The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight three views of the merger between two large telephone companies, SBC and Ameritech; two Israelis look differently at their country's past toward peace talks with the Palestinians; Lee Hochberg reports from Oregon on different ways to teach math; and FAA Administrator Gene Garvey updates the inspections of Boeing 737's, the nation's most flown airliner. It all follows our summary of the news this Monday. NEWS SUMMARY

JIM LEHRER: Another big merger was announced today. It was in the telephone industry. SBC Communications will buy Ameritech for $62 billion in stock. The new company--to be called SBC--will control 1/3 of the nation's telephone lines and have operations in nearly every part of the country. SBC was formerly known as Southwestern Bell, Ameritech Illinois Bell. The deal still must be approved by the Federal Communications Commission. We'll have more right after this News Summary. Mailing a First Class letter will soon cost a penny more. The Postal Rate Commission today granted the Postal Service request for the increase from 32 to 33 cents. It could become effective this summer, or at the latest by next January. Stamps for postcards will remain at 20 cents. Express Mail will go up $1 to $11.75. The chairman of the Rate Commission made the announcement at a Washington news conference.

ED GLEIMAN, Chairman, Postal Rate Commission: The Commission is reluctantly granting the Postal Service request to raise the price of a First Class stamp from 32 to 33 cents. Our decision here is governed by what I would characterize as non-negotiable realities. To leave the First Class stamp price unchanged would have triggered unjustifiably large increases for all other types of mail, with potential serious economic consequences for both mailers and the Postal Service.

JIM LEHRER: The Postal Service has had three years of billion dollar plus profits, but officials said the increase was needed as a hedge against future costs. Half of some 180 older Boeing 737's being inspected have wiring damage, according to the Federal Aviation Administration. The FAA pulled many of the U.S.-registered planes out of service yesterday. Some emergency inspections were ordered last Thursday. There were concerns bundles of wiring in fuel tanks might be worn or corroded, possibly allowing sparks to ignite jet fuel. We'll talk to FAA chief Jane Garvey about it later in the program. Attorney General Reno today requested the appointment of an independent counsel to investigate Labor Secretary Alexis Hermann. Today was the deadline for doing so. Hermann is accused for accepting money in return for helping a friend's company while she was a White House aide. A businessman made that allegation. Hermann has denied it. The government of India announced it conducted three underground nuclear tests today. They took place in the desert, 330 miles Southwest of New Delhi. They were the first nuclear tests in India since 1974. The country's prime minister said they did not release radiation into the air. In Washington, White House Spokesman Mike McCurry said the president was deeply distressed by the tests.

MIKE McCURRY, White House Spokesman: He has authorized formal presentation of our displeasure to be made to the government in New Delhi. While it was foreseen, given the electoral program of the newly elected party that they might take this step, it still flies in the face of an international consensus about the need to promulgate and to nurture the new regime on a comprehensive test ban, and we will certainly be sharing those thoughts and others with the new government in India.

JIM LEHRER: The United States also urged India's longtime rival and neighbor, Pakistan, not to respond with similar nuclear tests. Secretary of State Albright will meet in Washington Wednesday with Israeli Prime Minister Netanyahu. That announcement came today at the State Department. Netanyahu and Palestinian Leader Arafat were invited to meet in Washington today to advance stalled peace negotiations, but Netanyahu declined. He said Israel could not accept a compromise proposal on troop withdrawals put forward by the United States. Netanyahu had a scheduled speaking tour here this week. State Department Spokesman James Rubin had this to say.

JAMES RUBIN, State Department Spokesman: We've been consulting quietly, closely, patiently with both Israel and the Palestinians to factor in their needs and requirements. But this can't go on forever, and there is a need to make some decisions. And what we are doing here is trying to bring to bear our view that we have a sense of urgency about this. At some point, if we cannot bring this to a conclusion, then, as the Secretary said, we would have to re-examine our approach in this matter.

JIM LEHRER: We'll have more on this story later in the program. In Jerusalem today the government of Israel admitted that convicted U.S. spy Jonathan Pollard was an Israeli agent. Israel denied that for more than 10 years. The former Navy analyst is now serving a life sentence in North Carolina for passing classified military documents. Israel had insisted Pollard acted alone. Yet, it repeatedly urged the U.S. Government to be lenient. Sinn Fein Leader Gerry Adams today praised his group's endorsement of the April 10th Northern Ireland Peace Accord. It has traditionally refused to deal with the British government of Northern Ireland. Sinn Fein is allied with the Irish Republican Army, which has fought for the North to unite with the Republic of Ireland. And that's it for the News Summary tonight. Now it's on to the big phone merger, an Israeli debate, teaching math, and inspecting 737's. FOCUS - MEGAMERGER

JIM LEHRER: Kwame Holman begins our coverage of the phone merger.

KWAME HOLMAN: The recent spate of announcements of giant mergers continued today--thisTime in the world of telecommunications. SBC, formerly known as Southwestern Bell, said it will purchase Ameritech Corporation in a $62 billion stock deal. If approved, it would be the second largest merger ever.

RICHARD NOTEBAERT, CEO, Ameritech Corp.: When we looked at this together, there's a perfect fit, just a perfect fit. And I think customers will appreciate the ability to make one call and get service anywhere domestically within the United States, as well as internationally.

KWAME HOLMAN: SBC--based in San Antonio--is one of the fastest growing of the local phone companies, dubbed the Baby Bells after the phone system was broken up in 1984. Within the last two years, SBC purchased West Coast Baby Bell Pacific Telesis for $16.5 billion and another Baby Bell--Southern New England Telecommunications Corporation--for $5 billion. It now serves the West Coast, Southwest, and New England-- providing local phone, cellular, and Internet services. SBC also is involved in telecommunications services in South Africa and Europe. Ameritech is another of the original Baby Bells. It's based in Chicago and provides the local phone service in Illinois, Indiana, Ohio, and Wisconsin. Ameritech also offers cellular phone services and has interests in telecommunications ventures in Europe. The combination of Ameritech and SBC will carry SBC's name, employ more than 190,000 people, and control 57 million phone lines, nearly one third of the nation's total. SBC made its merger moves in the environment created by President Clinton's signing of the 1996 Telecommunications Reform Act. Since then, the number of regional phone companies has gone from seven to four, if this latest merger succeeds. They are: US West, Bell South, Bell Atlantic-- itself the result of a merger with New York Nynex--and finally the combined SBC and Ameritech. Before today's merger becomes final, it must be approved by shareholders in the two companies, the Federal Communications Commission, the Justice Department, and a number of state regulatory agencies.

JIM LEHRER: More now from Gene Kimmelman, Washington co-director of Consumers Union, publisher of Consumer Reports; Howard Anderson, president of The Yankee Group, a telecommunications market analysis firm based in Boston; and Peter Temin, economic historian at MIT, author of the 1987 book "The Fall of the Bell System."Mr. Anderson, why does this merger make sense for these two companies?

HOWARD ANDERSON, The Yankee Group: It makes sense for three reasons: It gives us joint company range from the Canadian border to the Mexican border; it gives them efficiencies in terms of lower cost; and it gives them a reach that gets to 1/3 of the U.S. telephones.

JIM LEHRER: And is there any advantage to either one of them? I mean, does one of them bring special strengths to the merger beyond reach, beyond regional reach?

HOWARD ANDERSON:

JIM, no, they don't. They essentially are two companies that own a geographic area. Other than that, they look very similar.

JIM LEHRER: All right. Mr. Kimmelman, does this pose a threat, or a potential harm, to the consumer?

GENE KIMMELMAN, Consumers Union: Absolutely. These are two local telephone monopolies that rather than going after each other, or going after companies and other businesses, are joining their monopolies together in markets that were supposed to be broken open to competition, with cable companies, long distance companies coming in and offering consumers choice. That hasn't happened yet. And while we're waiting for that competition to unfold, it's possible the government may let these monopolies reinforce their existing dominance in the market. We oppose that, and we'll ask the Justice Department and the federal regulators to block this.

JIM LEHRER: If they already have dominance in each of their areas, how does merging with a company outside their area increase their dominance in the areas?

GENE KIMMELMAN: As Congress said explicitly in this new law, it wanted more competition, particularly in the local market. When no one has been able to break that stranglehold yet, getting broader geographic power, bigger customer base will deter others from even trying to enter that market. So it's contrary to the design of competition that Congress laid out for the American people.

JIM LEHRER: Mr. Anderson, do you agree with that, this is counter competitive, to use a phrase?

HOWARD ANDERSON: Gene has opposed every merger since Ben & Gerry. The real answer is there's a hundred competitive local exchange carriers that are so far aiming at the business market that are giving them fits left and right. There's an enormous amount of competition, but Gene is right that the act was aimed at increasing local competition.

JIM LEHRER: Prof. Temin, was this inevitable by the '96 Telecommunications Act? A lot of people have said it was made inevitable. These companies were broken up as the result of break-up of AT&T, but the Telecommunication Act of '96 made it advantageous to come back together, do you agree?

PETER TEMIN, MIT: Well, the telephone system was broken up in the 80's, separating long distance and local, but the break-up did not specify how many local companies there had to be. That was a choice of the old integrated AT&T. They selected seven, thinking that each one would be large enough not to be taken over. That, clearly, is not true in the 1990's. But there's nothing inconsistent with this, with the original decree. Now, the 1996 Act wanted to encourage competition. It's unlikely that we would ever have hundreds of equally sized firms competing. Rather, we should always expect to have a few dominant firms with a competitive fringe, niche players, other kinds of people, and this really affects the identity of who will come out on top, rather than how many companies will come out on top.

JIM LEHRER: There's nothing specific--your reading then of the '96 Act and the breakup of AT&T--there was no intent to prevent this kind of thing that happened today from happening, is that correct?

PETER TEMIN: No. I don't think there was any intent. Perhaps there was a vision in someone's mind that this would be competition like the competition for bread in the supermarket, but I don't think anybody who's familiar with the industry thought that that was anything that would be realistic. More realistic would be something like is happening now in airlines, where you have say half a dozen major players and a bunch of fringe operators.

JIM LEHRER: Now, you saw it differently, Mr. Kimmelman?

GENE KIMMELMAN: Well, the problem here is that, unlike the airlines, where we had some competition in multiple airline- serving communities before we deregulated, in local telephony everyone had one phone company, still has one phone company. The hundreds of fringe players are attracting 1 or 2 percent of the market so far. So we're seeing consolidation before we ever got the broad explosion of competition as we had had in airlines. We haven't opposed every merger, and we're not worried about the size of the company. The problem is the core market is a monopoly, local telephony. And most consumers have and will only have one choice. These companies have a track record of wanting to substantially increase local telephone rates. If consumers don't have a choice of another company, they face a risk of significant increases in that market.

JIM LEHRER: Do you see the risk the same, Professor, Professor Temin?

PETER TEMIN: Well, I think that, as Mr. Anderson said, that the merger may well reduce cost, but as Mr. Kimmelman said, it will also increase market power so that while prices may go down, they won't go down as far as the costs go down.

JIM LEHRER: So they're both right?

PETER TEMIN: In a sense, yes.

JIM LEHRER: Mr. Anderson, do you see more of these kinds of things happening? I don't mean mergers in the world generally, but in this particular business. Are more of these old Bell companies going to get together?

HOWARD ANDERSON: No I think we're going to stop at seven. And that seven will also include AT&T, WorldCom, and possibly Sprint. What we will see is that local phone rates will probably go up 2 or 3 percent; long distance phone rates will probably go down 5 or 6 percent; cable rates will probably go up 5 or 6 percent over the next year. The cable company may be a provider in some of these markets and offer at least one form of the local competition.

JIM LEHRER: That was the whole intent of the '96 bill, was it not, that the cable companies were supposed to get in the telephone business and the telephone companies were supposed to get in the cable business, and that would be the main competitors? That hasn't happened, right?

HOWARD ANDERSON: Starting to happen, and you're starting to see the cable companies offering, for example, Internet access at high speed. A few of them like Cox and Media One, which is owned by U.S. West, are beginning to provide, albeit small,

JIM, measures of local competition.

JIM LEHRER: Prof. Temin, how do you see the future in terms of more of these kinds of--more--this particular kind of get-togethers?

PETER TEMIN: Yes. Well, I think there will be, but, as Mr. Anderson mentioned, Media One is owned by a telephone company, so that the question about how much competition there is for any person is different from the question of how many large companies there will be in the industry.

JIM LEHRER: Well, to that specific question of how much competition there is for an individual who wants to have a telephone service in his or her home, that's not going to change much, right?

PETER TEMIN: Well, what is going to happen is increasingly for the business customer, for the high end customer who wants lots of services, high speed, wide band access, there will be more competition. For the person just using the telephone, what we call POTS, Plain Old Telephone Service, probably going to be a long way before there's a lot of competition.

JIM LEHRER: And do you agree, Prof. Temin, that that's going to result in maybe--well, you heard what Mr. Anderson just said in terms of increased prices. Would your formula be about the same?

PETER TEMIN: Well, I think there might even be more change, but that is independent of this merger. That is a long process of what is called rate re-balancing, to try to get rates closer to costs. And, for that, local rates would have to go up; long distance rates would go down. Overall telephone bills for people would probably not change very much.

JIM LEHRER: Mr. Kimmelman, what do you see in the future?

GENE KIMMELMAN: Well, I wish the rate increases were as small as they suggest. I'm concerned the local rates will skyrocket--

JIM LEHRER: Skyrocket. Like what?

GENE KIMMELMAN: Up to doubling. That's what many of the phone companies--

JIM LEHRER: You think local phone rates will double?

GENE KIMMELMAN: If there's not ongoing, vigilant regulation, that's what the local companies have asked for, including a company like SBC over time. Long distance will come down. The distribution is the danger here. More than half the public will come out worse off because they will not make up in long distance reductions what they pay in increased local rates. Cable rates have been skyrocketing. I'm fearful that with this deregulation has gone too far before we had real competition and the consumer is being harmed across the board.

JIM LEHRER: What do you think should be done about this specific merger, Mr. Kimmelman?

GENE KIMMELMAN: We think this should be stopped, but what we really want is Congress establish this policy of more local competition, competition across the board. We want Congress to basically take a look at this and revisit the issue. If we're going to have local phone monopolies for most consumers, Congress should say so and say they should be regulated to hold price down and ensure quality. If they really want competition, they have to go back and do surgery on their law and do more to truly break open these local monopolies, rather than allowing them to combine and possibly hold out competitors.

JIM LEHRER: Mr. Anderson, how do you see that?

HOWARD ANDERSON: I see much competition coming quickly. There is an enormous amount of capital available. We figure $50 billion to build competitive services. Now, 16 percent of the U.S. household are TAF's, Technically Advanced Families. They will benefit immediately. There's another 32 million that are near TAF's. They will benefit--

JIM LEHRER: I've never heard that phrase before. What are you saying?

HOWARD ANDERSON: Technologically Advanced Families.

JIM LEHRER: Okay. And that means what--they got a computer, and a telephone, and what else have they got, cable?

HOWARD ANDERSON: They probably cable. They may even have more than one computer. There's about 32 million that may--may have advantage if their long distance bill is $28/$29 a month, and then there's about 50 million households that are not TAF's that will make fewer phone calls and will probably be disadvantaged in terms of rate increase.

JIM LEHRER: What do you think of Mr. Kimmelman's idea, that the Congress ought to get back into this? In other words, if they're going to have monopolies, these monopolies ought to be treated as monopolies and re-regulated to some degree?

HOWARD ANDERSON: Disagree. I think that competition is coming because there is exceptional opportunity. For example, the amount of E-mail in this country will this year surpass the amount of First Class mail. New and innovative services are coming, and those services will bring about new competitors.

JIM LEHRER: Prof. Temin, you studied this issue before you wrote your book in 1987. You studied it since. What do you think all of this--do you think the government has anything to do right now? Should they watch it, or do you have a view on it?

PETER TEMIN: Well, I think the government can't stuff the genie back in the bottle. Competition is here to stay. The question is what competition will look like. And it seems to me that to try to reopen the question of telecommunications with Congress is going to lead to a lot of disagreements, a lot of controversy, possibly not any benefit. It would be much better advised to use the antitrust laws to try to maintain the competition in this area.

JIM LEHRER: How do you feel about that, Mr. Kimmelman?

GENE KIMMELMAN: We're all for it. We're fearful that the antitrust people are one merger too late. They already allowed contiguous Bell Atlantic and NYNEX to join together. We're asking them to block this one. But I'm fearful the trend has already started. And as everyone has agreed, more than half the public comes out worse off with rate increases. It seems to me ultimately Congress must be responsible and accountable to the public for having promised more competition than is being delivered. Antitrust is a good stop gap measure. We're all for blocking this merger and asking for more aggressive enforcement. It hasn't been forthcoming in the communications area, but I'm afraid it's a little too little too late.

JIM LEHRER: Too little too late, Prof. Temin?

PETER TEMIN: I don't think that I was quoted as saying that half the people would be disadvantaged. I don't think that. I think that most people will benefit. Costs are going down. Services are increasing, the variety of services. But profits also will go up.

JIM LEHRER: Your final comment on this, Mr. Anderson?

HOWARD ANDERSON: I think what we need from Congress is a period of benign neglect.

JIM LEHRER: Well, we will end our attention to this subject on that point. Thank you all three very much. FOCUS - ISRAEL'S NEXT STEP

JIM LEHRER: Still to come on the NewsHour tonight, Israel's next move, math wars, and a 737 update.

JIM LEHRER: Elizabeth Farnsworth in San Francisco has the Israeli story.

ELIZABETH FARNSWORTH: There might have been a Mideast summit in Washington today but it never happened. Why not? We get the perspectives now of two Israelis who have been deeply involved in the peace process with the Palestinians. Dore Gold, now Israel's ambassador to the United Nations, was a foreign policy adviser to Prime Minister Netanyahu from June 1996 until last summer and was at that time directly involved in negotiations with the Palestinian. Uri Savir was Israel's chief negotiator with the Palestinians from 1993 to 1996 under a labor government. His book on those negotiations entitled "The Process" has just been published in the United States. Thank you both for being with us.Mr. Ambassador, what didn't Prime Minister Netanyahu come to Washington today?

DORE GOLD, U.N. Ambassador to Israel: Well, I think what the prime minister has been saying repeatedly is that we have to have an understanding with the Palestinians in order for this to work. The meetings in Washington were impossible to meet at this point because we have a gap between the parties. There are proposals out there for Israel to do certain size of further redeployment. Many of you have heard about different percentages--10, 11, 13. None of these percentages exist in the agreement. What we have to do now is go back to the Oslo agreements and have Israel decide to further redeployments, as was originally agreed in the Oslo agreements, and reaffirmed in letters of assurances that we received from former Secretary of State Warren Christopher and in other U.S. documents that were given to us.

ELIZABETH FARNSWORTH: Mr. Ambassador, was the key problem that the United States was sending their percentage, or that it was too high, or that it was an ultimatum? What was the key problem?

DORE GOLD: Well, I think there was a perception of an ultimatum that came out after the London meetings. It was probably an incorrect perception, but, nonetheless, the perception was out there and should have been handled. No prime minister of Israel can come to Washington under the cloud of the image of an ultimatum. What's important to remember is that the prime minister feels obligated to do whatever the Israeli government has done since the peace process began after the '73 war, to be responsible for Israel's security. Only he can decide the size of these further redeployments in the interim period. That's consistent with the Oslo agreements.

ELIZABETH FARNSWORTH: Uri Savir, why do you think the prime minister didn't come to Washington today?

URI SAVIR, Former Israeli Diplomat: Well, probably for the reasons that the ambassador's enumerated, but looking at it in terms of a longer process, I think there is a lack of direct talks with the Palestinians. I'd rather have the prime minister go to Gaza and Mr. Arafat meet him in Ramallah or elsewhere. It's there where the peace must be worked out. I think by stalling the process actually the sides and the prime minister invited United States in to take positions where it was not necessary. It's true that Israel has to decide unilaterally over the further redeployments. That was the Oslo agreements. And I'm happy that the Netanyahu government today accepts the Oslo agreements. Yet, by making the first proposal that was not sufficient, by stalling the process, by really creating a crisis of confidence between the two sides, they don't talk to each other enough, there's not enough secret diplomacy. There's a lot of public diplomacy, press conferences. One day we see Netanyahu, one day we see Arafat. They travel both to London in order to meet Sec. Albright. They should meet in the region, secretly work out the deals. The alternative would be to invite United States in even its interest and the United States making proposals, they are not going to be easy for either side.

ELIZABETH FARNSWORTH: Mr. Savir, what about the domestic political considerations in all of this, what are they for the prime minister, in your view?

URI SAVIR: Well, I'm not sure if I am the one to speak for the prime minister, but I think the general view in Israel is that actually the percentages in the West Bank or the security, stability in the West Bank are very much related to the stability of the coalition, and it's not an easy coalition to go towards an implementation of an agreement. A great part of our coalition these days is anti-Oslo. It's very difficult to implement Oslo to such a coalition. I would say in terms of permanent status talks, after we've overcome this crisis, which I believe is superfluous,if we are moving towards a national unity government, I cannot see progress otherwise.

ELIZABETH FARNSWORTH: Okay. And, Mr. Ambassador, I'm going to come back, by the way, to the question of how much the U.S. should be involved in this, but on the domestic political implication--or domestic political considerations at work here--explain that.

DORE GOLD: Well, to tell you the truth, I disagree with the supposition of the question, for one simple reason. I know how this works. The prime minister consults with the Israeli military. The Israeli minister of defense, Yitzhak Mortakai, the chief of staff, Amun Shatuk, come to the cabinet meetings with maps showing what Israel, what are the implications of these different size pullouts. You know, many times this whole question of 13, 10, 11, 9 percent sounds like a tedious debate over a tip in a restaurant. It isn't. Each percentage is 55 square kilometers. That's the area of Tel Aviv. So when you say to the Israeli army, well, somebody wants you to deliver 4 more percent, they say, where does it come from, does it come from the area over the Western Aquifer, where 40 percent of Israel's water supply comes when you don't have an agreement with the Palestinians over control of the Aquifer? Does it come from the Alone Plan area, where the strategic defense of Israel against Iraq is located? Do we have to neutralize an early warning station for observing movements of eastern air forces? So it has to come from somewhere, and the security establishment, as well as the government, is concerned that an excessive further redeployment, which is completely unnecessary under the agreements, will hurt the security of Israel.

ELIZABETH FARNSWORTH: And yet, Mr. Savir, when you were negotiating with the Palestinians, the same army did agree to larger pullouts earlier, right?

URI SAVIR: Well, the discussion with the army was over a third further redeployment because--

ELIZABETH FARNSWORTH: I'm sorry, what?

URI SAVIR: A third further redeployment. We're talking now about the second, and the third is the most critical one because this is where the agreement specified that Israel has to redeploy to specify security locations and to settlements. And there the talk was, as I say in the book that was published now about 50 percent of the West Bank would be needed by Israel in order to protect not just the security of Israel. To a large degree, it's our right to protect the settlements and the settlers, which is Israel's sole responsibility. So I'm not sure that everything is just the issue of the defense establishment. There is obviously politics involved. But, by and large, I would say that Israel needs to determine itself but to do it in a reasonable way because we have to understand that it's not just the percentages. It's not just the game between 9, 11, and 13. It's not just--security is not only a result of percentage in the West Bank. Security is also a result of a quality of relations that we develop with the Palestinians, that we develop with Jordan, with the rest of the Arab world, Israel's relations with the United States. All of that is also security and not just a percentage or two of the West Bank. And I think these relationships are now suffering from the current crisis and--

ELIZABETH FARNSWORTH: And, Mr. Savir, are you saying that precisely because the United States is so involved, there is not a more direct contact between the Israelis and the Palestinians? Is that part of what you're concerned about right now?

URI SAVIR: I think the opposite is true. I would like very much that this government to which I don't belong would bring about peace with the Palestinians as an Israeli. I don't think it is possible without direct secret negotiations. Because we have not seen direct secret negotiations, because it's too much finger pointing between Netanyahu and Arafat, because it's too much polemics right now in the press, this is what drew the United States in, and I hope that all sides, including our own government, will draw the right conclusions.

ELIZABETH FARNSWORTH: So do you--I'm just trying to get clear--do you think the U.S. should not be as involved as it is right now?

URI SAVIR: Given the present stalemate, there was no choice. The United States--every Israeli knows--cares about peace in the region, is a friend of Israel. This administration is friendly to Israel. There's no doubt about that. If we make progress with the Palestinians, they will not volunteer, they were never inside the negotiating room when I negotiated with my Palestinian partner or when Mr. Rabin negotiated with Arafat. When there is no negotiations, they will move in because these are American interests. We have common interests of Israel and the United States. What I'd like to see in the future is bilateral negotiations and a better Israeli-American coordination about the purposes of permanent status.

ELIZABETH FARNSWORTH: And Dore Gold, where do you come down on that, the need for the more face-to-face negotiations?

DORE GOLD: I partly agree with Mr. Savir. I believe the best way to reach peace, the way we did it with Egypt, and the way we did it with Jordan, and the way we did it with--we should do it with the Palestinians--is direct contact between Israel and our Arab neighbors. We helped and invited in the United States because we inherited a failing peace process, a peace process in which we had unprecedented--an unprecedented upsurge in terrorism in the heart of our cities, and we had hoped that American influence would lead to Palestinian compliance in fighting terrorism. Well, things have gotten a bit complicated. But I think if we take our three steps back and we think about where we want to go, we want to improve our relations, of course, with the United States, we want to re-establish our strategic coordination, but at the same time, we have to re-invigorate certain principles that have been forgotten, and that is that Israel must determine its own security, especially in these interim pullbacks.

ELIZABETH FARNSWORTH: Mr. Ambassador, is a compromise in the works right now on the 13 percent and other matters?

DORE GOLD: Well, the prime minister has been actively involved in trying to find creative solutions to break out of this impasse. A few weeks ago, he spoke about the idea if we can't reach those numbers, if our security establishment says that certain numbers are unsafe, maybe we can give quality instead of quantity, giving contiguity to the Palestinians, which addresses their concerns. We raised some of these ideas before. We raised new ideas in London that are presently being worked on. The prime minister is determined to break out of this impasse, to hold on and preserve and improve our close relationship with the United States, and try and take an impaired peace process in which we've had tremendous losses from terrorism, and make that peace process work.

ELIZABETH FARNSWORTH: And, Mr. Ambassador, is that what the prime minister will be discussing with Secretary of State Albright on Wednesday?

DORE GOLD: I'm sure they will be discussing some of the new ideas and the creative ideas that he has been working on, and I think he will be trying to improve the environment of our relations but he will also be insisting that certain principles be preserved. And that is in the interim period, not in the permanent status talks, in the interim period, that it is Israel that decides the size of these pullbacks. That's what's stated in the letter of Warren Christopher to us, and in other understandings we have, and that's what's in the Oslo accords that Mr. Savir negotiated.

ELIZABETH FARNSWORTH: I have a question for both of you. You have both been involved in negotiations with the Palestinians you have long experienced with Israeli politics and with the United States. Beginning with you, Mr. Savir, how--how serious is this current impasse between Israel and the United States? Are you worried about this?

URI SAVIR: I'm worried that we got to this point because I believe that the perception in the region is that there is friction between Israel and the United States. That perception weakens Israel's position. I don't think we had to get to that point. I think we have to draw conclusions. The first conclusion is that the government must determine where it's heading. Today I know where the Palestinians are heading--permanent status. I'm not sure that I know where the Israeli government is heading. On this there has to be coordination. There has to be coordination on the various issues related to permanent status, and then to negotiate with the Palestinian side. I think that an historical breakthrough to which President Clinton was a witness, was a party, to which the United States worked with us very thoroughly was late Prime Minister Rabin, there was a deep understanding between Rabin and Clinton, a deep friendship. And that was part of the perceptions of Israel's strength in the region. I think we have to go back to this type of relationship in an historical process, rather than what you see today, taking the historical process, micro managing. I don't think Israel's security will gain out of it. The fight against terrorism is an ongoing difficult struggle, and on the other side, negotiate with the Palestinians as partners, not issue orders, not issue ultimatums, understanding there has to be a basic equality with the Palestinians. It's moving towards permanent status based on equality. I think that this is really--

ELIZABETH FARNSWORTH: Excuse me. I just want to get Mr. Ambassador on this, and we don't have that much time. Ambassador Gold, your view on how serious this is.

DORE GOLD: Well, I think we have a common strategic aim with the United States, and that is to bring peace and security to the Middle East. The differences we have now are largely tactical. They're in interpretations of past commitments, interpretations of what's in Oslo. But we have a common strategic aim. Now we have problems that have occurred in the Middle East since Prime Minister Rabin shook hands with Yasser Arafat in 1993. At that time the Soviet Union had broken up. Today Russia is active across the Middle East, transferring technology to Iran, trying to help Iraq break out of sanctions, making new security contacts with Syria. Iraq was a defeated power then. Today, Iraq is trying to break out of the U.N. special inspection system in the Security Council, and is acting not like a defeated power but a power that's about to re-enter the Middle East balance. And at the time it was assuming that the Palestinians had made a strategic choice to leave aside the option of armed struggle, but over the last year we've had slip-ups by Mr. Arafat, including a green light to Hamas to assumeterrorist attacks against Israel. So we have to improve our strategic partnership to address both these larger regional and local problems in the Middle East. If we address them and we address them as allies together, we can make the peace process work. If we have tactical battles over the percentage of further redeployments, forgetting the commitments that were made in the past, that Israel must decide these further redeployments, then I think we're going to be in trouble.

ELIZABETH FARNSWORTH: Okay. Thank you both very much for being with us. FOCUS - MATH WARS

JIM LEHRER: The battle over the best way to teach mathematics. Lee Hochberg of Oregon Public Broadcasting reports.

KAREN EASON, Teacher: Willie the Wizard has a special hobby, and it's growing huge vegetables.

LEE HOCHBERG: It's the start of a story problem not unlike the ones from fifth grade math a generation ago. But listen further.

KAREN EASON: You're going to pick a strategy, so you can find out what the answer is. Should you just decide on one strategy by itself?

LEE HOCHBERG: It's math where there is no one way to solve a problem, where phrases like "essentially correct," seemingly out of place in the finite world of math, appear on the board. It's the latest version of new math, and 10 million American kids in 40 states like these at Fairplay Elementary in Corvallis, Oregon, are immersed in it.

[KIDS SOLVING PROBLEM]

LEE HOCHBERG: In this new math students often work in groups to figure out problem-solving strategies. They write up posters that describe varying strategies, and present them to the class. They use calculators and do experiments. The process of figuring out problems is more important than the answer.

LEE HOCHBERG: You didn't ask anybody the answer.

KAREN EASON: No.

LEE HOCHBERG: Teacher Karen Eason.

KAREN EASON: Answer is a product of what you have done before, but it's not the crucial thing. The crucial parts of it is--is the decision on what is it asking you, what are the best strategies to use, and then to be able to--to talk about why.

STUDENT: This appears to be a measurement problem, and it's using Algebra. The formula we used was T + 3 = N.

LEE HOCHBERG: The teaching style was developed in 1989 by the National Council of Teachers of Mathematics, or NCTM. Although there never was any scientific research conducted on the effectiveness of this style of teaching, the NCTM hoped it would better prepare American students for the modern adult workplace.

JIM Specht heads the NCTM's Oregon chapter.

JIM SPECHT, National Council for Teachers of Math: There are no ads in the paper for people who are highly proficient at long division with big remainders. Employers want employees who can communicate effectively on how they solved the problem.

LEE HOCHBERG: But in Oregon and elsewhere the new math has been tagged with such pejoratives as "fuzzy math" and "rain forest math" by parents who say it's weak on the basics.

PARENT: I see many, many children, you could throw that thinking at them, and they'd be extremely confused.

LEE HOCHBERG: Math wars have ignited, as at this recent meeting to promote new math in Beaverton, Oregon, a suburb of Portland.

SPOKESPERSON: Transforming mathematics problems is urgently needed. If we haven't learned to value that there are many, many, many different ways that problems can be solved, then it is the very notion of democracy that's at risk.

PARENT: What CPA is going to use that to compute my taxes? Is my banker going to be using that particular type of mathematics? You know, you have to think about math in the real world.

SPOKESPERSON: I think a lot about it. In fact, one--

LEE HOCHBERG: And in cities like Corvallis, Oregon, where this new math is already in place, parents like Dave Williams said the experimentation adds up to confusion.

DAVE WILLIAMS, Parent: Well, in the meantime, my children have lost. They only get one chance at a useful education. And all that experimentation ruins it for many children.

LEE HOCHBERG: Williams, an engineer by training, who works at Hewlett Packard, put five children through Corvallis schools. But he complained to school administrators when his son struggled with the verbal requirements of new math.

DAVE WILLIAMS: I felt like there was more concern over how the answer was going to be punctuated, rather than whether or not the answer was correct. The write-up seemed to be more important than the math.

LEE HOCHBERG: Three years ago the school district allowed Williams and other concerned parents to create a new back-to-basics school nearby.

TEACHER: Multiples of three. Okay, ready, let's go. Three, six, nine, twelve, fifteen, eighteen, twenty-one.

LEE HOCHBERG: At Franklin Elementary the emphasis was put back on computation skills and speed and accuracy.

TEACHER: Okay. You say it. I'll write it. Six times one.

STUDENTS: Six.

TEACHER: Six times two.

STUDENTS: Twelve.

DAVE WILLIAMS: There really is very little way to learn that, other than to memorize. You know, seven times five is thirty-five. And you just memorize it, and you do it over and over and over again until, you know, forty years later, or whatever the number of years later, you can still do that.

LEE HOCHBERG: But there was a problem. When it came time to do state testing, the back- to-basics students at Franklin School did poorly, scoring lower than the new math pupils at Fairplay Elementary. In fact, no Franklin student met the Oregon state standard on last year's math achievement test. That test is weighted towards being able to answer questions in writing. Franklin principal

JIM Schweigert says his students had only had a year of studying that new method.

JIM SCHWEIGERT, Principal: If you look at the multiple choice portion of the math assessment from last year, students did very well on that. Right now the critical thing is that teachers are learning how to provide instruction for that, which is a very new assessment.

LEE HOCHBERG: Test scores have been used by both critics and opponents of new math. Critics point out that in the recently released third international mathematics and science study of 21 nations American 12th graders beat out only Cypress and South Africa. But new math advocates answer that U.S. fourth graders--many of whom have been doing new math since kindergarten--scored above average in the same test. In California, where new math was implemented in 1992, students have performed poorly on national achievement tests. Some blamed reduced school funding and increased foreign immigration. But others blamed the curriculum. State officials agreed with that analysis and last December reverted back to a traditional curriculum.

TEACHER: And we're going to go to 6, F1, enter, enter.

LEE HOCHBERG: Math teachers, like the NCTM's

JIM Specht, say a return to the traditional teaching methods they derisively call grill and kill is not the solution. They say such teaching might work on those who learn step by step but ignores other types of learners, often girls and minorities.

JIM SPECHT: Some students learn the best when they can interact with others, teacher to student, student to student, like that. Some are audio learners; some are visual learners. They need a model where they can move things around. You can't just ignore those people. They have to be served. And curriculums and programs that engage the largest number of students are the programs we should be using.

LEE HOCHBERG: But critics say those are the very students new math won't reach, the estimated 20 to 40 percent of students classified at risk. University of Oregon math educator Doug Carnine is co-author of a traditional math text. He says children of poverty need a structured approach and can't follow process and language heavy new math.

DOUG CARNINE, Math Educator, University of Oregon: The real danger is using that kind of approach with at-risk kids, who are likely to fail in school. They don't have the support at home and the help at home to learn those essential foundation skills. If they don't get it, they're going to fail.

LEE HOCHBERG: And critics say in the effort to reach more kids, math textbooks have become a smorgasbord of colored graphics and multiculturalism, equations and math learning taking a back seat.

SEN. ROBERT BYRD, [D] West Virginia: I have to go a step further and call it wack Algebra.

LEE HOCHBERG: One text drew scorn from Sen. Robert Byrd on the floor of the U.S. Senate.

SEN. ROBERT BYRD: Page 5 of this same wondrous tome begins with a heading written in Spanish, English, and Portugese, a map of South America, and an indication of which language is spoken where. Pythagorus would have been scratching his head by this time. And I confess so was I.

LEE HOCHBERG: The Beaverton, Oregon, School District has just approved a different new math curriculum called "Mathland," which its publisher estimates half of California elementary school kids have used. Mathland has several colorful teacher aids but no student text to take home. Mathland's Richard Lefingwell says that's good for students.

RICHARD LEFINGWELL, Mathland: What it gets the students to do is it gets them to focus on what is really the activity and problem at hand, instead of trying to say let me look in the text and see where the clue is, let me look in the text and see where the text is telling me to go. The fact that we do not have a text makes the students focus on what's the activity.

LEE HOCHBERG: But without a text, students rely heavily on teachers to help learn the new math methods. Beaverton school board member John Wilkens voted against a plan to institute Mathland without intensive teacher training.

JOHN WILKENS, Beaverton School Board: That's training that's different from the traditional math of two times two is four or the basic computational skills. That requires talent that a lot of teachers now don't have the skills to do.

LEE HOCHBERG: School administrators later agreed to spend an extra million dollars for accelerated teacher training. And they also agreed to offer students a choice between traditional and new math programs. Wilkens says for schools that can afford it that may be the smartest way to move forward with new math.

JOHN WILKENS: In the absence of that option I would be very concerned about implementing the program because I think that the track record is not out there long enough. The kids would still learn math, but would they learn math as well? I don't think so. We need to have students that think. We need to have students that understand conceptually, and the majority of our students aren't doing that well. And that's what we're responding to.

STUDENT: For 1 percent you must move the decimal over two times.

LEE HOCHBERG: With the old math and new math camps growing more polarized, there appears to be no quick solution to the country's math problem. UPDATE - SAFE TO FLY?

JIM LEHRER: Finally tonight the safety of Boeing 737's and to Phil Ponce.

PHIL PONCE: Since the explosion of TWA Flight 800 nearly two years ago, aviation regulators have focused on faulty wiring as one of that disaster's most likely causes. Flight 800 was a Boeing 747. Now, the Federal Aviation Administration has ordered the immediate inspection of older Boeing 737's to check their wiring. This is the closest the FAA has come to grounding an aircraft model in almost 20 years. And here to tell us about it is FAA Administrator Jane Garvey.Administrator Garvey, thank you for coming and welcome.

JANE GARVEY, FAA Administrator: Thank you very much.

PHIL PONCE: What does your order say?

JANE GARVEY: Well, it says pretty much what you have just described, and that is it calls for the immediate inspection of the older 737's. That's those airplanes that have over 50,000 flight hours. And it really says that the inspection must take place before the planes return to passenger service.

PHIL PONCE: And what was it that made the order--that caused you to make the order immediate? Was there a specific event, or events that prompted the immediacy of this?

JANE GARVEY: Well, as you pointed out, we have been focused on wiring since the TWA accident. And we did complete the inspections on 747's. Our next threshold, if you will, was to ask Boeing to take a look at the--or to do a study for us on the older aircraft--737's. They were in the midst of that when Continental had a fuel leak that caused us some concern. And so just about last Thursday we issued a directive asking for the inspection of the 737's. On Saturday we found another such incident, and that really caused us to say we really need to have all of these planes inspected now and inspected before the return to service.

PHIL PONCE: And that Saturday incident, can you give us a little more detail on what it is you discovered?

JANE GARVEY: We really discovered abrasion in the most extreme sense, that is, the wires were bare, and that's a tremendous cause of concern for us. So we asked for the inspections of all the planes. And I want to say it happened very quickly. We really heard from Continental last Monday. We issued the directive on Thursday, and then we issued another directive very early Sunday morning.

PHIL PONCE: Well, now you brought a model that gives an idea of what it was that--what it was that you were finding and also what you're concerned about. Explain to us what it is you have and what the problem is.

JANE GARVEY: Well, this really is an illustration, and this really is the conduit. This is the conduit that you can find in the--connected with the wiring. Here's the wiring here, and if you--as you can see--this is really the Teflon that covers the wiring, that gives it a kind of protection.

PHIL PONCE: That white piece of tape.

JANE GARVEY: The white piece.

PHIL PONCE: That's the Teflon.

JANE GARVEY: Exactly. And when the Teflon is worn away and when it is exposed, then you can have the kind of bare wiring that you can see right here. So what we're--

PHIL PONCE: And you can actually see the copper wiring coming through the middle.

JANE GARVEY: That's right.

PHIL PONCE: That little spot right there.

JANE GARVEY: That's right.

PHIL PONCE: What causes that wire to corrode like that, the coating on the wire?

JANE GARVEY: It's really a vibration. And, remember, this is many, many thousands of hours of airplane travel. And the vibration that can occur can cause that Teflon to wear away and then expose the wiring. And our great concern, of course, is that either holes are burned through the conduit and sparks can occur and you can have either a fire or an explosion. So that's why it's a cause of concern.

PHIL PONCE: Back up a second. This model that you're showing, that's plastic, but in real life this is actually aluminum.

JANE GARVEY: That's right.

PHIL PONCE: So what happens is that bare wire can cause an arc--

JANE GARVEY: That's right.

PHIL PONCE: An actual spark between the wire and the inside--

JANE GARVEY: That's exactly right.

PHIL PONCE: --of the aluminum tubing.

JANE GARVEY: That's exactly right.

PHIL PONCE: And that mixed with the fuel obviously can cause a fire and explosion.

JANE GARVEY: That's right. That's right. And so what we're asking the mechanics and the inspectors to do is to look at all the wiring to make sure that the Teflon is in place; if it's not to replace it and then to put on another Teflon sleeve, if you will, a sleeve that will go over that and then they slip it back in the conduit.

PHIL PONCE: What are your findings showing? How many planes have you looked at, and how many of them have had--have shown evidence of this kind of corrosion?

JANE GARVEY: Well, first of all, we've been very impressed with how quickly the air carriers have dealt with this problem with us. And they're really more than halfway through the fleet right now, which I think is very good news. We've got about 96 planes that have been inspected. And the pattern is holding true, the pattern that we saw over the weekend, and that is about half of them are showing some signs of abrasion. So this was the right thing to do. This was the right action to take.

PHIL PONCE: So about half of the fleet, which numbers roughly 180, half of them have been inspected?

JANE GARVEY: That's right.

PHIL PONCE: And half of those have shown a problem, is that what you expect of that--

JANE GARVEY: Well, we think--

PHIL PONCE: It strikes some people as high.

JANE GARVEY: Well, now the abrasion will vary in severity, so some of the abrasion is very, very minor. Some of it is a little bit more cause of concern, but this is the pattern that we expected. And this is holding true to form. So we'll see what--as we continue with the inspections--what else we're able to learn.

PHIL PONCE: How old are the planes that are affected? Because obviously this is not the entire 737 fleet. You've got--you've got, what, more than a thousand U.S. registered 737's.

JANE GARVEY: That's right.

PHIL PONCE: This just--this order is aimed at the older ones. And how old are they?

JANE GARVEY: They're about 50,000 and above in flight hours and looking at the numbers, they are planes that are generally older than 16 years old.

PHIL PONCE: What do you want the public to realize as far as the safety of flying in these older planes once they're inspected and once they're fixed?

JANE GARVEY: Well, I, first of all, want them to understand, as I think they do, that we're taking this action because of the safety of the traveling public. That's our top priority. We are focused on that segment of the fleet that has--that is the oldest. It's the segment of the fleet that we've had some concern about. And so we're taking the steps that are necessary. And it's a small portion of the fleet, I might add. It's only about 13 percent. But we're taking the steps with the airlines to make sure they're inspected, to make sure that they're repaired, and to make sure that they're back in service.

PHIL PONCE: Now, you have expanded the order to include newer 737's, yes? Which ones?

JANE GARVEY: That's right. That's the fleet from about 40,000 hours to 50,000. So we started with 50,000 and above. We now lowered that a bit to 40,000.

PHIL PONCE: And how long is it going to take before all these inspections are completed?

JANE GARVEY: We have about seven days for the airlines to do that, but they're well underway. Some of the airlines have begun those, obviously focusing on the older ones first. But they have already begun on the 40,000. So they'll be well on their way in the next day or so.

PHIL PONCE: Some FAA observers are saying that this time around the FAA has acted--has acted unusually quickly. Is this part of a new posture on the FAA's part to be more pro active, or how would you describe it?

JANE GARVEY: Well, I think it is the FAA being pro active. I think it's taking steps, where it's necessary, to really raise the bar on safety. It's very important for all of us. And we take our job seriously. We want to do it the right way. And I think we're taking good, strong, pro active steps to ensure the safety of the traveling public.

PHIL PONCE: Administrator Garvey, thank you for being with us.

JANE GARVEY: Thank you. RECAP

PHIL PONCE: Again, the major stories of this Monday, SBC Communications said it would buy Ameritech for $62 billion in stock. The combined company will control 1/3 of the nation's telephone lines. The Postal Rate Commission agreed to raise the cost of a First Class stamp from 32 to 33 cents, and the government of India announced it conducted three underground nuclear tests. We'll see you on-line and again here tomorrow evening. I'm

JIM Lehrer. Thank you and good night.