Lawmakers Denounce 1996 Telecom Act as Severely Flawed

Key lawmakers charged with overseeing telecom policy say the law is a highly flawed product of powerful special interests.

It is an old adage that making laws is like making sausages, but when it comes to the Telecommunications Act of 1996, it appears increasingly that the ingredients were particularly rancid. Key lawmakers charged with overseeing telecom policy Tuesday denounced the law as a highly flawed product of powerful special interests.

Sen. John McCain, R-Ariz., who is slated to chair the upper chambers commerce committee in this session of Congress, said that the act resulted in thousands of new regulations, millions of dollars paid to lawyers and lobbyists, massive litigation and legislative paralysis.

McCain made the remarks Tuesday morning at a commerce committee hearing, where the five commissioners of the Federal Communications Commission testified about plans to reconsider the obligations of local telephone carriers, namely the Regional Bell Operating Companies, to allow rivals access to the local networks.

Sen. Ernest Hollings, D-S.C., severely chided the RBOCs for not honoring the spirit and letter of the 1996 law, even though they played a major role in crafting it. "[The Bells] wrote it, but they lied," Hollings said. "It was a pure sham."

Hollings criticized FCC Chairman Michael Powell for his willingness to consider cutting some of the Bells obligations. He said that the Bells as a whole have done little to actually offer long-distance services, and they continuously stymied the act by contesting portions of it in court. Despite those efforts, however, the act has achieved a measure of success and should be given more time to mature before the FCC makes major changes to the rules, Hollings said.

Charging that "orders that the FCC may soon implement would destroy competition at the very moment its about to take hold," Hollings was especially concerned about FCC proposals regarding the Bells obligations vis-à-vis broadband service to businesses. "The FCC is about to create a monopoly in the small and medium business market," he said.

Sen. Byron Dorgan, D-N.D., said he was concerned that major changes to the existing local network access rules could result in a train wreck. Dorgan explicitly cautioned that if the commission does not continue to require the Bells to provide switching services to rivals, it will cause "dramatic injury" to competitors.

Not all committee members were as critical of the FCC, however, and the lawmakers are divided on how to better promote competition—either by better enforcing rules allowing competitors access to the local telephone network or by reducing those rules. Sen. George Allen, R-Va., told the commissioners that the "costly, strenuous debate" has reached an unproductive stalemate in Congress.

Sen. Sam Brownback, R-Kan., indicated the most explicit support for removing some elements of the local network from the list of elements the Bells must lease at regulated rates. Brownback said he would welcome reform of the local network access rules, indicating that he would support reported FCC plans to at least partially relieve the Bells of having to lease switching services at regulated rates.

It appears clear that Congress will be unable to provide any decisive direction to the FCC, but several members of the committee, from both parties, cautioned that the commission should not undercut the role of state regulators in overseeing the obligations of local carriers.

In response, the commissioners each noted that the states will continue to play a role in implementing the 1996 act. Powell said that the states role is to establish prices for the portions of the local network that the FCC decides must be leased and to establish retail rates. He suggested to the committee that in reviewing which of the Bells local network access obligations to retain, the FCC would probably focus on network elements that constitute a physical impairment to competition, such as the last-mile connection to the customer. Switches could be construed as not constituting the same kind of impairment to competition, industry experts said.

Commissioner Michael Copps, one of the two Democrats on the commission, said that the states role should be as a full partner to the FCC. Copps told the committee that he believes the FCC must give the 1996 act more time to achieve the goal of competition.

Tea leaf readers saw in the commissioners statements the likelihood of some deregulation of the Bells obligations to provide rivals with access to the local networks, but not a massive change of rules.

Also Tuesday, Senate Commerce committee members announced plans to introduce several telecom-related measures, including a bill sponsored by Sens. Allen and Barbara Boxer, D-Calif., to promote more unlicensed spectrum; and a bill sponsored by Sens. Conrad Burns, R-Mont., and Max Bauchus, D-Mont., to provide tax incentives to carriers building out broadband facilities in rural areas.