CLECs TELL SENATE BELLS ARE PUSHING PRICE INCREASES
ILECs were pushing for “significant price increases” in negotiations with CLECs over UNE-P, a CLEC executive and representative of ALTS told the Senate Commerce Committee Tues. The increases “would not allow us to sustain our business,” said Cbeyond CEO James Geiger at the hearing on “lessons learned” from the Telecom Act: “The assumption of the incumbent is that unbundling elements are gone.” Geiger also suggested that ILECs weren’t even putting the local loop on the table, though Qwest Chmn. Richard Notebaert said he didn’t object to loops’ remaining an unbundled element.
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AT&T CEO David Dorman described the RBOCs as “reluctant suppliers who would prefer not to sell the way it’s being sold.” He said the Bells’ market power would make any negotiations “challenging.” Notebaert said CLECs should be described as “distributors” and Qwest is the only Bell to use a mediator in negotiations with CLECs (in this case, MCI.) “I think we can get there, if people are willing to accept that the status quo has changed,” Notebaert said.
Dorman urged the senators to support an appeal to the U.S. Supreme Court of the U.S. Appeals Court, D.C., decision on UNE-P. He said that was the only way to get and keep Bells at the negotiating table. Dorman said that AT&T needed UNE-P to establish a customer base, which was the only way it could move to facilities-based competition. He said any future telecom legislation should “demonopolize before it deregulates.” Dornan also said advocated reform of intercarrier compensation and access charges.
Notebaert said similar services are treated differently under the current regulatory regime and showed a map of cable modem services to emphasize the differences in rates and regulation compared with DSL. He said the Telecom Act created more uncertainty than solutions and the Act’s ambiguity created an “ongoing limbo” from which it was difficult to raise capital. He said customers were embracing new technologies -- such as cable modems or wireless telephony -- that don’t have the same regulatory restrictions.
Geiger said the Telecom Act provided a “disciplining impact on intramodal competitors,” and the Act was working because more facilities-based CLECs were emerging. He said without CLEC competition, a “cozy duopoly would develop between cable and the BOCs.” He said he had concerns that Congress would scale back the competition established under the Act.
Senate Commerce Committee Chmn. McCain (R-Ariz.), long a critic of the Act, said it has been rendered useless by technological advances. McCain lauded Notebaert for delivering a “courageous” statement emphasizing the need for regulatory parity. Senate Commerce ranking Democrat Hollings (S.C.) said the only problem with the Act was that Congress trusted the Bell companies. “It’s not a complicated bill. You wrote it,” Hollings said to Notebaert. Senate Appropriations Chmn. Stevens (R-Alaska), a likely candidate for Commerce Committee chmn. next year, didn’t issue a statement or ask questions and left at the hearing start for a funeral.
Hollings said negotiations between CLECs and ILECs likely wouldn’t work because ILECs hold too much market power. While Bells can negotiate with several providers for long distance, IXCs can only go to the Bells. “We, as policy-makers, should not allow the Bell companies to unilaterally dictate the terms of local competition,” Hollings said in his prepared statement.
Wyden said any new telecom laws should “frame policy around the concept of the network” in an effort to bring regulatory parity to different devices and applications. He said any reform of the Universal Service Fund should take into account legacy networks. “It doesn’t make sense to pour funds into old networks,” he said. Wyden said the Telecom Act also showed something else: “Monopolies do not get toppled overnight.”
Notebaert said the Telecom Act suffered from 3 problems: Excessive complexity and uncertainty and processes take too long. “Customers view voice service as a commodity,” he said, citing the growth in other telephony services such as wireless. Notebaert said 1 million jobs have been lost in the telecom sector since 1996. Hollings responded that 1 million jobs have been lost in the textile sector in that time -- implying that the economy, not the Telecom Act, might have caused the decline.
When McCain asked whether the FCC Chmn. Powell was right when he said the Telecom Act was “walking dead,” only Notebaert agreed. Dorman said the Act had been watered down through litigation, and Geiger said ILECs were still showing Wall St. numbers that were very profitable. Geiger said elimination of CLEC-based competition would leave 95% of businesses with one choice. Dorman said the goals of the 1996 Act “have been more difficult to obtain than imagined.”
Sen. Lautenberg (D-N.J.) complained that local telephone rates were too high. Notebaert told Lautenberg that Qwest was offering local services in some areas outside of their service region. Sen. Smith (R-Ore.) cited his USF reform bill (S-1380), designed to give ILECs in larger states a bigger share of the $260 million “non-rural” USF fund. The bill now has 30 co-sponsors and the House version (HR-1582), sponsored by Rep. Terry (R-Neb.), has 79 co-sponsors.