IP: FARNET's Washington Update

[David Farber <farber () cis upenn edu>]

FARNET's Washington Update --- February 14, 1997


IN THIS ISSUE:


-  One year anniversary of Telecom Act provokes renewed debate over telecom
reform


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ONE YEAR ANNIVERSARY OF TELECOM ACT PROVOKES RENEWED DEBATE OVER TELECOM
REFORM


A little more than one year after President Clinton signed the
Telecommunications Act of 1996 (on Feb. 8, 1996), its critics are saying
the bill has failed to begin introducing competition into the local
telephone market, the long-distance telephone market, the cable industry
and broadcast media.  In fact, the Washington Post reported in a January
19, 1997 article that cable and intrastate telephone call prices had
significantly outpaced inflation in the last year.  Reed Hundt, Chairman of
the FCC countered last week by saying that there was "absolutely nothing
significant or magical about one year after the Telecom Act. There is
nothing in the Telecom Act that anyone said would be done in one year...."


More than the statutory deadlines for introducing competition, however,
recent talk of the Act's failure really focus on the pledges and promises
of the industry, the Congress and the FCC to: aggressively get into each
other's markets, create thousands of new jobs and write the most
de-regulatory regulations ever.  None of these promises seems to have
produced many results - at least after one year.


First, almost all of the industry players have put their rhetoric about
jumping into each others' markets on the backburner.  Many of the telephone
companies have all but abandoned their plans to deliver video over their
networks.  Companies like TCI and Time Warner have also ditched their plans
to get into the telephone business.  Because the local competition and
interconnection order -- written by the FCC as a mandate from the Act --
has been held up in court by GTE and the BOCs, little has happened on the
local telephone competition front.  In fact, the only BOC to submit an
application (claiming it had successfully completed an agreement for
competitors to enter its local markets) to enter the long-distance business
has now withdrawn its application from the FCC.  Laws opening the local
telephone market to competition are continuing to proceed at the state
level, but the Telecom Act was supposed to pre-empt much of the piecemeal
style of local competition rules, essentially making entry into local phone
markets relatively similar across the entire U.S.


At the same time, the news has been full of merger stories - Time Warner
and Turner Broadcasting, Bell Atlantic and NYNEX, PacBell and SBC, numerous
local radio stations, etc, etc.  Fewer potential competitors might mean
less real competition and others point out the significant rise in media
concentration as the result of many of these mergers.


Secondly, the issue of job creation.  Then Senator Larry Pressler, Chairman
of the Senate Commerce committee called the Telecom Act, "...the biggest
jobs bill ever to pass this Congress."  Since then, the press has been full
of news about cutbacks at AT&T, Time Warner, TCI and others.


Finally, the FCC has continued to churn out pages of regulations to
de-regulate the industry.  The interconnection order was the first in what
the FCC calls its trilogy of proceedings to implement the Act.  As
explained above, it is being held up in court by the local phone companies.
The second was a mammoth recommendation on the future of Universal Service
by the Federal-State Joint Board, overseen by Hundt himself, that didn't
even get around to addressing how, exactly, the whole scheme would be paid
for.  Further, the FCC must now draft its rules on universal service based
on the Joint Board recommendation.  Third in the trilogy is the access
charge reform which has just gotten underway.  And Hundt has pointed to a
fourth proceeding coming down the pike on separation issues.


Meanwhile, the consumer interest community have been harshly criticizing
both the lack of delivery on last year's rhetoric and on the rise in cable
and intrastate long distance prices.  The group American for Competitive
Telecommunications (ACT) has also pointed out the lengthy arbitration
proceedings between new competitors and incumbent local phone companies in
the various states that have laws to allow local phone competition.  The
Telecom Act had set fairly aggressive time schedules for arbitration, but
those rules have not been implemented yet because they are part of the
interconnection order stalled in court proceedings.


To be fair, Reed Hundt continues to be the evangelist of the "competition
will solve it" philosophy that has been rampant in Washington as of late.
For example, on the question of whether ISPs should be made to pay access
charges to the LECs (as do the long-distance carriers) Hundt has maintained
that he'd rather see competition for those local access services solve the
problem.  Hundt also espouses the free market solution when it comes to the
auctioning of electromagnetic spectrum (often in opposition to his
commissioner colleagues), a position that apparently just baffles the Wall
Street Journal editorial page.


In all fairness, the Telecommunications Act of 1996 is the most sweeping
change that US communications law had seen in 60 some years.  Lobbying by
all sides of the industry as the bill was becoming a law was the most
intense, possibly ever.  Furthermore, the Act mandates that the FCC swing
180 degrees from regulator to de-regulator -- obviously something that many
argue hasn't yet happened.  The question might be:  if not yet, when do we
start worrying that the competition is not being achieved in
telecommunications?


The new chairman of the Senate Commerce Committee John McCain (R-AZ)
happened to be one of the only 'nay' voters on passage of the Act last
year.  Will he re-open the Act to revisions?  While there's been much
speculation about this, McCain himself said this week that he thought
Congress we not revisit the statute until at least next year.  His
counterpart in the House, Commerce Committee Chairman Tom Bliley (R-VA) is
also not inclined to re-open debate and has, by all accounts, been one of
the few Republicans who has stood by the FCC during its efforts to write
the regs mandated by the Act.  Bliley's subordinate, Rep. Billy Tauzin
(R-LA), Chairman of the Telecommunications Subcommittee may not be so
inclined to let the FCC go easy however.  He has expressed great interest
in keeping a short leash on the FCC - mainly through congressional
oversight hearings.


So when will we see competition in communications markets?  Larry Irving,
Administrator of the National Telecommunicaions and Information
Administration of the Commerce department and one of the most enthusiastic
proponents of technology in general, insists that we are seeing new
competitors entering new markets, including direct broadcast satellite,
personal communications services (pcs) and other digital wireless
solutions, and last but not least the Internet.  Irving also posits that
the mergers we've seen in the last year may not be all that bad, if they
reflect the need for companies to pool resources in order to do battle in
new markets.


At any rate, "telecom reform" is long from over.  The next 3-4 year will
see continuing action at the FCC as the rules governing the introduction of
competition emerge.


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