1994-01-25 White Paper on Communications Act Reforms

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

                ADMINISTRATION WHITE PAPER ON
                  COMMUNICATIONS ACT REFORMS


I.   Introduction


     Vice President Al Gore and Secretary of Commerce Ron
Brown announced the Administration's National Information
Infrastructure (NII) initiative in September 1993,
establishing an agenda for a public-private partnership to
construct an advanced NII to benefit all Americans.  In
speeches and policy papers since then, the Administration has
proposed legislative and administrative reform of
telecommunications policy, based on the following fundamental
principles:


     *    Encouraging private investment in the NII;


     *    Promoting and protecting competition;


     *    Providing open access to the NII by consumers and
          service providers;


     *    Preserving and advancing universal service to avoid
          creating a society of information "haves" and "have
          nots";


     *    Ensuring flexibility so that the newly-adopted
          regulatory framework can keep pace with the rapid
          technological and market changes that pervade the
          telecommunications and information industries.


     The Administration shares the belief of many in Congress
that legislative reform of telecommunications policy is
essential to meeting these goals, in order to bring the
benefits of advanced communications and information services
to the American people.  For many years, government
regulation assumed clear, unchanging boundaries between
industries and markets.  This assumption sometimes led
regulators to view and regulate firms in various industries
differently, even when they offered similar services, and to
address the threat of anticompetitive conduct on the part of
some firms by barring them from certain markets and
industries.


     A new approach is needed.  Even if the lines between
industries and markets were clear in the past, technological
and market changes are blurring and erasing them.  Regulatory
policies that are based on such perceived distinctions can
harm consumers by impeding competition and discouraging
private investment.
In light of these realities, the Administration is committed
to removing unnecessary and artificial barriers to
participation by private firms in all communications markets,
while making sure that consumers remain protected.


     In developing legislation to meet these challenges, the
Administration is grateful to Chairman Markey, Congressman
Fields, and their colleagues on the Telecommunications and
Finance Subcommittee for their pathbreaking, bipartisan

work on H.R. 3636, which addresses many of the Communications
Act issues that are most important to the development of the
NII.  The Administration's legislative telecommunications
reform proposals build on H.R. 3636, as well as S. 1086,
developed by Chairman Inouye and Senator Danforth.  The
Administration also salutes H.R. 3626, the related
legislative initiative to reform the AT&T consent decree
undertaken by Chairmen Brooks and Dingell, and the leadership
of Chairman Hollings on these matters.


     The specifics of the Administration's legislative
proposals on telecommunications reform are discussed below.
Because the Administration supports the general approach and
many of the existing provisions of H.R. 3636, the provisions
of that bill serve as a framework for describing the
Administration's proposals.  Those proposals also reflect the
innovative regulatory reforms taken by many state
telecommunications regulators.




II.  Local Competition and Interconnection


     Competition has generated lower prices, improved choices
for consumers, and rapid technological innovation in many
communications and information service markets, including
customer premise equipment and long distance service.
Similar benefits should be realized by the expansion of
competition in the local telephone service market.
Competition in that market also will reduce the ability of
any telephone company to harm competition and consumers
through monopoly control and will encourage investment and
innovation in the "on and off ramps" of the NII.


*    The Administration supports the general requirement of
     H.R. 3636 that all carriers must interconnect with other
     providers of telecommunications and information
     services. Such a requirement helps ensure that the NII
     functions seamlessly.


*    The Administration also supports the approach of H.R.
     3636 to impose more specific pro-competitive
     interconnection requirements on local exchange carriers
     (LECs), in light of these carriers' monopoly positions:


          an obligation to interconnect at any "technically
     feasible and economically reasonable point";


          an obligation to afford nondiscriminatory access to
     network facilities, services, functions, and
     information, where technically feasible and economically
     reasonable;


          no restrictions on resale or sharing of network
     facilities and services.

*    H.R. 3636 would require the FCC to adopt regulations
     governing the price, terms, and conditions under which
     carriers may provide interconnections, access,
     facilities, and services.  The Administration agrees
     with this general approach, but suggests that some of
     the details of this provision, such as the tariff filing
     requirement for LECs, are unnecessary based on current
     law and practice.  The Administration also would
     emphasize that, in carrying out this requirement, the
     FCC and the States must prevent undue rate increases for
     any class or group of ratepayers.


 *   The Administration supports the approach of H.R. 3636 of
     requiring carriers to provide facilities, services, and
     network functions on an unbundled basis, i.e., carriers
     would have allow customers to pick and choose the
     constituent parts of the services to be taken.  Thus,
     for example, instead of offering only switched local
     telephone service, a carrier would also have to offer
     separately the switching and transport components of
     that service.


*    The Administration supports authorizing the FCC to
     modify all of the foregoing obligations for small LECs
     and LECs serving rural areas.  This differs slightly
     from H.R. 3636, which would exempt carriers serving
     rural areas from the foregoing interconnection and
     unbundling obligations and authorize the FCC to modify
     those requirements for carriers with fewer than 500,000
     access lines nationwide.




III. Relations with the States


     Because of the crucial role of the states in protecting
ratepayers and addressing economic and technical
infrastructure issues in their areas, substantial state
jurisdiction over telecommunications must be preserved.
However, when national interests are at stake in realizing
the benefits of an advanced, interconnected NII, particularly
through local competition, national policies, with limited
preemptive effect in a few key areas, are necessary.


*    H.R. 3636 would prohibit state entry regulation for
     telecommunications services or state action restricting
     a firm from exercising the interconnection rights
     granted by the bill.  Similarly, in order to realize
     fully the benefits to consumers of increased competition
     in telecommunications, the Administration proposes to
     preempt state entry regulation for provision of
     telecommunications and information services.


*    H.R. 3636 does not address state and local rate
     regulation.  However, rate regulation of new entrants
     and other firms that lack market power not only is
     unnecessary, but can act as a powerful deterrent to the
     development of a truly competitive marketplace.
     Accordingly, to further the procompetitive goals
     discussed above, the Administration proposes to preempt
     state and local regulation of the rates for any service
     charged by a telecommunications

     carrier that the FCC finds, or has found, after notice
     and comment, to lack market power.  However, the
     Administration would permit states to petition the FCC
     to retain or regain authority to regulate such rates
     under certain conditions.  This approach for rate
     regulation is substantially the same as that passed by
     Congress in the last session for commercial mobile
     services, as codified in Section 332(c) of the
     Communications Act.




IV.  Regulatory Flexibility


     An Administration priority is to make government work
better for the American people by reducing red tape and
eliminating regulatory overkill.  This is particularly
important with regard to the telecommunications and
information industries, which are subject to continuing
technological and market changes. Detailed regulatory
requirements that may be well-suited for incumbent firms
with monopoly or near-monopoly positions may be quite
inappropriate, and even anticompetitive, when applied to
firms that lack market power.  Telecommunications reform
legislation should provide the FCC with the flexibility to
adapt its regulations to meet changing conditions,
consistent with the public interest.


*    The Administration proposes to authorize the FCC (1) to
     exempt carriers lacking market power from any provision
     of Title II of the Communications Act (except provisions
     relating: to the duty to serve and interconnect; the
     duty to charge just, reasonable and nondiscriminatory
     rates; damages; and customer complaints) and (2) to
     tailor the regulations it does impose to reflect a
     carrier's market power.  H.R. 3636 currently does not
     have comparable provisions.


*    The Administration supports the general approach of H.R.
     3636 authorizing the FCC and the states to permit
     carriers pricing flexibility for their competitive
     services.  H.R. 3636 is very detailed in requiring the
     FCC to develop standards and criteria to guide
     regulators in exercising that authority.  The
     Administration believes that legislation should provide
     more general guidance to the FCC.




V.   Universal Service


     The United States has long been committed to "universal
service" --widespread availability of basic telephone service
at affordable rates.  As we move rapidly into a world in
which advanced telecommunications capabilities, well beyond
traditional telephony, will soon be available to many
Americans, it is critical that our universal service goals
and policies advance as well.  The Administration

seeks to work with Congress and the states to develop an
enhanced concept of universal service that will serve the
information needs of the American people in the 21st century.


*    It is an Administration goal that, by the year 2000, all
     of the classrooms, libraries, hospitals, and clinics in
     the United States will be connected to the NII.  To help
     attain that goal, the Administration proposes that the
     National Telecommunications and Information
     Administration of the U.S. Department of Commerce
     conduct an annual nation-wide survey of the availability
     of advanced telecommunications services to those
     locations and report on its findings.  Moreover, the
     Administration proposes that the FCC be directed to
     commence an inquiry and, subsequently, a rulemaking
     proceeding to ensure, to the extent feasible, the
     availability of advanced telecommunications to public
     school classrooms, health care institutions, and
     libraries.  The FCC would consider the tariffing of
     preferential rates for interstate services to such
     locations, and ensure that standards are in place to
     permit uniform interconnection to the NII.


*    The Administration supports the approach of H.R. 3636 in
     making the preservation and advancement of "universal
     service" an explicit objective of the Communications Act
     (as opposed to an implicit goal emanating from Section 1
     of the Act).  The Administration would provide more
     general guidance, and more flexibility to the FCC and
     the states in specifying the details of how that
     objective should be achieved.  The Administration would
     state that advanced services should be available to
     rural and urban lower income users, to users in areas
     where the costs of service are high, and to social
     institutions, especially educational and health-care
     facilities.


*    The Administration supports charging the FCC and the
     states with continuing responsibility to review and
     revise objectives for expanding universal service to
     meet changing circumstances.


*    The Administration supports the requirement of H.R. 3636
     that the FCC and the states address universal service
     issues through a Federal/State Joint Board.  The
     Administration proposes giving the Joint Board more time
     to develop its recommendations to the FCC, and the FCC
     more time to act on them.


*    H.R. 3636 would require all providers of
     telecommunications service to make "an equitable and
     nondiscriminatory" contribution to the preservation of
     universal service.  The Administration agrees that the
     FCC and the states should have broad authority to
     require all providers of telecommunications services to
     contribute to the preservation of universal service.  In
     exercising that authority, the FCC and the states must
     ensure that no service provider is unfairly burdened
     relative to its rivals, and that contributions to
     universal service do not unduly distort consumer choices
     among alternative services.

*    The Administration also proposes authorizing the FCC, in
     consultation with the States, to permit "sliding scale"
     contributions (e.g., to avoid burdening small providers
     and new entrants), as well as "in-kind" contributions in