"Today's uncertain telecommunications policy landscape, wrought largely by rapidly developing technology, an outdated statutory framework unable to keep pace, and federal regulations mired in litigation from their outset, requires us to reexamine the very assumptions under which the Telecommunications Act of 1996 was put into law," said Senator John McCain (R-AZ) at the opening of special hearings by the U.S. Senate Committee on Commerce, Science and Transportation. McCain, who chairs the Senate Committee, described the Telecom Act as a "fatally flawed piece of legislation, written by lobbyists" and in need of updating.
David Dorman, who headed Pacific Bell (now part of SBC Communications) at the time the Telecom Act was passed and who now serves as Chairman and CEO of AT&T, credited the 1996 Act for launching "the very valuable process of opening the telephone exchange market to competition." However, Dorman stressed that gains made over the past eight years are now under "mortal threat" by the recent court decision that invalidated the FCC's UNE-p rules. Dorman argued that access to the local networks of ILECs remains essential for competition. "While UNE-P and circuit-switched facilities are the "now" for competitors serving mass market consumers, VoIP is the future. VoIP holds the promise of choices and capabilities far beyond today's offerings..... But if national carriers cannot remain in the market today, they will not be able to generate the revenues they need to make the investments necessary to make this service a reality in the near future. VoIP will be yet another technology controlled by the Bells -- who held back DSL from consumers for some ten years so customers would have to take their other, higher priced services."
"The Telecom Act of 1996 went wrong in three key areas," testified Richard Notebaert, Chairman and CEO of Qwest Communications. First, it was far too complicated. Second, the regulatory process took too long, especially in view of today's market realities. For instance, Notebaert observed, when Qwest responded to consumer demand and filed for permission to provide stand-alone DSL, that process cost $130,000 and took 45 days. Third, the Telecom Act created greater uncertainty and this "ongoing limbo makes it impossible to raise capital, to build a business plan, or to justify infrastructure investment." Notebaert recommended that any future legislation take into account the fact that telecommunications--at least voice services--is a commodity. Future laws should also recognize that customers are embracing new technology -- such as VoIP -- now.
"The Telecom Act of 1996 is not perfect, but competition is working," testified James Geiger, CEO of Cbeyond Communications and Chairman of the Association for Local Telecommunications Services (ALTS). Geiger pointed out that:
- Facilities-based CLECs invested nearly $75 billion from 1996 through 2003
- CLECs generate $46 billion in annual revenues, which is close to that of the cable industry
- CLECs employ nearly 60,000 in the U.S.
- CLECs currently serve 10 million access lines, in addition to the 19 million lines served by UNE-p carriers.
- After 8 years, CLECs have about 15% of the local market.
However, Geiger observed "I would have to count as a major deficiency of the 96 Act that it was not sufficiently clear in expressing Congress's view that broadband goals should be achieved by competition, not protecting incumbents from competition." His testimony warned that in current negotiations over local access lines the RBOCs are seeking "to impose unacceptable price increases for high-cap loops and transport by transitioning them to their special access rates."http://commerce.senate.gov/hearings/witnesslist.cfm?id=1164
