Posted: 12/1998
The Telecom Act--It's Working
By Cronan O'Connell
As you leaf through this issue of PHONE+, the Association for Local Telecommunications Services (ALTS) is poised to open its Annual Convention and Trade Exposition--its largest ever--Dec. 2-4 in Las Vegas, drawing thousands of attendees from the competitive local exchange carrier (CLEC) industry as well as from among the many manufacturers and vendors who serve them.
We have good reason to be excited, considering how far we've come. Thanks to the Telecommunications Act of 1996, we've created almost a $6 billion competitive industry that has doubled in size every year since passage of the act, and now is providing choice to customers throughout the nation.
The success of the Telecom Act and the CLECs is tangible and measurable:
- As we approach 1999 and the third anniversary of the act, there are more than 100 CLECs doing business in the United States.
- Twenty of these companies are publicly traded, roughly twice the number that were public as recently as a year ago.
- To date, the CLECs have raised nearly $20 billion on Wall Street--$17 billion of this amount just since the act--and invested $11 billion in local networks.
- The CLECs' robust local networks consist of 80,000 miles of fiber and 700 digital voice switches, including 350 data switches.
- Many CLECs are full-fledged "integrated" providers that offer the complete range of local voice services and features. Just as important, they are leaders in asynchronous transfer mode (ATM), frame relay and Internet services, as well as a new generation of products such as digital subscriber lines (DSLs).
The benefits of the CLECs' accomplishments are widespread. In hundreds of cities, businesses can choose from multiple CLECs for local service.
In sum, the CLECs have established a phenomenal track record, creating an all-new industry--and an all-new network and service infrastructure. Given the momentum of this engine, it's hard to conceive that anybody would want to slow it down. Yet there are opponents who oppose the Telecom Act and the principles of local competition because it actually works.
The principal critics are the incumbent local exchange carriers (ILECs). Their lament: The Telecom Act is not what they had imagined. The law requires sustained and robust local competition vs. what has been presented in their Section 271 applications for provision of in-region long distance services thus far.
Let's set the record straight. The ILECs asked for this law. In 1994 and 1995, they were among the main "movers and shakers" for legislation that would supercede the authority of the Modified Final Judgment (MFJ), and roundly praised its enactment on Feb. 8, 1996. The regional Bell operating companies (RBOCs) knew the rules from the outset because they agreed to them: No in-region long distance until they first opened their local markets to competition.
Yet despite what they said in support of the Telecom Act during the legislative process, the ILECs have spent most of their energy, futile to date, trying to skirt around the law:
- The RBOCs have filed repeated Sec-tion 271 applications with the Federal Communications Commis-sion (FCC), even when they knew that they had failed to meet the standards of the act.
- They filed so-called Section 706 petitions requesting relief from sections 251, 252 and 271 requirements for their advanced data services, even though the advanced services are offered over the same bottleneck facilities as voice traffic.
- The RBOCs are seeking to eviscerate accounting rules, which reveal cross-subsidies, and detailed network information as shown in the Automated Reporting Management Information System (ARMIS) reports.
- They are seeking pricing flexibility that would allow them to underprice competitors.
- Already, the RBOCs have set prices for DSL services below the sum that competing CLECs must pay for the loop and collocation.
- The RBOCs' pending mergers are designed to extend the geographic reach of their monopoly over the local market, while they simultaneously resist efforts to open those local markets.
- A bill, H.R. 4801, was introduced Oct. 9 that would eliminate all pro-competitive requirements of the act.
On the eve of the third anniversary of the Telecom Act, the ILECs reportedly are preparing their biggest-ever policy coup: a blatant attempt to overturn the act itself. The ILECs' motive is completely transparent: Having failed in their efforts to sidestep the law, they want to do away with it. As this new challenge surfaces, regulators and policymakers need to be more vigilant than ever.
The act works because both the state and federal regulators are ensuring the type of implementation envisioned by Congress. Pro-competitive Section 271 decisions by the FCC and the Texas Public Utilities Commission and recent pro-competitive commission staff reports in Georgia and California have sent the same unmistakable signal to the Bells: First open the local markets to competition, then apply for in-region long distance.
The Telecom Act is working--let's keep it in place. Thanks to the act and to the strong stand of state and federal regulators, the CLECs--and local competition--have come a long way, bringing choice in local telecommunications and advanced data services to American customers. Let's not imperil this progress by letting the ILECs bully the industry--and customers--back under monopoly rule.
Cronan O'Connell is vice president, industry affairs for the Association for Local Telecommunications Services (ALTS), the Washington-based trade group representing competitive local exchange carriers (CLECs). She can be reached via e-mail at coconnell@alts.org or by phone at +1 202 969 2595.
ROUNDTABLE
On access charge reform ..."The [Federal Communications] Commission should examine
universal service and access charge reform together, since they are critically
linked."
--Sherry F. Bellamy, president and CEO, Bell Atlantic-Maryland
"It is unclear whether the market-based approach can ever be effectively revived.
As a result, access charges remain significantly above their forward-looking costs. To
remedy this situation, the FCC should set specific deadlines by which access charges must
be set at cost-based levels."
--Genevieve Morelli, executive vice president and general counsel, Competitive
Telecommunications Association (CompTel)
"Access charge reform is one of the harder problems in telecommunications
deregulation. The most important factor is to set the ground rules now so that we get
facilities-based access competition in place and then market pricing can reign."
--Solveig Singleton, director of information studies, CATO Institute
