article

Federal Telecom Lawmakers Have Staying Power

Posted: 12/1998

Regulatory News

Federal Telecom Lawmakers Have Staying Power

By Kim Sunderland

All four of the top telecommunications policy makers were voted back into office Nov.
3, retaining their committee seats and solidifying a Republican-led agenda for the 106th
Congress.


Bliley

With these incumbents holding on to their seats, more of the same in telecom can be
expected in Congress during 1999, with some of the biggest issues likely to be slamming,
an assault on the Telecommunications Act of 1996 led by the Bell companies and aggressive
oversight of the Federal Communications Com-mission (FCC).

While the balance of power in the Senate remained at 45 Democrats and 55 Republicans,
Democrats in the House, in fact, gained five seats.

One Democratic senator was able to maintain his stature. Sen. Ernest "Fritz"
Hollings of South Carolina, ranking minority member on the powerful Senate Commerce
Committee, clung to his seat with 52 percent of the vote. Hollings, 76, begins his sixth
full term after defeating Republican Rep. Bob Inglis.


Hollings

Holling’s involvement in communications regulation issues has garnered him financial
support from media tycoon Rupert Murdoch, considered by many Capitol Hill insiders to be a
rarity for a Democrat.

Also in the Senate, Commerce Committee Chairman John McCain (R-Ariz.) easily tromped
his Democratic opponent Ed Ranger, an attorney, with 68 percent of the vote. McCain, first
elected to the Senate in 1984, is rumored to be considering a presidential run in 2000.

McCain is heavily against the practice of slamming and, along with Sen. Hollings,
introduced the Senate version of anti-slamming legislation in February. While it was
adopted by the full Senate, a compromise could not be worked out with the House version in
the 105th Congress. Following that defeat, McCain in late October issued directives to the
FCC to impose fines and penalties on any companies found to commit slamming, which is
changing a subscriber’s long distance provider without authorization.

"If the commission fails to do so," McCain warned this fall, "[slamming]
will be one of the [Commerce] Committee’s first priorities next year."

In the House, the top two Commerce Committee members easily maintained their positions,
solidly trouncing opponents in their respective states.

Commerce Committee Chairman Tom Bliley (R-Va.), who will begin his 10th term in 1999,
ran unopposed, garnering 74 percent of the vote in his state. He has said that one of his
committee’s chief challenges will be to make sure the FCC implements the Telecom Act as
Congress intended. Bliley plans to continue "aggressive oversight of the FCC, and
will not let up until the [telecom] law is properly implemented."


Tauzin

Rep. W.J. "Billy" Tauzin (R-La.), House telecom subcommittee chairman, also
ran unopposed in his state. Continuously in the telecom spotlight, Rep. Tauzin will rejoin
Sen. McCain in the fight against slamming. As the sponsor of the House’s slamming bill,
H.R. 3888, Tauzin was vocally disappointed when a House and Senate compromise could not be
reached before Congress adjourned, and his press secretary blamed last-minute opposition
by long distance companies.

Tauzin and Commerce Com-mittee ranking member Rep. John Dingell (D-Mich.) will
resurrect their InterLATA Communication Improvements Act, which proposes limiting the
FCC’s authority to block the Bell companies from offering their customers long distance
service, turning over most of that decision-making to state utility regulators. The bill
also would allow the Bells to transmit international calls and data without regard to
artificial boundaries called LATAs (local access and transport areas).


McCain

Also on the Commerce Committee, incumbent Rep. Rick White (R-Wash.) lost his bid for a
third term to Democrat Jay Inslee, nabbing 43 percent of the vote to Inslee’s 51 percent.
Inslee, a former House representative, may not fill the vacated committee seat because
House rules dictate that he could be assigned to another committee.

Although not a Commerce Committee member, but on the upside for slamming, Rep. Bart
Gordon (D-Tenn.) won his race with 55 percent of the vote.

Access Charge Reform’s Time Has Come, Carriers Say

By Kim Sunderland

The current interstate access charge system is not helping local competition flourish,
many competitive telecommunications carriers say.

Respondents filed comments Oct. 26 to the Federal Communications Commission’s (FCC’s)
request to "update and refresh" its record on access charge reform and price cap
performance review (Common Carrier dockets 96-262 and 94-1, respectively). The FCC in last
year’s access charge proceeding adopted a market-based approach that basically relies on
competition in the exchange market to drive down prices.

But "unexpected setbacks" in the FCC’s local competition rules, coupled with
roadblocks set up by incumbent local exchange carriers (ILECs), have "thwarted the
commission’s desire to rely on local competition to unleash competitive pressures to lower
switched access rates," according to the Competitive Telecommunications Association’s
(CompTel’s) filing.

"The current system distorts the marketplace and amounts to nice, warm funny money
for the ILECs and the BOCs (Bell operating companies)," said CompTel President H.
Russell Frisby Jr. in the filing. "We have to stop playing around with this
issue."

Among the insights the FCC sought to gain in this round of comments included whether it
should change its price cap formula to force down access charges faster, and whether LECs
should have access charge pricing flexibility.

The remedy, according to CompTel, is for the FCC to set specific deadlines at which
time access charges must be set at cost-based levels. If the market isn’t able to reduce
access charges to efficient levels, they must be reduced by prescription, the association
said in its filing, which also outlines a six-stage prescriptive transition plan.

"Competition that is robust and widespread enough to put downward pressure on
access charges has not developed anywhere in the nation, nor is it likely to anytime
soon," AT&T Corp. wrote in its filing. "The [FCC] should acknowledge this
reality" and speed up prescription.

And, AT&T stated in its filing, the FCC should not adopt the pricing flexibility
proposals submitted by Bell Atlantic Corp. and Ameritech Corp. because, in light of the
fact that competition still doesn’t exist, these proposals are "grossly
premature."

In its comments, AT&T lawyers also went so far as to suggest that the FCC not
approve any Section 271 applications by the BOCs "as long as access charges remain
above cost, nor should it permit the LECs to merge with other LECs."

The United States Telephone Association (USTA) supports the market-based approach, but
said the FCC still needs to address the recovery of historical costs and implement a
universal service plan. And the association says the prescription plan by the Big Three
long distance carriers isn’t justified.

"Access rates," says Linda Kent, USTA’s associate general counsel, "have
been steadily falling since price-cap reform was introduced."

Reply comments on this issue were due at the FCC Nov. 9.

Slamming Bill Dies, FCC Named Overseer

By Kim Sunderland

A compromise bill protecting consumers from the un-authorized switching of their
service provider got strangled Oct. 21 before it ever reached the Senate floor.

The full House approved slamming bill H.R. 3888, sponsored by Rep. W.J.
"Billy" Tauzin, (R-La.), Oct. 12 following Senate approval of its version, S.
1618, earlier this year. While the versions were radically different, concessions were
being hastily negotiated all week between House and Senate members attempting to get a
compromise bill to a conference committee before Congress adjourned for the year.

But that didn’t happen and telecom lawmakers are ticked off.

"We should never have been in this position," spouted Tauzin’s press
secretary Ken Johnson when Congress adjourned. "Without several long distance
companies voicing opposition at the last minute, we could have had a bill weeks ago."

AT&T Corp., among others, was concerned with such issues as fines and penalties
that would be imposed against a carrier for slamming. Such a provision existed in both the
House and Senate versions as a surety bond, a required upfront payment from telecom
carriers and switchless resellers to the Federal Communications Commission (FCC) for any
slamming fines or penalties. The provision was dropped from the House version, but not
from the Senate’s.

The long distance carriers and resellers argued the provision was unfair to any company
trying to compete in the local market, and instead supported self-regulation.

"They had a chance for [self-regulation] with the House bill," Johnson says.
"They would have had a place at the table when a voluntary code of conduct was
developed."

But now that won’t happen either. Instead, Tauzin, chairman of the House telecom
subcommittee, and Commerce Committee Chairman Sen. John McCain, R-Ariz., will give a green
light to the FCC to "hammer the slammers," a Capitol Hill source says.

The telecom lawmakers will instruct the FCC to do whatever it takes to prevent
slamming, including fines and penalties, according to the source.

And while earlier industry haggling helped run out the clock for a compromise, Senate
holds on the House version also held it up.

For varying reasons, H.R. 3888 fought against holds placed on by Republican Sens. Frank
Murkowski of Arkansas and Susan Collins of Maine, and another this week by Sen. Wendell
Ford, D-Ky.

U.S. Supreme Court Gets on Top of Telecom

By Kim Sunderland

The fate of local telephone service competition now rests in the hands of the U.S.
Supreme Court.

In two hours of oral arguments Oct. 13, the High Court got a hefty whiff of the
complexity of achieving local competition, which has been disabled by a wrath of nonstop
legal battles.

And while opening the local market to competition nabbed high priority in the
Telecommunications Act of 1996, the Supreme Court justices now know that the road to get
there will be anything but smooth.

In reviewing the Telecom Act’s rules on interconnection pricing, pick-and-choose
contracts and unbundled network elements (UNEs), the High Court will decide whether to
reinstate federal rules–vacated by a federal appeals court–that were designed to speed
up local competition.

Its far-reaching decision will affect consumers, state and federal lawmakers and the
telecom industry’s future, sources say.

Specifically at issue is whether the Federal Communications Commission (FCC) exceeded
its authority under the Telecom Act in setting up the rules promoting local competition.

In its Aug. 1, 1996, Report and Order (Common Carrier Docket No. 96-98) implementing
the act’s local competition provisions, the FCC adopted rules on new local market entry,
including what the local exchange carriers (LECs) could charge new entrants to
interconnect with their equipment. The FCC told state utility commissions to use the total
element long-run incremental cost method (TELRIC) to determine those costs.

In mid-1997, however, the LECs and various state utility commissions said the FCC’s
order was out of line because it usurped the powers of the states. The 8th U.S. Circuit
Court of Appeals agreed and set aside massive segments of the FCC’s order.

The federal government supported the FCC’s order yesterday, as did such hopeful local
market entrants as AT&T Corp. and MCI WorldCom Inc. Opposing the rules were state
utility commissions and the LECs. In all, eight cases were consolidated in an appeal of
the 8th Circuit’s ruling, which the High Court also is reviewing.

The FCC, according to Solicitor General Seth P. Waxman, has been authorized by Congress
through the Telecom Act to make local competition a reality.

The Telecom Act "does not take away the states’ rate-making role," Waxman
told the Court. "They still have that."

State regulators beg to differ.

Their interpretation of the FCC’s rules, says Diane Munns of the Iowa Utilities Board,
is that the FCC shouldn’t get involved in pricing unless arbitration breaks down between
state regulators and local market rivals. If a state "fails to act," then the
FCC should step in.

Justice Antonin Scalia was skeptical of the premise that 50 states set their own
standards in implementing local competition provisions.

But there’s room for the states to do that, said Laurence Tribe on behalf of the LECs.
"The states must implement a general federal standard," he said, because the
states are in the best position to determine "just, reasonable rates."

The Supreme Court is expected to issue an opinion by the end of its term in June 1999.

BellSouth Stumbles Again in Louisiana Long Distance Quest

By Kim Sunderland

If BellSouth Corp. would have listened the first time, the company might have been
approved this time to provide in-region, interLATA (local access and transport area)
services in Louisiana, the Federal Communications Commission (FCC) ruled Oct. 13.

The regional Bell operating company (RBOC) failed six of the Telecommunications Act of
1996’s 14 competitive requirements in this application, better than its first request to
provide the same services in Louisiana eight months ago.

In its order, FCC said it "expects applicants to remedy deficiencies identified in
prior orders before filing a new Section 271 application, or face the possibility of
summary denial."

But, according to the FCC, BellSouth didn’t listen.

While Louisiana regulators have determined twice that BellSouth has opened its network
to competitors, the FCC still sees problems in BellSouth’s operations support systems
(OSSs). "If not for deficiencies in BellSouth’s OSS, [it] would satisfy the
requirements of … local transport and services available for resale," the FCC noted
in its order.

BellSouth fails to provide competing carriers with nondiscriminatory access to both its
OSS functions and unbundled network elements (UNEs), the FCC stated, and the company
offers collocation as the only method for competitive LECs to combine UNEs.

The FCC also noted that BellSouth’s EDI flow-through performance has deteriorated since
the company filed its previous Louisiana application, bringing about other compliance
problems regarding interconnection, local loop transmission, switching, directory
assistance services, operator call completion services and number portability.


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