04/17/1996 03:10 PM House L&C

 HB 501 - COMPETITIVE LOCAL PHONE SERVICES                                   
                                                                               
 Number 1784                                                                   
                                                                               
 CHAIRMAN KOTT announced the next order of business would be HB 501,           
 "An Act requiring competition in local exchange telephone service."           
 He said HB 501 was before the committee about six weeks ago.  Both            
 HB 501 and HB 531 was put into a subcommittee.  Both of those bills           
 deal with telecommunications based on the revolutionary                       
 Congressional Act that was signed into law February, 1996.  He                
 said, "It was our impression that we should at least look at some             
 of the provisions and reach some kind of a conclusion or compromise           
 on what the state should be doing and based on that assumption, we            
 sent both bills to the subcommittee."  Chairman Kott said there has           
 been a considerable amount of time spent in trying to reach some              
 kind of conclusion or a compromise within the industry.  It was the           
 intent to bring some kind of consensus to the table and then move             
 a bill out of committee if that consensus was acquired.                       
                                                                               
 Number 1835                                                                   
                                                                               
 REPRESENTATIVE SANDERS, chairman of the subcommittee, explained the           
 subcommittee has spent a considerable amount of time on the issue             
 in trying to reach a compromise that will maintain support for                
 universal services while still paving a way for fair and open                 
 competition between the different factions.  There are several                
 factions and all of them have been cooperative but it is so                   
 complicated.  You have the rural, urban, local and long-distance.             
 When you get into long-distance, you've got the interstate and the            
 intrastate.  Representative Sanders said the committee worked on              
 both of the bills.  One bill was a one page very simple bill and              
 the other was a 16 page very complicated bill.  They were broken              
 down into a four page very complicated bill that everybody likes a            
 little bit, but nobody like very much.  Nobody is anxious to pass             
 the bill out of committee.  People have expressed an interest to              
 work on the bill more during the interim and perhaps get something            
 done next year.  Representative Sanders said with the possibility             
 that the committee could make a breakthrough during the next week,            
 it could be brought forward.  He said there is still a possibility            
 that something could be brought up that would satisfy everyone, but           
 it could be very hard to do.  There are some people that say there            
 is a need for a bill but not this bill.  There are some people who            
 say there isn't a need for a bill at all, but this one would be               
 O.K. if they had to have one.  There are people who say there isn't           
 a need for a bill, especially this bill and some say there is a               
 need for the bill now.  Representative Sanders said they have made            
 progress and the committee could be maybe about 65 percent on the             
 way to reaching a compromise.                                                 
                                                                               
 Number 1946                                                                   
                                                                               
 CHAIRMAN KOTT said it is his intent to take public testimony                  
 regarding the committee substitute, which is not before the                   
 committee.  He said rather than to adopt it, he would like to leave           
 it before the committee in order to listen to comments.  Based on             
 the comments, the committee will either adopt the committee                   
 substitute or refer it back to the subcommittee.  The version is              
 Version R, dated 4/9/96.                                                      
                                                                               
 TED MONINSKI, Director, Regulatory Affairs, AT&T Alascom, testified           
 via teleconference from Anchorage.  He said AT&T Alascom is one of            
 the participants that have been following the bills.  Mr. Moninski            
 said there has been previous testimony from his company where the             
 committee was told that the earlier version of HB 501 was confusing           
 and they have some serious objections to HB 531.  He pointed out              
 that there is now CSHB 501(L&C) and AT&T Alascom still has concerns           
 about the bill.  Mr. Moninski indicated AT&T Alascom would enter              
 objections to the bill as it is currently written.  They are still            
 very concerned that there is a great deal about this major change             
 in structure that has not been fleshed out yet.                               
                                                                               
 MR. MONINSKI referred to the Telecom Act - the federal bill, which            
 is on the books and said they know what it says but they aren't               
 entirely sure yet what it all means.  They know that the federal              
 Communications Commission is undergoing numerous rule makings to              
 help them understand what it means.  There is a federal/state joint           
 board that has been convened to deal with the significantly                   
 important issues such as universal service.  He noted Alaska has a            
 representative on the staff of that joint board.  The Alaska Public           
 Utilities Commission (APUC) has stated its intent to commence rule            
 making to help interpret the federal law.  Mr. Moninski said it               
 seems to him that with all of this work to be done and with the               
 complexities that have been noted, the legislature is probably not            
 yet aware of which issues need to be resolved.  While there may               
 very well be the need for some legislative action in the future, to           
 do it in advance of all of the work that needs to be done by the              
 various expert in industry, government and other, might make it               
 difficult for the legislature to undertake that task.   Mr.                   
 Moninski urged the committee to take no action at this time and to            
 revisit the issue, as necessary, in the future.  He noted they                
 stand ready to participate in any further discussions and work                
 sessions.                                                                     
                                                                               
 Number 2113                                                                   
                                                                               
 CHAIRMAN KOTT asked if there are any particular areas of the bill             
 that are extremely objectionable to AT&T Alascom.                             
                                                                               
 MR. MONINSKI said there are certainly some issues that AT&T Alascom           
 believes have not clearly resolved and compromises that have not              
 yet really been achieved.  There are areas where the playing field            
 is not really as level as we would all like it to be.  Mr. Moninski           
 said Section 6 is incredibly complicated and has not been                     
 thoroughly developed yet.  It is not at a point where good                    
 legislating can be done.  Mr. Moninski said that is the section of            
 the bill that would on (indisc.) appear to simply turnaround some             
 rules that were created in the federal Act and apply them to                  
 interexchange carriers.  But what happens is it become very much              
 entangled in some regulatory policy that has been out in the state            
 of Alaska for some time.  That needs to be disentangled before we             
 can really look at those questions about issues and determine what            
 really is in the public's interest.  The (indisc.) simple issue               
 about whether or not it is appropriate and good policy making to              
 allow one market segment, for example, the local exchange market              
 that continues to enjoy interconnection exemptions under the                  
 federal bill to simply move into a market without its own market              
 being open for competition at all.  Mr. Moninski said he would echo           
 Representative Sander's comments in that these are very difficult             
 issues and they need further development before something is put              
 before the legislature for resolution.                                        
                                                                               
 Number 2202                                                                   
                                                                               
 JIMMY JACKSON, GCI, was next to testify via teleconference from               
 Anchorage.  He said he agrees with Representative Sanders regarding           
 the bill.  Mr. Jackson said GCI opposes the proposed draft of HB
 and urged that the committee not pass the bill forward for                
 further consideration.  He said GCI had hoped that the various                
 interested parties might be able to come to an agreement on a bill            
 that everyone could support.  An acceptable compromise has not been           
 reached.  He said GCI doesn't believe that it is feasible to work             
 out an acceptable compromise during the remainder of the                      
 legislative session and they believe that the legislature's further           
 attention to this matter is not desirable during the short time               
 left in the session.  Mr. Jackson said he would agree with Mr.                
 Moninski that Section 6 is a problem.  He referred to there being             
 an amendment in Section 3 and said he thinks the committee tried              
 hard to come to a compromise, but it is extremely hard to say how             
 that compromise is going to be interpreted and they fear it wipes             
 out the (indisc.) principle.  He said there are things that aren't            
 included in the bill which GCI feels are very important.  One is a            
 provision to remove the antitrust exemption that local exchange               
 carriers presently enjoy.  If they are going to be competing with             
 GCI, they shouldn't be exempted from the antitrust law.  Mr.                  
 Jackson referred to Section 5 regarding local exchange competition            
 and said it isn't strong enough.                                              
                                                                               
 Number 2324                                                                   
                                                                               
 BOB LOHR, Alaska Public Utilities Commission, testified via                   
 teleconference from Anchorage.  He said, as the APUC has done in              
 the past, they remain available to answer specific questions.  He             
 said as the bill is currently drafted, some specific provisions               
 cause the staff concern.  Section 2, for example, the notion of a             
 fast turnaround on application for an unserved area is not a                  
 problem except in resource limitations.  He referred to the last              
 sentence in Section 2, "If the commission fails to act within the             
 90 days, the application is considered to be granted," and said he            
 believes it is shaky public policy because it is a false grant of             
 a certificate of public convenience and necessity which otherwise             
 would require a finding of public needs and necessity and a finding           
 of fit willing and able just doesn't seem appropriate.  He said the           
 commission has the message that things need to move more quickly              
 and within the available resources, they will do the best job they            
 can.  He said he doesn't think a default provision for granting the           
 certificate is necessarily appropriate.                                       
                                                                               
 MR. LOHR referred to Section 3 and said the rather confusing                  
 compromise that does erode the used and useful standard as a                  
 consumer protection vehicle is a concern to the commission staff.             
 He said he believes there has already been adequate comment about             
 the IFC competition provisions and what those mean.  He said this             
 is an extremely complex provision.  They do require a sifting out             
 process which is actively underway at the Federal Communication               
 Commission (FCC) level as well as within the APUC itself.  It is              
 very resource intensive and they are doing the best job they can              
 with it.  Probably the worst thing that could happen would be                 
 hastily crafted state legislation that doesn't add to the clarity             
 rather than the confusion or the capacity.  He said he would be               
 happy to answer any question.                                                 
                                                                               
 Number 2427                                                                   
                                                                               
 JACK RHYNER, Representative, Alaska Telephone Association and Tel             
 Alaska, Incorporated, came before the committee to give his                   
 testimony.  He explained Tel Alaska, Incorporated, is a company               
 which operates two telephone companies in the state of Alaska,                
 Interior Telephone and Mukluk Telephone.  Mr. Rhyner discussed the            
 hard work done in the subcommittee meetings.  He said the 17 page             
 bill was supported by the local telephone companies of the state              
 who are subject of the federal Act and who are now to face                    
 competition.  He said there is a lot of confusion about the new               
 version of the bill.                                                          
                                                                               
 TAPE 96-35, SIDE B                                                            
 Number 001                                                                    
                                                                               
 MR. RHYNER said while the current proposed committee substitute for           
 HB 501 doesn't fully address all of the issues that were raised by            
 the federal Telecom Act, it does address a number of outstanding              
 problems and issues with the APUC and would provide a needed "jump            
 start" to getting that agency moving.  He said he is a little                 
 surprised and disappointed in that he participated in all the                 
 meetings of the subcommittee and at the end of the last meeting, he           
 was under the impress that a compromise had been met.  The chairman           
 asked those present whether or not there were any other objections            
 to the bill and at that time the answer was "no."  Now there are              
 objections to the compromise.                                                 
                                                                               
 MR. RHYNER referred to extending service areas and said the staff             
 of the commission is concerned about the length of time.  He said             
 he feels that is a consumer issue.  Historically, the people in the           
 state of Alaska have been waiting a year and in many cases longer             
 just to obtain service.  They have been waiting for approval by the           
 APUC for extension of service areas.  That would have been remedied           
 by the bill.                                                                  
                                                                               
 MR. RHYNER referred to eligible telecommunications carriers and               
 said this is something that relates directly to the federal Act.              
 All telephone companies that are going to receive universal service           
 funding have to be designed by the APUC as eligible.  The final               
 rules from the FCC, by law under the Act, are supposed to be                  
 completed in October which is between Alaska's legislative                    
 sessions.  If the APUC doesn't move and designate these companies             
 as eligible, the consumers and the local telephone companies will             
 lose $4.2 million every month until they are designated as                    
 eligible.  He said he couldn't say whether that go to direct losses           
 for those companies or whether it would somehow passed through to             
 the consumer.  He referred to rate flexibility and said when these            
 companies are faced with competition they would be allowed to                 
 compete rather than being an incumbent carrier that was held down             
 by regulation and allowing someone else to come in and compete with           
 them.                                                                         
                                                                               
 MR. RHYNER referred to the long-distance section of the bill turns            
 the rules in the federal bill around so that anyone else that wants           
 to get into the long-distance market has exactly the same type of             
 arrangement for utilizing their facilities and service as they will           
 then have when they come in and use the local facilities.  Both GCI           
 and AT&T have already demonstrated their desire to get into that              
 market and have both already filed to compete in the Anchorage                
 telephone utility service area.  Mr. Rhyner said he would answer              
 questions the committee members may have.                                     
                                                                               
 Number 159                                                                    
                                                                               
 STEPHEN CONN, Executive Director, Alaska Public Interest Research             
 Group, was next to come before the committee.  He stated, "I agree            
 with the positions of the representative AT&T and GCI that the                
 questions -- the forthcoming questions as the federal legislation             
 is implemented - the factoring in of the 2001 telecommunications              
 report, an inquiry that was completed only recently, chaired by the           
 lieutenant governor, and ultimately the consumer's concerns - the             
 consumer's involvement in these debates, all suggest that this                
 matter - despite the hard work in energy undertaken to make a                 
 compromise of these two pieces of legislation - should mean that              
 this matter is taken past the session perhaps into interim hearings           
 and into the next legislative session.  The issues are startling              
 here as to universal service.  Alaska Public Interest Research                
 Group has prepared a two page statement on universal service.  It             
 is our strongly felt position that we would encourage the                     
 legislature to hold hearings that would involve the public to focus           
 not on the technical side of regulation and competition, but rather           
 on universal service as such.  What does it mean to Alaskans?  What           
 do they anticipate both in urban and rural Alaska?  How can we                
 achieve improved penetration of telecommunication services in rural           
 Alaska to improve the economic political and economic well being of           
 the people out there.  In other words, hearings held by the                   
 legislature with an end result, perhaps statutory and perhaps to              
 even lay the basis for a constitutional amendment that would make             
 of universal service an affirmative right.  This may be necessary             
 in order that the consumers and the public and their position in              
 this receive equal statue to that of the service providers - the              
 large service providers and the small service providers.  So I find           
 myself in agreement with these people.  I certainly hope that the             
 waters during the interim are not muddied by untoward pressure upon           
 our candidates and our lawmakers in the form of lobbying and most             
 especially in the form of campaign contributions.  I want your                
 heads clear to really evaluate this.  This is a critical moment in            
 Alaska's history and so perhaps, not to be precipitous is the                 
 smartest thing to do and I thank you very much for this                       
 opportunity."                                                                 
                                                                               
 Number 279                                                                    
                                                                               
 CHAIRMAN KOTT closed public testimony as there were no further                
 people to testify.                                                            
                                                                               
 Number 292                                                                    
                                                                               
 REPRESENTATIVE KUBINA indicated that he had thought they were                 
 closer to a resolution that they are.  He said he hopes everything            
 works out until a year from now and he hopes that if the                      
 legislature doesn't do something, he hopes it doesn't cause a                 
 problem.                                                                      
                                                                               
 Number 300                                                                    
                                                                               
 REPRESENTATIVE PORTER said he would echo Representative Kubina's              
 comments.                                                                     
                                                                               
 Number 320                                                                    
                                                                               
 REPRESENTATIVE SANDERS said he would agree with both of his fellow            
 subcommittee members.  He said he also thought that at the end of             
 the last subcommittee meeting that they were a lot closer to a                
 solution than they obviously are.  Representative Sanders pointed             
 out that the parties involved did say they would have to review the           
 new bill.  They did and then they came back.  Everybody said they             
 felt like progress was made, but nobody felt like enough progress             
 was made.                                                                     
                                                                               
 Number 353                                                                    
                                                                               
 REPRESENTATIVE MASEK moved to hold the bill until there are further           
 rulings from the FCC.  Work should also be done on the bill during            
 the interim.                                                                  
                                                                               
 CHAIRMAN KOTT indicated he appreciated the work done by the                   
 subcommittee and all parties involved.  He said when the matter was           
 sent to the subcommittee, his remarks were to the extent that he              
 wanted to ensure that the product that would come out of the                  
 subcommittee would be the very best product for Alaskans.  Based on           
 the testimony he heard today, he believes it would be in the best             
 interest of all the parties involved to retain this matter in the             
 subcommittee.  There is a work draft appearing as HB 501.  He said            
 he would ask the chairman of the subcommittee to continue to                  
 evaluate and look for middle ground to bring the parties together             
 during the interim and come up with a product that everyone can               
 agree to.  Chairman Kott said there was a motion by Representative            
 Masek to retain the bill in the subcommittee.  He asked if there              
 was an objection.  Hearing none, the motion carried.