A House Divided?
Lawmakers ponder whether separation breeds competition
By Stephen Barlas
from the June 4, 2001 issue of Broadband Week
WASHINGTON -- Anti-RBOC forces are unenthusiastic about a congressional proposal raising the FCC's ability to fine wayward telcos and would prefer legislation, yet to be introduced, forcing the RBOCs to separate their companies into wholesale and retail units.
FCC Chairman Michael Powell has asked for an increase in fine authority to $1 million per incident, up to a total of $10 million, and Rep. Fred Upton, R-Mich., has introduced such a bill (H.R. 1765), and heard testimony in his House Telecommunications and Internet subcommittee.
Prompting the proposals are widespread gripes from regulators, CLECs, smaller ISPs and others who complain the RBOCs generally have moved slowly or not at all to comply with Telecommunications Act provisions originally intended to foster competition.
But testimony on Upton's bill at a recent hearing ranged from skeptical, to unenthusiastic, to hostile, in the case of the United States Telecom Association. Russell Frisby, Jr., president of Competitive Telecommunications Association (CompTel), says the Upton bill won't work. "Ten million dollars is the equivalent of 83 minutes of Verizon's revenue," he states.
It also appears the House will not consider a tougher RBOC penalties bill proposed by Rep. Tom Davis, R-Va. That bill would force an RBOC to get out of the long-distance business in some instances.
The lack of faith in Upton-level fines has emboldened RBOC opponents to begin a push at the state level for structural separation. There are currently 11 states that are either fielding petitions from AT&T Corp., either separately or with CLEC support, or considering legislation in the state house to enable such separation.
But an April 11 decision by the Pennsylvania Public Utility Commission to rescind a September 1999 structural separation order for Verizon Communications pointed to a politically pot-holed road through the states for AT&T and its allies. Perhaps because of the Pennsylvania reversal, some RBOC opponents have begun to talk about pursuing a federal law on structural separation. In fact, when members of the House Telecommunications and Internet subcommittee voted on the Tauzin-Dingell bill that would free the RBOCs to offer inter-LATA data services, Rep. Heather Wilson, R-N.M., offered an amendment that would have mandated structural separation of the RBOCs. But she withdrew that amendment before it could be voted on.
Rep. Billy Tauzin, R-La., chairman of the full Energy & Commerce Committee, opposes structural separation. But Peter Jacoby, vice president and director of legislative affairs for AT&T, says he has talked to a number of representatives and senators about structural separation, and some have actually initiated discussions with him.
Sen. Fritz Hollings, D-S.C., the ranking Democrat on the Senate's Commerce Committee, is the probable leader of the effort. That could take on greater significance with any Capitol Hill power shuffle following the decision by Vermont Sen. James Jeffords to declare himself an Independent, thus ending Republican control of the Senate.
Democrat control of the Senate puts Hollings in line to become chairman of Commerce, which has jurisdiction over the Telecom Act.
And AT&T is not the only company promoting a national law. William T. Esrey, CEO of Sprint Corp., told the Executives' Club of Chicago on May 17 that structural separation of the RBOCs was an idea whose time had come. "It is clear that the most effective way--perhaps the only effective way--for competition to emerge generally in the local market is to separate the Bell companies' local monopoly facilities from their provisioning of retail local service directly to consumers," Esrey said.
James Fisher, a Sprint spokesman, says moving the structural separation debate to the congressional level "may be wise." But the RBOCs likely would oppose such a move. In Pennsylvania, Verizon pounded away at the notion that structural separation would lead to state job losses. When the PUC decided against structural separation in its April 11 order, Daniel J. Whelan, president and CEO of Verizon Pennsylvania, cited a public opinion poll showing state residents oppose structural separation by a margin of 2-1. "They opposed the domino effect of confusion, rate changes and job losses structural separation would create," Whelan says.
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