NACCHIO URGES STATES TO LET CAPITALISM WORK

Nacchio said regulators need to develop policies that create opportunities for capital formation through investment in new technologies and facilities: “They should not support businesses that simply exploit the unequal application or effect of regulations or rely on below-cost rates or subsidies.” But he cautioned that creating those competitive investment opportunities “may mean some people have to pay more for phone service.” Qwest has variety of global interests, he said, but within its 14-state region it has focused its human and financial capital in 2 areas: (1) Improving local service quality. (2) Obtaining interLATA long distance entry.

“We're not U S West anymore,” he said, and Qwest has been working over last 8 months to improve its service performance and efficiency. “Paying fines for performance failures is not part of our business plan,” he said, noting that company had dropped more than 40 lawsuits brought by former U S West against its state regulators. He said Qwest systemwide on average now completed 98% of installations and 95% of repairs on time and had only about 850 held orders regionwide, with fewer than 10 in Ida., N.D., Neb. Complaint volumes to state commissions have declined average of 15% since last summer, he said.

Qwest is intent on becoming first regional Bell to win interLATA long distance authority in all of its states, Nacchio said. It intends to file its first long distance application this summer and rest within following 9 months. He said he expected rest of Qwest states to win approval quickly on heels of first okay because of regionwide operation support system (OSS) testing and cooperation between Qwest and its states in addressing non-OSS aspects of Sec. 271 compliance on multistate basis. “We may be the last [Bell] to get its first long distance approval but I think we'll be the first to get all our states approved,” he said. One of Qwest’s moves to encourage and open local markets, Nacchio said, was putting its entire wholesale sales force on commission basis. Another was major wholesale agreements with CLECs McLeod USA and Eschelon Telecom.

Responding to question, Nacchio said Qwest wasn’t seeking to sell any more rural exchanges, but would complete sales agreements made by former U S West. “We like to keep our customers. We see unmet demand out there,” he said.

FCC Comr. Ness told NARUC Communications Committee that state regulators “will know local competition has genuinely arrived when you see Bell compete against Bell.” Ness, who’s expected to leave FCC later this year, said Telecom Act’s 5th anniversary showed successes on business local competition and universal service fronts, but residential local competition still lagged: “We are making progress. I know 5 years seems like an eternity in Internet time, but it’s nothing when you're trying to eliminate monopoly and establish competition.” Continued progress toward effective local competition for all customers, Ness said, requires market-based pricing practices, speedy and sure enforcement of open-market requirements and rules that reward investment and innovation.

In other business Mon., NARUC’s Telecom Committee adopted Lifeline policy resolution that urged FCC and Universal Service Joint Board to retain eligibility controls in any Lifeline program reforms that break current link between Lifeline and enrollment in welfare program. Resolution backers noted Cal. removed all verification checks from its Lifeline program and now received 46% of all federal low-income support and that accountability was key to any reform.

Telecom panel is scheduled to take up 3 other resolutions recommended by staff subcommittee addressing deregulation of small to midsized incumbent telcos, access reform for rural telcos and inside wiring.

First pending resolution would oppose passage of HR-496, by Rep. Cubin (R-Wyo.), that would deregulate incumbent telcos having less than 2% of nation’s access lines. This “2% bill” is same as measure that passed House last year. Resolution said bill would deregulate small telcos without any mandates to guarantee that, in return for regulatory freedom, they invest to make advanced digital services available in rural areas, and it would eliminate federal reports that states rely upon for administering their universal service programs. It also said Cubin bill was premature given that FCC was reviewing Multi-Assn. Group (MAG) access reform plan for small, rural telcos that also purports to promote advanced service development. Proposal would applaud bill’s goal of promoting rural telecom technology and removing competitive barriers, and offer NARUC’s help to Congress in developing legislation “more focused on these goals.”

Second resolution would urge FCC to reject MAG rural-telco access reform plan because it would give carriers increased regulatory flexibility without requiring them to do something in return that would assure rural consumers opportunity for price and service benefits from competition and because it would create its own market distortions. It would urge creation of task force of industry, consumer and regulatory interests to develop alternative reform plan.

Third resolution, on inside wiring, would urge state commissions to educate public, state and local building code enforcement entities and contractors about FCC’s 1999 inside wiring code that sets standards for copper inside wiring. Its backers said inside wiring quality could become issue as broadband technologies spread and that state/local building inspectors might not be aware of FCC’s requirements or importance to public of using proper grade of inside wiring.

Meanwhile, Qwest stock rose nearly 7% to $38.31 after CEO Joseph Nacchio told investors that company was on track to meet its 2001 target of $21.3-$21.7 billion revenue and $8.5-$8.7 billion earnings before interest, taxes, depreciation and amortization (EBITDA). Nacchio spoke after NARUC at conference sponsored by Janney Montgomery Scott. -- Herb Kirchhoff

NARUC Notebook…

NARUC panelists addressing 911 issues facing industry, and localities said most critical tasks were moving 911 from analog to digital technology and adapting 911 to multivendor local exchange market. Martha Jenkins, exec. dir. for govt. affairs at 911 management company SCC Communications, said 911 “still lives in the analog, wireline monopoly era of 30 years ago. The network that serves our mundane communications needs is vastly superior to the one that protects our life and property. We need prompt state and local action to bring 911 into the 21st Century.” Chris McLean, counsel to ComCare Alliance and 911 consultant, said upgrading 911 systems to all-digital would allow new capabilities, such as automatic crash location, that could save lives and money by making emergency response faster and operations more efficient. Steve Marzolf, coordinator for 911 systems technology in Va. Dept. of Technology, said coordination between CLECs and incumbents serving particular area was vital to prevent “operational problems that can kill.” He cited examples where responses to calls from CLEC-served premises were delayed because there was no one ensuring that database updates were taken care of. He urged creation of state agency for handling 911 coordination among multiple vendors, noting that 24 states have no state-level 911 offices.