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growth from the introduction of digital transmission and the advent of telephone company video services, others such as Hewlett-Packard, Thomson, Sun, and Sony have said they would enter. Today, telephones, like most consumer electronics, are produced by offshore companies, although many telephones carry the Bell label.

Retail sale proposals are advocated as consumer friendly and, as such, are supported by the organized public interest consumer groups. Retailers do not propose to cut off the right of network providers to also provide equipment, by sale or lease, but would prevent it from being bundled. Techniques such as those used so successfully by cellular telephone companies, whereby deep discounts for equipment allow more people to take advantage of service, would be barred. There are legitimate questions as to how "consumer friendly" it is to deprive consumers of the option of low-cost entry to these new services. Likewise, lease of equipment is likely to be an important component of the introduction of new services. It is one thing to buy a telephone for $15 to $100 from Radio Shack, knowing that the chances of its becoming obsolete are minimal. Indeed, it will almost certainly break before then. It is another thing to expect consumers to rush down to Circuit City to buy a $300 to $500 digital entertainment terminal and bear the risk of obsolescence and perhaps the risk that it will not work properly with the network.

48. Bell Atlantic, Nynex, and PacTel have issued an RFP for equipment, including separation of a network integration module (NIM) and a digital entertainment terminal (DET). The NIM would include network functions, including access control and decryption. The DET would be available for retail sale. See Chris Nolan, "The Telcos' Set-tops," Cablevision, April 3, 1995, p. 56. However, earlier this year, AT&T and VLSI Technologies announced a program that runs counter to the thrust of separation. See "AT&T, VLSI to Embed Security into Set Top Chips," Broadcasting & Cable Magazine, February 6, 1995, p. 36. AT&T customers, like GI customers, who are developing products, tend to focus, laser-like, on maximizing security. It is doubtful how many are aware that some in government have different plans for them.

49. Congressional Record, 104th Congress, 1st Session, April 4, 1995, p. S5143.

50. Although it is generally acknowledged that smart card technologies will be easier to develop and more secure in a digital environment, the experience in the analog environment is that security has been badly compromised. Satellite systems are badly compromised in Europe. See "Sky War Over 'Smart' Pirates," Sunday Mail, Financial Section, United Kingdom, October 9, 1994.

51. Interesting questions would be posed by such a government determination: What happens if nontechnologists in the Congress and or in the bureaucracies (or even qualified technologists, for that matter) turn out to be wrong and the technology is defeated by theft-of-service pirates? Since the government has chosen this technology, would or should the government be liable for the losses incurred as a result of the defeat of this technology? If the technology were defeated, could retailers be liable for losses incurred thereby? Would that liability require a showing of negligence, such as the failure to maintain secure warehouses for the equipment? Given that maintaining the security of these systems is a matter of concern to the government (the success of our communications networks and the investment in those networks depend upon their ability to maintain security and privacy), would it be appropriate that punitive damages be available in the case of a break against a party, including a retailer, whose negligence caused a break? Should tort reform legislation contain an exception for punitive damages in such cases? Could a manufacturer refuse to make products available to a retailer who failed to sign an agreement in which the retailer promised to maintain adequate security procedures or an agreement in which the retailer promised to indemnify against losses from a breach of security?

52. Hybrid fiber coaxial cable systems (HFC) seem the preferred model for cable television operators and some telcos. Other telcos are indicating a preference for switched digital networks (SDN). Ultimate choices will be worked out in the marketplace over time, as network providers experiment with different delivery models. Cost will be a fundamental issue.

53. For example, retail sale, or even including security considerations advanced without regard to cost or convenience.

54. Retail sale has implications for other values as well, such as innovation. To the extent retail sale is used to justify standardization, it can negatively affect continued development.



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