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MAY 20, 1999, THURSDAY

SECTION: IN THE NEWS

LENGTH: 3360 words

HEADLINE: PREPARED STATEMENT OF
HONORABLE BOB ROWE
CHAIRMAN
NARUC TELECOMMUNICATIONS COMMITTEE
FIRST VICE PRESIDENT, NARUC
COMMISSIONER, MONTANA PUBLIC SERVICE COMMISSION
BEFORE THE HOUSE COMMERCE COMMITTEE
TELECOMMUNIATIONS, TRADE AND
CONSUMER PROTECTION SUBCOMMITTEE
SUBJECT - FEDERAL COMMUNICATIONS COMMISSION REAUTHORIZATION

BODY:

Mr. Chairman and Members of the Committee:
My name is Bob Rowe. I am Chairman of the Telecommunications Committee of the National Association of Regulatory Utility Commissioners (NARUC), First Vice President of NARUC, and a Commissioner on the Montana Public Service Commission. NARUC is the national organization that represents state public service commissions from all fifty states, the District of Columbia and the United States Territories. Since passage of the Telecommunications Act of 1996, NARUC's member states have been immersed in implementation efforts nationally and in their own states. We pledge to continue to work constructively with the Congress, the Federal Communications Commission and other federal agencies in an effort to maintain a fair balance between various industry and consumer interests.
Members of the House Commerce Committee have focused extraordinary and constructive attention on FCC and state actions to implement the 1996 Act. Many of this Committee's members have worked closely with utility commissioners from their own state and with NARUC.
My testimony will cover the following areas:
1. The NARUC Telecommunications Committee's work;
2. State utility commission restructuring, which in some respects may serve as a model for FCC efforts;
3. FCC-state commission cooperation; and
4. Initial comments on the FCC reorganization plan previously presented to you.
In addition, Commissioner Bill Gillis of Washington State will discuss state-FCC work on consumer protection and education. Commissioner Irma Muse Dixon of Louisiana will discuss?. Commissioner David Rolka of Pennsylvania will discuss the process of federal-state "jurisdictional separations," and will offer several observations based on his experience in Pennsylvania.
I. THE NARUC TELECOMMUNICATIONS COMMITTEE WORKS TO IMPLEMENT CONGRESSIONAL INTENT.
Congress wisely adopted a "cooperative federalist" approach in the Telecommunications Act of 1996. You gave the FCC and the state commissions specific direction and authority in a number of areas including terms and conditions for carrier-to-carrier arrangements, universal service, deployment of advanced technology, and consumer protection. You reserved to the states authority over intrastate rates and service.
The NARUC Telecommunications Committee is the focal point for state implementation of the Telecommunications Act. It is a forum for sharing information, and takes the lead on much interaction with the Congress, the FCC, and the Administration.
My general approach is to identify ways to move forward within the policy framework developed by you in the Telecommunications Act and by state legislatures in companion statutes across the country. NARUC passes about thirty telecommunications resolutions each year, and also sponsors a range of research projects, working closely with the National Regulatory Research Institute (NRRI), located at The Ohio State University. Most of our work concerns competition, universal service, technology, or consumer protection.
I like to produce "deliverable products" which help advance both agency and industry implementation of Congressional intent. Several examples, of many, are:
1. Policies on Pricing and Universal Service for Internet Traffic on the Public Switched Network (NRRI, 1998). This identified many of the technology and policy issues associated with developing a robust Internet.
2. Section 271 Template (NRRI, July 1998). States play a crucial role in developing the record upon which Department of Justice recommendations and FCC decisions concerning Bell Operating Company in-region long distance are based. The Template brought together all the specific factors DOJ and the FCC had identified to date as relevant, allowing state commissions to develop the best possible record, and potentially giving the industry a useful roadmap for their applications.
3. Consumer Education Templates (www.naruc.org); Compendium of Resources on Consumer Education (NRRI, July 1998); No Surprises White Paper (July 1998), and other consumer materials. These are valuable resources for states developing consumer education and protection programs in emerging-competitive markets.
4. Year 2000 Template (www.naruc.org). The Template is a standardized way to track and encourage utility Y2K efforts, ensuring states develop the information they need, and minimizing burdensome or conflicting reporting requirements on industry.
5. Best Practices Implementing the Telecommunications Act (NRRI, April 1999). We solicited and received nearly fifty suggestions from industry and consumer groups concerning ways to carry out Congressional intent under the Act. Suggestions concerned alternative dispute resolution, customer service, universal service, advanced technology, interconnection and market entry, numbering, and collocation. Taken together, these "deliverable products" represent constructive, problem-solving approaches to implementing telecommunications competition, producing consensus, and moving forward on Telecommunications Act implementation.
II. STATE COMMISSION RESTRUCTURING IS DRIVEN BY CHANGES IN THE TELECOMMUNICATIONS AND ENERGY INDUSTRIES.
Several states began moving toward local telephone competition in the 1980s. Currently, many states are also opening up natural gas and electric markets to retail competition. While many issues are different, both energy and telecommunications competition require internal reorganization by state commissions. There may be lessons as federal agencies begin similar efforts.
Since 1995 NARUC and the National Regulatory Research Institute have actively supported state restructuring efforts. We have convened two commissioners-only restructuring meetings. NRRI has published an extensive series of agency change studies which are listed in Attachment 1.
Generally, state commissions are moving more toward a focus on wholesale-level issues: rates, terms, and enforcement of agreements.

Because much intrastate service, especially local service, is not yet competitive, state commissions do still set retail rates and require information concerning utility expenses, so-called "accounting information." Over time, however, the focus is gradually shifting from "shareholder versus ratepayer" to "shareholder versus shareholder"for the benefit of retail customers. Regulation is moving from being a substitute for competition to being a support for competition.
Customer education and protection have become more important areas. The challenge is to help passive ratepayers become active shoppers for utility service. Most state commissions have increased their customer- related staff and have experimented with new ways of providing customer protection. Many state legislatures have increased state commission authority to redress slamming, cramming and other abusive practices.
At least over the near-term, service quality has become an increased concern. In response to customer complaints, many state commissions have undertaken aggressive programs intended to correct service quality problems. The FCC's ARMIS/1 reporting system is an important resource to states.
States have also worked to develop ways to preserve the benefits of the previous legal and economic monopoly system. In telephony this includes universal service. In natural gas and electricity it includes various low-income assistance and weatherization programs. Similarly, states have adopted a new emphasis on economic development and promoting technology access, consistent with Section 706 of the Telecommunications Act.
State commissions have embraced new strategies to achieve new purposes. These include greater use off
1. Market-oriented economic analysis;
2. Alternative dispute resolution, structured negotiation, regulatory flexibility and forbearance;
3. Collaboratives, workshops, and outreach to new stakeholders; and,
4. Regional coordination, as for example through the Regional Oversight Committee for U S WEST (ROC). Recently, I have suggested regional coordination on third party testing of the technical systems necessary to support local competition as a way to improve the Section 271 review process.2
Barriers to commission change include resource constraints; resistance to change, and legal requirements associated with due process and administrative procedure. Resource constraints are especially pronounced for small states where the same staff must work with many major issues or even multiple industries. Resistance to change is both an internal and an external factor. It is sometimes difficult to secure industry participation in collaboratives and other alternative fora. Legal requirements such as limitations on ex parte communication can also impede beneficial commissioner participation in some meetings, and at the end of any innovative process awaits the prospect of a court appeal. NARUC, state commissions, and others have developed materials on alternative dispute resolution which may help reduce the prospect of litigation.3 Commissioner Rolka will describe Pennsylvania's experience with alternative dispute resolution and with administrative law constraints.
Every state commission has faced multiple appeals of its decisions implementing the Telecommunications Act. State commissions have defended (largely successfully) well over X decisions implementing the Section 251 and 252 provisions of the Telecommunications Act alone.
The Montana Public Service Commission is probably typical of small state commissions. It is in the middle of opening electric and natural gas markets to retail competition, as well as implementing the federal and Montana telecommunications competition statutes. It has thirty two employees, exclusive of commissioners. While reducing in size overall, it has increased its customer service staff from one to five and one- half. It has received increased consumer protection authority from the Montana Legislature, and has undertaken various consumer education and outreach programs. One staff person is assigned full-time to work on universal service issues, including outreach on technology access for rural health care providers, libraries, and schools. Interdisciplinary commissioner and staff teams work on telecommunications competition, natural gas restructuring, and electric restructuring. Telecom carriers (and gas and electric suppliers) register over the PSC's web page. The web and list-serves keep the industry and interested parties informed. One attorney handles almost all telecommunications proceedings at the Commission (rulemakings, contested cases, and other matters), including simultaneous state and federal court appeals of Commission decisions concerning its wholesale arbitration, intraLATA presubscription, and Section 271 proceeding. Attachment 2 reports the increase in Montana PSC consumer complaints in recent years, charts the number of calls to several of the Montana Commission's toll free lines, and summarizes the types of telecommunications complaints received.
Ill. FCC-STATE COMMISSION COOPERATION IS ESSENTIAL TO TELECOMMUNICATIONS ACT IMPLEMENTATION.
Congress gave the FCC and the states clear authority concerning respective elements of Telecommunications Act implementation. The primary area of dispute, of course, concerned whether the FCC had authority to require that state commissions follow particular rules when setting wholesale pricing in arbitrations under Section 252, and whether those rules interfered with state authority over retail pricing under Section 152(b). They won. We lost. However, they have been gracious winners.
NARUC's first action after the Supreme Court's AT&T v. Iowa Utilities Board 4 decision was to pass a resolution noting that most all states have adopted some form of forward looking wholesale pricing, and requesting FCC cooperation on several key implementation issues. The FCC has complied with NARUC's requests and has worked very productively with the states implementing the Supreme Court's decision.
NARUC's second action was to finalize an FCC-state commission "Magna Carta" which Chairman Kennard proposed shortly after taking office, and which we jointly developed. Attachment 3 is the "statement of participation" from that document. The agreement emphasizes that the FCC and the state commissions have complementary strengths, that there is great benefit in the diversity of the federalist system, and that a variety of approaches exist for the states and the FCC to work together. These include federal-state joint boards, joint conferences, identification of "best practices," and cooperative development of models or standards.
Among the things the FCC does well are data collection, analysis, development of models and standards, coordination among interested parties, and convening of national fora. State commissions often look to the FCC in these various areas. Among the state commissions' strengths are dispute resolution, consumer protection and education, infrastructure development
and local market analysis. Commissioner Gillis will describe efforts at FCC-state commission coordination on consumer protection, which are now underway. We need to work together to take advantage of one another's strengths, and streamline the process for the benefit of industry and consumers. I recently suggested voluntary FCC-state commission agreements to move more anti-slamming enforcement to the state commissions,s
NARUC also called for a federal-state joint conference to promote access to advanced telecommunications technologies under Section 706.6 This proposal has been endorsed by the Alliance for Public Technology, among others. A joint conference could help advance hands-on work on this important matter.
IV. THE FCC'S INITIAL REORGANIZATION PLAN IS CONSISTENT WITH MANY ELEMENTS OF STATE COMMISSION RESTRUCTURING.
I was especially impressed with the hearing this Subcommittee conducted on FCC reauthorization on March 17, 1999. I was struck by the similarities between several elements of the FCC's initial reorganization plan and the state commission restructuring I have described.
The FCC is correctly emphasizing universal service, consumer protection and information, competition and enforcement. The FCC needs to do much less retail rate regulation in its markets than do state commissions, and is correctly moving away from this function. It does require reporting of various kinds of information related to functions such as universal service and interstate access rates. Some of the information it collects is also especially useful to state commissions.
The FCC has identified many of the proper tools as well, including streamlined procedures, automation, and greater forbearance from regulation.

State commissions must work with the FCC to identify how we can coordinate reporting and other requirements, and to identify which reports and functions we find most valuable and which can be reduced or eliminated, either in the near-term or long-term.
The FCC faces a major challenge, reorganizing within the structure imposed by its existing statute. At what point does reorganization begin to look like rewriting the Act? How can the agency recognize industry convergence within the structure of separate Titles of the Communications Act? With Congressional guidance, the FCC is beginning to address these questions.? Without "reopening the Act" initial steps include consolidation of functions which are now performed separately within the agency, including for example enforcement and public information. As competition advances in each sector it should be possible to reduce the level of regulation in that sector, achieving consistency in the direction of regulation.
The draft restructuring plan identifies six goals derived from the Telecommunications Act.8 It will be important for the FCC to consult with state commissions (as is their intent) concerning these goals and their implementation.
Finally, the FCC's ability to restructure will be constrained by due process and administrative procedure requirements, as have been the states. Litigation awaits at the end of many high-stakes proceedings. However, Congress has strengthened the FCC's ability to reorganize by providing clear policy direction, strong forbearance authority, and sustained attention to Telecommunications Act implementation issues.
V. CONCLUSION.
Telecommunications and information investment and innovation are among the engines driving our economic and societal development. Consequently, few public policy tasks are more critical than successful implementation of the 1996 Telecommunications Act. NARUC and the states appreciate this Committee's close attention to implementation issues and its interest in the experience of state commissions.
RESPECTFULLY SUBMITTED this 20th day of May 1999.
FOOTNOTES: 1 ARMIS is the Automated Reporting Management Information System, which has traditionally provided information regarding the application of accounting, joint cost, jurisdictional separations and access charge rules for Tier One local exchange carriers; and also provides information regarding service quality and infrastructure for price cap local exchange carriers.
2 Rowe, "Let's Work Together to Resolve Bell Operating Company Long- Distance Entry," Telecommunications Reports (cite).
3 An early example is the NARUC Model Settlement Guidelines (May, 1989). See, Center for Public Resources, Negotiated Settlement of Utility Regulatory Proceedings - Recommended Practices (New York: 1993). See also the alternative dispute resolution proposals by the New York Public Service Commission and others in Best Practices to Implement the Telecommunications Act (NRRI, April 1999).
4 1999 WL 24568 (1999).
5 Letter to Chairman Kennard, April 20 1999.
6 That resolution states, in part:
WHEREAS, Partnerships between telecommunications service providers and community, regional and State organizations serving target populations could develop applications for advanced telecommunications capabilities that combine their resources and authority with federal and State resources and authority to address the critical needs of their constituents which in turn would stimulate demand for and deployment of such advanced telecommunications services; now therefore be it RESOLVED, The Board of Directors of the National Association of Regulatory Utility Commissioners (NARUC), convened at its 1999 Winter Meetings in Washington, D.C., urges the FCC to call a joint conference or other official advisory body involving the FCC and all States, Territories, and the District of Columbia, which will consult with industry service providers, the NTIA, the RUS and other potential federal, State, regional, local partners to address the complexities of promoting deployment of advanced telecommunications capabilities under the Act; and be it further RESOLVED, That the joint conference be chartered to facilitate the cooperative development of mechanisms, policies and resource allocations necessary to promote the maximum level of competition while encouraging, on a reasonable and timely basis, the deployment of advanced telecommunications capabilities to all Americans; and be it further RESOLVED, The joint conference should develop a set of best practices and program proposals, and monitor results of such practices and proposals to measure the degree to which they increase the deployment of and subscription levels for advanced telecommunications capabilities;...
7 0PP Working Paper 29, Digital Tornado: The Internet and Telecommunications Policy (March 1997), was an early identification of issues and policy goals associated with the Internet. OPP Working Paper 30, Internet Over Cable: Defining the Future in Terms of the Past (August 1998) squarely raises the question of Internet convergence between various media which are regulated in different categories under the Communications Act.
8 Promoting competition, deregulating, protecting consumers, bringing technology to every American, fostering innovation, and advancing competitive goals worldwide.
END

LOAD-DATE: May 22, 1999

Document 301 of 383.


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