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Telecom Act Celebrates Its Fifth Anniversary
February marks the fifth anniversary of the 1996 Telecommunications Act, and at the half-decade milestone, Congress is expected to assess whether the law designed to open the telecommunications market really did promote competition.
The 106th Congress failed to pass legislation designed to undo two provisions of the act, and the "Bells will be back with a vengeance to press bills they have been pressing vehemently," said Robert McDowell, vice president and assistant general counsel to the Competitive Telecommunications Association (CompTel).
Rep. Billy Tauzin, R-LA, considered a leading contender for the chairmanship of the House Commerce Committee, sponsored two of those bills: H.R. 2420, the Internet Freedom and Broadband Deployment Act of 1999, and H.R. 4445, the Reciprocal Compensation Adjustment Act of 2000.
H.R. 2420 would let the Baby Bells offer high-speed data services outside their local regions before meeting local competition requirements for voice-telephone services that are included in the 1996 act. Rep. John Dingell, D-MI, is a co-sponsor of the bill.
H.R. 4445 would eliminate the reciprocal-compensation billing system for calls connected to the Internet and replace it with a bill-and-keep system the Bell companies favor. Reciprocal compensation is the way telecommunications firms compensate one another for connecting and disconnecting calls. The bill was approved by the House Telecommunications and Consumer Protection Subcommittee, which Tauzin heads, but stalled in the full committee.
"We certainly plan to reintroduce our legislation next year and pursue it vigorously," said Ken Johnson, spokesman for Tauzin.
Seeing Green
Legislators will have to continue enduring the bickering between the incumbent carriers, or Baby Bells, and the competitive local-exchange carriers (CLECs) before they can assess the impact of the 1996 law. The trouble is, lobbying efforts on both sides largely drive the debate.
CLECs complain that the Bells have stymied progress through litigation, foot-dragging and untoward practices when hooking up CLEC customers. The Bells bemoan excess regulation and technological difficulties with compliance. Each wants remedies.
Thomas Hazlett, author of an article published in the Cato Institute's recent issue of its Regulation magazine, said the Telecommunications Act has been an unmitigated success in terms of "political contributions to federal policymakers from telecommunications firms and executives."
Nevertheless, policymakers will have to look beyond the lobbying and try to determine whether the act truly promotes competition.
Is It Or Isn't It?
"By any objective measure, the Telecom Act has not lived up to its own design or expectations," said Scott Cleland, an analyst at the Precursor Group, an independent research firm. "There is negligible monopoly competition," the average price for voice service has increased $3 per month, and Bells have entered the long-distance market in only one-eighth of the country, he said.
But Federal Communications Commission Commissioner Harold Furchtgott-Roth, who helped draft the 1996 act when he worked on Capitol Hill, disagrees.
"Yes, it is working," he said, noting that five years ago markets were closed but now, for example, cable companies may offer phone service that they previously could not. Furchtgott-Roth also pointed to developments in the wireless industry, where prices have fallen and consumers now have a choice of providers.
Adam Thierer, a fellow in economic policy at the Heritage Foundation, gives the telecom act a C-plus, saying the "the wireless telephony model is the most encouraging development." However, he said technology has made the Telecommunications Act irrelevant because "technology has driven change more than anything else."
The Carrot
The technological changes offer myriad communications options, from wireless to Internet to wireless Internet. The options make local wireline communication and long-distance service less appealing.
Right now most residential customers do not have a choice of local voice service, while businesses do. The question is if those markets are less lucrative, will firms seek to enter them?
"It is difficult to hold on when technology is changing and the distinctions are blurring," Furchtgott-Roth said. But he blamed the lack of choice for residential voice on the regulation of local wireline rates and the business need to focus on more densely populated areas to become profitable.
"Rate regulation creates a disincentive to go after local residential" services, he said, adding that, "Over time, I expect we will inevitably see less and less regulation."
Even with the advances in technology, "local voice is still very important, but it is not the be all and end all," Cleland said. He called the Telecommunications Act "backward looking."
The promise of entry into the long-distance market back in 1996 seemed like a good incentive to entice Bell companies to open their facilities to competitors. But with long-distance service becoming less profitable, it may not longer be the best prize. Now we're in an "age where long distance is a disposable commodity bundled in with all types of telecom services," Thierer said.
McDowell, however, said he thinks the promise of long distance remains an adequate incentive because firms can bundle a package of services and offer a one-stop shop for customers at better rates.
Yet Thierer said true facilities-based voice competition is lagging behind because many competitors chose to take advantage of the requirements that Bells provide access to the local loop rather than building out their own.
Now What?
As policymakers look back on the five years since telecommunications reform and ponder the future under the one, one thing is certain: With communications advances a driving force in the economy, companies are going to fight for the best regulatory environment to execute their business plans.
CLEC representatives by and large say they think the Telecommunications Act is working but want enhanced enforcement. "If you look at the letter of the law, everything is there to create competition," said Hollye Doane director of congressional affairs for the Association of Local Telecommunications Services, a group that represents competitive carriers.
Bell companies, on the other hand, back both of Tauzin's bills as well as additional changes to the act. "In 1996," said Edward Young of Verizon's government relations department, "a snapshot was taken of where we were and rules were written for that point in time. In five short years, a lot of things have happened that require additional changes."
Young, for instance, would like to see the requirements to enter the long-distance market eased and he backs a relaxing of regulations in markets where the same service is offered over different technologies.
But right now Congress does not have any major plans to revamp the act.
"By and large it has been a great success in spurring competition in areas such as wireless, but we still don't have full competition in both the local and long-distance telephone loops and we still don't have full competition in broadband, so there is a very strong possibility that we will try to address those shortcomings in the next legislative session," he said.
 | - by Teri Rucker |
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