Copyright 2000 Federal News Service, Inc.
Federal News Service
July 26, 2000, Wednesday
SECTION: PREPARED TESTIMONY
LENGTH: 2217 words
HEADLINE:
PREPARED TESTIMONY OF WILLIAM E. KENNARD CHAIRMAN FEDERAL COMMUNICATIONS
COMMISSION
BEFORE THE SENATE COMMERCE, SCIENCE
AND TRANSPORTATION COMMITTEE
SUBJECT - S. 877; COMMERCE BROADBAND
INTERNET REGULATORY RELIEF ACT
BODY:
Thank
you Mr. Chairman and Members of the Committee. I appreciate the opportunity to
submit written testimony to the Committee this morning.
I would like to
state at the outset that I agree wholeheartedly with the objective of speeding
deployment of broadband services to all Americans, regardless of where they
live. Nobody should be left behind in the broadband revolution.
Despite
the old saying, however, sometimes you do have to look a girl horse in the
mouth, particularly if it is a Trojan Horse. I am afraid that is what this
legislation is. It appears to be a girl horse to competition, but it is really
just the opposite. It would slow down the delivery of broadband services to
rural areas by impeding the growth of competition. The genius of the
Telecommunications Act of 1996 (1996 Act) is the delicate balance it strikes
between regulation and deregulation to achieve competition in all forms of
communications, and to deploy the fruits of that competition to all of the
American people. The process has worked well, and consumers are better off as a
result.
I am sure that increased competition is the well-meant intention
of the proposed legislation. Inadvertently, however, I believe this legislation
will not only upset the balance struck by the 1996 Act, it actually would
reverse the progress attained by the 1996 Act. In an effort to move us forward,
this bill mistakenly moves us backward.
The 1996 Act Is A Model For the
World
Recently, the European Commission (EC) issued a bold package of
proposed legislation and directives aimed at bringing the Internet revolution to
Europe. It is no coincidence that the EC's initiative looks like a close cousin
of our Telecommunications Act of 1996. The European Commissioners have concluded
that in order to chart a course towards American-style Internet growth they must
build a vessel not unlike the 1996 Act. This course includes such staple items
included in our Act as local loop unbundling and collocation.
We are
setting the example for the rest of the world. Changing course midstream by
diminishing the incumbent carriers' obligations to open the local markets to
competition would not only be detrimental to American consumers, but would also
put at risk the leadership role the United States has played in the global
telecommunications market.
A Fabric
The 1996 Act is a fabric,
with the thread of each part connected to every other part. Unravel one thread,
and you risk unraveling the entire fabric.
As I tell regulators from
other nations, you cannot cherry-pick the 1996 Act. In this age of convergence,
no network is an island, and the conduit and content of each is entwined with
every other.My message to you today is simple: the Telecommunications Act of
1996 is working. Because of years of litigation, competition did not take hold
as quickly as some had hoped. The fact, however, that it is now working is
undeniable. Local markets are being opened, broadband services are being
deployed, and competition, including broadband competition, is taking root.
Now that implementation is fully underway it would be tragic to change
directions.
That is my concern with the bill before you. It proposes to
exempt an incumbent local exchange carrier (ILEC) from the Section 251 (c)
unbundling and resale requirements, with respect to advanced services, if 80
percent of the local loops in a given service area are "DSL- capable" within 3
years or 100 percent are "DSL-capable" within 5 years. But, without unbundling
and resale, competitors seeking to provide broadband services would be frozen
out and rural consumers would soon be forced to pay higher rates. This is not a
step I can endorse.
I would also note that the issues surrounding
inter-carrier compensation for ISP-bound traffic are before the Commission in a
formal rulemaking proceeding. We have compiled a record, the analysis is
currently under way, and we expect to resolve the issues expeditiously.
Therefore, I respectfully request that the issue of reciprocal compensation
continue to reside, in the first instance, with the Commission. I will keep you
apprised of our progress in this proceeding.
Rapid Growth of
Broadband Deployment
As local markets are opened,
broadband deployment is both stimulated and accelerated.
Specifically, it is the opening of those local markets that is driving
broadband deployment and innovation. This is true because
nondiscriminatory access to the "last mile" and the ability to collocate -- both
components of the competitive checklist are critical inputs for the provision of
DSL service.
The Commission's faithful implementation of the Act has
resulted in an explosion of broadband deployment. As of the
beginning of the year 2000, we estimate there were 2.8 million actual
subscribers to broadband, high-speed telecommunications services at speeds of at
least 200 kbps in one direction. About 2 million of those lines were serving
residential subscribers.
The DSL business is growing so fast that the
BOCs are struggling to keep up with demand. The Wall Street Journal reported
that SBC is installing about 3,500 DSL lines each day. At the end of the first
quarter of 2000 there were approximately 800,000 DSL lines in service in the
United States. About 75 percent of those lines are provided by incumbent LECs
and 25 percent by competitive carriers.
These trends show no sign of
slowing down. Analysts project that deployment of DSL will increase by 300 to
500 percent over the next year. Analysts also estimate that subscribership to
cable broadband services will at least double by the end of this year,and by the
end of 2005 could reach as many as 20 million subscribers. LECs and cable
operators are predicted to invest over 25 billion dollars in infrastructure
improvements over the next four years to bring broadband services to their
customers.
The market-opening 1996 Act sparked infrastructure investment
in telecommunications facilities by incumbent LECs as well as competing
carriers. For example: Incumbent LEC investment in infrastructure was flat or
declining until the passage of the 1996 Act; - After the 1996 Act, incumbent LEC
investment jumped approximately 20 percent; Aggregate industry investment
subsequent to passage of the Act, including both incumbent LECs and competing
carriers, nearly doubled, increasing from 30 billion dollars to 60 billion
dollars.
These statistics do not paint a picture of incumbent companies
deterred by legal requirements from deploying new services to consumers.
The vision of the Act and the vision shared by the FCC - that consumers
will have a choice of providers offering a choice of pipes into the home or
workplace -- is being realized. It is being realized through the opening of
markets required by Congress in the 1996 Act. The rapid growth of broadband
services is tangible proof that the marketopening requirements of the Act are
working.
Competition Drives Broadband Delivery, to All Areas
The
opening of local markets drives competition, innovation, and produces a breadth
of offerings. Although DSL technology has been available for years, it was not
until the passage of the Act that competitive providers -- called data LECs or
DLECs -- specializing in DSL deployment were born and began offering DSL service
to consumers. Competitors need to collocate their equipment in BOC central
offices and require conditioned local loops before they can even offer
facilities-based DSL services. Then, to be competitive, DLECs require timely and
cost-based loops and collocation. Once the DLECs had access to the inputs
necessary to offer their DSL products to consumers, the threat of such
competition spurred the BOCs to develop their own DSL products. Competition from
the incumbent monopolies, in turn, is spurring the DLECs to develop even more
new and innovative broadband products, services, packages, and prices. It is
precisely this sort of competitive cycle that will accelerate the availability
of broadband technology for all Americans.
Of course, competition among
technologies as well as providers is also driving this investment. Wireless
technologies -- both terrestrial, and satellite -- are also on the scene.
High-speed Internet service via satellite is available today virtually
everywhere in the United States, including rural areas. Analysts project that
wireless technologies will have 6 to 12 percent of the broadband market by 2004.
Analysts also project that DSL will overtake cable as the overall leading
technology for delivery of broadband services as early as 2002, with cable
retaining its dominance amongst residential and small business customers until
2004, when cable and DSL will have equal market shares.
For the first
time in history consumers are able to choose their local service provider and
take advantage of increased competition for their long distance calls as a
strong new competitor enters the market. The rewards do not end there.
Competitive markets are also bringing consumers new choices in technology for
the 21st Century.
Changing the rules of the game at this juncture would
also undercut the substantial infrastructure investment being made by
competitive telecommunications providers. For example, competing carders have
invested 30 billion dollars in new networks since the passage of the Act and are
now investing over 1 billion dollars every month in their networks. In 1999,
competing carriers are estimated to have spent over 15 billion dollars on
overall capital expenditures, up from about 9 billion the year before. Investors
will cut off the spigot when competitors are forced to try to compete with
monopoly incumbent providers without full and fair access to the BOC's
bottleneck facilities.
The simple reason why rural customers, and other
customers in un- served and underserved areas, are not yet being served as
robustly as we would like is not caused by legal impediments. Rather it is
largely about simple economics. Providing customers with sophisticated services
in areas of low density is an expensive undertaking. As such, the Commission has
consistently acted to remove barriers to infrastructure investment and promote
competition in broadband. For example, the Commission has: Convened a
Federal-State Joint Conference to provide a forum for dialogue between the
Commission, the states, and local and regional entities regarding the deployment
of advanced telecommunications capability; Strengthened our collocation rules to
encourage facilities-based advanced services by competitors; Encouraged the
resale and unbundling of advanced services, but clarified that xDSL services are
not subject to the resale discount when sold in bulk to ISPs; Encouraged the
competitive delivery of xDSL services through line sharing;
- Ensured
non-discriminatory access to facilities through separate affiliate conditions in
the SBC/Ameritech and Bell Atlantic/GTE mergers; Established a comprehensive
reporting requirement for providers of broadband services in order to seek
greater insight into the development of broadband markets within particular
geographic areas; Completed a successful auction of LMDS licenses that can be
used for the provision of advanced services, and established a filing window for
applicants to apply for authority to provide two-way MDS services.
In
addition, to the extent that there may be instances where a LATA boundary is
standing in the way of consumers getting broadband services from BOCs, the
Commission has set up a LATA boundary modification process. For example: A BOC
that provides advanced services to customers within a state may demonstrate that
it cannot obtain an interLATA provider to connect its in-state network to the
Internet request a LATA modification to allow it to connect its network to the
nearest out-of-state Network Access Point;- A BOC could also request a LATA
boundary modification to allow it to serve a particular customer, such as a
hospital or university, where the customer cannot obtain an interLATA connection
for its network; or A BOC may also demonstrate that it would not be able to
deploy xDSL service to a LATA within a multi-LATA state unless the BOC is
allowed to aggregate traffic from one LATA to another, or may be the advanced
services provider of last resort for residential customers within a particular
state. The BOC may then argue that it is uneconomical to deploy advanced
services to such customers without a LATA boundary modification.
Notably, we have not received any requests for LATA modification since
adopting this procedure in February 2000, and have received no requests to
refile prior petitions. The Commission has stated its commitment to reviewing,
in an expeditious manner, all LATA boundary modification requests that would
provide consumers with advanced services.
Conclusion
In
conclusion, the 1996 Act is working. Passage of the proposed legislation at this
critical juncture would disrupt the Act's delicate balance between regulation
and deregulation, postpone the benefits of competition to consumers by creating
uncertainty and litigation, curtail the flow of investment into new markets, and
inhibit the Act's goal of fostering broadband deployment. For
all of these reasons, I urge you let the Act continue to work.
END
LOAD-DATE: July 28, 2000 
