Copyright 2000 Federal News Service, Inc.
Federal News Service
July 18, 2000, Tuesday
SECTION: PREPARED TESTIMONY
LENGTH: 2122 words
HEADLINE:
PREPARED TESTIMONY OF THOMAS J. TAUKE SENIOR VICE PRESIDENT, VERIZON
COMMUNICATIONS
BEFORE THE HOUSE COMMITTEE ON THE
JUDICIARY
SUBJECT - H.R. 1686 -- THE "INTERNET FREEDOM ACT" AND
H.R. 1685 -- THE "INTERNET GROWTH AND DEVELOPMENT ACT"
BODY:
Thank you, Mr. Chairman, for the
opportunity to testify before the Committee. I am Tom Tauke, Senior Vice
President for Public Policy and External Affairs of Verizon Communications, the
new company formed by the merger of Bell Atlantic and GTE.
Last year,
Bill Barr of GTE, one of our predecessor companies, urged you to quickly pass
these bills. Nothing has changed in those 13 months to make passage any less
important. In fact, recent developments demonstrate that Congressional action is
even more urgent.
Last year, we explained how the Internet market
suffered from severe constraints on competition caused by ad hoc and irrational
government regulation that has been lifted from the telephone and cable
television markets and haphazardly applied to the very different Internet
market. These conditions still exist. First, existing law prevents one set of
competitors local telephone companies like Verizon from competing freely in the
Internet market, thus insulating cable companies, such as AT&T, and the
largest long distance companies again such as AT&T and WorldCom and Sprint
from full competition.
These bills introduced by Congressmen Goodlatte
and Boucher deal directly with this problem. They would break down the existing
barriers to telephone company competition and would allow the local telephone
companies, including the Bell companies, to compete freely in the Internet
transport markets. I want to stress, however, that the bills would not in any
way remove the requirements on these companies to open their local telephone
markets to competition in order to enter the long-distance telephone market, but
would simply free them to participate fully in the Internet market.
The
Antitrust Division of the Justice Department agrees that the Internet transport
market needs more competition. In its complaint to enjoin the WorldCom-Sprint
merger, the Department found that the provision of Internet backbone services is
a relevant market for antitrust purposes and that this market is "highly
concentrated." Verizon wants an opportunity to decrease this concentration by
bringing new competition to this marketplace.
The Internet is an
end-to-end system based on hundreds of connections between different networks.
At the top of this system is the Internet backbone, which links together
thousands of web sites and Internet providers and takes traffic back and forth
at high speeds across the United States. Internet speed is a very important
issue to users. And the faster that data can get to the backbone and the more
backbone capacity there is, the better the connection and the higher the quality
of the data transmitted.
There are vast areas of the United States that
simply have no nearby backbone connections. The largest backbone providers have
little incentive to connect their systems with smaller providers or to locate
hubs away from major urban centers. Many Internet providers have no way to get
their data traffic to the backbone efficiently and without numerous back-ups and
delays. Many are simply located too far away from convenient backbone
connections. And when they do get to the backbone, they find that the lack of
adequate capacity slows their customers' service.
An example is
illustrative: an ISP in a community like Shreveport, LA, or Fargo, ND, must buy
high-capacity circuits to carry its traffic to the nearest Internet hub. These
charges are distance sensitive, so the farther away the ISP is, the more it pays
to get to the Internet. And because these links to the Internet are almost
always interLATA, the ISP pays the very same long distance companies that
operate the Internet backbones.
However, the Bell companies already have
high-speed fiber-optic facilities connecting virtually every city and town they
serve. A Bell company could use this network to solve this Internet connection
problem. That company could provide Internet hubs closer to the ISPs in these
communities and use the fiber that is already in place but which cannot now be
used for these purposes to connect them to the Internet backbone. That same
fiber-optic facility could also be used to deliver Internet traffic collected by
other hub providers to the main Internet backbone. These option would offer the
ISPs in these communities better service at a lower price.
The speed at
which a consumer gets her data a web page being transmitted to her home for
example -- is only as fast as the slowest link in the communications chain.
Moreover, if it is slowed at any point in the transmission, data can be lost,
the connection may drop and some of the more exciting applications for education
and telemedicine involving video, for example, will simply be impossible.
Whole new industries based on a more advanced Internet will be stymied
and the continued development of our high tech and computer industries will be
slowed. The Internet has driven the growth of the high tech sector. There is a
very real danger that if the Internet does not advance to a new level, one
capable of providing higher speed, higher quality connections, the growth our
economy has enjoyed because of the explosion of information technology could
well be undermined.
Rural areas in particular lack high-speed
connections to the Internet backbone. Without these connections, it will be
difficult for rural areas to retain businesses or to attract new businesses,
especially those in the high growth area of today's information economy.
Companies like Verizon have the resources and the capabilities to make
new backbone capacity and interconnection points available quickly to improve
Internet services. But, today, the government says we may not do this.
Keeping Verizon and other new entrants out of the Internet backbone
business has other harmful effects. In particular, it slows the deployment of
high-speed local Internet access technologies (such as DSL),
particularly in rural areas. Many rural areas of the country have no connections
to the Internet backbone. In these areas, interLATA restrictions aimed at long
distance voice services have had the inadvertent effect of preventing Verizon
from providing high-speed Internet services, including DSL
access. The reason is simple: There is little reason that Verizon or any other
company would invest to provide DSL in a remote area if there
is no cost-effective way to get the data to the Internet.
Finally, these
restrictions do more than merely prevent us from improving the Internet -- these
restrictions, and the resulting high level of market concentration, have
anticompetitive consequences as well. The Big-Three long distance companies
(which includes the number one cable company) can dominate the market,
discriminate against other backbone providers and drive customers to their own
backbones. This enables backbone providers to leverage downstream their backbone
market power into the ISP and content markets. Bell company entry into the
Internet backbone market would preserve competitive parity, however. With their
resources, Verizon and the other Bells could rapidly enter the backbone market
and be treated as peers by the existing major backbone providers.
Second, exploiting their insulation from full competition, some cable
companies are engaged in a classic anticompetitive tactic -- tying their
services together, which permits cable companies to leverage control from one
market into others. Specifically, AT&T and other cable giants are denying
access to other providers and requiring consumers who also want broadband access
to purchase the cable company's affiliated ISP instead of the ISP of the
consumer's choice.
Verizon supports open access. The principle of open
access is nothing new: It has been the central tenet of the telecommunications
industry for more than 15 years. That fundamental principle has been applied to
open up the telephone markets and to protect independent programming in the
video market.
That's why consumers today can choose their long-distance
carrier. It's not dictated by the local company. Consumers have a choice. That's
open access.
That's why cable company operators are not allowed to favor
video programmers owned by the cable company in providing cable television
service.
And that's also why consumers have a choice today when they use
the telephone line to get to the Internet. They can choose their ISP -- whether
America Online or Verizon.net or Mindspring or one of the other ISPs in
operation. Again, open access.
We support the open access requirements
for all providers.
Recent legal developments take a major step in the
direction of open access. A resounding victory in the fight for open access was
won just last month when the U.S. Court of Appeals for the Ninth Circuit ruled
that AT&T provides a "telecommunications service" -- not a "cable service"
-- when it provides high-speed Internet service over its cable lines. 1 While
AT&T won on its narrow claim that the City of Portland did not have
authority to impose open access (because the City had acted only pursuant to its
authority to regulate cable services), it lost a much bigger battle. As the
Ninth Circuit held, the principles of nondiscrimination and interconnection that
apply to common carriers of telecommunications apply fully to cable broadband
because it is a telecommunications service.
What this means is that
AT&T and other providers of cable broadband service, by force of existing
law and without any further action from the FCC, are now subject to open access
obligations in all the States in the Ninth Circuit. In particular, providers of
cable broadband service must "interconnect directly or indirectly with the
facilities and equipment of other telecommunications carriers" (section
251(a)(1) of the Communications Act) and must furnish their services to everyone
(including unaffiliated ISPs) on request and without discrimination (sections
201 and 202).
The open access war, however, is far from over. The issue
decided by the Ninth Circuit remains to be addressed and decided in other
circuits. We, of course, have never advocated a state-by-state,
circuit-by-circuit, or other fragmented treatment of open access, believing that
a national open access approach of the sort contained in these bills to be the
proper public policy outcome.
In light of the Portland decision, the FCC
has indicated that it will open a proceeding regarding the appropriate
regulatory treatment of cable Internet access. While we welcome this action,
there are very significant dangers. First, the FCC could succumb to further
delay, which only allows ISPs affiliated with cable operators to lock up market
share and lock out independent ISP in the interim. Second, and perhaps more
important, we expect AT&T and other cable broadband providers to ask the FCC
to forbear from applying to them the provisions of the Communications Act that
effectively impose open access on them. But it would be patently unreasonable
for the FCC to forbear from applying these provisions to cable broadband
providers without also forbearing from applying them to DSL
providers. Cable broadband, after all, is the market leader. Congress must,
therefore, be vigilant to ensure that the FCC does not try to use its
forbearance authority to exercise such arbitrary discrimination.
Some of
the opponents of open access claim that open access is "regulation of the
Internet." This is dead wrong. It is simply access to the Internet and Internet
interconnections to guarantee competition on the Internet and freedom of choice
for the consumer. The principle of open access is a free-market principle that
if imposed now, will avoid the need for truly massive regulation later.
The Internet has already become central not only to our economic
vitality, but also to our communal life. High-speed Internet access will become
the most important communications medium in the country. In the end, the
fundamental issue with respect to the Internet, as with all telecommunications,
is how to allow the consumer to communicate with and obtain information from
anyone anywhere in the world. There are only two ways this can occur: either
monopoly control of the entire network of wires and connections, or a network of
networks governed by principles of interconnection, open access, and free
competition. The choice between those two approaches for the Internet is now
before us. The choice must be made, and inaction itself will be a choice. Will
Congress side with AT&T and the other cable giants and allow a replay of the
20th century this time in the Internet market rather than the telephone market?
Or will the Congress heed the lessons of history and ensure free competition by
all?
Thank you.
END
LOAD-DATE:
July 20, 2000 
