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providers, interexchange (long-distance) carriers, and value-added networks that are built on top of these (e.g., the Internet).

Traditional telecommunications networks have satisfied many of the requirements implied by the vision of the NII, and, indeed, form the communications fabric of today's information infrastructure. They are affordable, ubiquitous, easy to use, and dependable, and they have supported a wide and increasing range of applications including telephony, data communications (using modems), fax, access to the Internet, voice messaging, e-mail messaging, voice-response services, and access to variety of information services. In addition to the applications listed above, which are supported by ubiquitous dial-up telephone services subscribed to by 94 percent of households,2 there is a variety of higher-speed and/or specialized telecommunications services provided to businesses and institutions for such things as high-speed data transport and video teleconferencing, and for interconnecting Internet routers (packet switching nodes).

The ongoing challenges in telecommunications networking today focus on the following:

1.

Realizing affordable, higher-speed communications networking capabilities to support multimedia applications for residences and small businesses, starting with the widespread availability of integrated services digital network (ISDN) access. The challenge is driven by the convergence of the telecommunications, computing, information services, and broadcasting industries.

2.

Realizing the ability to offer customized telecommunications services to residences and businesses (e.g., calling name delivery, personal telephone numbers, personalized call screening and routing) by using the emerging advanced intelligent network (AIN) capabilities of public telecommunications networks, and supporting customers' needs for mobility by using combinations of wireless access technologies and AIN functionality in core public network platforms.

3.

Meeting the challenges of "information warfare" as U.S. telecommunications networks increasingly become the target of hackers, criminals, and terrorists seeking to exploit the increasing dependency of U.S. citizens and institutions on network-based applications.

4.

Making increasingly complex and diverse telecommunications networks appear seamless and easy to use from the perspective of users and their applications.

Meeting these challenges in providing an advanced communications fabric for NII applications requires the investment of billions of dollars of research and development funds, and the investment of hundreds of billions of dollars in new network facilities on a nationwide basis over the next two decades. These investments include the installation of combinations of optical fiber, coaxial cable, wireless technologies, and network software throughout the United States. One cannot overestimate the challenges associated with making networks and network services reliable, secure, and easy to use, and doing so at costs that are compatible with the expectations and ability to pay of residential and small business consumers. The vast majority of these software investments are directed at meeting these challenges. Since the demand of residential and institutional consumers for the newer applications that are envisioned within the framework of the NII is highly uncertain, and by implication the demand and associated revenues for the telecommunications services that the advanced communications platform can support are uncertain, these investments involve high risk, except in situations where a combination of existing revenue streams and cost savings can justify the investments independent of the demand for speculative new services. The rapid depreciation of computer and communications technologies, in terms of rapidly improving performance/price ratios, makes these investments even more risky because investments made in advance of market demand may never be recovered in a competitive marketplace.

Further compounding the risk associated with the large investments required to put in place the telecommunications fabric of the NII is the uncertainty associated with the regulatory and legal framework within which network providers must operate. The regulatory and legal framework of the past is ill suited for an environment of large investments targeted toward highly uncertain market needs using rapidly depreciating technologies in a competitive marketplace. For example, the requirement of a network interface device erects an artificial barrier that prevents local exchange companies from providing complete services to their customers. The regulatory and legal framework of the future is still being defined in a slow-moving set of processes. These



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