Phones Companies Not Deterred by Fines

Lawmakers say the nation's largest telephone companies would rather pay millions of dollars in penalties than comply with public safety and competition obligations

In two separate forums in Washington today, regulators and lawmakers pointed to huge fines levied against the nations largest telephone companies as indications that it is more economical for the carriers to pay millions of dollars in penalties than comply with their obligations regarding public safety and competition.

The Federal Communications Commission said it plans to fine AT&T Wireless Services Inc. $2.2 million, charging that the carrier shirked its duty to make sure that emergency dispatch centers can locate wireless callers dialing 911. AT&T said it will fight the proposed penalty.

Meanwhile, Sen. Ernest Hollings, D-S.C., said Congress might have to pass legislation dividing the Regional Bell Operating Companies into separate wholesale and retail operations to ensure that they allow competing operators to lease portions of the local network, as required by the Telecommunications Act of 1996.

Hollings said that the hundreds of millions of dollars the FCC has charged the telcos have not deterred them from violating the Act. Quest Communications Inc. was fined $878.7 million; SBC Communications Inc. $739.1 million; Verizon Communications Inc. $300.4 million; and BellSouth Corp. $20.5 million.

Hollings referred to a Bell structural separations bill, which he sponsored but which has limited support currently, during a Senate commerce committee hearing on broadband deployment. The committee has before it a bill that would direct the FCC to put the telcos and the cable companies under the same regulatory regime when it comes to broadband Internet services. The Bells support the measure, which in effect is the counterpart to a bill sponsored by Reps. Billy Tauzin, R-La., and John Dingell, D-Mich., which the House passed earlier this year.

Testifying at the hearing were Reps. Edward Markey, D-Mass. and Chris Cannon, R-Utah, who both oppose the deregulatory legislation, arguing that it would reduce competition for broadband services. They testified that relieving the incumbent telcos of requirements to allow rivals to lease portions of the local network would drive the remaining competing carriers out of business, which would be particularly detrimental in urban and suburban areas where customers widely face a variety of choices among service providers.

"You go from 100 years of no progress [in telephony innovations], and then in six years you create a situation where competitors invest $60 billion, and the ILECs have to spend $100 billion in response. Lets not kid ourselves for a second—this is a huge success story," Markey said. "If youve got a problem out in rural America, we can deal with that. But lets not take away an urban/suburban—and for most or rural America—success story."

The sponsor of the Senate legislation, Sen. John Breaux, D-La., defended his bill and said it differs from the Tauzin/Dingell measure because it allows the FCC, not Congress, to change the regulatory regime.

The committee also has before it two alternative bills that contemplate grants and tax credits to promote broadband deployment in rural areas of the country.