FCC Criticized on Long Distance Competition

(March 31, 1998)  The House Subcommittee on Telecommunications, Trade, and Consumer Protection held a hearing today on reauthorization of the FCC which gave members the opportunity to either condemn or praise the FCC for denying the applications from regional Bell companies to provide in  region long distance services under Section 271 of the 1996 Telecommunications Act.

Rep. John Dingell (D-MI), the Ranking Minority Member of the House Commerce Committee, was unrestrained in his criticism.  The Bell Operating Companies (BOCs) are "chomping at the bit to provide long distance services, and have spent more than $8 billion in the past two years to open their own markets to competitors. But the long distance companies, while facing no regulatory barriers to entering the local market, have only done so in a narrowly targeted fashion. They have sought out highly valuable business customers while largely ignoring the residential consumer. They believe this is a logical business strategy and are not at all reticent about admitting it. The major long distance companies have publicly acknowledged their plans to abandon the residential consumer in recent weeks. MCI went so far as to say that targeting residential customers was like 'throwing money down a rat hole.'"

"It couldn't be more clear that the long distance companies refuse to enter the local market for fear of letting the Bells loose in their own backyards."  Rep. Dingell added, the "FCC must stop acting as a central planner."  And, this is "an inexcusable excercise of bureaucracy by the Commission."

Similarly Rep. Billy Tauzin (R-LA), the Chairman of the Telecom Subcommittee, stated that the FCC refuses "to set the bar in a clear and definable way."   Moreover, it has as tendency to hire staff and regulate, when it should let competition work.

In contrast Rep. Tom Bliley (R-VA) supported the FCC decisions to reject BOC's applications.  Ranking Minority Member of the Subcommittee, Rep. Edward Markey (D-MA), also backed the FCC.  "The Telecommunications Act is working as intended."

According to FCC Commissioner William Kennard, "the FCC will continue to examine how to streamline the process of evaluating Bell Operating Company petitions for entry in to in-region inter-LATA toll service."

Kennard continued in his prepared statement that "... it is crucial that a BOC satisfy the statutory checklist contained in Section 271 before it is permitted to enter the long distance market.  For if a BOC is permitted to offer long distance service before it has opened its local market to competition, then merger and consolidation will be the only avenues into the local market available to the long distance carriers ... Giving the BOCs a free pass into long distance would thus produce fewer, not more, competitors ..."

Part of the problem, says Kennard, is the Courts.  "We have seen the careful statutory design of Congress disrupted  by judicial rulings that have added uncertainty, slowed investment and planning, and frustrated promising market entry strategies.  Without these judicial setbacks, we would be further along the road to full competition in telecommunications.  These court decisions threaten to continue to hobble the development of competition and to deny our country the growth that broad telecommunications competition would create."

Senate Hearing on Section 271

The Senate Communications Subcommittee of the Commerce Committee held a hearing on March 25 on the Section 271 Application Process.

Sen. John McCain, Chairman of the Subcommittee, stated that, "Responsible administration of its fourteen point checklist is among the most important jobs Congress has given to the FCC."   McCain continued that "the FCC's implementation of the competitive checklist has been the subject of considerable criticism" and caused it to become "a regulatory nightmare."

Sen. McCain suggested that the FCC "must explain publicly, promptly, and precisely what applicants must do to meet each of the requirements that have been grafted onto the checklist."

Sen. McCain introduced a bill (S 1766) on March 16 that would allow any BOC to offer long distance service within one year of passage of the act, thus circumventing the Section 271 application process.

Links to copies of statements in the Senate Commerce Committee website:

• Sen. John McCain.
• Sen. Conrad Burns.
• FCC Commissioner Kennard.