Copyright 2000 Federal News Service, Inc.
Federal News Service
July 20, 2000, Thursday
SECTION: CAPITOL HILL HEARING
LENGTH: 16794 words
HEADLINE:
HEARING OF THE TELECOMMUNICATIONS, TRADE AND CONSUMER PROTECTION SUBCOMMITTEE OF
THE HOUSE COMMERCE COMMITTEE
SUBJECT: THE
REGULATORY BURDEN ON EXCHANGE CARRIERS
CHAIRED BY: REPRESENTATIVE
W.J. TAUZIN (R-LA)
LOCATION: 2322 RAYBURN HOUSE
OFFICE BUILDING, WASHINGTON, D.C.
TIME: 1:00 PM EDT DATE:
THURSDAY, JULY 20, 2000
WITNESSES:
CAROL
MATTEY, DEPUTY CHIEF, COMMON CARRIER BUREAU, FEDERAL COMMUNICATIONS COMMISSION;
JACK MUELLER, PRESIDENT, CINCINNATI TELEPHONE COMPANY/BROADWING;
JOHN SUMPTER, VICE PRESIDENT, REGULATORY AFFAIRS, PAC-WEST
TELECOMMUNICATIONS INC.;
LARRY DARBY, ECONOMIST, DARBY
ASSOCIATES, COMMUNICATIONS CONSULTANTS;
BRUCE HANKS, PRESIDENT,
CENTURYTEL;
BODY:
REP. W. J.
TAUZIN (R-LA): The chair apologizes. The meeting will come to order. Welcome to
today's legislative hearing on H.R. 3850, the Independent Telecommunications
Consumer Enhancement Act of 2000, which has been introduced by colleague,
Congressman Cubin -- Congresswoman Cubin, excuse me -- four years ago after our
struggle the Telecom Act. It is clear that our efforts have indeed paid off.
We're truly in a new and changed telecom environment. The industry has
seen an explosion in new entrants, new participants and increased competition.
In fact, we have some mid-sized carriers here today who will surely tell us that
competition is so vibrant that many FCC regulations are no longer necessary to
protect the consumer.
(I was one?) to believe that some of the FCC
regulations are too burdensome particularly for mid-sized carriers. For
instance, I understand that mid-sized carriers must complete voluminous reports
which cost them hundreds of thousands of dollars when the usefulness of such
reports is easily debatable. A paper reduction act here may be indeed a good
measure. However, whether competition in the area is served by mid-sized
carriers is so robust as to warrant the reduction of FCC oversight -- indeed, we
ought to talk about that and that is why we're here today. The central debate of
this bill is an old one. And, frankly, one that has always been difficult to
answer. At what point is the marketplace strong enough to replace the government
regulator? I hope to hear some of the answers to that question today. I want to
thank Representative Cubin for introducing the important issue to this
subcommittee and we, indeed, look forward to hearing the witnesses that have
assembled today. And, again, my apologies for starting a little late, Barbara,
and to all of you who have gathered to be with us today.
The chair will
yield to my friend from Ohio, Mr. Sawyer, for an opening statement.
REP.
THOMAS C. SAWYER (D-OH): Thank you, Mr. Chairman. There's some water there for
you if you need it. (Laughter.) I have a longer statement but just let me
summarize it by saying that it's rare that one size fits all except maybe for
Spandex.
REP. BARBARA CUBIN (R-WY): And even not then. (Laughter.)
REP. SAWYER: I really don't have much first-hand experience with this.
(Laughter.) Having said that, it is currently being argued that some of our
telephone companies are burdened by an ill-fitting regulatory regime and we're
here today to talk about whether or not a more tailored regulatory treatment
would be appropriate. I look forward to hearing everybody's comments on that
question. I yield back.
REP. TAUZIN: Thank you and I'll now yield to the
author of the legislation, Congresswoman -- for her statement -- Ms. Cubin.
REP. CUBIN: Thank you, Mr. Chairman, and also thank you for holding this
hearing. It really is important to rural areas like mine especially. H.R. 3850
is legislation that will modify regulatory burdens on small and mid-sized
telephone companies, allowing them to shift more of their resources to deploying
advanced telecommunication services to consumers in all areas of the country.
Small and mid-sized companies really are truly that. While the more than
1200 small and mid-sized companies serve less than ten per cent of the nation's
lines, they cover a much larger percentage of rural markets and they are located
in or near most major markets in the country. Some of these telephone companies
are mom-and-pop operations, typically serving rural areas of the country where
most other carriers fear to tread, in high-cost places where it is much less
profitable than in more populated areas.
In 1996 this committee wrote,
and the Congress passed, historic legislation in the form of the
Telecommunications Act. Section 706 of the act sent a clear message to the
American people and to the Federal Communications Commission that the deployment
of new telecommunications services in rural areas around the country must happen
quickly and without delay.
Unfortunately, the FCC has not made it any
easier for small telephone companies to deploy advanced services in rural areas.
In some cases they've actually made it more difficult. The reason is that the
FCC, more often than not, uses a one-sized-fits-all model in regulating all
incumbent local exchange companies. This type of model may be fine for the big
companies that have the ability to hire legions of attorneys and staff to
interpret and ensure compliance with the regulations. But the small and
mid-sized companies don't have the resources available to them to complete the
paperwork requirements put forth in these outmoded and (preponderous ?) reports.
These are the instructions -- over 900 pages -- these are just the
instructions for filling out the CAM and ARMIS reports that are required
annually. Now, I want to show you another thing. Should have to carry that
around, I didn't. Here are CAM and ARMIS reports, required annually, that have
to be filed, and these are by very small and mid-sized companies. These things
cost from $300 (thousand) to $500,000 to fill
out and in many cases are not even reviewed. They aren't even looked at.
Now, I don't want them to be totally useless so what I'm going to do is
sit on it so that I can see you better and you can see me better and know I'm
the one here in charge. They have to be good for something. Now, I'd like to
offer one of these. These are other reports. These are not CAM and ARMIS but
these are reports that will have to be filed anyway even if these are not under
my bill. Here they are. Michael, you can have one. Bill, you can -- everyone can
have one. (Laughter.)
These reports, separately -- CAM and ARMIS again
-- they cost about $500,000 to compile and would equate to a
small company installing a (D-SLAN?) or other network infrastructure to provide
high-speed internet data access to customers in rural areas.
Just to
give you an example of how burdensome these are -- I showed you, this is over
900 pages long and those are the instructions for filling out the forms.
(Off-mike comment.) More often than not the FCC doesn't refer to -- and in some
cases simply ignores -- the data filed by the mid-sized companies.
The
bill, however, I want to make this very clear, does absolutely nothing to
restrict the commission's authority to request this -- any of this or all of
this -- at any time. The commission absolutely retains that authority under my
bill. Nevertheless, the FCC should be commended, I believe, because they have
made efforts to bring some of these reporting requirements down to a reasonable
level. And I want to make that very clear, that I acknowledge that and
appreciate it.
In fact, it's reported to me that the FCC may be issuing
a notice of proposed rulemaking on the agency's reporting requirements, for
two-percent companies, some time this fall. The problem, though, is that the
agency's timeframe on issuing these proposed rules has changed like the Wyoming
winds. I don't know how many of you have been to Wyoming but they blow in a
circle. It's time that those obligations are met and this legislation would
solidify what the FCC has already promised to do for a long time.
In
closing, Mr. Chairman, I want to state for the record what this legislation does
and what it does not do. The bill does not reopen the 1996 act. It does not
fully deregulate two-percent carriers and it does not impact regulations dealing
with large, local carriers. It would, however, be the first freestanding
legislation that would modernize regulations of two-percent carriers. It would
accelerate competition in many small to mid-sized markets, accelerate the
deployment of new advanced telecommunications services, and benefit many
consumers by allowing two-percent carriers to redirect their resources from
regulatory burdens to network investment and new services.
Mr. Chairman,
I believe this legislation is critical for rural areas such as Wyoming where
these small companies operate. Without this bill these two-percent companies
will continue to be burdened with this one-size-fits-all regulatory approach
that has kept them from providing rural areas with the services they need in
order to have a share of the new economy.
Again, Mr. Chairman, I truly
thank you for having this hearing today, the other members for being here, and I
look forward to hearing from the witnesses.
REP. TAUZIN: I thank the
gentlelady. The chair recognizes the ranking minority member, my friend from
Massachusetts, Mr. Markey.
REP. EDWARD J. MARKEY (D-MA): Thank you, Mr.
Chairman, very much. There are a number of issues raised by legislative
proposals before the committee including whether there is sufficient competition
in identified markets to warrant elimination of certain rate-payer protections,
whether certain regulations have outlived their usefulness, whether provisions
are targeted to affect truly small companies or rural markets, and whether
elimination of reporting requirements will increase rates or cause universal
service subsidies to become even more bloated.
The FCC has already taken
many steps to relieve regulatory burdens on so-called two-percent companies and
the FCC is poised to consider even more relief. In my view, removing regulations
after markets have become fully competitive makes eminent sense. Yet the bill
before the committee not only removes arguably unnecessary regulatory
requirements, which I would support, but also removes certain requirements that
help to make smaller markets more competitive.
In addition, the
legislation contains a number of provisions that may have adverse implications
for consumer rates. The legislation appears to eliminate the ability of the FCC
to review interstate access rates for reasonableness once competition arrives in
a two- percent company's market. The problem here is that competition may
(arrived at?) while providing competition in certain markets may not provide
competition for certain types of access rates such as terminating access
charges. This could leave interconnecting companies with no means to challenge
such rates thus forcing them to charge higher rates elsewhere to compensate
them.
If rural Americans want to inhibit the growth of competition in
their rural markets, or put rural consumers at risk of rate increases, that's
one thing. And that's their prerogative, to advocate such positions and to take
such risks. I believe we would do better by rural Americans to revise the
legislation to keep in place those provisions that foster competition while
focusing solely on those provisions that are unnecessary to the promotion of
competition or to consumer protection.
With respect to rates that affect
urban consumers, however, I do not support putting urban consumers at the risk
of increased subsidies simply because rural companies seek relief from
competitive provisions and requirements. I support universal service. I don't
want to see people in North Dakota, or Alaska, or Wyoming, or any rural
community, pay $240 a month for local phone service. I believe
rural consumers should reasonable rates. I believe it is important for urban
ratepayers to help out in this endeavor -- which my family has been doing for my
entire life in the city of Boston, helping out rural Americans.
REP.
CUBIN: Thank you.
REP. MARKEY: And we like doing it. (Off- mike
comments.) We like you people, you're good people. But I'm an Easterner, what do
I know? You know what I mean? What do I know? My father delivered the milk, we
didn't milk it. (Laughter.) That's another story.
I believe it's
important for urban ratepayers to help out in this endeavor. I don't believe,
however, it is fair to ask urban consumers to pay $24 a month
for phone service so that rural Americans pay $16.
REP.
CUBIN: I agree.
REP. MARKEY: That doesn't sound right. (Bingo? There you
go?) We're going to write the bill right now. Okay, and permit rural telephone
companies to build moats around their phone networks which isolate them
competitive practices.
I continue to believe that the current universal
service system is in dire need of revamping because it is bloated to the tune of
billions of dollars. Competition can help bring down subsidy costs and we should
try to drive competition as far out into rural America as possibly we can. And I
hope that would be our goal.
Having said that, there are certain areas,
again, where we can and should relieve regulatory burdens. I look forward to
hearing from the FCC so that we can do more work. And I hope at some point we
can hear from the state regulators and state consumer councils so we can have
their perspective as well. Thank you, Mr. Chairman.
REP. TAUZIN: Thank
you, Mr. Markey. I suspect one day Ms. Cubin will cow you into an agreement. I
now yield to the vice chairman of the committee, Mr. Oxley from Ohio.
REP. MICHAEL G. OXLEY (R-OH): Thank you, Mr. Chairman. I am moved by the
generosity of the gentleman from Massachusetts.
REP. TAUZIN: You're
mooed by it?
REP. OXLEY: Moved. (Laughter.)
REP. TAUZIN: Oh,
moved, yeah. (Laughter. Off-mike comments.) We want to try to make this a
pun-free zone, please, at least for the next hour or so.
REP. : I'm in
udder (sic) amazement. (Laughter.)
REP. TAUZIN: There you go again.
REP. OXLEY: Let me first welcome Mr. Jack Mueller, president of what
used to be Cincinnati Bell, now Cincinnati Telephone Company/BroadWing, glad to
have you here. I'm a proud cosponsor of this legislation with Ms. Cubin and
clearly relief is necessary for many of these small and mid-sized companies. And
I'm particularly interested in the testimony from the FCC and the (common
carrier?) because, indeed, I'll give credit to the FCC for taking some action on
several areas in reducing auditing requirements for mid-sized carriers and the
like. And was also pleased to have them indicate that they are preparing to
recommend further regulatory reductions for mid-sized carriers.
I know
that the FCC does have some issues with this legislation but that's really what
a hearing is all about.
But, clearly, from my discussions with some of
my constituent companies and others throughout the country, there is a crying
need for some commonsense regulatory relief here as it relates to the incredible
paperwork that the gentlelady from Wyoming so graphically brought before us. And
for that reason I think it's very important that this hearing be held and for
that I thank the chairman and I yield back.
REP. TAUZIN: The chair
thanks the gentleman. The chair recognizes the gentleman from Tennessee, Mr.
Borden -- Gordon.
REP. BART GORDON (D-TN): Thank you, Mr. Chairman.
REP. TAUZIN: That's another pun. (Laughter. Off-mike comments.) Mr.
Gordon.
REP. GORDON: All of us are worried about the growing imbalance
between the urban and rural Americans access to advanced telecommunication
services. My home state of Tennessee is a good example of the effects of the
so-called digital divide. Tennessee currently ranks 43rd in households with
internet access. While broadband is coming to larger cities, such as Nashville,
it's not coming to the smaller cities and rural areas of middle Tennessee
anytime soon. In fact, households in rural areas are half as likely than those
in the urban areas to have internet access.
Ms. Cubin and I realize that
most people overlooked one of the chief assets we have in closing the digital
divide and that's the 1,200-plus independent communication companies across
America. These are the small and mid-sized companies that have less than two per
cent of the nation's access lines. Two-percent companies are ideally positioned
to close the digital divide because they already serve small cities and rural
areas. And they have a track record of providing long distance service,
high-speed data and other advanced services to these smaller markets.
But they're being held back by this one-sized-fits-all FCC regulations.
Small and mid-sized telephone companies spend a lot of resources dealing with
ill-suited regulations that were originally written for the big Bell companies.
And, as Ms. Cubin pointed out earlier, the FCC requires mid-sized companies to
file both ARMIS and CAM reports on an annual basis. Collecting this data costs
mid-sized companies $300 (thousand) to
$500,000 per report, on the average. Yet the FCC, we
understand, rarely ever looks at this information.
Two-percent companies
are also required to maintain separate affiliates for long distance and wireless
services. Ironically, the 1996 act (sunsets?) the separate affiliates position
-- provision for the Bell companies three years after entry into the long
distance market while two-percent companies, who have always been able to offer
long distance services, are prohibited from integrating these services.
Other complaints include petitions, waivers and merger reviews that
sometimes languish for years at the commission without a decision because the
focus is on the larger companies and the 271 proceedings. Ultimately these
regulatory costs are passed onto customers. One company estimates it spends
$25 per customer complying with federal regulations alone. This
kind of money could better be spent on bringing the digital divide in our nation
to the rural areas. (sic)
Reducing the regulatory burden placed on
America's independent telephone companies will free up these small companies to
spend more or their resources deploying advanced competitive services and less
time filing paperwork in federal regulations. H.R. 3850 represents a small,
practical step Congress can take to close the digital divide in rural areas.
And, once again, I want to state my understanding that the commission is
working on some of these issues and I applaud their efforts. And hopefully this
legislation was something of a prod to help bring this forward. I look forward
to hearing this panel's comments. Thank you.
REP. TAUZIN: I thank my
friend. The chair will now yield to the gentlelady from California, Ms. Eshoo.
REP. ANNA G. ESHOO (D-CA): Thank you, Mr. Chairman, for having this
hearing, to the witnesses that are here and certainly to the gentlewoman from
Wyoming -- who's a good friend -- for her good work on this.
The
legislation we're considering today addresses a segment of the
telecommunications industry that because of its size is hindered from making
advances in service and technology. And while the goal of the legislation is
something that I -- the intent is something that I generally support, I think we
need to take a close look at what it means if, in fact, it is enacted.
I
think that there seems to be a consensus that some regulations on carriers may
place inequitable burdens on smaller carriers. If true, then a careful
examination is appropriate both of the means this legislation takes to alleviate
the burdens as well as the measures that already underway at the FCC which may
reach the same end without congressional intervention. And I certainly hope that
happens, I know that two of my colleagues -- maybe more but two that I paid
close attention to -- have already mentioned this.
As always, I think
that we need to be wary of unintended consequences. Do we re-regulate only to
find that we've shifted the burdens elsewhere? I usually describe that as
putting a punch in the pillow and thinking we've put a dent in something and
then something else pops up as a result of it. Does the elimination of some of
the reporting requirements deprive the FCC -- or the Congress, for that matter
-- of information necessary to the evaluation of the telecom act's
effectiveness? If we relax rate regulations for two-percent carriers will be
faced with "me too" arguments from another segment of the industry in the very
near future?
As I'm saying this out loud I'm thinking, well, maybe
that's what members of Congress are supposed to do -- be referees in all of
this. But I still think it's important to pose the questions.
Also, will
mergers that would otherwise not have been approved be completed simply because
they were not acted upon within the 45-day period established by the
legislation? And, on a more practical level, if we demand that the FCC act
faster on merger applications involving these carriers, are we able or prepared
to provide them with the resources and the manpower to do so?
I think
that these are all important questions which I hope we're going to answer or
begin to address today in this hearing. And I thank you again, Mr. Chairman, for
having the hearing and for my good friend, Barbara Cubin, for bringing this
forward. I yield back.
REP. TAUZIN: I thank the gentlelady. The chair is
now pleased to welcome our first panel. By unanimous consent all members written
statements are made a part of the record as well are the written statements of
our panel, without objection. In saying that, let me remind you we operate under
the five-minute rule. We have little timers in front of you and as we click them
on we'll ask you to watch them carefully. When the yellow comes on, try to wrap
up for us. To do that you probably have to summarize, not read to us. So, if you
can, summarize your points and we'll get into Q and A as quickly as we can.
Let me introduce the panel. First, Ms. Carol Mattey, the deputy chief of
the Common Carrier Bureau of the Federal Communications Commission. She's
accompanied today by Mr. James Bird, the senior counsel of the Office of General
Counsel. I want to welcome you both and thank you for coming.
Next is
Mr. Larry Darby, economist and, by the way, Chinese chef extraordinaire.
(Laughter.) And who also, coincidentally, married far above himself. Of Darby
Associates Communications -- (Laughter.) his wife is a doll -- Consultants here
in Washington, D.C.
Mr. Jack Mueller, the president of Cincinnati
Telephone Company, who was introduced by my friend Mr. Oxley. Welcome, Mr.
Mueller. Mr. David Cole, the vice president of operations and support for
CenturyTel, Monroe, Louisiana -- wonderful state, I might add, that also enjoys
universal service support. And Mr. John Sumpter, the vice president of
regulatory affairs at Pac-West Telecommunications, Incorporated of Stockton,
California.
Indeed, a very renowned panel of experts who can tell us a
little bit about whether all that paperwork is necessary and what's happening in
the FCC to take it down. So we'll start with the FCC, Ms. Carol Mattey. Your
five minutes are on. Welcome, Ms. Mattey.
MS. CAROL MATTEY: Good
morning, Chairman Tauzin and members of the subcommittee.
Thank you for
this opportunity to appear today to discuss H.R. 3850, the Independent
Telecommunications Consumer Enhancement Act of 2000. This legislation is
directed at reducing the burdens of regulation on those local exchange carriers
with less than two percent of subscriber lines, which includes all local
companies in the country with the exception of the regional Bell companies and
Sprint.
I'm appearing today on behalf of the Common Carrier Bureau and,
as noted, with me today is James Bird, from the office of general counsel, who
can answer specific questions relating to the merger aspects of the bill.
I would like to begin by expressing the bureau's strong support for the
overall goal of this legislation. The bureau agrees that it is necessary to
remain sensitive to the impact of regulation on smaller carriers and lighten
those regulations where appropriate. With that in mind, the FCC has already
taken significant steps to reduce regulatory burdens on the smaller carriers,
and the FCC will be considering additional measures in the future.
At
the same time, the bureau believes that the regulation of common carriers in
some areas advances significant goals of the Communications Act. The bureau
believes that H.R. 3850, as drafted, raises a number of questions that should be
explored further to consider the possibility of unintended consequences. I'd
like to highlight several examples discussed more fully in my written testimony.
In some areas it is critical that we gather information from all
carriers and not just the RBOCs. For example, section 706 requires the FCC to
consider whether advanced telecommunications capabilities are being deployed on
a reasonable and timely basis. Smaller carriers are playing a large role in the
deployment of broadband. Our ability to monitor what's happening across America,
and report to Congress on broadband deployment, would be
greatly hindered if the commission were precluded from gathering the same
information from all carriers.
Likewise, there are certain goals of the
act, such as the protection of consumers, that should apply equally to all
carriers. Section 281 of the draft legislation could be interpreted as requiring
the FCC to reduce the obligations of two-percent carriers to comply with the
commission's truth-in-billing and slamming rules. The bureau feels strongly that
consumers in Golden Meadow, Louisiana should receive bill that are easy to
understand and should be protected against unauthorized changes in their
provider just like consumers in New York or California.
REP. TAUZIN: How
do you know where Golden Meadow, Louisiana is? (Laughter.)
MS. MATTEY: I
don't know precisely but I have to tell you my mother lives in Louisiana so I'll
have to ask her where it is. Anyway. She lives in (Treefork ?).
I also
would like to point out that certain --
REP. TAUZIN: That's Yankee
country compared -- (Laughter.) way up there.
MS. MATTEY: Okay, okay,
well, whatever. I also would like to point out that certain of the timing
aspects of the legislation may be problematic. For example, the requirement that
decisions on mergers be made within 45 days or be deemed granted is hard to
reconcile with section 309(d)'s requirement that the commission provide parties
with a minimum of 30 days from the time of public notice of the application to
file petitions to deny.
The requirement that all petitions for
reconsideration filed by two-percent carriers be resolved in 90 days would be
difficult to implement. Particularly in light of the Administrative Procedures
Act requirement that we seek comment and consider such comments thoroughly
before acting on such petitions. Finally, it may be difficult for the bureau to
meet these statutory deadlines while meeting other statutory deadlines such as
acting on section 271 applications.
To conclude, the bureau supports the
goal of reducing regulatory burdens for carriers with less than two percent of
the nation's subscriber lines. And we would like to work with you as you
consider this legislation further. Thank you for this opportunity to testify. I
would be happy to answer any questions you have.
REP. TAUZIN: Thank you
very much, Ms. Mattey. Next, Mr. Larry Darby, economist with Darby and
Associates here in D.C., Larry.
MR. LARRY DARBY: Thank you, Mr. Chairman
and members of the subcommittee, for hearing my views this afternoon. My
complete testimony addresses the consumer benefits of beginning seriously to
reform or eliminate some of the tens of thousands of rules accumulated during
the pre-competitive era in telephony, and how H.R. 3850 begins to advance that
cause.
I want to commend you, Mr. Chairman and the subcommittee, for
your leadership in considering the role of less regulation, not more, as a means
of improving consumer welfare in this country. The D word, deregulation, is
controversial. It evokes more words than thoughts, more fear than faith, and
more speculation than analysis. The mere suggestion that government should
forebear extending -- and, in fact, should reduce -- its presence in governing
incumbent telephone companies is seen as revolutionary, too soon, like drinking
wine before its time.
I have a sense of dij vu this afternoon about this
hearing, having testified here nearly 25 years ago to promote another heretical
notion, the C word -- competition. There were naysayers then as now: it will
never work, service will decline, rates will go up, innovation will have come to
a halt, the network will be harmed, chaos, the full catastrophe. But events have
converted those naysayers, those dis- believers, as they will eventually
transform opponents of the D word, deregulation.
Deregulation or
unregulation, regulatory reform, all suggest pulling back in some measure part
of the government's enormous presence in these dynamic markets. By whatever name
-- deregulation, whatever -- it means opening up markets and promoting
competition and it's the inevitable result of steps we've already taken. Both
technological trends and economic changes support the presumption that market
forces are increasingly adequate and that government can and should step aside
and out of the way.
There's no denying the value to consumers of
regulation generally. I fully support those and, in fact, participated in
putting a lot of these rules in place over the years, no question about it. But
many regulations have clearly outlived their usefulness, many do not address any
particular market failure, others should be calibrated more carefully to current
conditions. Most importantly, none of these are costless.
These are
recurring themes in my prepared testimony. Regulation is not free and the cost
to consumers who bear them are too important to ignore. My statement catalogs a
variety of different costs we have to pay to get the benefits of regulations.
First, the direct costs to taxpayers which have grown substantially, ironically
enough, during this period of deregulation and competition. Then there are the
substantial costs of compliance, which Ms. Cubin has been referring to. And I
emphasize while these are incurred -- in the first instance by private firms
they're shifted ultimately to consumers.
My testimony documents a number
of hidden, less visible, invisible costs such as the cost of delay, cost of
uncertainty, regulatory risk that adds to investment costs and discourages
investment in both rural and urban areas. Hidden cost of inefficiency, foregone
and slowed innovation. And, very importantly, the cost of reduced competition
resulting from constraints on market conduct of incumbent firms. The cost of
complying with regulations are particularly burdensome to medium and small-sized
carriers.
We should look, I think, for ways to apply the time-tested
market principles and objectives to government regulation. Much is made of the
need for efficient markets but there is lamentably little discussion of
efficient regulation. Regulation should be able to pass, I think, a reasonable
cost-benefit test. A private firm that routinely made decisions or continued
past practices whose cost exceeded their benefits would go belly-up and
rightfully so. But there is not such built-in restraint on bad government
regulation.
H.R. 3850 begins to address some of these problems.
And I have to add, I'm certainly impressed by the questions that have
already been posed by members of the panel because those go to the very heart of
the need for cost-benefit regulation. (H.R.) 3850 is consistent with the
principles I've spelled out. My statement contains a fuller discussion of these
points and I'd be happy to try to answer your questions. Thank you, Mr.
Chairman.
REP. TAUZIN: Thank you very much, Larry. Poetic, for an
economist, at times. Thank you very much. (Laughter.) Mr. Jack Mueller,
president of Cincinnati Telephone Company/BroadWing. What's the slash all about?
MR. JACK MUELLER: It's just -- BroadWing is the parent company, that's
all, since (CiBell ?) Telephone Company is a subsidiary of BroadWing.
REP. TAUZIN: Welcome, sir.
MR. MUELLER: Thank you. Good
afternoon, Mr. Chairman and members of the subcommittee. Thank you for allowing
me to present my company's perspective on H.R. 3850. Before discussing the
reasons why Cincinnati Bell supports this legislation, I will provide some
background on Cincinnati Bell.
Cincinnati Bell serves the greater
Cincinnati marketplace providing local exchange services for some 1.1 million
access lines, as shown on chart number one. Cincinnati Bell is one of the oldest
telephone companies. Although once a part of the Bell system it has never been
owned by, nor affiliated with, a regional Bell operating company. Since 1873,
Cincinnati Bell has had a reputation for providing innovative, high quality
service.
Most recently, Cincinnati Bell has been in the forefront in
bringing advanced services to its customers. ADSL service is currently available
to 75 percent of our customers. The provision of innovative service has been
crucial to maintaining customer satisfaction, the cornerstone of our business.
Although Cincinnati Bell is extremely proud of its heritage and
reputation, it must move beyond its traditional boundaries to remain a player in
the competitive market mandated by the '96 act. The first important step in this
expansion occurred last year when Cincinnati Bell's holding company acquired IXE
Communications. IXE's state-of- the-art fiber network and Cincinnati Bell's
operational expertise created a powerhouse in the internet backbone marketplace.
The new company, BroadWing, is an integrated communications provider, or ICP,
that delivers voice, data, wireless and internet services nationwide. The next
chart shows the current BroadWing companies and its fiber network.
Although Cincinnati Bell and BroadWing are proud of what we have
accomplished in the past nine months, we cannot stop here. Unfortunately,
BroadWing is disadvantaged relative to other ICPs because of restrictions placed
on its telephone company. I believe that the time is right to lift the
restrictions that hinder Cincinnati Bell and other mid-sized companies in their
quest to provide alternatives to consumers throughout the country. H.R. 3850 is
a step in this direction. As the mid-sized carriers open their traditional
markets, there is no need for the FCC to oversee our every move. In short, the
'96 act is working. Cincinnati Bell has complied with all of the market-opening
provisions in section 251.
As the next chart shows, the Cincinnati
marketplace is one of vibrant competition. And, as the final chart shows, SBC
and Verizon will have entered the market by the end of next year. Yet, despite
mounting competition from huge companies, mid-sized companies are still subject
to the regulatory paradigm that existed prior to competition. At the same time,
competitors enter our market with little regulatory oversight. It is time for
the regulatory structure to better reflect market realities for the mid-sized
companies.
While I am not suggesting what the regulatory regime should
be for other ILECs, I believe that the public interest demands that the
mid-sized companies be considered separately. The provisions of H.R. 3850
specifically address the fact that one-size-fits-all regulation of incumbent
telephone companies does not meet the needs of today's marketplace. (H.R.) 3850
proposes a regulatory framework for two- percent companies founded on the
principles of choice, fairness and independence.
So, in closing, let me
sum up. First, (H.R.) 3850 will enhance consumer choice by eliminating
unnecessary costs to our businesses so that we can move more easily -- so that
we can more easily invest in the latest technologies and bring advanced services
to more Americans. It also promotes consumer choice by providing two-percent
companies with greater flexibility in the introduction of new services. (H.R.)
3850 will allow mid-sized companies to offer new services in the same fashion as
their competitors. In order to successfully compete we must be as fast, if not
faster, in bringing new products and services to our customers.
Second,
with regard to fairness, (H.R.) 3850 will provide additional pricing flexibility
for two-percent companies by allowing for the de-averaging of interstate access
rates and the ability to enter into contractual arrangements with customers for
specific needs. Furthermore, it will provide full pricing deregulation on
interstate services when a large incumbent local exchange carrier enters our
service area. In providing this flexibility, (H.R.) 3850 provides an opportunity
for policymakers to assess how deregulatory initiatives foster increased
competition.
Finally, H.R. 3850 seeks to promote independence, an
increasingly rare attribute in an environment where continuing consolidation of
the industry has decreased the number of competitors. While there is no doubt
that each company's success is its own responsibility, today's inappropriate,
one-size-fits-all regulation tilts the competitive landscape against two-percent
companies. (H.R.) 3850 promotes independent telephone companies by providing an
appropriate level of regulatory oversight while eliminating unnecessary, costly
and time- consuming regulatory burdens that impede innovation and ultimately our
success.
H.R. 3850 doesn't give the two-percent companies special
treatment. It simply rectifies regulatory inequities by creating an appropriate
level of regulation for two-percent carriers. The regulatory flexibility found
in (H.R.) 3850 would allow us to invest in the latest technologies, pursue
out-of-territory opportunities and provide consumers with an outstanding choice
of telecommunications services. Thank you.
REP. TAUZIN: Thank you very
much, Mr. Mueller. And next -- a man I know who knows where Golden Meadow is --
Mr. David Cole, vice president of operations support, CenturyTel, from Monroe,
Louisiana. Also, by the way, way of a nod, the home of Delta Airlines. Mr. Cole.
MR. DAVID COLE: Good afternoon, Mr. Chairman, members of the committee.
Thank you for your interest in the issues that we're discussing today and thank
you also for inviting CenturyTel to participate in this process.
My name
is David Cole and I am senior vice president of operations support for
CenturyTel, headquartered in Monroe, Louisiana. CenturyTel is a leading provider
of integrated telecommunications services in primarily rural and smaller
metropolitan markets. We serve small markets throughout Louisiana, Ohio,
Mississippi, Tennessee, Wisconsin, Minnesota and Texas. We also serve Pinedale,
Big Piney, Farson and Medicine Bow in Wyoming. And we're especially appreciative
of the leadership of Ms. Cubin, Mr. Pickering, Mr. Gordon, and Mr. Barrett, in
introducing H.R. 3850.
Many of our markets may be rural and small but
our customers demand, and they deserve, the highest quality telecommunication
services available. I am proud to say that CenturyTel has made this commitment
to serve these markets by working to provide the same variety of high-quality
services that are available here in Washington.
We have already deployed
broadband digital subscriber line service in Ohio, Wisconsin, Texas, Montana,
and the state of Washington, and we plan to spend about $20
million more to make DSL service available to over 40 percent of our access
lines by the end of this year.
I would like to spend just a few minutes
today on some of the provisions of this legislation that are most important to
CenturyTel: the merger review and price cap and pooling waiver provisions.
Last summer, CenturyTel, by itself and in partnership with Spectra
Communications Group and Telephone USA of Wisconsin, signed agreements with GTE
to purchase approximately 460,000 access lines in the states of Arkansas,
Missouri, and Wisconsin. These are exchanges that GTE they no longer wanted to
serve, and that closely complemented CenturyTel's existing operations.
Once we are able to begin serving these exchanges, we plan to spend
millions of dollars upgrading the facilities in these states and launching new
services, including dial-up and broadband internet access, but also including
some very common services that these customers currently do not have. These new
services include the offering in these communities -- for the first time, in
many cases -- of voice mail, call waiting, caller ID, and other services that
you and I have enjoyed for many years.
Today, as we speak, three of the
four acquisitions that we have filed at the FCC this past spring are still
pending FCC approval. One of these transactions will actually create the
nation's first African-American-owned local exchange carrier, operating in the
state of Missouri. These past few months have been expensive ones for
CenturyTel. We have assembled a team of well over 100 employees to make these
transactions a reality. Both companies are ready to close and all state
approvals have been received. However, we and our future customers still wait.
In order to complete these transactions, we must also seek and obtain
commission approval for a set of rule waivers, including waivers of the price
cap, common line pooling, and study area boundary rules. These waivers are
routinely granted to all applicants because they raise no substantial policy or
legal issues. Although routine, this process normally takes a number of months
to complete and the FCC has no established deadlines within which to complete
this review.
Therefore, we've been unable to close on any of these
transactions, largely because of regulatory delays. Rapid approval of
transactions such as this -- and there will be more of them if the RBOCs further
divest rural properties -- are in the best interest of consumers.
Also,
apart from the transactional context, the commission's rules prohibiting
CenturyTel to elect price cap regulation for individual operating companies are
outdated and deny the benefits of price caps to hundreds of thousands of
mid-sized carriers' customers. Although price cap regulations won't work for all
of CenturyTel's companies, it would make sense for some. However, the
commission's current rules prevent us from implementing price caps in this
manner.
In conclusion, Mr. Chairman, members of the committee, I urge
you to press forward with the regulatory and FCC reform efforts reflected in the
legislation before you today. These changes it would make are essential to
permit carriers, like CenturyTel, to compete in today's new world of
telecommunications and to deploy DSL internet access and other advanced
communications services to our customers.
I'd like to thank you again
for the opportunity to appear before you today, and look forward to responding
to your questions.
REP. TAUZIN: Mr. Cole, thank you very much. We have
time for one final presentation and we'll have to take a break. We have two 15-
minute votes on the floor. So we'll hear from our last witness and then we'll
all break and go vote and come back in about a half-hour. The last will be Mr.
John Sumpter, vice president, regulatory affairs of Pac-West Telecomm in
Stockton, California. Mr. Sumpter.
MR. JOHN SUMPTER: Thank you, Mr.
Chairman and members of the committee. I appreciate very much this opportunity
to speak to you today on this issue. Pac-West is a small, competitive local
exchange carrier created, in effect, by the Telecommunications Act of 1996. And
we're very grateful for the opportunity you've given us to compete.
We
are in Stockton, California which is the heart of California's great
agricultural area. We serve a lot of rural communities. Our business plan was
sort of the reverse of a lot of CLECs where we started in rural and agricultural
areas and then spread our services into the more urban areas of California.
I'm also a member of the operating board of ALTS, the Association for
Local Telecommunications Services, which represents CLECS -- about 100 of them.
ALTS does not represent IXEs, large IXEs, it does not represent any RBOCs. All
of the companies of ALTS would not exist without the Telecommunications Act.
ALTS primary mission -- and a significant issue of importance to Pac-West -- is
to open the local telecommunications market to competition.
We support
the Telecommunications Act of 1996 and we support the efforts of the Federal
Communications Commission and state officials to implement that act. The most
important means of creating the competitive local market that Congress
envisioned is to ensure that the incumbent local exchange carriers -- or ILECs
-- interconnect with the new entrants and make available to competitors the
critical components of their network on a wholesale basis.
In other
words, our principal focus is to make sure that the ILECs provide the wholesale
components that will allow us to build new technologically advanced networks.
We're less concerned with the regulation of retail rates. Our view is that
competition, once its established, will keep retail rates low and affordable
without the need for detailed rate regulation. However, market forces will only
restrain rates and spawn new services if competitive providers can interconnect
and get access to essential unbundled network elements of the monopoly telephone
company networks on a wholesale basis.
We're concerned about some of the
provisions of H.R. 3850 that might weaken the prospects for local telephone
competition. On the other hand, we have no disagreements with other provisions
of the bill that have little or no effect on competition, such as those that
streamline and remove unnecessary and burdensome regulatory requirements.
Our views on this bill are colored by our experience in the marketplace.
Many CLECs are working hard to bring competition to suburban and rural markets.
We're confident that competitors and small and mid-sized ILECs alike are
striving to provide broadband services to rural consumers as quickly as
possible. However, many CLECs have had a difficult time entering the markets
served by small and mid- sized ILECs. Many CLECs are not able to obtain
authority to offer service in areas served by the small and mid-sized carriers.
The Telecommunications Act of 1996 already permits ILECs with less than
two percent of the nation's access lines to avoid many of the unbundling and
pro-competitive requirements that currently apply to the larger ILECs. There's
no reason for Congress or federal or state regulators to deny consumers served
by mid-sized or small telephone companies the benefits of competitive choice.
The record is clear, competition produces lower prices, higher quality services,
faster internet access services and greater customer responsiveness. Rural
consumers deserve to receive these benefits as much, if not more, than urban
consumers.
Remarkably, the legislation under consideration today may
make it even more difficult to compete in these markets. This is because the
bill would remove some of the enforcement power of the FCC and state regulators
to enforce the pro-competitive provisions of the law. For instance, section four
of the bill directs the FCC to adopt separate, less burdensome rules for ILECs
with less than two percent of the nation's access lines. This provision would
apply to all the pro- competitive provisions of sections 251(a), (b), and (c) of
the Communications Act. Thus, this provision would likely reduce the
interconnection and unbundling obligations for small and mid-sized ILECs.
Finally, we're somewhat concerned about the strict time deadlines
suggested by the legislation on the FCC's merger review. Perhaps a longer time
would be more appropriate. While we do not oppose the provisions that deal with
cost allocation manuals and the like, the committee should consider accompanying
these deregulatory initiatives with provisions designed to improve the prospects
for competition. Thank you.
REP. TAUZIN: Thank you, Mr. Sumpter. We'll
all take about a half-hour break. We've got --
REP. CUBIN: Mr. Chairman,
if I might, I have another bill that I have to chair the hearing on, it's to
start at 1:30, so I was wondering if we could make the 15-minute vote and then
vote quickly and come back and I could do my questioning and then --
REP. TAUZIN: You'll be up first, Ms. Cubin.
REP. CUBIN: I can't
-- I have two bills at the same time.
REP. TAUZIN: Yeah, it's tough
around here.
REP. CUBIN: All right.
REP. TAUZIN: We'll, uh, we
have about ten minutes left to go on this vote, then the other vote will start.
We'll get back here in about 20 minutes, let's say, and if I'm not back here
before you are, Ms. Cubin, start it up.
REP. CUBIN: I will.
REP.
TAUZIN: All right. The committee stands in recess.
(Recess for vote.)
REP. TAUZIN: The witnesses had completed their statements and the chair
will now recognize himself and other members and -- well, let me recognize the
gentlelady from Wyoming first since she's here.
REP. CUBIN: Mr.
Chairman, that'd be fine if you go --
REP. TAUZIN: Not at all, I know
you have other things to do and I want to accommodate you, Barbara, so you're up
first.
REP. CUBIN: Thank you. First of all, I do appreciate the
testimony from all of the witnesses here today. There are a few points that I
want to make based on not only the witness's testimony but also on some of the
reservations that members expressed about the bill.
First of all, I want
to make it absolutely clear that there is nothing in this bill that prevents the
commission from getting any information anytime that they need. You know, there
are a lot of times when I think it's a disadvantage to me because I'm not a
lawyer and so political process gets kind of tied up with procedure and those
kind of things. But I am a chemist and so I have a background in statistics as
well. And I happen to know that the information that is garnered from some of
these two-percenters -- in the information that they submit in CAM and ARMIS
reports and the others -- is so statistically insignificant that it would have
to be thrown out when the -- you know, when policy decisions are made. And so I
think that's one important point to make.
But that's all aside because
you can get the information -- the commission can get the information if they
need it, they just don't necessarily need to require it in such a comprehensive
and costly form.
Another point that I wanted to make was about the
pricing flexibility in that two-percenters would be able to adjust their (fares
?) in one day. Well, 90 percent of the providers can do that now. And so why
remove that -- why not -- why not the two-percenters?
Another thing,
mergers. And I realize that the mergers and the time it takes that -- that, you
know, that's a difficult point. I'm not saying that necessarily 45 days is the
right number of days but what I am saying is these people have a right to get a
decision made. Most of the time these mer -- in fact, I think all of the time
that I'm aware of these mergers are one two-percent company merging with another
two-percent company resulting in another two-percent company. So the information
isn't complicated, it isn't detailed. And, to my knowledge, the FCC has never
denied one so I just think it is -- 45 days isn't an unreasonable amount of time
to get this done.
There are a lot of other regulatory problems that we
could have identified. But we identified these reports, the problem with mergers
and the pricing flexibility and the deregulation when, in fact, there is
competition in place, where an investment has been made and so they aren't going
anywhere. The competition is there, will remain there. Why not let the
two-percenters do what the other CLECs can do?
So, with that, I'd like
to start my questioning with Carol Mattey and certainly do want you to know that
I appreciate the work that you have done to move these issues forward. And we
will be glad to work with you to try to get this done. I absolutely think the
legislation needs to be here, though, because I think people aren't necessarily
like me in temperament but they're like me in you do the things that are
aggravating you the most. And so I think that we have to do this so that we can
get this accomplished. Because I know you intend to do it but it's the time that
is a problem with me.
In your testimony regarding section 281 of the
bill, you mentioned that the FCC would not be able to receive data from the two-
percent carriers such as broadband deployment reports. I must
say that that never was the intention of the bill and I'm afraid that your
statement kind of missed the mark in that area. It was not ever intended to keep
information from you for regulating or receiving the information that you need
to do your job, and especially when it comes to broadband
deployment. But this bill is about your trying to think of ways that
smaller companies can provide you with the information that you really need in a
more appropriate and less burdensome manner given their relative size.
In fact, I have information that indicates that CAM costs for RBOCs are
about four cents per customer and for two-percenters $3 per
customer. Those are the kind of things I'd like you to be looking at. So, you
know, I just -- these are suggestions. Couldn't you get more general information
from two-percenters and more detailed information from the larger companies
which serve 92 percent of the customers? I mean, it seems to me that that would
be a good base of information.
Or, couldn't you require two-percent
carriers to report annually while the larger carriers could report semiannually?
Or, why not give smaller carriers a longer time to submit their information? I
just think we need to be creative on ways to lessen their regulatory burden. Do
you see a problem with any of those suggestions?
MS. MATTEY: We
certainly are open to thinking through and discussing further all of those
suggestions. I want to clarify, for the benefit of the committee, that the CAM
filings that you referred to presently there are, you know, over 1200 carriers
that fit the category of two-percent carriers and today, under the current
regulations, only eight of those 1200 carriers actually filed the CAM report
that you showed the committee. And, so, I would be -- I would share your concern
if all 1200 of them were filing that big report but as it is today the
commission already has recognized that the -- what I would call the really small
companies, which are the bulk of the 1200, do not need to file that sort of
report.
And as I, you know, alluded to in my testimony, the bureau is
preparing to recommend to the commission that we do a rulemaking. And, in fact,
the bureau believes -- the Common Carrier Bureau believes -- that the CAM
reports do not need to be filed any longer. And we would be recommending that
the companies file a certification that they're in compliance with our cost
allocation rules. So, that's an example of an area where we hope to be moving
forward in a very constructive way.
With respect to the financial
reports --
REP. CUBIN: Could I ask you a question about that first?
MS. MATTEY: Sure.
REP. CUBIN: That's great news. Can you give me
an idea of when that will be?
MS. MATTEY: Well, I can tell you when the
bureau hopes to make the recommendation but, obviously, when the commission
adopts it is subject to the commission. But we are hoping to be making the
recommendation in the early fall.
REP. CUBIN: So, that's great. So, my
response would be that I would really like the legislation to stay in place
maybe to help boost that process along.
MS. MATTEY: And I must confess,
with respect to eliminating the filing, if you were to enact that particular
provision it would mean we wouldn't need to do the rulemaking and that takes
time and resources as well. So I don't object to that. I mean, if you had the
elimination of the CAM filing. But the one thing I would suggest that you think
about is at least having some sort of provision that there be a certification
that the cost allocation rules are being complied with. So that's just one
suggestion.
With respect to the financial reports, again, you know, you
showed the committee the big fat reports in that folder. That -- those financial
reports, again, are not filed by all 1200 companies, approximately 55 out of the
1200 currently file those financial reports and the remainder do not file those
financial reports.
And, again, as part of the rulemaking that the bureau
is preparing, we would like to recommend to the commission that we eliminate
those financial report filings and instead have, basically, a one-page summary
financial report. Because we think there's some baseline information that the
commission needs in order to have, you know, an assessment of what carriers
across America are doing. But we don't need as much information. So, again, if
you would consider that sort of tailoring just to have some sort of one-page
summary or something that would be something that we're very open to talking
about.
REP. TAUZIN: You're making a lot of progress here, Barbara.
REP. CUBIN: Really, those are exactly the kind of things that we hope to
achieve.
MS. MATTEY: Yeah, I mean, we've been actively thinking about
this and, you know, you know, I know you hope that the legislation is spurring
us to think about it but, indeed, we were actually thinking about. This is
something that we had started working on early this year and so the legislation
and our thought process is sort of moving on in a parallel timeframe.
REP. CUBIN: Well, I really do appreciate that and would like to offer
any assistance that you might need from this end. I would really like to do
that.
Let me -- I can't go through all these questions but would like to
submit them not just to Ms. Mattey but to other members of the witness panel
today, too. In your testimony, and it was mentioned otherwise, too, that the
45-day deadline that you had a problem with that. I wanted to note that even Mr.
Sumpter favors the concept of a merger review deadline. Apart from the actual
number of days, I have a more basic question. Is it warranted, you think, to set
a shorter deadline for action on the simpler mergers between smaller companies?
MS. MATTEY: That's his question.
MR. JAMES BIRD: I'll take that
question. We -- I think very often mergers between the smaller companies will
take a shorter period of time.
REP. CUBIN: Shorter -- help me with that
because some of these have been pending a year, months, years. So just help me
what you mean by shorter.
MR. BIRD: I don't know that any two-percenters
have taken that long. There really haven't been that many mergers among the two-
percenters. The one that was referred to in Mr. Cole's testimony, around 1996,
came out at an unfortunate time in some ways. It was right after the commission
had addressed a very large merger -- Bell Atlantic, NYNEX -- it was a brand-new
concept and they -- a lot of the structure for analysis that was in the Bell
Atlantic-NYNEX opinion was applied in this context where -- to come to the basic
conclusion that it really -- that the competitive concerns were not there. And
because that was the first case it was a much more extensive analysis.
I
think if you look at the more recent cases, last year the (AllTel Alliance ?)
merger, the competitive analysis was three pages and basically found that there
were no major problems.
REP. CUBIN: And how long did that take for the
company to receive that?
MR. BIRD: It was submitted in January and the
decision was adopted in June but the major period of time on that one was not
spent on those Bell Atlantic-NYNEX issues. I think there were waiver issues that
were involved. And that's one thing I wanted to mention with respect to the
mergers. The mergers often involve questions of waiver of one or another of the
commission's rules. And depending on which rule it is, and how much experience
there's been with the waiver of the rule and what the circumstances are, those
can take a fair amount of time to decide. And that's really, I think, we try to
decide these cases and the commission has taken steps to speed up its review of
--
REP. TAUZIN: What's the average time right now?
MR. BIRD: The
average time for --
REP. TAUZIN: To handle one of these reviews.
REP. CUBIN: To review a merger.
MR. BIRD: Well, it depends on
the size of the merger. We've made a commitment to reach conclusions in even the
most complex mergers within 180 days after the time it goes out for public
notice.
REP. TAUZIN: Barbara, if you'll yield again. Mr. Sumpter, didn't
you recommend 180 days in your statement?
MR. SUMPTER: Yes, Mr.
Chairman.
REP. TAUZIN: And you're saying you can do it in 180 days? Even
the most complex?
MR. BIRD: The most complex ones -- we've made a
commitment to attempt to do those with 180 days from the time that they go out
on public notice. And we've qualified that with only two qualifications. One is,
there are certain things that we -- are within our control in terms of these
merger applications, things that the commission can do and should do within the
time period that it sets for itself. There are other things that are not
completely within our control that occur with some frequency in merger
applications.
One of those is if we don't get sufficient information
from the applicants on one point or another --
REP. TAUZIN: Barbara, if
you'll yield again.
REP. CUBIN: Sure.
REP. TAUZIN: One of the
problems, we -- you know, we've got a bill moving that deals with that and one
of the problems we've found in examining this issue is that as long as that's a
subjective question -- that whether or not you've got enough information -- that
the time never tolls, you never start ringing it. And the problem -- the problem
of setting any kind of time limit is defining when it starts. If you can decide
it never starts because you never go out on public notice because you keep
asking for more information that the applicant doesn't know you want when he
first files, you know, the legislation and time limits are meaningless.
And, so, I suppose what I'd like to ask you -- if you don't mind,
Barbara -- is, the bill we've offered, the Barrett-Pickering bill, basically
says that the time starts the moment the applicant gives you all the information
that you say up-front you need in a merger application. And once you have that
information -- if he knows what it is and doesn't give it to you, that's a
different matter. But if you're telling what's required at the get-go and he
supplies it, the timing begins to run. Would you accept such a provision?
MR. BIRD: This is for the more general -- these questions frequently
don't happen too much with the two-percenters but the -- I think that would go a
long way to addressing the concern we had that an applicant may come to us with
an incomplete application. We think it's very important that applicants know
exactly what's expected of them. And in what we've -- in the process guidelines
that we have put forth on our web page we suggest that the applicants get in
touch with us before they file the application. And we can get -- and we've done
this with a number of people -- so they know what's required and we can get that
together and things move rapidly at that point.
REP. CUBIN: That hasn't
been a problem that I've heard about -- knowing what to submit -- but certainly
we need to know when the clock starts clicking and when it should end. Just to
follow up on this a little bit, Mr. Darby. I just have one more question after
this one but you discussed in your testimony the cost of uncertainty. And, like
my bill, H.R. 4019, that this subcommittee has already marked up, H.R. 3850
proposes deadlines for merger reviews, as we've said already.
I've
always believed that we need more certainty in that time. So, could you tell us,
what are the costs to two-percent company -- to two-percent carriers of merger
review without deadlines of any kind? What kind of -- not only inconveniences
and delays in, you know, being able to offer more advanced services, but what
are those direct costs to you?
MR. DARBY: Sure, I'd be happy to, thank
you. It's important to understand that mergers or acquisitions have a sound
economic basis to the stockholders who are engaged in it. Otherwise they
wouldn't be considering it. So, what happens is, if there is a proposed merger
the benefits of that merger are delayed. Okay, so they're -- in the first
instance there is a cost of delay. But there is in a sense a discriminatory cost
of delay because not only merger applicants -- not all merger candidates have to
go through these kinds of processes.
That is to say, there are
alternatives for an unregulated company to merge with another or acquire another
unregulated company. So that if I'm looking -- as a potential acquirer of let's
say resources that will give me access to a particular market and I look at a
cable company, a wireless company, a satellite company or another company that's
not subject to these regulations, that's an incentive to me to avoid doing deals
with these kinds of people. So, there's a discriminatory piece to it and there's
also a delay piece to it.
I think, the bureau's response is we need more
time and I sympathize with that. These are very difficult issues many of the
times but I think what's missing from that is that this -- and this is the point
of my testimony, this is not a free good. Okay? That taking more time while at
the margin may create benefits for the regulatory process it also brings about
these kinds of costs.
REP. CUBIN: Thank you, Mr. Chairman.
REP.
TAUZIN: Thank the gentlelady. The chair recognizes the gentlelady from
California, Ms. Eshoo.
REP. ESHOO: Thank you, Mr. Chairman. I'd like to
direct my question to Mr. Mueller and to Mr. Cole and then to Ms. Mattey from
the FCC. You heard some of the questions that I raised in my opening statement.
Let me direct myself toward this part of the bill, the bill would remove the
separate subsidiary requirement for long distance and other non-regulated
activities. Now, we know that this requirement is intended to protect ratepayers
and competitors from cross- subsidization. But at the same time the bill removes
the requirement for the companies to file what's known as the CAM -- the cost
allocation manual -- with the FCC. These filings are also intended to protect
against cross-subsidization.
I understand that requiring both of these
protections could be considered overkill. I understand that one. But how do you
justify eliminating both of them? And how can we be sure that ratepayers will be
protected against the cross-subsidization if neither of these mechanisms are in
place?
MR. MUELLER: I'll be happy to go first.
REP. ESHOO: Sure.
MR. MUELLER: Thank you for the question, I appreciate the opportunity to
respond. First of all, let me just give you some --
REP. ESHOO: Do you
really mean that? (Laughter.)
MR. MUELLER: Yes, I do. Yes, I do.
REP. ESHOO: We always say things like that and then, you know --
MR. MUELLER: Let me just give you an example that I think might help the
committee understand the situation in Cincinnati. I'm president of the telephone
company. Some of the things that I don't have under my direct control are
wireless, long distance -- two subsidiaries that we have to have separate
subsidiary requirements and so they are separated subsidiaries. Because we have
those separated subsidiaries we have general managers for those businesses. We
have additional costs -- we have the cost of creating separate books and all of
those kinds of things -- which are passed on to consumers and businesses in our
market. There's really no need for that kind of separate subsidiary requirement
when you have a company that's our size.
Your second point was about,
well, what if we take away these kinds of requirements and do not have -- and
you do not have to file any cost allocation materials? The reason -- let me put
it this way, at the FCC we file a lot of cost material for our states. We break
that cost material down between the states of Ohio and Kentucky. We provide that
information to the FCC and honestly we don't know whether or not that material
is even used for any purpose other than filing what you saw. We also file
similar materials --
REP. ESHOO: They can tell us that. But if you
remove both -- I mean, I acknowledge that if you have both of them on it may be
overkill but how are we guaranteed? I mean, how do we know?
MR. MUELLER:
We also file similar materials at the state level and the states review our
businesses on an ongoing basis -- Public Utilities Commission of Ohio, Public
Service Commission of Kentucky. And there are, I would say, some onerous, some
not onerous, restrictions upon us in the states. And that's true across the
country and many states are different in terms of how they regulate the
companies within those states. So, I don't want anyone to get the impression
that because this bill is passed in this current form that regulation goes away.
That's clearly not the case at all. We clearly would still be a regulated
organization and all two-percent companies would be.
REP. ESHOO: But the
bill lifts both and so my question -- I mean, you're telling me what you do. But
I'm asking you, given what the bill says, both are gone, how do we know that
ratepayers are protected against the cross-subsidization?
MR. MUELLER:
Congresswoman Cubin also responded to that, I believe, by saying that the FCC
still has the authority to ask at any particular point of time, to any of the
companies, for this information. It just would take away the requirement that we
provide this information on an annualized basis.
REP. ESHOO: If they ask
and you give the information, do they have the hands to do anything? Well, maybe
we can get Mr. Cole to answer and then maybe the views of the FCC. I appreciate
your response.
MR. COLE: Yeah, to the issues on point, ours is even a
more complicated situation in that we have 20 states and the allocation process
is extremely burdensome but it is a very complicated process for us. But, again,
I believe this legislation does not alter any of the cost allocation
requirements that we as companies are required to follow as far as allocating
our costs. So it does not change anything as to how we do business or how we
allocate costs among regulated and non-regulated businesses whether they be
separate entities or not. It only says that we would not be able to -- or not be
required to produce this annual CAM and ARMIS filings that are very extensive.
We would still be required --
REP. ESHOO: Let me ask the question
another way.
MR. COLE: I'm sorry.
REP. ESHOO: How is the
ratepayer guaranteed that these protections that you are referring to, by intent
anyway, will be honored?
MR. COLE: I think, one is I believe from the
FCC staff -- one of their recommendations which is for us filing just an annual
statement that we are complying with cost allocations requires us to submit to
the FCC that we are following these rules and adhere to those.
The other
is, there is also state regulatory review of those same allocation methods as
they have questions. And, again, if there are any questions from the FCC or
other bodies as to -- for us to sit down and show how we are following those
processes we would be doing that at that time. This is really just saying --
it's doing away with the filing requirement, not that any of the rules of what
we follow change as far as the ongoing business practices and how we account for
costs. And I do believe that the requirement for an annual certification that
we're following those rules would be much less burdensome.
REP. ESHOO: I
think I'm running out of time but I appreciate your answers.
Mr.
Chairman, can Ms. Mattey -- I won't say anything else -- can she respond?
REP. TAUZIN: Of course, absolutely. Ms. Mattey.
REP. ESHOO: It's
hard for me to say that I won't say anything.
MS. MATTEY: Well, one
thing, you know, obviously I agree with the gentleman that it be important and
it be clear that even though a carrier would not file a, you know, a report
detailing how it complies with the FCC's cost allocation rules, it be -- you
know, there be no misunderstanding that there would still be an obligation to
comply with those cost allocation rules. And that is critical to make sure that
ratepayers -- that the consumers are not bearing the costs of competitive
ventures or other ventures. So, I think that's a very important thing that we
need to keep in mind.
REP. ESHOO: With the permission of the chair, how
would the FCC know that they're complying then? Is that enough for you?
MS. MATTEY: Well --
REP. ESHOO: I mean, somewhere, somehow --
everyone is saying that with what they would still have to do, be required to
do, so that there is a protection, so that the rate payer is protected -- um, my
question still is, after all of what you've said --
MS. MATTEY: Well, it
certainly would be more difficult --
REP. ESHOO: Will they --
MS. MATTEY: It would certainly be more difficult for us to figure out
whether there is a need for any kind of enforcement action because if you
eliminated both the separate affiliate requirement and the cost allocation
manual filing requirement simultaneously it would leave us with, you know, a lot
less information in which to make any kind of informed judgment. You know, these
are things we would need to think through if this proceeds how -- you know, what
the ramifications would be.
REP. ESHOO: Thank you, Mr. Chairman.
REP. TAUZIN: I thank the gentlelady. The gentleman from Illinois is
recognized.
REP. JOHN SHIMKUS (R-IL): Thank you, Mr. Chairman. Ms.
Mattey, the many different issues that we've addressed through this
subcommittee, especially with the FCC, it always has to do with the time of
rendering some type of ruling. And I know I've written -- I think Senator McCain
got in trouble during the campaign for writing letters asking for an expedited
-- or at least a timeframe by which filers would get a response.
REP.
TAUZIN: If the gentleman would yield, I remember when he got criticized for
that. I invited the press to come check my files. I had probably 100 times more
letters than him. Anyhow, go ahead.
REP. SHIMKUS: And I haven't been
here nearly as long but I know I have a few myself. And the issue has never been
-- the issue I think in all those letters has never been to encourage the FCC or
move the FCC in moving in a particular direction it's always been with the
intent of the FCC to make a decision. Because I think -- our panelists here
understand that time is money and that they're looking for -- in the terms of
another hearing I had this morning -- some legal certainty by which to make
business situations, whether to expand into a market or whether to not. And I
think -- my fourth year here, I think that's just been a constant crescendo from
this committee to the FCC, is --. So, in reference to this bill and its
timeframe, that's the premise by which legislative language has been put in
there. It's not just with the two-percenters, it's with everything we deal with
in addressing with the FCC.
So if we're going to -- so I don't know how
a bill would move out of this committee without some type of timeframe in there.
So, the question would be, if there's going to be a timeline or some definitive
fish-or-cut-bait, make-a-decision timeframe, what should that be?
MS.
MATTEY: Well, I think that the timeline really needs to depend on the
circumstances. For instance, petitions for reconsideration in rulemaking
proceedings -- even though they may filed by a small company -- may raise broad
policy issues that apply equally to the larger companies. And if you have a
short timeframe that the commission must act on that for the small company --
REP. SHIMKUS: Can you define short and long?
MS. MATTEY: Well, I
mean, I will tell you I think in general 90 days for a commission action on
petitions for reconsideration of rulemakings is too short because rulemakings,
by definition, have to be adopted by the full commission.
REP. SHIMKUS:
And what is too long?
MS. MATTEY: Well, again it depends on the
circumstances. I agree with the gentleman from ALTS that something more on the
order of 180 days would be a more reasonable timeframe but, again, it depends on
the circumstances because if it -- there's a difference between actions that we
can do at the bureau level and actions that can be done by the full commission.
And the full commission things just take longer because of that, you know.
So, but also I just was trying to make the point that issues that may
raise broader policy issues take longer because you have to think about the
inner relationships of those issues and how they impact on other carriers.
REP. SHIMKUS: All right, thank you. My point -- and hearing the answer
-- is, you can define a time that's too short but you can't define a time that's
too long. You can define a time that 90 days is not enough time for us to do it.
But you can't give me a time -- this is in excess of what we need to get it
done.
MS. MATTEY: Oh, I'm sorry, I misunderstood your question. I
thought you were asking what a reasonable time was. I'm sorry, I misunderstood.
REP. SHIMKUS: Well, I -- in essence I was and I didn't get an answer.
MS. MATTEY: I thought I said that I agreed with the gentleman from ALTS
that 180 days --
REP. SHIMKUS: Okay, on the record, 180 days would be --
could I have --
MS. MATTEY: I mean, I said that would be --
REP.
SHIMKUS: Mr. Darby, could you respond as --
MR. DARBY: Sure. Let me just
talk about 180 days and I certainly appreciate, you know, the concern from a
regulatory point of view that you want to get the policy right. But getting the
policy right to the extent it takes time, you know, might very well keep a lot
of good things from happening in the private sector. As a former banker, if I
were looking at a property I wanted to acquire and I knew I could prove
(synergies ?) for my shareholders and shareholders of the companies, and it
would create value and growth for the consumers going forward, the prospect of
spending 180 days to get an uncertain review would certainly be a turnoff. I
think that's what we're hearing.
Again, I'm sympathetic to the notion
that to get the policy right you need more time but maybe you can do it with a
little less time, take some chances with the policy and let some good things
happen in the private sector. After all, this is not the same, you know, as the
telephone sector was 20 years ago. We hear a lot about internet time and the
pace at which these deals are made, and the pace at which these evaluations are
made. A hundred and eighty days -- with all due respect to your need to get it
right -- is just far too long.
REP. SHIMKUS: And I'm just going to -- I
have some two- percenters in my district and they really -- they do an
invaluable service. They have provided -- and they're trying to reach out in
other areas. But I know of -- Alaska Telephone has had a decision pending for
over two years and it's still pending.
Could you comment on that?
MS. MATTEY: Well, I'm sorry I'm not familiar with more details on that
but --
REP. SHIMKUS: Could you -- could you forward the --
MS.
MATTEY: I would just --
REP. SHIMKUS: Ma'am -- Mr. Chairman, if I could
ask for the FCC to give us a response on Alaska Telephone and why the --
REP. TAUZIN: The gentleman's suggesting you do it in writing.
REP. SHIMKUS: In writing, so that we can get further clarification.
MS. MATTEY: I would be happy to provide something in writing if perhaps
you could give us a little more detail -- Alaska involving what?
REP.
TAUZIN: How much time do you need? Do you need 180 days? (Laughter.)
MS.
MATTEY: No, but we would be happy to follow up on that.
REP. SHIMKUS:
Okay, thank you.
MS. MATTEY: And, also, just one thing I wanted just to
clarify for everyone, in rulemaking proceedings we are subject to the
Administrative Procedures Act requirements that we seek public comment. And
often -- in those sorts of situations we normally provide, you know, 30 days for
comment and at least a minimum of 15 days for parties to file reply comments.
So, in a normal situation that takes 45 days just to get the record of what
people think of what we're proposing to do. And then, you know, again, if
something is going before the full commission normally our commissioners expect
a minimum of a couple of weeks before they will vote on something. And, so, if
that takes, you know, just for the sake of argument, 30 days that -- again,
those two things together take up 75 days. And then the remainder of the time,
obviously, the bureau is working on preparing a recommendation and, you know,
revising that and responding to the parties.
REP. SHIMKUS: And I'm not
belaboring a point, it's just something that really has irked myself and, I
think, many members of this committee for a long time. And I don't think it's
directed at an administrator. I just think it's directed at a bureaucracy and
hopefully we would be as vigilant should the administrations change and there's
Republicans in there. And if they are slow and will not commit to timely
processing I would probably say that this committee would be as vigilant on
trying to get some legal certainty on time and response to some of these
filings. And, with that Mr. Chairman, I yield back.
REP. TAUZIN: I thank
the gentleman. The chair recognizes the gentleman from Tennessee, Mr. Gordon.
REP. GORDON: Thank you, Mr. Chairman. I guess maybe just follow up
quickly on that. Ms. Mattey, is there a relationship between adequate staffing,
adequate funding, and timely response?
MS. MATTEY: Yes, I think there is
and I can say, just based on my own experience in the bureau, our staffing
levels are not adequate to move things along in the timeframes that are
contemplated by this bill. We have a number of matters that -- I mean, I assure
you I would dearly love to be able to complete them and finish them as quickly
as we could and we just don't --
REP. GORDON: Those folks who want
things to move promptly, if they would vote for additional funding, you think
that might be one way to help this out?
MS. MATTEY: That would be.
REP. GORDON: Okay. Now, let me ask also another question. In your
statement you said that (H.R.) 3850 could be interpreted to say that the FCC
would not have the authority to regulate the two-percent companies in slamming
and truth in billing. Could you be more specific about what section you're
referring to?
MS. MATTEY: Section four of the bill which would add a
section a new section -- 281 requires the commission to adopt less burdensome
requirements for the two-percent carriers and also the bill also would allow the
two-percent carriers to seek a waiver of any regulations. And our concern about
that would be that a two-percent carrier would seek a waiver of the requirements
that it comply with our truth-in-billing rules and our slamming rules and, as I
read the bill, the commission could not enforce those rules pending action on
the waiver petition. And the legislation mandates that we adopt less burdensome
requirements.
REP. GORDON: Just because they petitioned didn't mean -- I
mean, I think no one would suggest that you should relieve them of slamming and
truth in billing. I mean, they could petition for relief for anything, I assume.
MS. MATTEY: Right. I was --
REP. GORDON: I mean, even without
this bill they could still petition for that.
MS. MATTEY: Of course, of
course.
REP. GORDON: So, how are things different?
MS. MATTEY:
Well, I -- again, I was just focusing on the language that says the commission
shall adopt less burdensome regulations. So, as I read that language, it does
not allow the commission to apply the same slamming rules and the same truth-in-
billing rules to the two-percent carriers.
REP. GORDON: So, should we
say reasonable? Or do you need report lang -- with report language -- I mean, I
think that's very much of a stretch but --
MS. MATTEY: Well, if I'm
misreading it then I feel more comfortable.
REP. GORDON: Right, so if
there was report language or the authors were to say to you, that's not what is
supposed to be included within the less regulation, then that should clear up
that matter.
MS. MATTEY: Yes, that would be helpful, I think.
REP. GORDON: Okay. Let me just, I guess, ask Mr. Mueller, do you read it
that way? And what would be your response?
MR. MUELLER: To the question
of whether or not two-percent companies should be relieved of slamming or
truth-in-billing requirements, first of all, thank you, I don't read it that
way. And, certainly, that -- as a president of a company -- that would
absolutely not be our intent. I'm not interested in being reduced from the
regulatory requirements surrounding slamming nor truth in billing. Truth in
billing has some onerous requirements on us but we are complying with those and
plan to continue to do so as well as continue to comply with the slamming
requirements.
REP. GORDON: Well, I think we can find a consensus that
that clearly was not the intent of the legislation and, if necessary, can have
that in more specifically or in report language so that that should no longer be
a concern of the FCC. Thank you.
REP. TAUZIN: I thank the gentleman. The
chair recognizes himself. But, first of all, let me -- let me assure you, Ms.
Mattey, that in my very humble opinion if the commission were enforcing a 14-
point checklist instead of 1,014-point checklist on 271s, you might have enough
staffing and money and time to do your other work. But that's a personal
opinion.
In regards to the issue before us, however, the law defines a
two-percent company, does it not?
MS. MATTEY: In section 251 or the
draft legislation?
REP. TAUZIN: The current law.
MS. MATTEY: The
current law -- my understanding is 251 has an exemption from 251 requirements
for companies two-percent or less, yes.
REP. TAUZIN: Yeah, so the
current law recognizes that there's something magical about a two-percent thing.
Does it say anything about companies that are really two-percent or sort of
two-percent or kind of two-percent? Or does it -- does it address all the
companies under two-percent?
MS. MATTEY: My understanding is the current
law refers to all two-percent companies.
REP. TAUZIN: That's what I
thought. I don't think it makes a distinction but the commission does. The
commission through its rulemaking, at least up to this date, has distinguished
between some two-percent companies and others. You've testified today that
certain numbers of two-percent companies have to comply with some rules and
certain numbers don't. And certain numbers have to comply with other rules and
certain don't. But the law says that basically that there's a class of companies
called two-percent companies that Congress obviously intended to be treated
differently than the larger ILECs. Is that right?
MS. MATTEY: Well, the
particular requirements that we've been discussing today were all adopted by the
commission prior to the passage of the law. I agree with you that 251 does
create a category of two-percent carriers. It's not clear to me whether the law
mandated that we go back and reexamine all of our existing regulatory framework
to conform it to that particular (percentage ?) --
REP. TAUZIN: Well --
MS. MATTEY: -- which relate specifically to the local competition
(percent ?).
REP. TAUZIN: Yeah, if -- if you follow Reed Hunt's (sp)
argument that the 1996 Act created the capacity of the commission to create its
own legislative intent -- I assume that's true but there's a clear legislative
intent in defining a two-percent company as something that is deserving of less
regulatory burdens than companies that obviously have a larger share of the
marketplace and therefore should be regulated more deeply as monopolies. I mean,
isn't that obvious?
MS. MATTEY: I agree with you and that's what the
bureau is working on.
REP. TAUZIN: That's why you're moving in that
direction now and that's why I think you've consented to some of the changes Ms.
Cubin is recommending in her legislation. And I'm glad to see that. I just
wanted to make the point that I think it's real slow getting there. I think we
need to get there as rapidly as we can.
Is it the real reason why the
commission is considering doing that and the reason for the Cubin bill
illustrated in those charts that Mr. Mueller held up earlier -- the arrival of
incredible and significant competition to the two-percent companies.
MS.
MATTEY: I'm afraid I don't understand the question. Could you please --
REP. TAUZIN: Let me try again. Isn't the whole notion of the D word,
deregulation, less filing requirements, less regulatory costs being imposed upon
the two-percent companies -- either your decision to change your rules in
regards to what's required to be filed or Ms. Cubin's bill. Either one, isn't
the genesis of that notion really in the fact that the two-percent companies
are, number one, small -- smaller than the large companies, by definition --
and, number two, they're being subjected to much greater competition in their
local markets than they ever were before?
MS. MATTEY: Yes, I agree with
you that as competition is unfolding in particular markets the commission should
be thinking about -- and the bureau is thinking about ways to deregulate.
REP. TAUZIN: Yeah, and you see, and here's a big problem, I think, we're
not only going to face with two-percent companies but eventually with the whole
telephone industry. The big problem is that competitors are arriving who don't
have all of these regulatory burdens. And the '96 act anticipated that, it
really begged for that. It asked the cable companies to consider getting into
telephones and it helped create CLECs and it helped really establish the
capacity of companies that weren't normally engaged in voice communication to
get into it. Just as it told the telephone companies, it's okay for you to get
into other things like video and, you know, data, whatever you want to get into.
As companies do that, we still have bureaus that regulate these
companies as though they were only doing what they used to do. And if you fit
into that category you fit into this heavy, you know, shelf of regulation. If
you don't, you can be delivering the same services to the same customers in the
same market, now, but if you come in by virtue of having been another company
you're not subject to them.
And I think Mr. Darby put his finger on it,
as we transition into that world, what enormous disadvantage these two-percent
companies are going to be in because, number one, this a costly process for them
to have to go through. Number two, as Mr. Darby points out, it creates a
prejudicial economic situation for them. And, number three, it really damages
them in terms of their ability to sustain themselves in a merged market, merged
functional communications delivery system and marketplace.
And I guess
what I'm saying, in a nutshell, is don't you agree with us? We've got a lot of
work to do, both the commission and those of us in Congress who try to write
definitions for two-percent companies and give them meaning -- to literally
finding the right formula over the right amount of time as competition is
evident in the marketplace -- really creates a more level playing field for all
of the players. And don't we really have think about the whole regulatory
structure at the FCC which was designed for a world where everybody was doing
something functionally different and now they're all doing the same thing. I
mean, we're getting down to that.
You needn't respond, I'm asking
rhetorical questions. (Laughter.) But I think --
MS. MATTEY: This is my
first time here, I have to learn what -- what to do. (Laughter.)
REP.
TAUZIN: Well, unfortunately, it's my first time here. (Laughter.) We've been
through this a lot over the years. But I really think we're at a period of time
where we're going to have to think about of the box on it because the
marketplace is changing so rapidly. And the gentlelady from California -- and
asked all of you a question how do we know these companies that comply with cost
allocation? Well, number one, if they certify they are and they aren't -- and
you can always check them if you -- you know, audit them just like the IRS can.
If they're not you can rap them pretty good and you have a habit of doing that
when companies are out of compliance with you, and you should.
Number
two, there's a marketplace out there. If Mr. Mueller's company starts
subsidizing his other operations and raises the price dramatically on his
services, I suspect that marketplace is going to react. I mean, the only reason
we're here talking about deregulating two-percent companies is because that
marketplace is emerging. It's a competitive, vibrant marketplace in which he not
only faces local competitors but now the big ILECs are coming in and challenging
him. And they're still going to be subject to all your regulations and your
rules. And if he raises his prices in order to subsidize his other activities, I
don't have any doubt what his customers are going to do. I know what they do in
my hometown. They go find another store.
And that's the beauty of what
we're getting into. We're getting into the place and time when there are going
to be a lot of stores in town. And when there are a lot of stores in town
there's a lot less raison d'etre for you and I. Because we don't have to
regulate prices and terms and conditions and cost allocations and
interconnections and all the things that we have to do today in order to somehow
transition from a monopoly marketplace to that vibrant, merged consolidated and
diverse and, at the same time, incredibly mixed multimedia communications market
as we're seeing developed.
So, I think -- well, I guess I'm trying to
say -- is that I think you're making some steps in exactly the right direction,
I wish they'd come sooner. And, frankly, I think we need to put some time limits
and some definitions of when the time limit starts on these things. I'm never
more frustrated with the FCC than when someone in this country of ours comes to
me and tells me, I can't get an answer. I'm just hanging out there. I'm hanging
out there. And, by the way, while I'm hanging out there people show up and tell
me if I hire them they're going to unstick me, they can get me processed. And
sometimes it's not lawyers asking to be hired, it's just people -- claim they
have influence with you. I'm not saying they do, I'm not saying they don't. I
hope they don't. But when you hang people out there you create all the
uncertainties, you create all the problems, you create the financing problems
and you create all this vulnerability for these people.
And I think it's
in our interest -- all our interest -- for the integrity of the commission,
integrity of the process -- for us to have time limits that are real. That start
at a given time and end at a given time and if you've got a reason to disapprove
somebody you say so. And then no one can come to me and complain that I got hung
out to dry and I got subject to all of this other stuff that sometimes happens.
None of us -- I know none of you, none of us -- would approve of it.
It's a real passion with a lot of us here in this panel to try to do
something about that and we're asking your help in thinking it through and
finding a way. The transitions are always tough. Transitions from monopolies to
competitive marketplaces are always tough. And we're going to make some mistakes
as well as you're going to make some mistakes along the way. So we need some
failsafe mechanisms but we need to plod ahead. As Mr. Darby said, we've got to
we've got to quit thinking in the 1930s, competition is here. When competition
comes and when it comes evidently and when it comes in buckets, we need to be
quick enough and smart enough to deregulate. And then stand back and let the
beauty of the marketplace work, always with the capacity to step in if somebody
gets too big and plays unfairly. That's my soapbox.
Let me ask my friend
from Tennessee if he has any closing remarks.
REP. GORDON: Just quickly,
again I want to thank the panel for being here today. I think we better
understand this issue because of your testimony. Ms. Mattey, I want to also
thank you and the FCC for moving forward on these issues. We hope that you will
continue to do that.
Clearly, as the chairman related, frustration is a
limbo when -- normally when you contact an agency or someone it's a very
important issue to you. You know, you've got lots on your table but it's
something very important to them and they're thinking about it every day and so
every day they don't hear something about it, it's a problem. I've had the same
experiences just trying to get information from the committee (sic). I do think
a lot of it is, is not adequate funding. And I think that it's not really
responsible of us, on the one hand, to give you a lot more responsibility, ask
for a lot more, but then try to cut your funds in retaliation. You know, you've
got to do a better job of showing us how the funds will -- you know, can get
results because I think things do need to move promptly.
Also, let me
just thank you for your testimony today. You say this is your first time. A part
of the problems that FCC has here is many of the surrogates that come simply
haven't been prepared, haven't done a good job. And, you know, I've come here
oftentimes -- not oftentimes but on occasions -- wanting to support the FCC and
their own folks can't explain it. And you -- you know, hopefully that -- you
know, you're a model of what we'll see in the future. So, thank you.
REP. TAUZIN: That was pretty sweet of you. (Laughter.) Let me echo that,
I really appreciate you coming here. First time testimony from Ms. Mattey, thank
you for your contribution. You've been very forthcoming. And, frankly, I think
you and Ms. Cubin made some real progress here today in terms of helping us
fashion a bill that will work and one that will meet your concerns. I hope we
get closer as we go along and I thank you for that.
MS. MATTEY: You're
welcome.
REP. TAUZIN: I thank you, counselor, for assisting as well. And
I want to thank the other members of the panel, you've added to our
understanding of these issues. What I would suggest is we keep the record open
for 30 days, we generally do that. Let me ask if you can, in the next 10 days,
respond to Mr. Shimkus's questions about the status of the filing that he --
MS. MATTEY: And the 10 days start when he tells me which matter he's
talking about? (Laughter.)
REP. TAUZIN: If you can do -- I think you can
gather that information rather quickly and just let him know what the status of
that filing is, why it's being held. If it is over a year, why? What's going on
there?
And then if you -- the last thing I always request of our
witnesses, if you have any additional information or if you want to comment
about something you heard today that you disagree with, or if you think we've
said something you disagree with, and you want to add some testimony in the
record, a good time to do is it over the next 30 days. You're welcome to do
that.
Let me finally say that I think -- I think we're going to make an
effort, a really big effort, next year to do more than just process reform.
We're going to talk about structural reforms at the FCC as well, see if we can't
create structures as well as processes that work better in these transitional
marketplaces and eventually will work better in a much more deregulated open
marketplace. And if we do that, we would probably -- I think we're going to
solve a lot of the resource and the time problems of the FCC.
I frankly
think you're spending a lot of time doing things that were probably required of
you a long time ago that are not really required anymore. And if you weren't
doing those, you know, there could be time to do the things that are more
critical as we try to, you know, objectively and professionally think our way
through this period of transition. And I'd like to help put you in that position
where you had the time and resources to really -- to do it right. And so we'll
focus on that and if you have any thoughts from your bureau as to what we might
do to make it a more efficient operation -- not having to do things you
shouldn't have to spend your time doing -- please let me know.
I have
often been very critical of the FCC as the ranking minority member, Mr. Dingell,
has been. It's not a personal thing. I hope you understand that, not at all. The
folks I know and work with at the FCC all tend to be extraordinary people who
work very hard for this government and for our country. We differ on a lot of
the policy and that --that ought to be the way it is. That's the way we get it
right, sooner or later. So, thank you for that and thank you for understanding
that.
And thank you all for your testimony today. The hearing stands
adjourned.
END
LOAD-DATE: July 27, 2000
