NARUC Notebook...
Speakers at NARUC winter meeting panel on special access agreed impartial performance standards for special access were of vital interest to telecom suppliers and buyers. Chip Casteel, WorldCom dir.-regulatory affairs, said improving incumbent telco accountability for special access provisioning was critical to development of effective local competition. He said lack of universal special access performance metrics meant unpredictable provisioning, which would upset CLEC business planning. Casteel said long distance entry would give Bell companies incentives to retain their overwhelming dominance in special access market so they could offer customers one-stop shop. Melissa Newman of Qwest said major question in special access standards debate was “which is the ‘right’ standard.” She said if there were to be national minimum performance metrics, they should be few in number and uniform for all providers. She suggested most useful general measures would be order confirm time, percent completed on time, percent done correctly first time, outage restoration time. Carl Johnson of N.Y. PSC staff said that 6 years after passage of Telecom Act, Verizon still had more than 80% share of special access market. He said Verizon special access service quality generally had been good up until adoption of price cap regulation in 1995, after which time quality plummeted for variety of reasons and didn’t get back to anything approaching good until late in 2000. He said PSC requirements such as credits to wholesale and retail customers for late special access installations could address intrastate service, but bulk of special access was interstate and it was up to FCC to develop and enforce performance standards. Brian Moir, partner with Moir & Hardman, said bulk of dedicated service contracts between big users and carriers consisted of performance metrics and guarantees. Special access today, he said, is mostly for data circuits essential to customers’ business operations. Performance is key for biggest users, he said, and they tend to stay with biggest provider because they are more likely to get performance they must have.
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WorldCom’s top domestic long distance service executive told state regulators at NARUC winter meeting that 2002 was pivotal year for addressing high unbundled network element platform (UNE-P) rates that threatened wireline market’s transition from separate local and long distance services to combined “all distance” service. “Long distance may soon be no more,” said Wayne Huyard, COO of WorldCom’s MCI Long Distance Group. “Traditional local and long distance are converging into a new all-distance service” that would be similar to what some wireless carriers already offered. Federal and state regulatory decisions this year may determine whether there ever will be meaningful competition in that emerging wireline all-distance market, especially for residential customers, he said. Developing competitive all- distance market, Huyard said, will require that regulators bring competitors’ local exchange entry costs down to reasonable levels by cutting incumbents’ recurring and nonrecurring charges for UNE-Ps. “The central issue for us and others is pricing,” Huyard said. “Right now, the local exchange playing field is often so tilted that we can’t keep our fighting feet beneath us.” He said Mass. UNE-P rates were almost equal to Verizon retail local rates, leaving no margin. With long distance approval and high UNE-P rates, he said, Verizon is only carrier in Mass. that can profitably be one-stop, all-distance shop for customers. Of 9 states with RBOCs in long distance, only 3 have UNE-P rates low enough to allow competitors a chance for profits, Huyard said: “Local competition must be enabled through UNE-P rates below retail rates before there’s any more RBOC long distance entry.”
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Universal service panelists at NARUC winter meeting agreed that changing statutory background for universal service was no way to cure current industry problems with funding and distributing universal service subsidies, but that was only point they agreed upon. Big-user consultant Brian Moir, partner, Moir & Hardman, said current universal service contribution system passed on to customers universal service fees now approaching 10% of bill, soon to be closer to 15%. For biggest users, he said, such fees might drive them off public network to private fiber facilities, forcing those who couldn’t leave to absorb difference. Equitable fix, he said, would be to eliminate revenue-based universal service assessments and go to connection or capacity-basis regardless of type of service. CTIA Gen. Counsel Michael Altshul said wireless industry recognized obligation to support universal service fund, but wireless assessments must recognize unique characteristics of industry. He suggested basing wireless fund assessments not on states but on same basic trading area system that defined license coverage areas. Telecom attorney Earl Comstock said existing system put disproportionate universal service funding burden on interexchange carriers. He said contribution system needed to be reformed so all carriers that depended on local exchange network for their connections to interstate bore their fair share of funding load. Rick Cimmerman, NCTA state policy dir., said cable industry supported universal service as goal and, to extent that cable offered telecom services, contributed to fund. He supported idea of connection-based contribution system as neutral, simple assessment scheme. All agreed further reform of universal service contribution system was needed. On disbursement side, 2nd group of NARUC panelists said thorniest issue was: How much support is enough? Frank Gumper, public policy consultant for Verizon, said some parts of current universal service program, like schools & libraries support, seemed to be open-ended subsidy for some recipients while others went begging. There’s no sense of equity in support system, he said. Greg Berberich, CEO of Alaska’s Matanuska Telephone Assn., said his phone co- op depended on universal service support for 25% of its revenue. Without subsidy, he said there would be no way to bring affordable service to his 35,000 member-customers spread over area that’s size of Vt. He said free market approach wouldn’t work for most customers in far rural areas, and said his co-op was created to serve people ignored by markets. In free markets, he said, big carriers get bigger so they can serve bigger customers, forgetting ordinary people: “But a market without responsibility to the people inevitably leads to Enrons,” referring to recent collapse of energy market’s biggest trader. Attorney Margot Humphrey said confusing court decisions on sufficiency of funding had “left statutory standards in disarray.” She said courts seemed to be saying support must be defined in terms of goals, which would mean eliminating caps on universal service support. Matt Brill, senior legal adviser to FCC Comr. Abernathy, said FCC universal service policy could only create “opportunity” for universally fair and affordable rates. It’s jurisdictional job of states to actually set local rates that turn opportunity into reality. Universal service, he said, depends on federal and state coordination and cooperation.