Telecom Reform: New Congress, New Bill

Fortnightly Magazine - April 15 1995

Here we go again. Last year, the 103rd Congress failed to pass the much-promised and highly touted telecommunications reform legislation aimed at bringing the antiquated Communications Act of 1934 into the 21st century. Now it's up to the 104th Congress, and both parties have draft legislation ready to go.

In February, Sen. Larry Pressler (R-SD) (em chairman of the Senate Committee on Commerce, Science, and Transportation (em introduced the "Telecommunications Competition and Deregulation Act of 1995," designed to accelerate deployment of advanced telecommunications and information technologies by opening markets to competition.

Two weeks later, the Democrats, led by Sen. Ernest F. Hollings (D-SC), who chaired the Commerce Committee last year, released their 99-page reform proposal, "Universal Service Telecommunications Act of 1995."

According to Sen. Pressler, the Republican draft is a product of bipartisan teamwork, which makes him "confident" that Congress will enact a major deregulation bill during the first six months of the year, and perhaps as early as Easter. The draft proposes a three-year transition to the new competitive rules. In the first year, Phase I, the Federal Communications Commission (FCC) and the states would:

s Remove barriers to entry

s Implement interconnection and opening requirements

s Establish separate subsidiary and safeguard requirements

s Establish a universal service support scheme.

They would also reform foreign ownership limits on a reciprocal basis. Where markets are competitive, the FCC and the states would be excused from regulating.

During Phase II, the second and third years, they would:

s Preempt state and local barriers to entry

s Lift the MFJ (Modification of Final Judgment) restrictions on incidental services and out-of-region long distance

s Raise the cable/telco ban

s End cable rate regulation

s Allow utilities to enter telecom markets

s Reform spectrum flexibility for broadcasters

s Reform broadcast ownership and structural rules.

At the end of three years, state and federal regulators would lift the MFJ restriction on long distance and manufacturing. Short-haul long-distance competition would be permitted along with dialing parity.

Finally, in Phase III, the FCC and the states would establish price-cap regulations. All remaining federal, state, and local regulations would undergo biannual review. Where competition is not present, regulators would introduce incentives for deploying advanced telecommunications. The FCC would streamline and harmonize regulatory treatment of all telecom providers so that similar service providers are treated the same.

The Democrat's version of a telecommunications reform bill resembles the one pushed through the Senate Commerce Committee last year. Providing they open themselves up to competition, regional Bell operating companies could ask the FCC and the Justice Department for authority to provide long-distance or manufacturing services. Any new Bell manufacturing plant would have to be located in the United States. In addition, the Democrats would continue cable television rate regulation, and permit telephone companies to enter the video services market a year before cable companies are allowed to provide telephone services.

Meanwhile, in the House, Reps. Rick Boucher (D-VA) and Paul Gillmor (R-OH) have introduced a bill as part of the comprehensive telecommunications reform to ensure that all electric utilities are free to offer communications services on a commercial basis.

Boucher noted that the 14 electric utility registered holding companies are barred by the Public Utility Holding Company Act from offering telecommunications services. Although these holding company utilities provide 20 percent of the electricity consumed in the United States, only the utilities offering the other 80 percent are allowed to offer telecom services. Boucher would remove that restriction. He observed that utility demand-side management uses only 2 percent of the available space on fiber-optic lines, leaving 98 percent free for other uses. That excess capacity has caused the utilities to seek entry into the telecom market as telephone and video service providers. Nevertheless, Boucher feels that electric ratepayers should not bear the costs of the new services. The bill would require registered holding companies to conduct their communications activities through a separate subsidiary. The bill would also add consumer safeguards to telecom reform (em for example, giving the FERC and state commissions authority to prohibit

cross-subsidization. t


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