Cybertelecom
Cybertelecom
Federal Internet Law & Policy
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Notes: Computer Inquiries: Background
These notes are not complete and there is no guarantee that they are accurate. They are presented simply as notes. Feel free to use them but as with all material on the Cybertelecom, you should consider them a beginning to your research and not an end. Notes Table of Contents
  • General Purpose
  • Interdependence of Computer Networks and Communications Networks
  • Distinction between common carriage and data processing
  • Regulatory Parity
  • Two Primary Goals:  Definitions and Separation
  • Basic Service
  • Communications Needs of Computer Networks
  • Open Network Architecture Plans (Computer III)
    •
  • Privacy
  • Computer I
    •
  • Access Charges
    •
  • Backbround
  • Computer I 1960
  • Convergences of Computers and Communications
    •
  • Computer II
  • Procedural
  • History
  • Packet Switching
    •
  • Computer III
  • Narrowband Telephony Environment
    •
  • Categories / Definitions
    •

    General Purpose

     3.  It was alleged at that time that common carriers were about to offer data processing services and that unregulated entities were offering communication services.  This raised a number of issues.  A major regulatory concern of the Commission was the appropriateness of a carrier utilizing part of its communications switching plant to offer a data processing service.  Further, there was the issue of whether communications common carriers should be permitted to sell data processing services, and if so, what safeguards should be imposed to insure that the carriers would not engage in anti-competitive or discriminatory practices.  There was also concern as to the extent to which data processing organizations should be permitted to sell communications as part of a data processing package not subject to regulation.  Two basic regulatory and policy questions had to be resolved:  (a) the nature and extent of the regulatory jurisdiction which could and should be applied to data processing services, and (b) whether, under what circumstances, and subject to what conditions or safeguards, common carriers should be permitted to engage in data processing.
    -- In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Tentative Decision And Further Notice Of Inquiry And Rulemaking, 72 FCC2d 358 (July 2, 1979)

     59.  This proceeding was initiated to:  a) foster a regulatory environment conducive to the stimulation of economic activity in the regulated communications sector with respect to the provision of new and innovative communications-related offerings; and b) enable the communications user to optimize his use of common carrier communication facilities and services by taking advantage of the ever increasing market applications of computer processing technology.  Implicit in these objectives is the need to establish a regulatory scheme which gives primary consideration to user needs and availability of adequate communications services to the public. This requires that carriers be afforded sufficient flexibility to tailor their services to individual user needs.  Underlying these objectives, are the regulatory responsibilities the minimize the potential for improper cross-subsidization, safeguard against anticompetitive carrier behavior, and the need to protect the quality and efficiency of telephone service.
    -- In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Tentative Decision And Further Notice Of Inquiry And Rulemaking, 72 FCC2d 358 (July 2, 1979)

     30.It should be made clear that we are not seeking to regulate data processing as such, nor are we attempting to regulate the substance of any carrier's offerings of data processing. Rather, we are limiting regulation to requirements respecting the framework in which a carrier may publicly offer particular non-regulated services, the nature and characteristics of which require separation before predictable abuses are given opportunity to arise. Additionally, the success of our regulatory scheme is dependent upon a uniform application of our safeguards irrespective of the technical legal status of any carrier or the particular geographic community which it serves.
    --In The Matter Of Regulatory And Policy Problems Presented By The Interdependence Of Computer And Communication Services And Facilities, Docket No. 16979, Final Decision and Order, 1971 WL 22948 (FCC), 21 Rad. Reg. 2d (P & F) 1591 (March 18, 1971) (Computer I).
     

    Dependence of Computer Networks on Communications Networks

     7. There is virtually unanimous agreement by all who have commented in response to our Inquiry, as well as by all those who have contributed to the rapidly expanding professional literature in the field, that the data processing industry has become a major force in the American economy, and that its importance to the economy will increase in both absolute and relative terms in the years ahead. [FN4] There is similar agreement that there is a close and intimate relationship between data processing and communications services and that this interdependence will continue to increase. In fact, it is clear that data processing cannot survive, much less develop further, except through reliance upon and use of communication facilities and services. Conversely, modern communication systems rely upon and make increasingly greater use of data processing. We stated in our Notice of Inquiry, and no respondent has challenged the finding, that common carriers 'as part of the natural evolution of the developing communications art' were rapidly becoming equipped to enter into the data processing field, if not by design, by the fact that computers utilized for the provision of conventional communication services could be programmed additionally to perform data processing services. Notice of Inquiry, 8 FCC 2d 11, 13 (1966).
    --In The Matter Of Regulatory And Policy Problems Presented By The Interdependence Of Computer And Communication Services And Facilities, Docket No. 16979, Final Decision and Order, 1971 WL 22948 (FCC), 21 Rad. Reg. 2d (P & F) 1591 (March 18, 1971) (Computer I).
     

     1. The modern-day electronic computer is capable of being programed 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 versatility, the computer 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.
    . . . . .
     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 EDP-communications 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 mutiplexing equipment, must be reviewed for their effects on a burgeoning industry.
     21. This, then, is another area of concern. Are the service offerings 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?
    --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, ¶ 1 (November 9, 1966)
     

     14.  More than a decade ago an inquiry was commenced to address the regulatory and policy problems raised by the interdependence of computer technology, its market applications, and communications common carrier services.  In that proceeding, commonly referred to as the 'First Computer Inquiry,' [FN1] information was sought regarding actual and potential computer uses of communications facilities and services.  Views and recommendations were sought as to whether there was any need for new or improved common carrier service offerings, or for revised rates, regulations, and practices of carriers to meet the emerging communications requirements for the provision of data processing or other computer services involving the use of communication facilities.
     15.  A number of regulatory issues were raised in the course of the proceeding.  A major issue was whether communications common carriers should be permitted to market data processing services, and if so, what safeguards should be imposed to insure that the carriers would not engage in anti-competitive or discriminatory practices. Concern was also expressed as to the appropriateness of a carrier utilizing part of its communications switching plant to offer a data processing service.  The potential existed for common carriers to favor their own data processing activities through cross-subsidization, improper pricing of common carrier services, and related anti-competitive practices which could result in burdening or impairing the carrier's provision of other regulated services.  There was also concern over the extent to which data processing organizations should be permitted to engage in transmission as part of a data processing package free from regulation.
     16.  Two fundamental regulatory issues were addressed:  (a) whether data processing services should be subject to regulation under Title II of the Communications Act, and b) whether, under what circumstances, and subject to what conditions or safeguards, common carriers should be permitted to engage in data processing.  In addressing the first issue, we looked to the basic purpose of our regulatory authority as well as specific statutory guidelines and determined that data processing services should not be regulated, even though transmission over common carrier communications facilities was involved in order to link user terminals to central computers. Thus, certain communications-related services involving electronic transmission over common carrier communication facilities were not subject to regulation under the Act.
     17.  Regulatory forbearance with respect to data processing services made it necessary to distinguish regulated communications services from unregulated data processing services.  Accordingly, in the First Computer Inquiry a set of definitions was adopted to assist in making such determinations.  See 47 CFR s 64.702.  The thrust of this definitional approach was to distinguish between unregulated data processing and permissible carrier utilization of computers by establishing a dichotomy between data processing and message or circuit switching.  We recognized that entities would offer 'hybrid' services combining both communications and data processing functions.  We stated that where message-switching is offered as an incidental feature of an integrated service offering that is primarily data processing, there would be total regulatory forbearance with respect to the entire service.  However, where the package offering is oriented to satisfy the communications or message-switching requirements of the subscriber, and the data processing function is incidental to the message-switching performance, we concluded that the entire integrated service would be treated as a communications service.  We also stated that in making such determinations we would look to whether the service, by virtue of its message-switching capability, has the attributes of the point-to-point services offered by conventional communications common carriers and is basically a substitute therefor.
    --Final Decision, In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, 77 FCC2d 384  (1980)
     

     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 pubic. There is now evidence of a trend among 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 nonregulated 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 nonregulated entities as well as the apparent difficulties in classifying the various elements of a computer service into discrete communication and noncommunication 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.
    --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 (November 9, 1966)

    Regulatory Parity

     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.
    --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 (November 9, 1966)

    Two Primary Goals:  Definitions and Separation

     14. We turn now to the two basic regulatory and policy questions which remain to be resolved in this Inquiry. These questions require our determination of:
     (a) The nature and extent of the regulatory jurisdiction to be applied to data processing services; and
     (b) Whether, under what circumstances, and subject to what conditions or safeguards, common carriers should be permitted to engage in data processing.
    --In The Matter Of Regulatory And Policy Problems Presented By The Interdependence Of Computer And Communication Services And Facilities, Docket No. 16979, Tentative Decision, 1970 WL 17225 (FCC), 18 Rad. Reg. 2d (P & F) 1713 (April 3, 1970)

    Basic Service Providers

    See also Telephone Entrance Into Enhanced Services Market: Purpose / Concerns

    That the ability for abuse exists as does the incentive, of that there can be no doubt.  As stated above, information services are fragile, and because of their fragility, time-sensitivity, and their negative reactions to even small degradations in transmission quality and speed, they are most easily subject to destruction by those who control their transmission.  Among more obvious means of anti-competitive action in this regard are increases in the rates for those switched and private lines services upon which Regional company competitors depend while lower rates are maintained for Regional Company network services; manipulation of the quality of access lines; impairment of the speed, quality, and efficiency of dedicated private lines used by competitors; development of new information services to take advantage of planned, but not yet publicly known, changes in the underlying network; and use for Regional Company benefit of the knowledge of the design, nature, geographic coverage, and traffic patters of competitive information service providers.
    --United States v. Western Electric Co., Inc., 673 F.Supp. 525, 566 (DDC 1987).
     

    we identified specifically the following areas of regulatory concern:  (a) That the sale of data processing services by carriers should hurt the provision of common carrier services; (b) That the costs of such data processing services should not be passed on to telephone rate payers; (c) That revenues derived from common carrier services should not be used to cross subsidize data processing services; and (d) That the furnishing of such data processing services by carriers should not hurt the competitive computer market (Tentative Decision, para. 34).
    --In The Matter Of Regulatory And Policy Problems Presented By The Interdependence Of Computer And Communication Services And Facilities, Docket No. 16979, Final Decision and Order, ¶ 9 (March 18, 1971) (Computer I).

    Communication Needs of Computer Networks

    We attempted to develop views and recommendations as to whether there was any need for new or improved common carrier service offerings, or for revised rates, regulations, and practices of carriers to meet the emerging communication requirements for the provision of data processing or other computer services involving the use of communication facilities.
    -- In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Tentative Decision And Further Notice Of Inquiry And Rulemaking, 72 FCC2d 358 para 2 (July 2, 1979)

     6. Before addressing these basic issues in detail, we wish to note several other important issues raised in our Notice of Inquiry which merit comment at this time in light of our decision to terminate this docket. The first is whether existing common carrier rates, regulations and practices are compatible with the present and future needs of the computer industry (Item G). The second concerns the need of the data processing industry for new common carrier tariff offerings or services (Item H), and the adequacy of the existing common carrier facilities in attempting to meet present-day needs (Item I). The third is whether any measures are required to be taken by the computer industry or common carriers, or both, to protect the privacy of data stored in computers and transmitted over common carrier facilities (Item J). It is our purpose here to review briefly the progress that has already been made in the treatment of certain aspects of these remaining issues and to indicate how we intend to deal further with them.
     7. With respect to the first of these issues, the adequacy of present tariff offerings of common carriers, and particularly the question of interconnection, was the subject of considerable comment from many computer respondents. We have already pointed out in our First Report that, in compliance with our decision in the Carterfone Case (In The Matter of Use of Carterfone Device in Message Toll Telephone Service, 13 FCC 2d 420, (1968); Petition for Reconsideration Denied, 14 FCC 2d 571, (1968)), the telephone companies had filed tariff changes effective January 1, 1969, greatly liberalizing the provisions with respect to interconnection, and that informal proceedings had been instituted to consider and resolve the remaining interconnection problems (First Report, supra, Paragraphs 9-12, at 589, 590). Since that time there have been further significant developments with respect to this matter. Further liberalizations of the interconnection provisions were made in the Wide Area Telephone (WATS), Private Line and TWX tariffs following the filing of the January 1, 1969, tariff revisions. Formal hearings are now in progress on the question of whether additional interconnection revisions should be made in the TWX interconnection tariff (Docket FCC No. 18718). Informal conferences under Commission auspices are proceeding on various nontechnical aspects of the interconnection tariffs. In addition, the National Academy of Sciences is making a study for us and will report its recommendations as to the technical feasibility of further tariff changes proposed by the computer industry to enable it to make a more effective use of common carrier facilities.
     8. Many of the data processing respondents to this Inquiry also emphasized the need for a shorter, and lower-rate, minimum period to permit a more economical transmission of data, large volumes of which can be transmitted in short bursts measured in seconds. We recognized this concern in our First Report (supra, Paragraph 13, at 590) and called attention to certain steps then under way by the telephone companies to experiment with a rate structure in certain limited geographical areas that would feature a 1-minute, rather than a 3-minute, minimum rate period for the use of the switched telephone network. Since our First Report, AT&T has taken a first step in this direction by filing revised tariffs, effective January 1, 1970, which offer a low 1-minute minimum rate service on a regular and nationwide basis, between the hours of 12:00 midnight and 8:00 a.m. This service offering provides a lower rate for message toll service which can be used for the transmission of data over the switched telephone network. Also, since our First Report, the Commission has issued a significant decision in which a new carrier, Microwave Communications, Inc., was permitted to enter the field of intercity long distance service between Chicago and St. Louis for the purpose, among others, of providing the public a wider range of voice and data transmission services (Microwave Communications, Inc. (Docket FCC No. 16509 et al.) 18 FCC 2d 953 (1969); Petition for Reconsideration Denied, 21 FCC 2d 190 (1970)). * Applications have since been filed by a number of other entries for license authority to enter the common carrier field to provide service, in part, to meet the asserted needs of computer users. One such entity proposes a dedicated data transmission switched network interconnecting 35 of our larger cities with the ultimate aim of providing customer-to-customer service in digital form (Datran Proposal). There is an informal proposal by Microwave Communications, Inc., pending before the Commission to interconnect existing specialized microwave common carriers in a nationwide network for the purpose, among others, of satisfying the requirements of the educational community for low cost data transmission services. Proposals have also been advanced with respect to the possible use of communications satellites for a low-cost business oriented nationwide communications network service.
     9. Our First Report also referred to the need stressed by respondents to our initial Inquiry for greater customer sharing of common carrier facilities (First Report, supra, Paragraph 14, at 590-591). We noted that the telephone companies had, after comments were submitted, filed tariffs which permit sharing of private line circuits of voice grade or lesser bandwidth. More recently tariffs have been filed, on an experimental basis, offering a wideband private line service over certain high-capacity cable and radio routes of the telephone companies in which the sharing by joint users will be permitted on virtually an unlimited basis (AT&T's Series 11000). The aforementioned Microwave Communications, Inc. proposal for intercity service between St. Louis and Chicago, also includes sharing as a major feature thereof, as do the recently filed applications of Datran and others referred to above. Removal of restrictions on the customer sharing of Telpak private line services is also being currently considered by the Commission in Docket FCC No. 17457.
     10. It must be understood that the outstanding proposals for new common carrier services which are now pending before the Commission remain to be evaluated in accordance with applicable statutory standards and regulatory policy. It is our view, however, that all of the foregoing developments signify that since the inception of this Inquiry, major progress has been made and is continuing toward improved and more economical communications services for computer users. These developments also lead us to the conclusion that the questions relating to interconnection or to the need for other improved common carrier service offerings, regulations and practices to serve computer needs, can best be handled through rate, tariff and licensing proceedings that are now pending or that may be initiated in the future, rather than through a continuation of our Inquiry in this Docket.
    11. With respect to the questions which have been raised by respondents regarding the adequacy of common carrier facilities and services to meet present and future communications needs of computer users, the specific nature and extent of such requirements are not clearly ascertainable from the information available to us. This is largely because computer technology and its commercial applications are developing with no fixed patterns at this time with the result that it is most difficult to project and quantify the communications requirements of computer users. These are matters that the Commission intends to monitor on a continuous basis. It is important for this purpose that the Commission have a continuing input from interested parties with respect to current requirements which are not being met adequately by the common carriers as well as with respect to anticipated requirements for which the carriers should be planning. Accordingly, we intend to establish appropriate informal procedures by which such information may be received and reviewed on a continuing and current basis by the Commission. Such procedures will be designed to afford interested parties the opportunity to participate in a discussion and evaluation of present and future communications requirements of computer users, the steps that are to be taken by carriers in order to respond to any such bona fide requirements, and the actions, if any, the Commission may be called upon to take in order to assure that the carriers are properly responsive to such requirements.
    --In The Matter Of Regulatory And Policy Problems Presented By The Interdependence Of Computer And Communication Services And Facilities, Docket No. 16979, Tentative Decision, 28 FCC 291 (April 3, 1970)

     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 EDP-communications 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 mutiplexing equipment, must be reviewed for their effects on a burgeoning industry.
     21. This, then, is another area of concern. Are the service offerings 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?
    --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 (November 9, 1966)

    Privacy

    Computer I

     39. It is contended by non-affiliated data processors that the extent to which they, as communications customers, must divulge to the carrier the purposes toward which the leased communications facilities will be employed in any service offering compromises them and their offerings with respect to a carrier's data affiliate. In effect, the fear is expressed that provision to the carrier of detailed information regarding a competitive offering is, in essence, provision of such information to the carrier's data affiliate. We believe this to be an unreasonable fear on the part of non-affiliated data processors. In the first instance, the majority of such non-affiliated firms will doubtless turn to companies of the Bell System for communication services and facilities since the latter provide the greater share of such services. And since these companies are legally precluded from providing anything other than regulated common carrier service, [FN13] they will have no data processing affiliates which could secure unfair advantage from the information supplied with requests for service. Information and data respecting the substantive nature of a data firm's service offering is indeed proprietary and need not be submitted to any carrier unless compelling reasons dictate otherwise. We will consider any attempt on the part of a carrier to secure and use such information for the benefit of its data processing affiliate as a serious breach of the policy established herein, and will not hesitate to impose appropriate sanctions as provided by law. Accordingly, we shall retain jurisdiction over this matter in order to insure that carrier suppliers of communications services do not exploit their position as such to the detriment of non-affiliated data processors, and shall thus be in a position to take whatever further action may be necessary in light of future developments.
    --In The Matter Of Regulatory And Policy Problems Presented By The Interdependence Of Computer And Communication Services And Facilities, Docket No. 16979, Final Decision and Order, 1971 WL 22948 (FCC), 21 Rad. Reg. 2d (P & F) 1591 (March 18, 1971) (Computer I).
     

     12. The third remaining issue concerns itself with the privacy and security of data stored in computers that are interconnected with common carrier communications lines. As indicated in our Supplemental Notice of Inquiry, we do not believe that the Commission's concern is coextensive with the entire range of problems which stem from the potential invasion of privacy, where information can be stored and illicitly retrieved from a computer, even though the storage and retrieval through communications facilities (Supplemental Notice of Inquiry, 7 FCC 2d 19, Paragraph 11, at 22 (1967)). The privacy issue in its broadest sense has numerous social and public policy implications which go well beyond the pale of our jurisdiction over communications and which have already been the subject of Congressional studies and hearings, as well as a matter of concern and analysis by social scientists, lawyers and computer engineers. In this connection, we note that the National Academy of Sciences is conducting an investigation of public and private data banks to determine the magnitude of the threat to individual privacy.
     13. The Commission, of course, does have a fixed and continuing responsibility with respect to the privacy and integrity of intelligence traversing the communications networks of this country, as well as with the possible use of such facilities for unlawful purposes. As we indicated in our First Report, we intend to give further consideration to the needs which may exist in this area and to the regulatory actions which may be required. We also recognized the need to obtain more information regarding present and future needs and the technical, operational and economic implications, as a basis for such further consideration.
    --In The Matter Of Regulatory And Policy Problems Presented By The Interdependence Of Computer And Communication Services And Facilities, Docket No. 16979, Tentative Decision (April 3, 1970)
     

     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 becoing 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.
    --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 (November 9, 1966)
     

    Resale

     35. We are not imposing the same requirements upon non-common carriers who offer what they consider to be hybrid data processing services. The non- common carrier generally will be using communication facilities leased from a common carrier to provide these services. We anticipate, therefore, that the communications common carrier providing the communications portion of the hybrid service will question any service that appears, in fact, to be a hybrid communications service. This is so because of the tariff provisions of the carrier that prohibit the resale of service by its customers. The carrier in such circumstances could either call this matter to the Commission's attention or, pursuant to its tariffs, treat it as an attempt for the resale of communications service, which as noted above the tariffs prohibit, and refuse to provide the facility.
    .....
     38. In order to facilitate prompt actions on these matters, we will delegate authority to the Chief of the Common Carrier Bureau to make the initial determinations required herein above (See Appendix A herein, Section 64.702(e), (f) and (g) of the Commission's Rules,) subject, of course, to reconsideration de novo by the Commission in those instances where such is requested. Accordingly, Part 0 of the Commission's Rules and Regulations will be amended to reflect the delegation of authority to the Chief of the Common Carrier Bureau to render such initial determinations. (See Appendix B herein.)
    --In The Matter Of Regulatory And Policy Problems Presented By The Interdependence Of Computer And Communication Services And Facilities, Docket No. 16979, Final Decision and Order, 1971 WL 22948 (FCC), 21 Rad. Reg. 2d (P & F) 1591, ¶ 35 (March 18, 1971) (Computer I).
     

    Background (Procedural and Historical)

    Computer I 1960

    Regulatory & Policy Problems Presented by the Interdependence of Computer and Communications Services & Facilities (Computer I), 7 FCC 2d 11, 13 (1966) (Notice of Proposed Rulemaking); 28 FCC 291 (1970) (Tentative Decision); 28 FCC 2d 267 (1971) (Final Decision), aff'd in part sub nom. GTE Service Corp. v. FCC, 474 F.2d 724 (2d Cir. 1973), decision on remand, 40 FCC 2d 293 (1973).

     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 salable 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 complement 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 nonmanufacturing 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 programed 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 programed for message and circuit switching in addition 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 electromechanical switching units provided by the communications common carriers. Motivations of increased business efficiency and 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 channels linking remote locations to form a real-time data processing and communications system.
    --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 (November 9, 1966)
     

    Convergence of Computers and Communications

     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 in creased use of computers for their conventional services to perform message and circuit switching functions. These computers can likewise be programed 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 programed 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 airlines 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 airlines subscribing to this additional service, through communication facilities connected to airline offices and agencies on an on-line real-time basis. Other carriers plan to introduce similar service offerings.
    . . . . .
     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 pubic. There is now evidence of a trend among 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 nonregulated 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.
    --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 (November 9, 1966)
     

    Computer II

    Procedural

    The Federal Communications Commission (Commission) orders comprising the Computer II decision are as follows:  Final Decision, In re Amendment  of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, 77 FCC2d 384 (1980) (Computer II Final Decision);  Memorandum Opinion and Order, In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), 84 FCC2d 50 (1980) (Computer II Reconsidered Decision);  Memorandum Opinion and Order on Further Reconsideration, In re Amendment of Section 64.702 of  the Commission's Rules and Regulations (Second Computer Inquiry), 88 FCC2d 512 (1981) (Computer II Further Reconsidered Decision).  The appeal case is Computer and Communications Industry Association v. Federal Communications Commission, 693 F.2D 198,  224 U.S.APP.D.C. 83 (D.C. Cir. 1982), cert. Denied ...

    Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Final Decision, 77 FCC 2d 384, 417 (Computer II).
     

     "In 1994, the United States Court of Appeals for the Ninth Circuit remanded the Commission's Computer III rules because the Commission had not adequately explained how its nonstructural safeguards offered adequate protection against discriminatory interconnection by the BOCs.  California v. FCC, 39 F.3d 919 (9th Cir. 1994) (California III), cert. denied, 115 S.Ct. 1427 (1995).  In 1995, the Commission released a Notice of Proposed Rulemaking which sought comment on both the remand issue in California III and the effectiveness of the Commission's Computer III and Open Network Architecture (ONA) nonstructural rules in general.  Computer III Further Remand Proceedings:  Bell Operating Company Provision of Enhanced Services, CC Docket No. 95-20, Notice of Proposed Rulemaking, 10 FCC Rcd 8360 (1995) (Computer III Further Remand Notice).  Since the adoption of the Computer III Further Remand Notice, significant changes occurred in the telecommunications industry that affect our analysis of the issues raised in this proceeding.  Most importantly, Congress passed the Telecommunications Act of 1996 to establish "a pro-competitive, de-regulatory national policy framework" in order to make available to all Americans "advanced telecommunications and information technologies and services by opening all telecommunications markets to competition."  Joint Statement of Managers, S. Conf. Rep. No. 104-230, 104th Cong., 2d Sess. 1 (1996).  In light of the 1996 Act and ensuing changes in telecommunications technologies and markets, the Commission believed it necessary not only to respond to the issues remanded by the Ninth Circuit, but also to reexamine the nonstructural safeguards regime governing the provision of information services by the BOCs.  We therefore issued in 1998 a Further Notice to address issues raised by the interplay between the safeguards and terminology established in the 1996 Act and the Computer III regime.  Computer III Further Remand Proceedings:  Bell Operating Company Provision of Enhanced Services; 1998 Biennial Regulatory Review ? Review of Computer III and ONA Safeguards and Requirements, Further Notice of Proposed Rulemaking, CC Docket No. 98-10, 13 FCC Rcd 6040 (1998) (Further Notice)."  -- In the Matter of Computer III Remand Proceeding: Bell Operating Company Provision of Enhanced Services, CC Docket No. 95-20, CC Docket No. 98-10, Report and Order,  3 n. 5 (March 10, 1999).

    "In December 1991, the Commission released another Report and Order with respect to the structural separation and state preemption issues.  Once again, the Commission permitted the BOCs to provide enhanced services free of the Computer II structural separation requirement, subject to certain non-structural safeguards and conditions.  The Commission's Order backed away from preempting state regulation but asserted that the FCC will continue to preempt state regulation that impedes federal objectives.  The state commissions are essentially left to regulating only costing and pricing methodology for intrastate ONA services.  No enhanced services that are both interstate and intrastate in nature may be regulated by the state commission."  --Henry M. Rivera and Laura Johnson, Patents, Copyrights, Trademarks and Literary Course Handbook: Panel on Developments in Manufacturing and Information/Enhanced Services, 352 PLI/Pat 27, 46 (Dec. 3-4, 1992).

    Historical

     19.  The First Computer Inquiry was a vehicle for identification and better understanding of problems spawned by the confluence of computer and communications technologies taking place at that time.  The scope of the Inquiry was very broad and determinations were made based on the state of the art as it then existed.  However, significant advances in computer hardware and software have been made since that time.  In particular, dramatic advances in large-scale integrated circuitry and microprocessor technology have permitted fabrication of mini-computers, micro-computers, and other special purpose devices, which are capable of duplicating many of the data-manipulative capabilities which were previously available only at centralized locations housing large scale general-purpose computers.  With this new technology, users now find it cost-beneficial to remove some of the computing power from a centralized computer location.  The phenomenon of distributed processing allows computers and terminals to perform both data processing and communications control applications within the network and at the customer's premises.  See Notice at paras. 8-10.
    . . . . .
     23.  In addition to its impact on network services, we noted that microprocessor technology has clearly made it possible for terminals to perform many processing operations which they previously performed poorly or not at all by employing techniques previously limited to central computers. Microprocessor technology permits terminals to perform many sophisticated arithmetic and word processing functions at the remote location while reducing the processing load at the central location.  Thus technology may have rendered meaningless any real distinction between 'terminals' and computers.  With the trend toward distributed processing, functions are being taken over by 'smart' terminals which are (a) offered to users by the regulated carrier sector and by the unregulated terminal equipment manufacturing sector, and (b) under the control of the user--not the carrier.
    . . . . .
     83.  The history of this proceeding lends perspective to the issues before us.  The First Computer Inquiry was initiated in 1966.  Five years later in 1971, after receiving thousands of pages of comments and having an independent contractor evaluate them, the Commission issued a Final Decision, supra at n. 1.  Litigation over our decisions in the First Computer Inquiry ended in 1973. A mere three years later, this proceeding, the Second Computer Inquiry, was initiated and now, after almost four more years, we are again issuing a final decision on issues raised by the confluence of technology in the offering of communications and data processing services.  The significant difference now is that the evolution of a distributed processing environment makes the issues more complicated, and the resulting regulatory uncertainty greater. We believe the time has come to address these matters in a manner which gives clear direction to the marketplace, but without restricting the types of services that may be offered to consumers. We will thus clearly set forth those offerings, resulting from market applications of computer processing technology, that will not be regulated by this Commission.
    --In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Final Decision, 77 FCC2d 384 (May 2, 1980) (Computer II Final Decision)

     8.  The First Computer Inquiry was a vehicle for identification and better understanding of problems spawned by the confluence of computer and communications technologies taking place at that time.  While the scope of the Inquiry was very broad and determinations were made based on the state of the art as it then existed, it was recognized that because of technological advancements which could not be predicted it would not be a final resolution of the problems presented therein.  Since the release of our Final Decision in the First Computer Inquiry technological advances in hardware and software have been made and are tending to cause a blurring of the distinctions between data processing and communications which were then established.  In particular, the dramatic advances made in large-scale integrated circuit technology have permitted fabrication of minicomputers, micro-computers, and other special purpose devices, which are capable of duplicating many of the data-manipulative capabilities which were previously available only at centralized locations housing large scale general purpose computers.  With this new technology, users are finding it cost-beneficial to remove some of the computing power from the centralized computer location and to distribute it to terminals, or incorporate some of it into the network itself.  A new phenomenon has emerged--the distributed computer network, wherein computers and terminals are performing both data processing and communications control applications, both within the network and at the customer's premises.  These networks are being constructed by common carriers and also by private entities using carrier furnished dedicated channels.
    . . . .
     10.  Technological and market developments since our decision in the First Computer Inquiry are such that Section 64.702 appears to be an inadequate regulatory device for coping with certain current service offerings.  This potential inadequacy is evident when viewed in the context of its original adoption.  The immediate issue before the Commission at that time concerned the various applications which might be made of central computers, and the proper role and regulation of common carriers with respect to these different uses. The First Computer Inquiry did not address the question of data processing elements being removed from the central computer and distributed throughout the total information processing and transmission system.  The regulatory guidelines which were incorporated into Section 64.702 were addressed primarily to situations wherein a carrier would be using a host computer, in conjunction with a remote, 'unintelligent' communications terminal, to provide a data processing service.7  Now, however, processing can be placed anywhere--within the network or outside the network interface--giving greater flexibility in the designing of equipment and in the structuring of various service offerings.
     11.  The versatility of the user terminals which are available today further complicates our efforts to establish regulatory boundaries.8 Microprocessor technology has clearly made it possible for terminals to automatically perform many processing operations which they previously performed poorly or not at all--by employing techniques previously limited to central computers.  Many of the input/ouput processing functions necessary to establish:  (a) network control and (b) interaction of a computer with specific terminals are now done by distributed terminals.  Microprocessor technology also permits terminals to perform many sophisticated arithmetic and word processing functions at the remote location while reducing the processing load at the central location.  Thus technology may have rendered meaningless any real distinction between 'terminals' and computers.  With the trend toward distributed processing, functions are being taken over by 'smart' terminals which are:  (a) offered to users by the regulated carrier sector and by the unregulated terminal equipment manufacturing sector and, (b) under the control of the user--not the carrier.
    --In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Tentative Decision And Further Notice Of Inquiry And Rulemaking, 72 FCC2d 358 (July 2, 1979)

     8.  Since the release of our Final Decision, we have witnessed technological advances, in hardware and software, which are tending to cause a blurring of the distinctions between data processing and communications which we had then established.  In particular, the dramatic advances made in large scale integrated circuit technology have permitted the fabrication of minicomputers, micro-computers, and other special purpose devices, which are capable of duplicating many of the data-manipulative capabilities which were previously available only at centralized locations housing large scale general purpose computers.  With this new technology, users are finding it cost-beneficial to remove some of the computing power from the centralized computer location and distribute it to the terminals, or, incorporate some of it into the network itself.  We have witnessed the emergence of a new phenomenon--the distributed computer network, wherein the new computers and terminals are performing both data processing and communications control applications, both within the network and at the terminal.  These networks are being constructed by common carriers and also by private entities using carrier furnished dedicated channels.
     9.  The versatility of the user terminals which are available today further complicates our efforts to establish regulatory boundaries.7  Many of the input/output processing functions necessary to establish:  (a) network control and (b) interaction of a computer with specific terminals--which were formerly performed by the central computer--are now done by distributed terminals. Microprocessor technology also permits the terminal to perform many sophisticated arithmetic and word processing functions at the remote location while reducing the processing load at the central location.  With the trend to the decentralization of computing functions we can see the communications and data processing functions together being taken over by 'smart' terminals which are:  (a) offered to users by the regulated carrier sector and by the unregulated terminal equipment manufacturing sector and, (b) under the control of the user--not the carrier.
     10.  The distribution of computing power from the central porcessing location can also be accomplished by placing some of this intelligence within a carrier's network--rather than in a user-owned terminal.  One important application involves the use of carrier processing facilities to allow terminals to 'converse' with each other even though they may have disparate communications line disciplines and alphanumeric character codes.  Such services are currently being offered by Telenet and the offering of similar features, in the future, has been announced by AT&T officials and reported in trade journals.8  Another application of network-located computer processing capability arises where the carrier offers some of the performance features which would be otherwise incorporated into a 'smart' terminal.  This would give the user the option of using a less sophisticated terminal.  Thus, features such as automatic call forwarding, restricted and abbreviated dialing, and special announcements could be provided, for example, by Bell and its new ESS equipment rather than be implemented by a terminal at a user's premises.
    --In re Amendment Of Section 64.702 Of The Commission's Rules And Regulations, Docket No. 20828, Notice Of Inquiry And Proposed Rulemaking, 61 FCC2d 103 (August 9, 1976)

         3.  The potential inadequacy of the present Section 64.702 is evident when viewed in the context of its original adoption.  The immediate issue before the Commission at the time of the original Computer Inquiry concerned the various applications which might be made of central computers, and the proper role and regulation of common carriers with respect to these different uses.  The regulatory guidelines which were incorporated into Section 64.702 were addressed primarily to situations herein a carrier might be using a host computer, in conjunction with a remote, 'unintelligent' communications terminal, to provide a data processing service.  The original Computer Inquiry did not address the question of data processing elements being removed from the central computer and distributed throughout the total information processing and transmission system.  The 'smart' remote access device capable of both traditional communications functions and certain data processing functions was not then a practical reality--hence no specific guidelines applicable to these devices were offered.
         4.  Rapid advancements in data handling technology have taken place since then.  In our new Computer Inquiry, we noted that peripheral devices are now capable of duplicating many of the data-manipulative capabilities which were previously available only at centralized locations housing large scale general purpose computers.  The applications of modern solid state technology to the fabrication of microprocessors and minicomputers has led to the development of new types of devices--which may be viewed as ranging from 'smart' remote access devices to 'distributed' data processing devices and systems.  The new devices are capable of executing local processing operations, thus alleviating a remote host computer of a processing burden which would otherwise be implemented in its central processing unit (CPU).6 They are also capable of performing message addressing and routing operations, which again, could otherwise be implemented in a host CPU.  In either application these devices would be equipped with relatively inexpensive solid state random access memory arrays which may be used for the storage and retrieval of data formerly stored in the host computer's memory unit.
         5.  The modern 'smart' remote access devices, which incorporate microprocessor technology in conjunction with the new solid state mass memories, are capable of duplicating many of the capabilities of the general purpose digital computers which were on the market in 1971.7  Microprocessors can be combined with a variety of input/output devices and mass memories8 to function as powerful stand-alone processing installations.  A stand-alone installation can be converted to a full-fledged communications device (or host computer) with but a relatively minimal amount of additional electronic circuitry.
         6.  Processing can be performed by such devices--either in the stand-alone mode or when connected to a communications line.  The scope of the processing capability is, of course, quantitatively limited by constraints in the processing speed of the terminal microprocessor or in the amount of mass memory which can be made available to the device.  But these devices are qualitatively capable of performing all of the data processing activities cited under the broad categories in paragraph 20 of our original Notice.9  Similarly, all of the processing activities listed under the categories cited in paragraph 21 are possible.10  In fact, merely by inserting a new program, which can be incorporated into a wired-in read-only memory, a manufacturer can radically change the nature of the processing activity performed by the terminal device and market it as, inter alia, any of the following:  text editor, information storage and retrieval system, inventory control system, payroll system, scientific calculator, network controller, message switch or code converter.
         7.  The new technology has clearly made it possible for terminals to automatically perform many processing operations which they previously performed poorly or not at all--by employing techniques previously limited to central computers.  The new technology may also have rendered meaningless any real distinction between 'terminals' and computers.  We are now seeing the development of the so-called distributed network--one in which data processing and communications processing capabilities are distributed, to varying degrees, among a number of processing units.  Greater flexibility is afforded in designing a system wherein computer power, and just the right amount of it, can be placed wherever in a system it makes economic sense to do so.  Data manipulation requirements control the extent to which this distribution of processing takes place.  To the extent one is able to distribute computing power and a centralized data base, a reduced dependence on the processing capabilities of the host CPU is possible.  From a technical point of view, processing can be placed anywhere--within the network or outside the network interface--giving one greater flexibility in designing equipment and structuring various service offerings.
    6  These applications include, inter alia:  (a) arithmetic operations upon raw data by a CPU located in the remote access device prior to further computations to be carried out by a remote host computer CPU, (b) the editing of originating text prior to transmission to a host or to another remote access device, (c) the generation of displays of hard copy data (printed) and soft copy (video).
    7  Miniaturization has imposed some compromises in the microcomputer system architecture--e.g., shorter word lengths, microcoding and serial computations. These compromises have resulted primarily in slower computational speeds.  On the other hand, some microprocessor systems are also capable of being programmed in popular programming languages such as FORTRAN and BASIC.
    8  Typical input/output devices would be:  electric typewriters, various keyboard/CRT combinations, high speed line printers.  Memory options include: solid state random access arrays, magnetic tape cassettes and disc files.
    9  The categories are:  'arithmetic processing,' 'word processing,' and  'process control.'
      arithmetic processing--general commercial accounting, payroll, inventory control, banking and point-of-sale processing, financial and econometric modeling, scientific calculations, etc.
      word processing--a rapidly developing application resulting from advances in mass memory technology and word processing software.  Applications include: interactive information retrieval systems, management information systems, text editing, translation, typesetting, etc.
      process control--the increased reliability and availability of computers is leading to an expansion of applications where a computer is used to monitor and control some process which is occurring continuously--such as a nuclear-powered generating station, an electric power distribution grid, an automatic machine tool, or a fire detection and control system.
    10  These categories are:  'network control and routing' and 'input/output processing.'
      network control and routing--applications include:  pulse format conversion, error detection and correction, analog to digital and digital to analog conversion, signal processing and time division multiplexing.
      input/output processing--this category comprises the uses of a computer capability resident in a carrier network facility for the purpose of making disparate computers and terminals compatible with each other.  Typical functions are the formatting, editing and buffering of data to make it compatible with the electrical characteristics of different transmission media.
    See, however, paragraph 10, infra.
    -- In re Amendment Of Section 64.702 Of The Commission's Rules And Regulations (Computer Inquiry), Docket No. 20828, Supplemental Notice Of Inquiry And Enlargement Of Proposed Rulemaking, (March 8, 1977)

    Packet Switching

    Other applications involve the use of switching computers to provide radically new features which were hitherto impractical with the older technology. 11
    11  We have seen, for example, the introduction of packet switching networks--which were not considered in the Rules.  We also note the introduction of the No. 4 ESS by Bell, whose 1-A processor can be programmed to provide optional features for circuit switched services.
    - In re Amendment Of Section 64.702 Of The Commission's Rules And Regulations, Docket No. 20828, Notice Of Inquiry And Proposed Rulemaking, 61 FCC2d 103 para 12 (August 9, 1976)

    Computer III

    Amendment of Sections 64.702 of the Commission's Rules and Regulations (Third Computer Inquiry), 104 FCC 2d 958 (1986), on reconsideration,  2 FCCR 3035 (1987);  2 FCCR 3072 (1987);  on further reconsideration, 3 FCCR 1135 (1988);  on reconsideration, 3 FCCR 1150 (1988)

    Robert J. Butler, In the Aftermath of California V. FCC: Computer III remand Proceedings Pose Difficult Policy Choices For the Enhanced Service Industry, 8 No. 5 Computer Law. 24, 24 (May 1991).

    1990s

    "The Internet access market is also highly competitive and dynamic, with over 2,000 companies offering Internet access as of mid-1996.   It is extremely likely that, had per-minute interstate access rates applied to ESPs over the past 13 years, the Internet and other information services would not have developed to the extent they have today -- and indeed may not have developed commercially at all." In re Access Charge Reform, NPRM, Third Report and Order, and NOI, CC Docket 96-262 ? 285 (Dec 24, 1996)

    Narrowband Telephony Environment

    But see ATT Frame Relay and Protocol Processing. (broadband services under Computer Inquiries)
        36. Second, with respect to technology, the core assumption underlying the Computer Inquiries was that the telephone network is the primary, if not exclusive, means through which information service providers can obtain access to customers.  This network was optimized primarily to carry voice traffic and narrowband data applications, such as voicemail.  Yet now information service providers may access customers over a variety of network platforms, such as cable, wireless and satellite.  Some of these platforms are broadband, rather than narrowband, and they carry traffic to and from companies, educational institutions, organizations and other users through a global interconnected packet-switched network called the Internet.  This technology allows users to interact with media, with information and with each other in ways and at speeds that were scarcely considered when the Computer Inquiry was begun.
        37. Third, the technological evolution that enabled other network platforms to be used to provide information service enabled cable, wireless and satellite providers to begin to compete with the telephone network.  In the broadband arena, the competition between cable and telephone companies is particularly pronounced, with cable modem platforms enjoying an early lead in deployment.  In the context of this competition, telephone companies and various Internet and technology companies have begun to advocate that the Commission take steps that, to the extent the Act allows, would reduce the regulatory burdens and regulatory uncertainties the telephone companies face, and thereby provide incentives for those companies to continue or accelerate their investments in critical broadband infrastructure.
    --In Re Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, CC Docket No. 02-33, CC Dockets Nos. 95-20, 98-10, NPRM (February 15, 2002) http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-02-42A1.doc
     
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