Copyright 1999 Federal News Service, Inc.
Federal News Service
FEBRUARY 25, 1999, THURSDAY
SECTION: IN THE NEWS
LENGTH:
2024 words
HEADLINE: PREPARED TESTIMONY OF
LARRY
PRESSLER
FORMER SENATOR
BEFORE THE SENATE JUDICIARY
COMMITTEE
ANTI-TRUST, BUSINESS RIGHTS AND COMPETITION SUBCOMMITTEE
BODY:
(Larry Pressler is currently a partner in the
law firm of O'Connor & Hannan. He served in the U.S. Senate from 1978-1996,
and in the U.S. House of Representatives from 1974-1978. He was the principal
author of the Telecommunications Act of 1996, and served as
Chairman of the Senate Commerce, Science and Transportation Committee as well as
that Committee's Subcommittee on Telecommunications.)
Thank you, Mr.
Chairman, for this opportunity to revisit the Judiciary Committee, on which I
formerly served. It is a great honor for me to be able to testify before this
Committee, which has such a hallowed tradition.
"Let's get everybody into
everybody else's business in telecommunications" was my motto in speeches to
staff, industry, labor groups and consumer groups during the four years of final
consideration of the Telecommunications Act of 1996. I first
started working on the new Telecommunications Act with Barry Goldwater when he
preceded me as chairman of the Telecommunications Subcommittee of the Commerce
Committee, back in the 1980s.
Many people deserve credit for passage of the
Telecommunications Act of 1996. Senator Fritz Hollings and I,
and many others, worked hand- in-hand on that bill on a bipartisan basis. Many
senators on this committee made major inputs to that bill. I hand-carried an
original draft of the bill to each U.S. Senator, and I believe each member of
the Senate had some input, plus some House members, the White House and many
others. It was truly a bipartisan effort on which many people cooperated.
In
the end, at least eleven interest groups from industry, labor, consumer groups,
and decency groups had virtual veto power over passage of the Act. Somehow, we
had a moment of "Camelot" when the fighting paused, and I went to Bob Dole, Newt
Gingrich and many others and begged for floor time to move the bill. Somehow the
moment of "Camelot" lasted long enough, and we accomplished this.
Thus, it
was one of the great honors of my lifetime to have been the Chairman of the
Commerce, Science and Transportation Committee, and to have been the principal
author of the Telecommunications Act of 1996. That Act took 13
years to pass, and was a hard-fought bill.I do not believe it is generally
known, but teams of about 35-45 staff worked on Saturdays and Sundays throughout
much of 1995 to hammer out differences. They worked as volunteers--as you know,
there is no overtime pay in government service--so the least I could do was pay
for their lunches!!
It was with some amusement that I recently heard Justice
Scalia comment during a Supreme Court proceeding that a certain paragraph in the
Act was not entirely clear. I wanted to jump up and recall how we had to
negotiate each weekend so that an equal number of House members who each
insisted on adding adverbs, adjectives and punctuation to that paragraph.
Indeed, one even insisted on the addition of a comma! Making legislation or
making sausages is probably not a pretty business. But considering all the
business, labor and consumer interests that had a veto power over the bill, I
think we did a pretty good job of getting it done.
Many have called for
changes in the telecommunications bill since its passage, but to my knowledge,
no serious effort has reached either floor, or, indeed, has been considered in
any committee. According to a speech I regularly give on telecommunications
interest groups, there are about a dozen groups which have veto power over any
new telecommunications legislation. Therefore, I suggest that there probably
won't be any new telecommunications legislation for five to ten years, if then
even. There are several groups which can veto telecommunications legislation.
Included among them are: regional bells; cable; labor; newspapers; long-distance
companies; decency lobbies; burglar alarm companies; universal service and
consumer leagues; electric utilities; the American Association of Retired
Persons; broadcasters; and several others. Therefore, it is my conclusion that
this Anti-Trust Subcommittee, chaired by my friends, Sens. DeWine and Kohl, will
play a major, major role in telecommunications activities in the next five to
ten years, as I do not anticipate any new legislation.
The ideal thing would
be for the traditional regulation to wither away with time, and, indeed, on an
international basis for the WTO, regulations to be met and to have less
regulation in each country. Everyone would compete with anti-trust rules, to
ensure that fair trade practices are used. The true "nirvana" of
telecommunications deregulation might be when we don't need any more regulation,
and anti-trust laws can take over.
It is my feeling that we are also about
to enter an era when anti- trust extraterritorial rules will govern more and
more. We presently use "positive comity" among Europe, the U.S. and many of our
other allies. I predict that Europe, especially, will attempt to impose its
anti-trust standards on the U.S., via the World Trade Organization.
The 1996
Telecommunications Act Is Working
The 1996 Telecommunications Act is working
positively and has worked. There are bumps in the road, and the biggest one is
probably the long- distance/RBOC controversy.As author of that Act, I dream of
the day when we have the RBOCs in long distance; the long distance companies in
local service and everybody in everybody else's business. We would then use the
anti-trust rules to prevent unfair business practices and traditional regulators
would fade away. That was our goal when we passed the Act.
There is a strong
fear of letting the RBOCs into long distance. But they already are in the
cellular business and smaller cellular companies are able to compete quite well.
Getting everybody into everybody else's business was part of the deal when the
Act was passed. I understand that Bell Atlantic probably will get into long
distance by the end of this year, and I hope that the FCC, the courts and
everyone else concerned will tell the other RBOCS exactly what they must do to
gain entry, as the fulfillment of the Act will be in everyone's best interests.
I recall in one debate I said that I considered the CLECs would grow up like
flowers across the face of American telephony, and that the RBOCs' entry into
long-distance would merely heighten competition and not harm anyone. Someone
shot back that the CLECs, rather than being flowers on the face of American
telephony, might well be blemished pock marks on the face of American telephony!
You can see that we had some high rhetoric! The point of the rhetoric was that
we will have these new competitors but we also will let the RBOCs into long
distance. Now people are saying that we didn't really mean that. And what the
Act clearly says is being ignored.
Anti-trust rules and legislating for
telecommunications is extremely complex, as it is an industry which needs some
very big companies and some small companies. The automobile industry, to
everyone's agreement, needs large companies to build automobiles. The
telecommunications industry needs large companies if one is to make a
direct-dial phone call from India to my home in South Dakota.
However,
the telecom industry also needs small companies--we call some of them
competitive local exchange carries, others are smaller manufacturers, other are
rural local exchanges, etc. Several things have happened since the passage of
the Telecommunications Act. It is working, and much progress had been made. We
do not yet have the long- distance local situation solved, but as the author of
the Telecommunications Act, I very much want to see the development of more
CLECs on the one hand, and I want to see the regional bell operating companies
get in on long distance, on the other hand.
We now have more than 140 local
competitive exchange carriers currently operating with their own
facilities-based local telephone service--far more than the 13 at the end of
1995. These new companies are vigorously raising money on Wall Street, and they
are employing fiber optic subscriber lines more quickly than the local
incumbents. We all want to see them thrive. On the other hand, we want everybody
into everybody else's business and I hope the courts, the FCC and others find a
format by which the RBOCs can get into long distance so we truly have everybody
into everybody else's business.Some people have been concerned about the number
of mergers under the Telecommunications Act of 1996. Let me
point out that these same mergers are occurring in agricultural companies,
international companies, manufacturing companies and all types of companies. The
Harvard Study, Mergers, Sell-Offs, and Economic Efficiency by David J.
Ravenscraft and F.M. Scherer, points out that about half of mergers never work
out. They create a company which is too clumsy or cumbersome, and there is
either a business failure or essentially a business divorce. We need some big
companies and some small companies in telecommunications.
Justice Learned
Hand said in the Alcoa case that bigness itself was not a basis for preventing a
merger, but rather unfair business practices were. This committee will have more
influence over which mergers should and should not be allowed, and I commend you
to Learned Hand's philosophy.
The International Picture
The
Telecommunications Act of 1996 was used as a basis for much of
the language of the WTO agreement on telecommunications finalized in 1997. That
agreement has encouraged other countries to open up their markets to foreign
competition, and to have transparent systems for issuing licenses. I do an
annual rating of how quickly countries are opening up, or liberalizing, their
telecommunications markets. The most liberalized, or open, include: England,
Sweden, Finland, Chile, Norway, New Zealand and Australia. The middle group
includes: the USA, Canada, and most other European countries. This is followed
by a third group of the other countries in the world and, finally, are the least
liberalized or the least open. They include: China, Pakistan, India, Vietnam and
others. Of course, many other countries in the world do not have very
well-developed telecommunications systems.
The point is, though, that almost
all countries of the world have made it their business to try to cooperate on
international telecommunications standards, and many of those are based almost
verbatim on the 1996 Act.
Herein, enters the issue of anti-trust
extraterritoriality. Increasingly, those countries in categories one and two are
demanding that fair business practices be followed, and they are using "comity"
in demanding that there be an international anti-trust standard. Europe, in
particular, is pushing for broadened WTO anti-trust standards.
We live in an
age when we want to be able to use a credit card in a remote country, and be
billed accurately later. We also want to be able to directly dial a telephone
call or send an e-mail around the world instantly and have it go accurately and
to be billed fairly and accurately for that transaction. It requires big
organizations or big companies to be able to accomplish that. The trick is to be
able to retain competition with that bigness, and also to allow start-up, small
companies to compete.We must all recognize that the marketplace, especially in
this industry, is an international one. That is understandable as we all want to
be able to directly dial a telephone call or send an e-mail around the world
instantly and have it routed accurately and billed fairly and correctly. It
requires big organizations and big companies to be able to accomplish such
feats. The trick is to be able to retain competition with that bigness. This
will stimulate fascinating questions concerning the international application of
anti-trust laws. When international companies combine, not only U.S. law is
invoked, but that of other countries as well. This committee will need to
examine questions of international comity in the application of anti-trust laws.
Conclusion:
Thank you for the opportunity to testify today. I will do my
best to answer any questions that you may have.
END
LOAD-DATE: February 27, 1999
