LACKLUSTER DEMAND, NOT REGULATION, SAID TO SLOW BROADBAND
Supporters of Senate Commerce Committee Chmn. Hollings’ (D-S.C.) broadband legislation on Wed. highlighted lackluster demand for high-speed Internet as reason why his more limited bill made more sense than House’s Tauzin-Dingell version. ILEC deregulation legislation, such as Tauzin-Dingell (HR- 1542) and Breaux-Nickles (S-2430), doesn’t address demand issues and would further stifle broadband competition, said witnesses who included Reps. Markey (D-Mass.) and Cannon (R- Utah), 3 state telecom regulators and Pa. state senator. Hollings asked: “We are at a crucial juncture in telecommunications policy -- are we going to hold steadfast to the goal of competition and allow it to continue guiding our decision making, or are we going to allow groups with other objectives in mind to guide our actions?” Opponents of Tauzin-Dingell told Hollings and committee there was no “crisis” in broadband deployment that needed legislative fix. Hollings’ bill (S-2448) is designed to help fund broadband rollout to rural areas. No witnesses spoke in favor of HR- 1542, S-2430 or similar regulatory approaches.
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State regulators worried that Tauzin-Dingell approach would preempt their regulatory authority over broadband services and potentially over telecom as a whole. Cal. PUC Pres. Loretta Lynch said HR-1542 and S-2430 could be worse for her state than electricity deregulation. “It prevents both the state and the FCC from regulating most aspects of DSL services,” she said: “Both bills would force states to learn a lesson California does not need to learn again -- a market should not be deregulated where the firms in that market retain significant monopoly power.” Deregulation would provide, at best, license for duopoly as ILECs competed with cable for broadband customers, she said. Only 15% of Cal. residents can choose DSL or cable modem service, Lynch said. She said 57% of Cal. market was DSL and 43% was cable, quoting FCC data, “so DSL is doing well in Cal.” SBC Pacific Bell has most DSL connections, she said, and owns stake in only significant DSL competitor -- Covad Communications. “That’s hardly a prescription for vigorous competition,” Lynch said. SBC said it had invested “tremendous resources” to open networks to local phone competition and 85% of residents had access to competing services.
Sen. Breaux (D-La.), Commerce Committee member, questioned whether PUCs and state regulators actually had significant regulatory authority over high-speed Internet and suggested that PUCs wanted more authority over such services. Mich. Public Service Comr. Robert Nelson, also vice chmn. of NARUC committee on telecom, said if PUCs were shut out of broadband regulation through preemption, then once broadband was used for voice, states would lose their traditional jurisdiction. “Eliminating state oversight of the facilities that carry both voice and traffic raises a host of cost allocation and universal service issues that will take years to sort out,” Nelson said. NARUC strongly opposes Tauzin- Dingell and Breaux-Nickles, saying they “incorrectly assume that voice and Internet traffic can easily be distinguished and, as a result, the underlying facilities can be regulated differently,” he said. NARUC supports use of tax credits and loans to deploy broadband to rural areas, he said, such as proposals sponsored by Hollings and Sen. Rockefeller (D-W.Va.).
Markey said competition in broadband market would be weakened by Tauzin-Dingell. History of wireless and long distance shows that competition also leads to technological innovations, which would be lost under deregulation of ILECs. “We have to put our faith in competition,” he said. Broadband is too expensive and faces “crisis” because of its lack of content, Markey said. The argument that ILECs have barriers to deployment is false, he said, because 80% of nation has some form of access to broadband. “This is a huge success story. We have a policy that’s working,” he said. Problem, Markey said, is that only 15% of those with access to broadband actually subscribe, with most declining because of limited content on Internet. Even Tauzin-Dingell bill wouldn’t make more people want to subscribe, he said. “If there’s a rural problem, we'll fix that,” Markey said, and members of Congress from rural districts could provide guidance on such issues.
Breaux disputed suggestions that his S-2430 was similar to Tauzin-Dingell, saying his “3-page bill” simply would instruct FCC to “provide parity in broadband services.” “It tries to take the politics -- and the politicians -- out of it,” he said. Breaux said his bill wouldn’t affect Sec. 251 or 271 of the Telecom Act, nor e-rate and universal service obligations. But Hollings said Breaux bill “heads us in the wrong direction.” He cited FTC’s AOL-TW merger review decision as example of “right direction,” where FTC regulators imposed access conditions as part of merger. Hollings voiced approval of recent collapse of the FTC- Justice Dept. merger review agreement, where DoJ would have all review authority over media mergers (WID May 22 p1). Telecom industry representatives told us they hoped Hollings would hold hearing focusing on how different broadband legislation would affect industry.