Senate Holds Hearing on FCC Common Carrier Bureau

(May 7, 1998)  The Senate Telecommunications Subcommittee held an oversight hearing on the Federal Communications Commission's Common Carrier Bureau.  Senators and witnesses complained about FCC handling of various universal service issues.   Richard Metzger, the head of the Bureau, also testified, but made no commitments regarding future FCC actions affecting universal service.

Five witnesses testified and answered questions from Senators:

• Richard Metzger, FCC Common Carrier Bureau.  (Prepared Statement in PDF)
• Ron Benz, Competitive Policy Institute.
• Earl Comstock, Attorney.
• Albert Halprin, Partner, Halprin, Temple, Goodman, and Sugrue.  (Prepared Statement in PDF)
• Peter Huber, Senior Fellow, Manhattan Institute.

The two hour hearing was attended only by "farm team" Senators Burns (R-MT), Brownback (R-KS), and Rockefeller (D-WV), who all stated that they want the FCC to maintain a strong universal fund, to keep phone rates from rising in rural states like Montana, Kansas, and West Virginia.

Sen. Burns criticized the FCC's Universal Service order of May 8, 1997 which established the "75-25" rule.  This provides that 75% of universal service contributions come from within a state.  Burns stated that this will cause phone rates to rise in rural states that do not also have large metropolitan areas.  Burns stated that "this ruling is not consistent with the Telecom Act of 1996 or the intent of Congress."

"We want to work with you to make sure rural rates do not go up," Sen. Brownback told Metzger. "We did not pass this Act to raise rural and residential rates ... I hope the Commission gets that."  He was particularly critical of how the FCC calculates costs of phone service in rural areas, suggesting that it deliberately understates these costs, for the purpose of reducing universal service support.

Sen. Rockefeller also wants the FCC to enforce truth in billing by AT&T and others regarding the e-rate.

"I don't think that you educate the public on this problem.  The public is not so taken with the magisterial complexity of this issue, that they just can't wait to read in USA Today what is going on inside the FCC. ...  It is not a question of educating the public.  It is a question of: 'Do you make them tell the truth in their billing information?'  AT&T -- I have seen the ad which they are preparing to put out.  It is horrendous.  ...  They are doing that because they are going to scare people. ...  It is my belief that people in this country are willing to pay a buck, let's say, to see this thing happen.  So don't talk to me about educating the public.  The only thing I am interested in is what they are going to do about the billing."

Despite repeated pressure from Rockefeller, Metzger promised nothing.  Metzger also made no commitments on behalf of the FCC regarding rural rate increases, methods of calculating costs, billing statements, or any other universal service matter.

Earl Comstock testified that "the FCC has failed to follow the mandates of Congress ... on universal service."  He complained that the FCC has deferred action on all aspects of universal service except schools and libraries and rural health care.

Comstock also criticized the FCC's handling of Section 271 of the 1996 Act.

"I cannot believe that those Senators more than two years later would find us in the position we are in.  Without question, if the Commission had the will and the desire to see Bell company entry into long distance it would have built the mechanism to permit entry long before now.  And the Commission would have done so in a way that aided the development of local service competition, while providing the benefits to residential and small business customers that will flow from Bell entry."

Halprin joined other witnesses in criticizing the FCC's handling of universal service.   "The Commission has failed to follow the clear mandate of Congress in the most important area remaining within the jurisdiction of the Common Carrier Bureau: Universal Service."

He continued that:

"With respect to Section 254, the Commission's and the Administration's top priority has been the school's and libraries component.  The Commission has accordingly devoted considerable resources and decision making time to implementing that component, to the detriment of the broader reform of the universal service system that was the clear priority of Congress."