WASHINGTON-After two years, is the Telecommunications Act of 1996 a success or failure? In the eyes of Washington telecom insiders, is it an industry boon or an industry bust? Right now, it’s even money.
“You need to get some perspective on this,” said Kathryn Brown, associate administrator of the Commerce Department’s National Telecommunications and Information Administration, speaking last week at the annual Communications Network conference here. “It was a long time in the making, and it was an elegant framework for the introduction of competition. The environment now is extraordinarily different than it was then. The states and the federal government have opened up pricing and costing, and they are moving ahead. The next year will show what all this means.”
With much of the Federal Communications Commission’s interpretation of the act’s statutes tied up in court, is this the time to start re-evaluating the act for weaknesses? “Americans are not patient, and it takes time for an act to take hold. It’s only been two years,” commented David Siddall, departing legal adviser to FCC Commissioner Susan Ness. “Already, a lot of implementation has taken place, and no changes are needed yet.”
In light of that, there is not much competition in the local loop, at least where residential customers are concerned. Has the FCC’s telecom act rulemakings had anything to do with this dearth? Lauren Belvin, Republican staff counsel for the Senate Commerce Committee and former adviser to retired FCC Commissioner James Quello, cited Sen. John McCain’s opinion that “human nature doesn’t change, and that the act is flawed in that the local exchange carriers have all the incentives to get into long distance but the interexchange carriers have little incentive to go into the local loop.”
Eventually, Belvin believes, this will change if there is some stimulation for both sides to do so. However, she recognized that entrepreneurs for some time will continue to serve the business customer first because of the high margins “and that’s where the act is flawed. Congress didn’t have a full grasp of how business and economics really work. This is not the FCC’s fault.” Bottom line, Belvin said, Congress should be able to assess the act’s processes now to see if there are any roadblocks that can be fixed.
On the other hand, today’s behavior of the telecom market as a whole is telling Congress the act is a failure, said Belvin’s Democratic counterpart on the Commerce Committee, Ivan Schlager. “The market rewards companies that are dominant players, like the Bell companies,” he said. “Technology hasn’t panned out in a number of areas, especially in personal communications services.”
Perhaps the most visible “happening” directly related to telecom-act deregulation is the number of mergers and consolidations-and even some initial public offerings-that have come to dominate the business pages of newspapers. But is forming what could become new monopolies a good thing for the consumer? Agreeing with previous statements made by Schlager, Belvin said, “The marketplace is driving companies to become bigger because communications [as a whole] favors major players. But some companies are merging because it’s easier to do that to provide new services than to comply with the telecom act.”
Because surveys have shown that residential customers would like a “one-stop-shopping” communications services scenario that would include voice, data, video and entertainment on one bill, don’t these mergers bode well for the public interest? “Vertical mergers have an argument for one-stop shopping but we can’t put together the old monopoly,” Schlager added. “We don’t want a [deregulatory] situation like we had with the airlines.”
Among their promises to the American people, backers of the telecom act predicted two wires (or wireless conduits) into every home-one for voice and one for other services. This has not happened yet, but Richard Welch, chief of the FCC’s Policy and Program Planning division, said that reasons for the lack of broadband communications proliferation are being studied. “It is far too early to judge if [this aspect] is a failure,” Welch said. “We won’t know for 10 or 15 years. We just need more time. The states, Congress, the FCC, industry and the courts all have work to do.”
Siddall added that the upcoming local multipoint distribution service auction could help put another pipe into the house, and that certainly wireless services are cheaper, in a broadcast sense, to send into houses than wireline solutions.
With so much of the act either in appeals courts or headed for the Supreme Court during the 1998-99 session, will competition continue to be stymied? NTIA’s Brown pointed out that 34 states have adopted forward-looking pricing methods, despite pending court action, and that many groups are working together to solve the problems surrounding collocation, number portability, and contract agreements and their timing. “This is a time for us to keep on going … hard,” she said.
Regarding rules pending in the Eighth Circuit Court of Appeals, Siddall said, “Don’t confuse the trees with the forest. The strong opinion is that competition is good in many states. You have to look at what is happening rather than how it is happening.”
