to one-hundredth of the total final investment, but that's yet to be determined. But the basic point, Brit, is that if the government doesn't make this next step for the public sector's use of the Internet, research universities and national laboratories, none of the private sector groups are going to be making investment because there's no commercial piece to this particular part. This is for government and university research.
Q Just to clarify, the $100 million you're setting aside now is about one-fifth of the money that you expect the federal government to spend over the next five or six years on this project?
MR. SIMON: Not quite. The committee recommended a particular size program. What we are committing to right now is one year after which we will evaluate the progress and what we need to do following that. There is no commitment at this point to the entire funding profile that the committee recommended, because we need to evaluate this as we go along, because it changes so rapidly.
Q Also, once this project is complete as you envision it, it will only affect these users that you're talking about here -- universities, national labs. This is not something that ultimately the home user will affect them in terms of the speed at which they can use the Internet?
MR. SIMON: Number one, by improving the Internet protocol and increasing the addresses on the Internet, we will help relieve some of the congestion that affects home users today. But, secondly, by speeding up the process that universities use the Internet, many people go through universities to get to the Internet, so this will have an impact on them as well.
Q Talk about the third initiative he announced, this formation of a commission by seven CEOs. Did we know about this before, and what are these CEOs promising to do?
MR. SIMON: The CEOs, each of them already have some corporate level of commitment to educational technology. They are committing, number one, to help us raise the matching money for the new technology literacy challenge program that got $200 million from Congress, which is matching money to state and private contributions.
Number two, they will work individually. They haven't set a limit on what they will raise and if Sumner Redstone is the head of it, I wouldn't set a limit, either. Number two, they are going to work individually and as a group to achieve the teacher training program which Gerry Levin will head up from Time-Warner, the content piece of it, which Mr. Redstone and Mr. Brian Roberts from COMCAS will help head up. The connectivity piece of it, which Ray Smith and Bob Alvin will help with; and the connectivity -- I mean, the computers in the classroom which Mr. Ellison from Oracle is going to help with.
Each of the CEOs has a particular priority. They will all work to achieve those four pillars of our ed-tech agenda: computers, connectivity, content, competence. And they will do this over the long term. This is a long-term commitment to reach our goal of connecting every classroom by the year 2000. Thank you.