That was the question on the minds of representatives from local telephone exchange carriers (LECs) who huddled at the United States Telephone Association (USTA) National Issues Conference days before legislators passed sweeping telecommunications legislation that would affect everyone's future.
But the question went beyond what would become law when President Clinton fulfilled his promise to sign the bill. "What now" had more to do with what happens when the 280-page document's deadlines and directives arrive at the Federal Communications Commission (FCC) and each state's public utility commission (PUC). Or when competitors straddle new markets to come face to face with rivals they've never seen before, such as electric utilities.
Besides the thoughts of price wars and mergers, conference attendees worried about the intimacy they'd have to kindle with their PUCs. The commissions, one speaker noted, will carry the "major burden" of the legislation. Attendees wondered (em as did the senators, representatives, and industry leaders who took the dais (em whether the FCC is prepared for what's to come. If, when felled by the budget ax, the FCC would, like other federal agencies, crawl along by mere workload.
One USTA conference attendee summed up the future this way: "It's a whole new ballgame."
But are the players ready?
Almost. Maybe. First, most agreed, telecommunications reform will need reform. Rep. Rick Boucher (D-VA) cited several areas:
s Antitrust exemptions. Small companies will be able to get enhanced services from neighboring large companies. An exemption is needed to protect smaller entrants from the antitrust implications of those relationships.
s Section 214 approval. When LECs face competition, they shouldn't have to obtain section 214 approval for investments in new equipment, file tariffs when they want to offer new services, or file depreciation schedules at the FCC. If new entrants aren't required to comply with the rules, LECs shouldn't have to either, Boucher argued.
s Price regulation. Price regulation should replace rate-of-return regulation across the board. Price regulation encourages greater efficiency, Boucher noted, by rewarding only those investments that enhance productivity. It also places risk where it belongs (em on shareholders, not consumers.
FCC reform also is on the agenda, Boucher said.
"We need to be very conscious of the fact that the FCC needs what it currently has, and it's probably going to need more (em at least in the short term (em as it drafts the rules necessary to affect the many transitions toward competitive markets," he said.
But less, not more, might be likely.
"The guiding principle, at least in the House these days, is that we should trim substantially the budgets of virtually all agencies, abolish many agencies," the congressman said. "And to think of the FCC in terms of resources, I think, hangs in the balance."
Rachelle Chong, FCC Commissioner, who earlier waved a Gumby toy to poke fun at the "supple" 60-year-old communications laws her agency worked under, was more hopeful. Congress understands what's needed to carry out the new law, she said. As many as 80 rulemakings, carrying short deadlines, are required. "Congress members assured me that they recognize that we're going to require a certain amount of manpower, person power, at the commission," Chong said.
"I have a feeling the agency will not get a cut in its funding right now," said Jeff Sheldon, general counsel for UTC, the telecommunications association, from his Washington office. "I think there's going to be some recognition on the Hill that this [law] will require some additional staffing, at least for the short term."
The Federal Energy Regulatory Commission also will play a larger role, Washington attorney William F. Maher, Jr. told USTA's conferees. Maher said that while the FCC will set the general framework, it will be up to PUCs to follow through and implement the new law. "This places a major, major burden on the state commissions," he said. "It also highlights the importance of talking with the state regulatory staffs and the commissioners about LEC needs under this bill." Because sooner or later they will have a
But Lee Palagyi, acting director of congressional affairs for the National Association of Regulatory Utility Commissioners, speaking from her office, said she thinks states are prepared for what the telecommunication legislation will bring them. Moving away from rate-of-return to price regulation simply places different requirements on PUC staff, she said. Deadlines, for one, will be shorter.
For registered holding companies, the new law means they can provide telecom, information, or other services, subject to state oversight, but without prohibitions that might apply under the Public Utility Holding Company Act.
More important, the new law creates a test of what is a "telecommunications carrier." A utility that wants to lease fiber-optic cable and not "cross the line" isn't a telecom carrier. The definition is "Are you offering service to the public?"
Utilities have jumped the wire to varying degrees. Baltimore Gas & Electric, for example, is certified by the Maryland Commission to provide telecommunications services. Many other agreements, mostly high-dollar deals, have ranged from security and energy services to full-service information and cable TV services. AT&T and PSE&G; PG&E, Tele-Communications, Inc. and Microsoft Corp.; and LG&E and TKR Cable already have arrangements to provide customers various "communications" services.
"A lot of companies are just looking for ... the minimum technology ... to remain competitive in this business," Sheldon said. "Others are taking that concept one step further and saying, 'Well since I've got to put in a communications backbone to do that kind of thing, what else can I do with that infrastructure?'
"We feel we're going to see a lot more deals coming down the pike, between utility companies and the new competitive entrepreneurs." t
Joseph F. Schuler, Jr. is associate editor of PUBLIC UTILITIES FORTNIGHTLY.
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