NARUC Notebook

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As Congress eyes Telecom Act changes, NARUC panelists on the subject Sun. said the lawmakers need to decide what they want a new law to do. “The ‘96 Act’s goal was to promote competition. What’s to be the goal of a new act?” asked Debra Berlyn, AARP senior legislative representative. She said states should have a role in implementing whatever goal Congress sets for a new telecom act: “Federal policymakers shouldn’t fear the idea of a patchwork of state regulations because, properly handled, patchwork can become a nice quilt.” She said Congress needs to keep certain consumer-oriented principles in mind, such as ensuring affordable access to all services, and giving consumers “aggravation-free” ways to exercise their choices. She also said states are best able to protect consumer interests. Robert Blau, BellSouth public policy vp, said Congress is increasingly likely to pass a new telecom act next year because lawmakers realize the market has become much more competitive. Politicians also are becoming concerned about adverse effects of legacy regulation and taxation on new services, and are seeing that the intercarrier compensation system is broken beyond repair. Blau said he expects any new telecom act to concentrate not on rates and economic regulation but rather on carrier service quality and responsiveness, consumer protection, public safety and regulatory parity for all providers. Blau said he'd like to see a law that has the FCC setting the standards, with states doing enforcement. Jeff Glover, Century Tel external relations vp, said rural carriers are concerned with revenue stability so they can meet customer demand for advanced urban-level services while maintaining universal service. He said a new telecom act needs to broaden the universal service support base and hold all subsidy recipients to account for their use of the money. He said Congress also needs to ensure that universal service and intercarrier compensation systems send correct market signals to carriers. Glover said he would support deployment of advanced infrastructure and services in rural areas. He said incumbent carriers represent the best avenue for getting advanced services to rural consumers. Rick Cimerman, NCTA senior telecom policy dir., disputed some industry segments’ claims that the 1996 Telecom Act failed: “It accomplished its purpose and is still working, so total replacement isn’t needed. But it needs modification to address the impact of IP voice and video services that didn’t exist back then.” Cimerman said the cable industry believes all providers of voice service should have the same rights and responsibilities and that regulators’ proper role is to enforce those rights and responsibilities. He said while video franchising is today’s “hot button” issue, efforts to reform video franchising must involve all interest groups, including the cities and even content owners. -- HK

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Unsurprisingly, municipal and cable representatives on a Sun. NARUC panel about IP video’s regulatory future disagreed with telco speakers on the need for local video franchising for IP video services. Brian Grogan of Moss Barnett, speaking for municipal interests, said local franchising helped make cable a major industry by ensuring cable’s ubiquity, and should have the same effect on IP video. He said local govt. embraces innovation and competition but also wants technological neutrality. Grogan said localities have 2 main interests regarding video services: (1) Preserving control over public rights of way and revenue streams from ROW fees. (2) Preserving local access and supporting local values. He urged video providers to appreciate local govts.’ expertise on neighborhood characteristics. Mike Olson of Cablevision Systems said local franchising reflects community needs and values. Any move to statewide or nationwide video franchising must preserve local interests in rights of way, local programming and revenue from franchise fees, he said. Local franchising isn’t incompatible with speedy telco video entry, Olson said. For instance, he said, states could let telcos opt into existing cable franchise terms. But Randell Milch of Verizon said franchise opt- ins may be a problem for telcos, since some cable franchise provisions may violate U.S. telecom law, or a franchise may contain onerous provisions the cable company accepted in the days when cable video was a monopoly. He said local franchising is a barrier to telco video entry and is inequitable, since cable firms don’t need telephone franchises to provide voice service. Tim Leahy of SBC said new telecom delivery technologies are challenging traditional regulation of both telephone and cable. “It’s bad policy to try and force a new video entrant into the incumbent’s model,” he said, because that simply slows the arrival of new video services and technologies. He said policy-makers should strive to reduce entry obstacles. Leahy agreed that any new approach to video franchising must include safeguards for local interests.

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XO Communications CEO Carl Grivner Mon. urged state regulators to join CLEC and consumer interests in opposing the proposed SBC-AT&T and Verizon-MCI mergers unless the firms remedy competitive harms all but certain to occur. Addressing the NARUC Telecom Committee, Grivner called telco arguments for the mergers “a house of cards” that would fall under close scrutiny. He said a report by the N.Y. PSC staff concluded the Verizon-MCI merger will up market concentration in N.Y. unless the merged company is reined in by divestitures, price and quality controls, and wholesale performance measures: “Other members of NARUC should heed these words.” He said Verizon’s and SBC’s arguments for their mergers are “a blatant inversion of the facts.” He said intermodal competition may exist but cable, wireless and VoIP aren’t useful alternatives to landline phone service for most larger business customers. He also said the history of the Bell System monopoly shows a tendency to stifle innovation unless there is a direct and immediate competitive threat. He also said merger conditions must include draconian penalties to be effective. He noted SBC has paid over $1 billion in penalties and Verizon over $200 million for violating conditions on previous mergers.

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Municipalities wanting to provide residents broadband must study their goal, because it will affect their choice of entry path and prospects for success, speakers said Mon. at a NARUC Telecom Committee panel on municipal Wi-Fi service. “Municipalities must decide what their network’s primary purpose is -- economic development, universal service, public access, quality of life -- because that purpose will dictate what technology they deploy, how they deploy it and how much it will cost,” said Paul Marks, with Utah’s UTOPIA consortium of 14 municipalities building fiber broadband networks. Marks said UTOPIA’s goal of economic development dictated a fiber-based wholesale network that will be open to private-sector providers of retail broadband services. Consultant Mike Balhoff of Balhoff & Rowe said municipalities contemplating broadband entry must be prepared to manage the political and financial risks of entry, and should decide to enter only when there’s clear indication of market failure. ‘Municipalities shouldn’t be competing against successful private enterprise,” he said. He also said if municipalities do enter broadband markets, they should do so gradually to minimize market risks. Kelly Dunn, exec. vp for Verizon Avenue, said his business unit seeks to form public-private partnerships with the small towns that are its target market for broadband services. He said the most attractive markets are towns under 15,000 population that lack broadband service but have lots of “vertical real estate” for wireless broadband network facilities. He said efficient back-office functions are critical to success of any broadband provider, whether a business or a govt. Tom Koutsky, of the Phoenix Center for Public Policy, said municipalities vary so widely in need and characteristics it’s impossible to generalize on whether municipal broadband is a good idea: “It’s not a simple decision to make, but municipalities need to understand what they are getting into and why.”

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Speakers at a NARUC Consumer Affairs panel Sun. on truth in billing questioned whether state agencies have jurisdiction over wireless billing, and whether competition will solve billing problems. The issue is pending before the FCC in the form of a NASUCA petition seeking Commission review of how carriers bill regulatory cost recovery charges and whether they are misleading the public that discretionary fees are taxes. Jay Keithly, deputy chief of the FCC Policy, Consumer & Governmental Affairs Bureau, said that, for wireless carriers, U.S. law denies states authority over wireless rates. He said regulation of how carriers bill their charges could be considered a ratemaking issue. He said “the toughest issue we have to crack” is providing nationwide wireless service if states were allowed to impose different billing requirements. He said key issues facing the FCC in this case are drawing a precise line between forbidden state regulation of rates and permissible state regulation of “other terms and conditions,” clearly distinguishing between govt.-mandated fees and discretionary fees, and deciding whether carriers can combine fees on the same billing line. Patrick Pearlman, W.Va. deputy consumer advocate, said the NASUCA petition stems from a W.Va. proceeding examining an AT&T monthly “regulatory assessment fee” and whether it was being portrayed correctly on bills as a fee to recover certain operating costs. He said state regulation of billing formats isn’t hurting the wireless industry, so federal preemption may be unnecessary. Dale Snowden, CTIA strategic relations vp, said since wireless is an intensely competitive industry, any extra regulatory layer would only disrupt this competition. He questioned the FCC’s even considering the NASUCA petition, saying CTIA’s consumer code addresses truth-in-billing.