Irving testimony on Telecom Reform Legislation[FWD:CITS]

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Message-Id: <9503082043.AA18719@a.cni.org>
Date:  Wed, 08 Mar 95 15:43:18 EST
From: "W. Curtiss Priest" <BMSLIB@mitvma.mit.edu>
To: Telecommunications Policy Roundtable <ROUNDTABLE@CNI.ORG>
Subject: Irving testimony on Telecom Reform Legislation[FWD:CITS]


FYI -- Curt

Curtiss Priest
<bmslib@mitvma.mit.edu>

----------------------------Original message----------------------------
Date: Wed, 8 Mar 95 08:24:30 PST
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From: BBracey@aol.com
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Subject: Irving testimony on Telecom Reform Legislation[FWD:CITS]



                    TESTIMONY OF LARRY IRVING

     ASSISTANT SECRETARY FOR COMMUNICATIONS AND INFORMATION

                   U.S. DEPARTMENT OF COMMERCE



                               ON

          TELECOMMUNICATIONS POLICY REFORM LEGISLATION




                BEFORE THE COMMITTEE ON COMMERCE,

                   SCIENCE AND TRANSPORTATION

                      UNITED STATES SENATE


                         MARCH 2, 1995



Mr. Chairman and Members of the Committee:


                          INTRODUCTION

     Good morning.  Thank you for this opportunity to testify
before you today on the issue of telecommunications policy
reform.  The Administration shares your interest in promoting the
advancement of a modern telecommunications and information
infrastructure in a procompetitive manner that benefits all
Americans.

     Congress has the opportunity this year to enact legislation
that will open all telecommunications markets to vigorous
competition, produce clear, flexible, and limited government
regulations to ensure that such competition is robust and fair,
and link the introduction of new products and services to
producer initiative and consumer demand.  Such legislation, in
short, can unleash the promise of the Information Superhighway
for all Americans.

     The key test for any telecommunications reform measure is
whether it helps the American people.  Legislation should provide
benefits to consumers and spur economic growth by ensuring
competitive telecommunications markets.  Competition will provide
consumers with lower prices, higher quality, and greater choice.
The continuing competitiveness of U.S. companies will create jobs
as the telecommunications sector grows.  Only competition -- not
monopoly -- will enable us to achieve these goals.

     The Administration looks forward to working with you and
your Committee to ensure that a complete, integrated set of
telecommunications reform proposals moves forward.


                    THE NEED FOR LEGISLATION

     An advanced information infrastructure will transform
everyday life for every person in the United States in the near
future.  Projects are underway that are changing the way we work,
educate our children, receive medical services, and interact with
our family and neighbors.  For example, in your home state of
South Dakota, Mr. Chairman, the Rural Development
Telecommunications Network is connecting 47 schools to networks
and providing distance learning programs.

     It would be a mistake, however, simply to "let nature take
its course" and allow change to proceed under the existing legal
regime, whose underlying structure was established 60 years ago.
This is true for three essential reasons.

     First, we need legislation to promote innovation and
competition.  Information transmission increasingly is the life
blood of all our industries.  Archaic rules or entrenched
monopolies that inappropriately retard innovation by
telecommunications firms are detrimental to the international
competitiveness of the private sector, inhibiting industrial
productivity and job creation.  Legislation that reforms these
outdated structures and supports entry of new competitors will
enhance competitiveness and spur the creation of good new jobs.

     Second, the existing regulatory structure discourages
private investment.  It places artificial barriers on firms that,
due to technological advances, are now in a position to be
competitors.  The regulatory structure has created an uneven
playing field that favors some companies or industries over
others.  This, in turn, inappropriately skews the growth of
industry sectors and retards the development of the National
Information Infrastructure (NII).  Accordingly, legislation is
needed to eliminate such unwarranted regulatory disparities.

     Third, we need to be sure that our telecommunications
policies are fully responsive to the needs of the American people
as a whole, and, in particular, poorer and disadvantaged
Americans.  As Secretary of Commerce Ronald H. Brown has
emphasized, we cannot "become a nation in which the new
information age acts as a barrier, rather than a pathway, between
Americans" -- a nation divided between the information rich and
the information poor.  Yet, while the universal provision of
"plain old telephone service" has long been a national goal, the
existing regulatory structure may not be sufficient to ensure
that all Americans benefit from the broader range of information
services that will become available under the NII.  Accordingly,
legislative reform is urgently needed to address this
shortcoming.  I will have more to say about the Administration's
views on universal service.

     Several states have already adopted innovative regulatory
reforms that seek to open up local competition.  These states
serve as models for the benefits that competition can bring to
consumers.  But we can't build a system one state at a time.  We
need a national vision and a national system.


            THE SENATE'S LEGISLATIVE REFORM PROPOSALS

     I would like to offer, as briefly as possible, the views of
the Administration on the legislative reform proposals currently
being discussed in the Senate.  I commend the Committee for
tackling these difficult issues.

     The draft bills propose reforms in many key areas that we
agree need to be addressed.  These include, for example, prompt
lifting of the cable/telco crossownership ban, preempting state
barriers to competition in local phone service, reexamining
broadcast ownership and spectrum rules, and providing a process
for reviewing the need for continuing regulation.  We support
these efforts and hope to have the opportunity to work with the
Committee on the details of these proposals.

     This morning, I would like to focus my remarks on five
areas:  (1) local competition, (2) BOC entry into long distance
and manufacturing, (3) universal service, (4) cable regulation,
and (5) foreign ownership.

Local Competition

     A critical area for reform is ensuring local competition.
Your draft bill, Mr. Chairman, would permit the details of
interconnection and unbundling -- implementation of which is
crucial to the development of local exchange competition -- to be
determined in negotiations between incumbent local exchange
carriers and prospective entrants.

     While we share your goal of promoting local competition,
while simultaneously minimizing government regulation, the
Administration has concerns about how effective the negotiation
process will be.  And here, Mr. Chairman, experience is
instructive.  The local interconnection agreements that have been
finalized to date are, in most cases, the fruit of difficult,
contentious bargaining processes that have exceeded significantly
the four-month period contemplated in your draft bill.  The
recently-announced agreement between NYNEX and Metropolitan Fiber
Systems -- which some hail as an exemplar of the negotiation
approach -- was two years in the making.  In short, there are
legitimate questions whether the proposed private negotiations --
even with a credible threat of government intervention -- are the
best method for expeditiously facilitating completion of the
interconnection/unbundling agreements essential to the growth of
local exchange competition.

     In the five years since New York State first mandated local
exchange interconnection, agreements have been finalized in a
number of other states as well.  These pacts provide strong
evidence of the interconnection terms and conditions that are
acceptable to both local exchange carriers and their potential
competitors.  The FCC, with assistance from the States, could use
those agreements as the model for uniform, nationwide, minimum
regulations concerning interconnection and unbundling.

  The Administration believes that nationwide regulations would
have the clear advantage of informing local competitors
everywhere of their basic rights and responsibilities.  This
would make it easier and quicker for new companies, particularly
smaller ones, to enter the local exchange markets and deliver the
benefits of competition to consumers.

BOC Entry into Long Distance and Manufacturing

     In addition, Mr. Chairman, the negotiation approach to
interconnection/unbundling in your draft bill will require
incentives to ensure that parties negotiate in good faith.  This
brings me to another critical provision in your draft bill:  the
provision setting a date certain -- three years after enactment -
- for elimination of the AT&T Consent Decree and guaranteed BOC
entry into long distance and manufacturing.  Assistant Attorney
General Bingaman has ably outlined the Administration's
reservations about that provision.  I will add only this:  a date
certain will undoubtedly erode the BOCs' incentives to conduct
and conclude interconnection negotiations expeditiously.

     Your draft bill recognizes this fact and attempts to
mitigate the potential consequences by authorizing stiff
penalties in the event that the BOCs do not comply fully with
their interconnection/unbundling requirements.  However, the very
severity of those penalties may reduce the likelihood that they
are ever imposed.  More importantly, the threat of sanctions for
bad conduct is, in general, a poor substitute for strong
incentives for good conduct.

     As Assistant Attorney General Anne Bingaman has outlined,
the better approach is to establish the preconditions for BOC
entry, including a careful assessment by the Department of
Justice of the state of competition in the local exchange market.
The Administration will work with the Committee to develop an
approach that meets this objective while giving the BOCs
incentives to comply with their interconnection and unbundling
obligations.

Universal Service

     The Administration shares the Committee's recognition that
implementation of new universal service policies for the
information age is of profound public policy significance.  We
are pleased that both the Chairman's and Senator Hollings'
proposals seek to ensure universal service.

     The Administration supports efforts to develop a new concept
of universal service that will serve the information needs of the
American people in the 21st century.  Indeed, the full potential
of the NII will not be realized unless all Americans who desire
it have easy, affordable access to advanced communications and
information services, regardless of income, disability, or
location.

     We welcome the continued bipartisan Congressional support
for universal service.  A major concept on which all agree is the
need to establish a Federal/State Joint Board to make
recommendations to the FCC on both the evolving definitional and
funding elements of universal service.  There is also agreement
on many of the principles that should form the basis for the
FCC's and the Joint Board's efforts.  These include:

o    providing quality services at just, reasonable, and
     affordable rates;

o    establishing a coordinated Federal and State universal
     service funding system administered by an independent,
     non-governmental entity;

o    requiring telecommunications services providers to
     contribute to the preservation and advancement of
     universal service on an equitable and nondiscriminatory
     basis; and

o    permitting consumers to exercise choice among
     telecommunications carriers.

     Such a broad framework of general principles can form the
bedrock upon which the FCC and the states can establish universal
service policies for the future.  The Administration wishes to
work closely with the Committee on this framework.

     We also hope to work with the Committee on legislative
provisions to facilitate the connection of all our classrooms,
libraries, hospitals and clinics to the NII by the year 2000.
Universal access to the NII will promote U.S. competitiveness,
create new jobs, and ensure that all citizens realize the
benefits of the information revolution.  We want to work with the
Committee in exploring all possible methods of accomplishing this
goal.

Cable Television

     I would also like to address some concerns the
Administration has with the draft bill with respect to the
language that would eliminate government regulation of cable
television rates beginning one year after enactment.  Mr.
Chairman, the Administration believes that this approach would
not serve the public interest.

     The 1992 Cable Act rests on the sound principle that rate
regulation will cease immediately in markets where there is
effective competition.  However, today fewer than 1 percent of
households nationally have Direct Broadcast Satellite service and
virtually none have a choice of wired video provider.  Without
the disciplining effects of such competition, deregulation will
rarely, if ever, benefit consumers.  And while it is true that
competition in the video marketplace is increasing with the
advent of Direct Broadcast Satellite service and the prospect of
video dialtone, it remains to be seen whether and to what extent
these potential competitors will become actual alternatives to
entrenched cable systems.  The years following passage of the
1984 Cable Act demonstrated the perils of deregulating on the
promise of potential competition rather than the existence of
actual competition.  The Administration believes that we should
not repeat that experience.

     That is not to say that changes to the 1992 Cable Act should
not be made.  I understand that the National Cable Television
Association has proposed a number of amendments to that Act's
definition of "effective competition," which would deregulate
cable operators more quickly with the advent of competition in
local markets.  The Administration has indicated a willingness to
work with Congress and industry to minimize the burden of
government regulation without sacrificing cable subscribers.  We
will not, however, support deregulation of monopolies before the
arrival of actual competition.  As long as monopolies continue to
exist, consumers must be protected.



Foreign Ownership

     We also agree with the Committee's interest in reexamining
Section 310(b) to help foster open telecommunications markets
worldwide.  As reflected in the Vice President's speech at the
G-7 Conference, the Administration joins many in Congress who
support lifting the Section 310(b) restrictions for countries
that have also opened their telecommunications markets to U.S.
companies.  We suggest that a determination of whether this goal
has been achieved for a particular country should be made by the
President, based on the advice of the appropriate Executive
Branch agencies.  This would be an interim step until
multilateral talks with other nations resulted in reciprocal
agreements on access.

     Clearly, in revising Section 310(b), we must recognize that
many countries are in the process of change, but progress will be
varied among countries and will evolve over time.  We do believe,
however, that once a critical mass of countries with open
telecommunications markets is achieved, the momentum and demand from 
both national and multinational companies, as well as global
alliances, will create a powerful force to push the remaining
countries toward competitive and open markets.

     We would not, however, move to lift the restriction with
respect to broadcasting at this time.  The Administration
believes that we should not be too hasty in lifting restrictions
on the amount of foreign influence over, or control of, broadcast
licenses due to the editorial discretion of broadcasters over the
content of the transmissions.

     The Administration thus welcomes the opportunity to work
with the Congress to reform 310(b) to help achieve our mutual
goals of continuing to open telecommunications markets around the
globe to facilitate participation by U.S. companies.  This will
help boost economic growth, create jobs, and ensure that U.S.
companies remain world leaders in the global telecommunications
marketplace.

                           CONCLUSION

     Mr. Chairman, let me close by reaffirming my central
message.  Both your reform proposal and that put forth by Senator
Hollings have considerable merit.  Although the Administration
has concerns about specific provisions, there is also much with
which we agree.  I remain convinced that if we work together,
Congress, the Administration, and the many other interested
parties can forge telecommunications reform policy that promotes
the objectives to which we are all committed -- competition,
investment, consumer welfare, and reduced government regulation.
Thank you again for the opportunity to testify, and I will be
happy to answer any questions.

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