Host what led to that decision. Guest well, it was during the Johnson Administration in the late 1960s. It was part of the Telecommunications Task force. It had concluded that the Telecommunications Industry could be competitive. And they have made recommendations mainly to the federal Communications Commission on how to make that happen. Then when Nixon Administration came along, the staff in the antitrust division, after watching for a couple of years, decided to pursue antitrust rather than sec regulation as the means to introduce the competition. My role that i was on both the Telecommunications Task force and i was one of the outside economists advising the department of justice when the case was being shaped. Host professor houseman . Guest i didnt come in until 1982 and thereafter when the antitrust division decided to review, about three years later, there was a report that was done. I was an advisor to the government on the reports. I was involved thereafter in the various changes and modifications. Host professor houseman, where he supportive of the decision . Guest well, at the time, i would say medium. I it was based on an incorrect theory, in my view. I have written academic papers. The cost consumers somewhere between 50 and 100 billion in payments that they should not have had to pay based on voluntary. Actually, although i liked judge green, i really doubt that a federal judge, no matter how wellintentioned could really do a good job here. He was definitely in over his head. He was not a telecommunications expert. But on the other hand, i have always thought that federal Communications Commission probably would not have gotten it done and done as well as it has turned out. Looking back, i think things have worked out well, although past was a bit rocky. Host professor noll, what you think 30 years later and were you a supporter . By agree with jerry, that some of the details that judge green imposed on the settlement had no real basements. In either technology or economics. I guess my standard isnt as high in the sense that when either a judge or a Regulatory Commission makes a generally procompetitive decision, and so i believe that divestiture was important as an event. One of many that has caused the american telecommunication system to be the best in the world and the most competitive. Guest professor noll, you had mentioned that there were some errors that judge green made. What were some of those errors . Well, ms, judge green believed something that at t argued prior to a at ts change of heart to go along with the divestiture. Which was the weak sister was old operating company. So in the divestiture, there are it is silly to go into details the details because most of them are relevant today. What he did, whenever there was a close call, the divestiture decision was something in favor of the local operating companies and against the Equipment Manufacturing part of at t. It was fundamentally a mistake. The premise of the case, as it was developed and litigated was the interstate part. The longdistance telecommunications that could be competitive and it was local target was a secure monopoly because of the role of state legislation. An Old Supreme Court decision that said they could not assert jurisdiction over local regulation. I agree with jerry. The premise that he entered, but somehow it was a local service that needed to be protected was completely false. Guest there was another problem as well. The government brought the case against at t in 1976. As i have pointed out some of my paper, and fundamentally change the technology and was going to doom the bell system as it was at the time. That was when digital switches came in 1976. So that was a fundamentally change that was brought to the industry. In 1995 when congress got rid of judge green, he did things based on that technology because that was part of the case. Intel mutations, where things are changing fast, my cell phone, which has fundamentally changed the world, but he really couldnt take into account technology, because he didnt have the way to do it. I am certainly agreeing with roger with respect to local companies. But what i really thought the main problem was, for instance, france come at the beginning of the 90s had a very good internetbased system. In the United States did not really get back until five to 10 years later because of the restrictions builtin. So it certainly had its pluses and minuses. Roger and i agree though that it has worked out for the best. Host how has the breakup of at t affected the world we live in today . Certainly we have what some would say is a monopoly in network access, that is to say that the Big Broadband pipe business a lot has changed since then. How has that breakup affected the market today . Guest i think he really have to look at the technology. At t was a Large Corporation in the world. That company is gone. It is the old operating company, bell south, they bought out at t. Well, it is sort of what roger pointed to. No other company when they privatized and allowed competition and telecommunication, because as of 1976, the old bell system was not going to exist in the future. So the longdistance companies are gone. Mci is but a faint memory. The old at t is gone as well. So what has changed . Well, there was a huge mistake made at the time of the breakup. Mckenzie is a wellknown company. At the time of the breakup, at t had to make a decision. Should we keep our cellular spectrum, which the fcc had given us, or should we let the others have it and mckenzie productive as of the year 2000, there would be 1 million users with cellular telephones. Except it was off by 99 million. There were actually about 100 million cellular subscribers in the year 2000. That fundamentally changed the world. They basically gave up the ghost by letting go of cellular. Long longdistance has ceased to be a separate business. There are always people arguing in washington. But if you actually look, the latest government statistics are 32 of the people dont even have landline telephones anymore. They use cell phones. The competition out there, in terms of the internet. 4g is coming in. I would be willing to predict that in 10 or 15 years, the majority of youth on the internet will be over mobile phones and cell phones throughout the world. Host if you expand that to wireless devices so you dont limit it to cell phones guest thats what i mean. Tablets, you name it, exactly. Host i think the really important point about your question is that the mindset of the world well into the mid1990s was that wireline access was stuck on poles or buried in the ground was the key to understanding competition in telecommunications. The intriguing part of the wireless story is how very few people inside the industry that that is why the Mckenzie Mckinsey report listed, it wasnt just judge green and the fcc who did not understand the potential of wireless. It was the entire industry, except for a few visionaries that were regarded as kooks. So what turned out to be the case was that the hope that some people have that you could have a robustly competitive, explain this industry are half Dozen Companies are offering Telephone Service over wires fever turn out was thinking. The wireless is really the future. Solve this problem, the spectrum scarcity problem with which the fcc is trying to solve a, than the almost everything that historically that we thought as being the des moines of wires and cables is actually going to be provided over the air. That industry is robustly competitive. You know, the at t didnt have anything to do that . It had something to do with it but the relevance today is not as great as it would have been, had the original vision of everybody getting Telecommunication Services through things on telephone poles and buildings until buried underground, have happened right, there would have been a more important case. Guest i would like to make two points along those lines. The first is i completely agree with roger. When the act that was passed by congress in 1996, the fcc set up regulations to try to bring this kind of competition in. But by that time you could see that cellular was going to be very important. Somewhere in the hundreds of millions of dollars, probably much more than that, probably in the tens of billions of dollars was invested in the competitive wireline business. That just completely failed. When they came in 2000, the Companies Dropped like flies. Not only to a lot of people in the industry see this, there are a lot of people investing hundreds of millions of billions of dollars and they didnt see it coming either. But i would actually like to bring up one thing that i dont think that the old at t gets credit for. I see there in theyre enabling technologies, and they really change the world. The first was the transistor development. The second was the cellular telephones. Where would they innovated . Arguably, the third is the Radio Technology that is used, which is potentially cdma, and that is a small club to mit, that began to be part of this. Then qualcomm was started coming out with the technology that was used throughout the world. The industry does not want to do fundamental research and we do have government labs. But i would say charitably that they are less than a success in terms of innovation. Big innovations like transistors and cell phones, it is hard to make predictions. But i dont think that we ever want to lose sight of many other technologies. Pretty much everything that you use today came from transistors in terms of electronics. It has changed the world. And so are we going to get innovations like that in the future . Well, things remain to be seen. Gentlemen, you mentioned the importance of wireless. A third of u. S. Families have cut the cord. Last year, as both of you know, we heard lots of artisans my question is how many competitors do we need in the market to ensure this . Guest that is a very hard question because the Technology Changes so rapidly. But the standard answer that most economists would give you is somewhere around five robust companies that are innovative, it is the number that would guarantee you a competitive outcome. Indeed, many are wireless carriers. I am not particularly worried. The main issue about the reliance on competition in wireless to keep us all happy and innovative is the spectrum issue. But the government still sits on an enormous quality of spectrum that is not utilized at all. Sometime over the next few years, we have to break that loose. We have to create substantially more spectrum that is available to the private sector for use in wireless telephony. And also telecommunications. I think that will happen, although every time one makes his step, one finds resistance. So i think the single most important policy issue for us in the next two years is to make certain that the spectrum available is adequate that consumers and the firms are going to have to take us to. Guest i think the spectrum issue is of utmost importance. I think there was a huge innovation made around 1994, myself and other economists recommended the spectrum rather than giving it away. One might remember if you go back and read various books that the johnson family, Lady Byrd Johnson was given all sorts of radio stations. Her husband was powerful in congress and that led to the family fortune. Even in the 90s during the clinton administration, a special deal was given to the Washington Post to get a much cheaper spectrum as with other people. The government has found it difficult to run this as a market. Also, they have huge debt problems with local governments. They are sitting on an enormous amounts of spectrum. If they switch from analog technology, which is the Generational Technology to digital technology, they can share with private users by global phones and tablets and everyone would be better off. That is what economists want to see. As rogers at them every time we get close, politics seems to enter this fray again. I am hopeful, but i cannot guarantee that this problem will get solved. Host Jerry Hausman . Guest it took us only 40 years to get there. [laughter] host roger noll is the director of the Stanford Institute for Economic Policy research. Jerry hausman is a professor at the Massachusetts Institute of technology. We are talking about the 30th anniversary of the decision to break up at t. Gentlemen, we will start with you, professor hausman. What is the relationship between a 1982 decision by harold green and is there a relationship between not matt and in 1996 Telecommunications Act . Yes, by 1996, it was well recognize that things had gotten out of hand. You know, technology had changed. In 1996, a deal was made in large part. That was a competition was introduced and became sufficient, then the Consent Decree would be illuminated. Even by 1996, i actually made a prediction that within 10 years the old at t would be gone and i was off by one week. It took 10 years and one week for them to be gone. It was certainly an improvement and it had its heart in the right place. But again, it was somewhat behind technology. As i said. The regulations favored the new entrants and invested in a lot of money and they all failed, and now it is completely irrelevant. Two years later, 17 years later, it is completely irrelevant. But that is due to the technology, more than anything else in my view. Host professor noll . Guest at the time it passed, i thought it was very complex. It was not a good piece of legislation. We complain about judge green with his lack of sophistication. Well, i will take him over congress any day. The act is not very well practiced. Nonetheless, the beauty of telecommunications is that nobody in the sec, not the congress and no one has ever made a bad decision to stop technology in the places that it is taking us. Retrospectively, the 1996 act, the single most negative feature was that it caused an enormous amount of resources to be devoted to regulatory strategies as a means to gain a competitive advantage in the industry. It was not competitive enough. But because Wireless Technology quickly moved into it, it is not doing any significant amount of damage now. Host is impossible to regulate telecommunications, and if so, should it be done . Guest well, i think it certainly is possible to regulate it. We have the ability to prove that it is regulated. The competition, if its feasible, is always the preferred strategy of regulation. Regulation makes enormous sense if technology has dealt you a hand. You cant hope to have more than one or two friends in it. They will have enormous market power and they can control technology in nefarious ways, letting the technology blossom. To be done reluctantly, to be dumbwaiter is much restraint is consistent with the policy objective. I think the main criticism all of us can study over time is that even when the sec was allowing competition to increase, it was hiding off the components in which it was allowing competition, the process was way too slow. It could have been accelerated rapidly and more efficiently handle than it was. Now, the best is always the enemy of the good. I still believe that given where we are today, obviously not all decisions were bad. It is just that it took longer than it should have taken. Given the Way Technology is today, the industry can provide enhanced Telecommunications Services in a competitive market. There is relatively little need for regulatory supervision with what goes on in the industry. I think for managing the spectrum, they should basically be abolished. Host paul barbagallo. Last question. Guest i think the sec should declare victory because we are very competitive. The segment of washington lawyers and lobbyists we have one competition. Roger and i have always been in favor of that is most economists are. I think it would be absurd to have regulation. Host in 10 words or less, professor hausman, who is the victim of the breakup of at t . Guest students. I talked, therefore i am, anyone who picks up the cell phone, any moment of the day, those people that call anyone in the world, i mean tablets as well. They have benefited the most. Guest you also have to add in the firms and people who provide the software and internetbased services that are only made possible by highspeed digital technology, google, facebook, those are also the big beneficiaries. Host roger noll, Jerry Hausman, and paul barbagallo. Thank you all so much. In a few moments a discussion of the relationship between public and private universities. And then we will focus on recent changes in higher education. After that, chairman bill gates on the quality of college graduates. Several live event to tell you about tomorrow. William hague speaks to the house of commons in the topic of the middle east. Also on cspan2 on 12 30 p. M. , Julius Genachowski on International Security policy. He will be at the council of foreign relations. Also a political practice, mike allen interviews Obama Campaign manager jim mussina that is just after 8 00 a. M. Eastern. Then on cspan at noon, the Wilson Center and a discussion on middle east policy. Includes the jordanian ambassador to the United States. How does one adequately express the feeling about a special friend . When a friend is also a world icon. A National Hero of unimaginable proportions. And the legend whose name will live in history long after all today have been forgotten they look down kindly onus when she chose neil to be thend First Adventure to another world. And to havthe opportunity to look back from space at the beauty of our own. It couldve been another comment but it wasnt. It wasnt for a reason. No one, but no one could have accepted the respns