Legislature(1997 - 1998)

03/26/1998 08:19 AM House STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
       HOUSE STATE AFFAIRS STANDING COMMITTEE                                  
                   March 26, 1998                                              
                     8:19 a.m.                                                 
                                                                               
                                                                               
MEMBERS PRESENT                                                                
                                                                               
Representative Jeannette James, Chair                                          
Representative Ivan Ivan, Vice Chairman                                        
Representative Joe Ryan                                                        
Representative Kim Elton                                                       
Representative Mark Hodgins                                                    
                                                                               
MEMBERS ABSENT                                                                 
                                                                               
Representative Ethan Berkowitz                                                 
Representative Al Vezey                                                        
                                                                               
COMMITTEE CALENDAR                                                             
                                                                               
HOUSE BILL 416                                                                 
"An Act relating to competition in the provision of local exchange             
telephone service; and providing for an effective date."                       
                                                                               
     MOVED CSHB 416(STA) OUT OF COMMITTEE                                      
                                                                               
(* First public hearing)                                                       
                                                                               
PREVIOUS ACTION                                                                
                                                                               
BILL: HB 416                                                                   
SHORT TITLE: LOCAL EXCHANGE TELEPHONE SERVICE                                  
SPONSOR(S): REPRESENTATIVES(S) KELLY, Therriault, Mulder                       
                                                                               
Jrn-Date    Jrn-Page           Action                                          
 2/16/98      2332     (H)  READ THE FIRST TIME - REFERRAL(S)                  
 2/16/98      2332     (H)  STATE AFFAIRS, FINANCE                             
 2/18/98      2367     (H)  COSPONSOR(S): THERRIAULT                           
 3/11/98      2604     (H)  JUD REFERRAL ADDED                                 
 3/12/98               (H)  STA AT  8:00 AM CAPITOL 102                        
 3/12/98               (H)  MINUTE(STA)                                        
 3/26/98               (H)  STA AT  8:00 AM CAPITOL 102                        
                                                                               
WITNESS REGISTER                                                               
                                                                               
SAM COTTEN, Chairman                                                           
Alaska Public Utilities Commission                                             
1016 West Sixth Avenue                                                         
Anchorage, Alaska 99501-1963                                                   
Telephone:  (907) 276-6222                                                     
                                                                               
POSITION STATEMENT:  Provided information and answered questions               
                     on HB 416.                                                
                                                                               
REPRESENTATIVE PETE KELLY                                                      
Alaska State Legislature                                                       
Capitol Building, Room 411                                                     
Juneau, Alaska  99801                                                          
Telephone:  (907) 465-2327                                                     
POSITION STATEMENT:  Sponsor of HB 416.                                        
                                                                               
ROGER EVANS, Owner                                                             
Computer Cache and                                                             
  Northern Information Systems, Incorporated                                   
505 Old Steese Highway, Suite 112                                              
Fairbanks, Alaska  99701                                                       
Telephone:  (907) 457-2665                                                     
POSITION STATEMENT:  Testified in support of HB 416.                           
                                                                               
TOM MEADE, Manager                                                             
Regulatory Affairs                                                             
Telalaska, Incorporated                                                        
2131 Abbott Road                                                               
Anchorage, Alaska 99511                                                        
Telephone:  (907) 267-4149                                                     
POSITION STATEMENT:  Testified in opposition to HB 416.                        
                                                                               
JIM HAYES, Mayor                                                               
City of Fairbanks                                                              
800 Cushman Street                                                             
Fairbanks, Alaska 99701                                                        
Telephone:  (907) 459-6772                                                     
POSITION STATEMENT:  Testified in support of HB 416.                           
                                                                               
JIM ROWE, Executive Director                                                   
Alaska Telephone Association                                                   
201 East Fifty-sixth Avenue, Suite 114                                         
Anchorage, Alaska 99518                                                        
Telephone:  (907) 563-4000                                                     
POSITION STATEMENT:  Testified in opposition HB 416.                           
                                                                               
GREG BERBERICH, Vice President                                                 
Corporate Services                                                             
Matanuska Telephone Association                                                
Pouch 5050 South Chugach                                                       
Palmer, Alaska 99645                                                           
Telephone:  (907) 745-3211                                                     
POSITION STATEMENT:  Testified in opposition to HB 416.                        
                                                                               
RICK SOLIE, Member                                                             
Fairbanks North Star Borough Assembly                                          
4437 Stanford Drive                                                            
Fairbanks, Alaska  99709                                                       
Telephone:  (907) 474-8084                                                     
POSITION STATEMENT:  Testified in support of HB 416.                           
                                                                               
DANA TINDALL, Senior Vice President                                            
Legal and Regulatory Affairs                                                   
General Communications, Incorporated                                           
2550 Denali Street, Suite 1000                                                 
Anchorage, Alaska 99503                                                        
Telephone:  (907) 265-5611                                                     
POSITION STATEMENT:  Provided information and                                  
                     answered questions on HB 416.                             
                                                                               
ACTION NARRATIVE                                                               
                                                                               
TAPE 98-42, SIDE A                                                             
Number 0001                                                                    
                                                                               
CHAIR JEANNETTE JAMES called the House State Affairs Standing                  
Committee meeting to order at 8:19 a.m.  Members present at the                
call to order were Representatives James, Ivan, and Elton.                     
Representative Ryan and Hodgins arrived at approximately 9:05 a.m.             
                                                                               
CHAIR JAMES noted they didn't have a quorum, but since people are              
waiting to testify, she began the meeting.                                     
                                                                               
HB 416 - LOCAL EXCHANGE TELEPHONE SERVICE                                      
                                                                               
CHAIR JAMES announced HB 416, "An Act relating to competition in               
the provision of local exchange telephone service; and providing               
for an effective date," sponsored by Representative Kelly.                     
                                                                               
CHAIR JAMES mentioned she received a copy of the transcript from               
APUC's (Alaska Public Utilities Commission) meeting which was held             
in Anchorage yesterday.                                                        
                                                                               
Number 0007                                                                    
                                                                               
SAM COTTEN, Chairman, Alaska Public Utilities Commission, testified            
via teleconference on HB 416.  He noted that the full transcript of            
the Alaska Public Utilities Commission meeting will be ready                   
tomorrow.  He said the intent of the commission was to formalize a             
recommendation which is based on the nature of the comments that               
were in the material that he faxed.                                            
                                                                               
MR. COTTEN asked if he was correct in assuming that you wanted to              
hear what the commission's position was.                                       
                                                                               
CHAIR JAMES replied yes.                                                       
                                                                               
MR. COTTEN said, "The bottom line is that the commission would                 
recommend to the legislature that you wait until next year on                  
legislation such as this.  We are, we believe on track to produce              
the regulations that are discussed in the legislation, we've had at            
least one experience with a petition to remove the rural exemption             
and I think you may be familiar with that particular case.  The                
commission's concern is centered generally around the potential                
changes to the support mechanisms that most rural phone companies              
depend on greatly.  We feel that, this year our efforts to produce             
the regulations dealing with access, charge reform, and universal              
service should advance our ability to act with greater confidence              
in that area.  Obviously this remains a policy call on the part of             
the legislature but our recommendation is to let the process work              
for at least this year, gage our success and progress, and perhaps             
reconsider this again early next session."                                     
                                                                               
Number 0029                                                                    
                                                                               
CHAIR JAMES referred to Sec. 42.05.870. Competition in local                   
exchange service, subsection (6) and subsection (b):                           
                                                                               
     (6) The commission should provide for competition in a timely             
     manner and should adopt regulations that eliminate impediments            
     to entry for local exchange carriers fit, willing, and able to            
     provide service.                                                          
                                                                               
     (b) By December 31, 1998, the commission shall adopt                      
                                                                               
CHAIR JAMES referenced subsection (b) By December 31, 1998, the                
commission shall.  She asked, "All of those areas (1) through (6),             
in the bill, are not a problem to you."                                        
                                                                               
MR. COTTEN replied, "Those are again -- that's a prerogative of the            
legislature to make findings.  And none of them stand out to me as             
particularly onerous.  Number (6) does say that we should eliminate            
impediments.  I'm sure that could be read many different ways."                
                                                                               
Number 0042                                                                    
                                                                               
REPRESENTATIVE KIM ELTON asked would your further recommendation be            
that, if the legislature waited until early next session, that the             
date would then be changed to give you 12 months from that date.               
Or would you anticipate that there would be a lesser period of time            
than 10 or 11 months.  The date right now is December 31, 1998.                
                                                                               
MR. COTTEN replied his expectation is that they'll have the                    
regulations done this year in any event.  And that the legislature             
could gauge the progress that the commission has made, and the                 
Federal Communication Commission has made to determine whether the             
legislation is even necessary.  He said he wouldn't expect that                
they'd ask for another 12 months to produce those regulations.  His            
expectation is that they're going to make good progress on them,               
and hopefully finish them this year.                                           
                                                                               
Number 0055                                                                    
                                                                               
CHAIR JAMES expressed that she is concerned with the requirement by            
the federal regulations that these rural areas be evaluated                    
individually to determine the effect on the consumer.  She                     
indicated her other underlying concern she has with this piece of              
legislation is how far it covers - and it appears it would preclude            
that deliberation process by the APUC.                                         
                                                                               
MR. COTTEN stated they discussed that topic at the APUC public                 
meeting yesterday.  He said there appears to be more than one                  
opinion on that as well, but their read of it was that it did                  
affect that and took away that process.  The other thing that was              
discussed was the -- and the Attorney General agreed that there was            
a lingering legal question as to whether, and how - if the                     
legislature is able to step in and make this change.  And if so,               
how must they do it in order to comply with federal law.  There                
were a couple of points that, again, seemed to have the potential              
for more than one interpretation, and certainly there was a legal              
question he believes remains unanswered.                                       
                                                                               
Number 0075                                                                    
                                                                               
REPRESENTATIVE PETE KELLY, Alaska State Legislature, indicated that            
he was under the impression that the legal questions were resolved.            
He asked if Mr. Zobel (Assistant Attorney General, Department of               
Law) was present (Anchorage Legislative Information Office,                    
Anchorage) to perhaps address some of those.                                   
                                                                               
MR. COTTEN replied he's not here at the moment -- he did appear                
yesterday.  Mr. Cotten mentioned Mr. Zobel outlined some answers to            
questions Representative Kelly had and noted he had referred him to            
Mr. Zobel for that purpose.                                                    
                                                                               
MR. COTTEN said he guesses the point remains, If the legislature is            
going to act, it's a matter of - in what form.  He mentioned, at               
yesterday's hearing, Mr. Zobel allowed that, "Yes, there was a                 
lingering legal question as how that would have to happen."                    
                                                                               
Number 0083                                                                    
                                                                               
REPRESENTATIVE KELLY said, "I guess the thing we do - is that how              
we're going to act, and then it goes through the process, and that             
is determined."  He referenced page 2, line 9, and mentioned he may            
have misunderstood what Mr. Cotten said.  But if you are allowing              
the APUC to make regulations ensuring universal services, what                 
you've done is you've given them the ability to address the impact             
on the consumer.  What this bill does, is it allows us to make the             
policy call that Mr. Cotten was telling us about.  Representative              
Kelly said he thinks the APUC is very capable of engaging in                   
regulatory process, it needs to follow this legislation.  He said              
he constructed this bill in such a manner that it allows them to,              
they will still be able to ensure universal services, which is on              
page 2, line 9.  It just gives them a deadline for the regulations             
that they are already working on for the universal services.  He               
said he believes that deadline could be somewhat important and                 
reiterated that Mr. Cotten stated they'll be done with that anyway.            
He explained, we saw long distance deregulated, that was the                   
problem - is that they weren't able to act, and it went on year                
after year.  It was until the legislature -- the legislature did               
exactly what we're doing right now which took away the question of             
competition.  That was the policy call that they were sticking on.             
They were trying to do what we are best at doing.                              
                                                                               
REPRESENTATIVE KELLY added he doesn't want to get into the business            
of doing what they're best at doing, that's why we have a provision            
in the bill for cream-skimming, that's why there's a provision in              
the bill to protect universal services.  He indicated that what                
we're left with is that we've made the policy call and that                    
competition is good.  And then we go to the APUC and we say, "You              
still have the regulatory authority to determine if the price                  
structure.  You have the regulatory ability to determine if someone            
is fit, willing and able, if they want to come into this                       
competitive environment.  You have the ability to determine whether            
it is technologically feasible.  Whether cooking up will even work,            
or if it is maybe so expensive that it'll be an economic burden on             
the incumbent carrier."  Yes it is.                                            
                                                                               
Number 0107                                                                    
                                                                               
REPRESENTATIVE KELLY gave an example, he said if you had someone               
who had a copper system - copper wires, and you had someone else               
with fiber optics, the APUC could make the determination.  He noted            
that we're not going to force that (indisc.) carrier to hook up to             
the fiber optics - it's just going to be so expensive, it's going              
to break that company.  He said he believes we still leave the                 
regulatory questions in the control of the regulatory body.                    
                                                                               
REPRESENTATIVE KELLY said, "I think what this bill asks for, is                
give us the policy making decision to say competition is good so               
that Fairbanks and Juneau -- and I don't think, with the bill as it            
is - with the 1,500 line cutoff it's going to impact the really                
small companies.  Well, it's not.  But it's going to allow some of             
the larger communities to get into the electronic age, to allow us             
to access to some of the services that we're currently being                   
denied. ... I have to admit that I haven't had time to read these              
over to know exactly what these services are and said.  But I look             
at Fairbanks, on the list of services, and I see that there's a                
whole lot of NA's (not applicable), and there should be backup                 
paper to tell you what those services would mean to the consumers              
of Fairbanks and Juneau, and other communities as well."                       
                                                                               
Number 0122                                                                    
                                                                               
REPRESENTATIVE KELLY pointed out that it's keeping us out of the               
electronic age.  He said, "And I think it is exactly - all the                 
arguments we hear against this bill are the same arguments that we             
heard with the long distance, that it's going to drive prices up.              
In fact, what we've seen with long distance is that the prices have            
gone down.  It's going to hurt services, in fact we have more                  
services, and the people are thriving in a competitive environment.            
Not only the consumers are thriving in a competitive environment,              
but the companies that are in that market are thriving as well."               
                                                                               
REPRESENTATIVE KELLY concluded he believes some of the testimony               
overstates what could potentially be the downside.  He said people             
had some legitimate concerns, they came to his office saying,                  
"We've got a problem with this in the bill and here's our problem."            
He immediately went to drafting and said, "Change that because it's            
a legitimate concern."  And as a result of those discussions,                  
universal services ensured cream-skimming is not allowed, and local            
municipal regulatory bodies are held intact.  Those were the three             
biggest complaints that he heard, and they've been addressed in the            
bill.                                                                          
                                                                               
CHAIR JAMES asked him to point them out.                                       
                                                                               
Number 0135                                                                    
                                                                               
REPRESENTATIVE KELLY referred to page 2, line 9.  It allows the                
regulatory body to make the determination on universal services.               
No one's taking that away from them.                                           
                                                                               
     (1) regulations ensuring universal service and providing for              
     access charges that are compatible with full competition in               
     the provision of local exchange telephone service using all               
     methods allowed by 47 U.S.C. 251 - 276 (Telecommunications Act            
     of 1996); and                                                             
                                                                               
CHAIR JAMES asked where does it eliminate (indisc.).                           
                                                                               
REPRESENTATIVE KELLY referenced line 22.                                       
                                                                               
     In accordance with 47 U.S.C. 253(f), the commission may                   
     require the applicant to offer service throughout the study               
     area of the existing local exchange telephone utility.                    
                                                                               
REPRESENTATIVE KELLY explained that they can't come in and take the            
hospital or the government agency, they've got to take on the whole            
system.  If you can't compete on the whole system, you can't                   
compete.                                                                       
                                                                               
Number 0142                                                                    
                                                                               
REPRESENTATIVE KELLY referred to page 2, line 27, subsection (d):              
                                                                               
     A local exchange telephone company, other than a municipally-             
owned local exchange telephone company, that is exempted in who or             
in part from complying with all or a portion of this chapter may               
not be regulated by a municipality under AS 29.35.060 or 29.35.070.            
                                                                               
REPRESENTATIVE KELLY said, "If I had to explain that, bit by bit,              
it'll be a little tough.  It applies mostly to Ketchikan.  They                
have the unified municipal utilities, and they were afraid that the            
regulatory authority would be taken away from them if this bill                
passed.  This was to address them - they said it does."                        
                                                                               
Number 0147                                                                    
                                                                               
CHAIR JAMES noted she wants to make it perfectly clear that she is             
supportive of this concept and understands that getting into the               
competition with long distance was a much harder job than this is.             
But, she is not totally convinced that the same situation exists               
now - on this issue as it did then.  She said, "I'm not sure, even             
if we pass this, that it's going to speed up the process even all              
that much. ... And if that was the case, why am I concerned.  But,             
I just have this nagging concern that there are some issues that               
haven't been addressed, and I don't know what they are.  And so,               
therefore, that is part of my hesitancy.  I have no problem with               
moving this bill out, when we have enough votes here to move it                
out.  But, I just want to be sure that those concerns are heard and            
that they're part of the end all process that we have here.  And I             
certainly am looking forward to having better service.  I know that            
in comparing some of these prices, on this comparison here, that it            
might be very well to note that we have universal services funds               
subsidy in Fairbanks, that they don't have in Anchorage.  And it               
looks like most of our prices of normal universal services are the             
same.  So we're enjoying the subsidy because we're a rural area.               
I don't want to lose that in any way, shape or form.  And I'm also             
interested, and I believe that the federal government is in the                
process of redefining universal services.  And I hope they do.  I'm            
supportive of that.  And I want to be sure that we don't do                    
anything that precludes us from having even a better description of            
what universal services ought to be in this technological age that             
we're coming into.  I understand you're comfortable with this.  You            
have to understand I'm not.  And it has nothing to do with the fact            
that we don't have the same basic belief and philosophy."                      
                                                                               
Number 0169                                                                    
                                                                               
REPRESENTATIVE KELLY said he believes they do have the same basic              
belief and philosophy because he spoke with her a number of times              
on this issue and many others.  He said, "I think, many times a law            
is passed there are going to be some questions.  I think the                   
federal communications arena is one where we can say there's always            
going to be questions.  We have technology that is changing - right            
now there's someone in a lab changing how we think about                       
telecommunications and, as a result, the federal government is                 
probably going to have to address that.  And I think it is going to            
be in a state of flux from here till our kids are grown.  So I                 
think if we wait to make sure that the environment stabilizes -                
that the federal government finds themselves in it, I don't know if            
that will ever happen."                                                        
                                                                               
REPRESENTATIVE KELLY told Chair James he thought she made a good               
point on the long distance services and drawing too tight a                    
comparison between the long distance service and this service.  He             
said, "I don't say it's necessarily the same thing.  You're right,             
it was a bigger battle, it was more complicated, it was also the               
first step so it was very difficult.  It makes this bill a little              
easier to write for one thing.  But the fact is, all I'm really                
saying on the comparison with the long distance is that the                    
arguments are the same.  We have two things that are similar, maybe            
not exactly alike, but they are similar and the arguments are the              
same.  Those arguments didn't prove out, and we find too that the              
arguments (indisc.), but also the process is the same that it was              
taking time and that their regulatory body is very capable of                  
making regulatory decisions.  I think Ms. Hanley, and Mr. Cook and             
Cotten, and ... all the APUC members, I think they're capable of               
coming up with the regulations that this bill leaves them with.                
But again, it's a policy call and what we've done, is we've said,              
'We want you guys to make a policy call here.'  They're not                    
equipped to do that, and they weren't equipped back then in the                
long distance fight either.  And finally, when somebody stepped                
forward and said, 'Here's a policy call we'll make for you guys, it            
was able to have them.  And I think that's what we're trying to do             
here.  And I agree with you, there's always room for question about            
the future of a bill like this, particularly because of the                    
environment that is in such a state of flux, the federal                       
government.  You make a good point, but it's changing and I don't              
think it's going to stop changing."                                            
                                                                               
Number 0193                                                                    
                                                                               
ROGER EVANS, Owner of Computer Cache and Northern Information                  
Systems, Incorporated, testified via teleconference in support of              
HB 416.  He noted his business is a local computer retail and                  
computer network services corporation.  Mr. Evans provided the                 
following testimony:                                                           
                                                                               
"My support for HB 416 started several years ago when our local                
exchange carrier, in some of their ratings, would charge more for              
a second phone line than my first phone.  If you wanted two, you               
have to pay more for the second one.  Their reasoning for that was,            
if you need two lines, you must use it a lot so we'll have to                  
charge you more.  In the real world, you lose a lot of customers               
with explanations like that and with pricing practices like that.              
                                                                               
"The original scope of a local exchange carrier is much different              
then the needs of today's phone systems.  Back then, phones meant              
the voice, multiple voice line, PBX (private branch exchange)                  
consoles and phone switches - a fairly simple technology that was              
changing, but it was not changing at break neck speeds.  There were            
so many new technologies that one company could not keep up with               
all of them.                                                                   
                                                                               
"Today whole businesses depend on voice and data infrastructures               
for many or all of their business functions, and you have only one             
choice to get you business going or to keep it going.  You can only            
hope that the one company has the technology, the price, and the               
level of service that you need.  This is too big of a risk to take             
because, if that one company is not right for you, then you have to            
be right for them.  You have to pay for them to retro fit a                    
technology that they offer to fit your needs, and you have to pay              
whatever they charge.  Today most companies and whole industries               
place large portions of their infrastructure on their voice and                
data systems.  These systems are constantly changing and expanding,            
and like all expenses costs must be controlled.                                
                                                                               
"Many new and some old technologies have not been brought to                   
Fairbanks, ISDN (integrated systems digital network), Fractional               
'T-1', 'OC-3' [both different measurement of transmission speed] to            
name a few, are technologies used in Anchorage and most areas of               
commerce throughout the United States.  With competition in price              
and product, these services would have been available here giving              
Fairbanks businesses the infrastructure that they need to complete.            
Health Care Finance and Retail are just a few of the industries                
that depend on voice and data infrastructures to provide acceptable            
levels of service today and tomorrow.                                          
                                                                               
Number 0212                                                                    
                                                                               
"We need competition in our local phone services not just for a                
choice in like services, but for a choice in technologies, to have             
the option to choose a technology that one company decided not to              
offer or to choose a different company for a different level of                
service and customer support.  Having one company that data                    
services must be channeled through is an unfair advantage in a very            
competitive field.  Fairbanks has a lot of information technology              
advancement growth at this time.  The longer we wait, the harder it            
is for these companies that are competing on fringe services like              
cabling, high speed data configurations and network configurations.            
All these peripheral services can be unfairly won by a local                   
exchange carrier through delays in hooking up services for                     
competing companies and wining these peripheral services by                    
supplying a more favorable time line for implementing the whole                
data system.  I urge support for HB 416."                                      
                                                                               
Number 0221                                                                    
                                                                               
TOM MEADE, Manager, Regulatory Affairs, Telalaska, Incorporated,               
testified via teleconference in opposition to HB 416.  Telalaska               
owns Mukluk Telephone Company and Interior Telephone Company which             
operate approximately 20 Bush exchanges from Little Diomede to Fort            
Yukon, to Dutch Harbor, to Port Lions.                                         
                                                                               
MR. MEADE said, "I'm here today to speak against HB 416.  Yes, we              
believe that it's impossible to ensure universal service until we              
know how much funding we're going to get through the federal                   
mechanisms.  Until the FCC (Federal Communications Commission)                 
finishes its rule making, you simply can't ensure that universal               
service is going to be accomplished if you put regulations in place            
before that.  I think, if you pass this bill, you've given the APUC            
an impossible task.  I know you've discussed this at some length.              
We believe that, because there is a company by company                         
determination in the Federal Telecommunications Act, simply ruling             
that competition is in the public interest in all places over 1,500            
lines is illegal."                                                             
                                                                               
MR. MEADE continued, "And furthermore, one of our concerns is cream            
skimming, and we keep hearing that the bill has been corrected to              
prevent that.  We don't believe that it has at all.  If you read               
the language of the bill, it simply says, 'using all methods                   
allowable by 47 U.S.C. 251-276.'  That includes -- in order to                 
provide service to everyone through the service area, that includes            
service through the local exchange carrier that's already in                   
existence.  That means, essentially that GCI can continue to cream             
skim as they've been doing, and then meet the requirements of the              
bill simply by using the facilities and local exchange carrier.                
That will essentially put us into a death spiral.  And, GCI, in one            
of their hearings, on the PTI (Pacific Telecommunications,                     
Incorporated) rule exemption, said, 'That's okay because we can                
simply provide service when they go out of business by buying their            
assets at the bankruptcy sale.'  So, I don't believe that's good               
telecommunications policy for the state."                                      
                                                                               
Number 0244                                                                    
                                                                               
MR. MEADE concluded, "We keep hearing about the IHC (interexchange             
carrier) example - the competition in the interexchange market.                
While, with competition in the interexchange market did was drive              
the rates toward cost - toll was subsidizing local.  When                      
competition came in, competition cream skimmed the toll and drove              
local rates up.  I was with ATU when we put in a 50 percent rate               
increase simply as a result of competition in the interexchange                
market.  I do not believe this bill is in the public interest, I               
don't believe that it's legal, and don't believe that it is                    
necessary."                                                                    
                                                                               
Number 0251                                                                    
                                                                               
JIM HAYES, Mayor, City of Fairbanks, testified in support of HB 416            
via teleconference.  He said, "I wish to offer my support for HB
416 and urge its passage from this committee.  Fairbanks sold the              
utilities going through the APUC process based on the argument that            
the sale would result in lower prices and increased services.  Now             
we would like to see the bill pass because it will help make this              
come true.  We have already made good on this sale.  HB 416 will               
allow us to make good on the promises be made about lower prices               
and increased services.  The advances happening in the world of                
electronics awaits the interest of competition who have the                    
incentive to invest in these new services, HB 416 important to                 
prevent Fairbanks residents from losing out to other communities               
and the opportunities that the information age will bring."                    
                                                                               
Number 0260                                                                    
                                                                               
JIM ROWE, Executive Director, Alaska Telephone Association,                    
testified in opposition to HB 416 via teleconference.  He said,                
"You've heard my comments, somewhat at length in a prior meeting               
and I'll not belabor those points today.  But I assure you that the            
Alaska Telephone Association still opposes HB 416."                            
                                                                               
MR. ROWE said, "I want to thank you, Madam Chair, particularly for             
the concern and caution you've voiced today about this bill.  I                
think it's very appropriate.  I would also like to say we've spent             
a lot of time in both meetings talking about the speed of the APUC             
moving.  Among the states, the Alaska commission is in the                     
forefront of complying with the telecommunications Act.  And in                
being the forefront doesn't mean they're always putting competition            
in anywhere it's asked for.  It means that their concern,                      
considering and moving, and they have been doing that.  However,               
the speed, the timetable, is red herring.  What this bill does is              
say that the public interest will not be a consideration, the                  
ramifications of having unbundled competition anywhere in the state            
shall not be a consideration.  The impact on the consumers will not            
be a consideration when you make that determination.  It says, 'You            
will have unbundled competition anywhere, that a competitive entity            
has to have it.'"                                                              
                                                                               
Number 0268                                                                    
                                                                               
GREG BERBERICH, Vice President, Corporate Services, Matanuska                  
Telephone Association, testified in opposition to HB 416 via                   
teleconference.  He noted he has already testified before the                  
committee and stated they are opposed to this bill.                            
                                                                               
MR. BERBERICH said, "We believe that the policy issue has been                 
decided with the Telecommunications Act, competition is the                    
reality, something that we're all going to face.  I think, Madam               
Chair, you hit the nail on the head when you said that the issue               
really is in the support mechanisms and those determinations have              
yet to be made at the FCC level.  I believe it would be very                   
premature for the legislature to force the APUC in a position where            
it couldn't make those considerations.  And we believe that this               
House bill is not in the best interest of the public.  We think the            
commission is working diligently and we believe that they will come            
out with regulations this year."                                               
                                                                               
MR. BERBERICH said he believes there is a legal question - whether             
this state legislature, in this particular bill, is doing the right            
thing or whether there would be a legal challenge to it.                       
                                                                               
Number 0283                                                                    
                                                                               
RICK SOLIE, Member, Fairbanks North Star Borough Assembly,                     
testified in support of HB 416 via teleconference.  He said, "I                
worked for Senator Frank during the passage of the long distance               
telephone competition bill that was passed in 1990, Chapter 93, I              
believe it was, SLA 1990.  And I guess what I hear, much of the                
arguments today are very similar to the ones that we heard a few               
years back.  I support this legislation because I believe the                  
benefits of competition will approve in the local exchange market              
to Fairbanks residents and others as it has in the interexchange               
market.  It is a philosophical decision, but I think you can help              
base that on empirical evidence.  The benefits of competition, are             
lower rates and better service.  We heard from Mr. Evans before -              
talking about some of the technological advances that he would like            
to see.  The mayor articulated quite well our community's desire to            
see private oriented telecommunications services here in the                   
community and that the community is expecting some of these things             
to occur."                                                                     
                                                                               
MR. SOLIE continued, "And finally, if you remember, there was an               
initiative about seven years ago in which the people said they                 
wanted to have phone competition.  So I think that there is a much             
imperical evidence that can indicate that we would not have what               
the doomsayers would say.  They said seven years ago that prices               
would go up, that service would go down, and we'd have this                    
downward spiral, we would loose a federal subsidy, and life would              
be terrible.  Well, I think that has not been the case, I think                
that clearly the opposite has happened.  My rates have come down,              
my service has gone up and I think that overall the public has                 
benefited from long distance competition.  There's no reason this              
can't happen in the local exchange market in communities with more             
than 1,500 lines.  And I think that this legislation would give the            
APUC a power to set up the necessary safeguard so that there                   
wouldn't be concerns over cream skimming and things of that nature.            
That is what the APUC is enable to do is to oversee some of that.              
But I think it's appropriate for the legislature to make this                  
policy call."                                                                  
                                                                               
MR. SOLIE said, "And I'll, I guess at the risk of sounding                     
redundant, talk a little bit about seven years ago.  The APUC at               
the time said they were dealing with competition and that they                 
wanted more time.  Well, I don't' think at that point they were set            
up to deal with competition and make that policy call.  It wasn't              
until the legislature acted that they followed through with the                
regulations and such to implement competition.  And so I think                 
we're in a similar situation today and I would urge you to pass                
this legislation, let the public enjoy the benefits of competition             
at a local level.  The notions of subsidies, frankly the new                   
competitors in the long distance are providing service without                 
those subsidies and we need to be able to do that, and I think - to            
the extent that we can eliminate cross subsidies, between the                  
interexchange and the local exchange market, that will provide a               
better mechanism for service as well."                                         
                                                                               
Number 0319                                                                    
                                                                               
DANA TINDALL, Senior Vice President, Legal and Regulatory Affairs,             
General Communications, Incorporated, came before the committee.               
She noted she will respond to the other testimony that's been                  
offered today since she has already provided her direct testimony              
at a previous committee meeting.                                               
                                                                               
MS. TINDALL said, "I would first like to address Chairman Sam                  
Cotten's testimony on the need for more time, and the fact that                
there is no need for legislation.  In response to that I would like            
to say that the Telecommunications Act of 1996 was passed over two             
years ago.  In August of 1996, the APUC issued an omnibus order                
detailing the regulations that they would need to put out to be in             
compliance with the Telecommunications Act of 1996.  Almost two                
years later, out of some ten different rule making and regulation              
proceedings, to my knowledge, they have concluded one.  They have              
argued to the FCC that the FCC should complete the works of the                
larger Bell operating companies for access charge reform before                
they get to the rural telephone companies.  This further delays FCC            
Acts as charge reform in Alaska.  The local telephone companies                
argued the same.  The fact that the APUC is using an excuse as to              
why we can't have competition in local telephone services that they            
have not completed their work in rule making and regulation                    
proceedings is a travesty.  It is the regulatory and bureaucratic              
catch 22."                                                                     
                                                                               
MS. TINDALL continued, "The legislation before you today does not              
impact the APUC's deliberation on consumer impacts.  The                       
legislation before you today does not decide the issue, it                     
establishes a procompetitive guideline, but it does not decide the             
issue of whether competition is in the public interest.  That has              
already been decided.  What it does is it establishes that the                 
legislature believes competition is a good idea and that the APUC              
should get on with it, that the APUC should finish its work.  The              
APUC should remove the excuses it itself has used to hold up                   
competition.  The APUC should enact regulations to protect                     
universal service for all consumers throughout the state.  This                
does not remove the APUC's ability to determine impact on                      
consumers, it enhances it, it requires them to do it."                         
                                                                               
Number 0338                                                                    
                                                                               
MS. TINDALL continued, "I'd like to address an issue that came up              
when Representative Kelly was testifying and, Madam Chair, I                   
believe you made the statement,' that the long distance fight on               
competition was a bigger fight.'  And that's true.  And that it                
true for one reason, that's because the subsidies were bigger in               
that fight.  Alascom was receiving $100 million per year from AT&T             
(American Telephone and Telegraph).  That was not a fight about                
competition that was a fight about retention of subsidies.  The FCC            
finally put out an order saying they're beginning to believe that              
the problem in Alaska is not a high-cost problem but rather a high-            
profits problem.  When the FCC finally terminated the $100 million             
subsidy, per year to Alascom, Alascom decided it did not want to be            
in the long distance business any more."                                       
                                                                               
MS. TINDALL stated, "There are two types of telephone companies.               
There are competitive telephone companies and there are companies              
who gained the subsidy system - PTI was a subsidy gainer.  Since               
they no longer had a subsidy, they chose to sell their company to              
AT&T.  In a competitive environment, in long distance, and it was              
sold in 1994, AT&T has managed to reduce the internal subsidy                  
flowing from the Lower 48 to Alaska to almost zero.  They have cut             
back their employees from almost over 700 to 350, they're providing            
service at lower costs and better services today, and their                    
revenues are just as fine."                                                    
                                                                               
MS. TINDALL said, "I submit to you that the problem today is the               
same.  This is a retention of subsidy problem.  We're not arguing              
that the subsidies be taken away.  We're not arguing that anybody              
go out of business.  GCI believes very firmly the subsidies are a              
bad idea when they're not needed, but we're not taking that battle             
on.  The PUC (public utility commission) has before it several                 
proposals for universal service system that would continue to                  
subsidy and allow for the benefits of competition.  What is the                
problem?  The problem is the same problem Alascom has.  When you               
have a competitor who's providing service without a subsidy, it                
starts to look like that subsidy's no longer necessary.  And people            
start to talk about making it go away, they start doing things like            
making subsidies explicit and the jeopardizes them further.  We had            
the same problem here today, but again, GCI is not attacking the               
subsidy problem.  The reduction and need for subsidies is an                   
inherent spinoff of the competitive process.  People have to get               
their cost down, they bring in new technologies - and costs go                 
down, service improves, consumers buy more (indisc.) and subsidies             
are no longer necessary.  That is an inherent spin off of the                  
process.  But GCI is not attacking that today.  We believe today               
you can have the same subsidies and you can have the benefits of               
competition."                                                                  
                                                                               
Number 0363                                                                    
                                                                               
MS. TINDALL concluded, "In summary, I'd like to say to you today               
that there has been a lot of claims laid on the table of what will             
happen if there's competition.  Rates will go up, service will go              
out, there will be cream skimming.  All of those issues have been              
addressed in this bill.  The APUC has been given full authority to             
deal with all of those issues.  What hasn't been fully brought out             
is what will happen if there won't be competition.  In the two                 
pages that Representative Kelly gave to you, as you can see, there             
is not advanced technical services offered in Fairbanks.  We know              
what we have under a monopoly system.  It's not perfect by a long              
shot.  We can move to a better world under a competitive system and            
put into safeguards to protect everybody.  It is a philosophical               
decision and it is a decision the legislature should make."                    
                                                                               
Number 0373                                                                    
                                                                               
CHAIR JAMES thanked Ms. Tindall and thanked GCI for being the                  
aggressive company that they have been.  She said, "Or we wouldn't             
be where we are today, you wouldn't even be sitting there asking               
for this if you hadn't gone this task before.  And I recognize                 
that, and so for that we're all thankful.  And they certainly have             
contributed an awful lot to the good services and the prices that              
we have.  And my hesitancy has nothing to do -- I would jump right             
on that bandwagon in a second if I didn't have all these other                 
concerns.  And it's very difficult for me to even put my thumb on              
exactly what they are."                                                        
                                                                               
CHAIR JAMES noted she is willing to move the bill out, but there               
isn't a quorum.  Chair James was informed members would be here                
shortly.  She asked for a brief at ease at 9:05 a.m.                           
                                                                               
CHAIR JAMES called the meeting back to order.                                  
                                                                               
Number 0384                                                                    
                                                                               
REPRESENTATIVE JOE RYAN referred to page 2, line 9, subparagraph               
(1) of (b).  He asked, "On the universal service access charges, is            
that going to affect any way the program the federal government has            
for subsidy for rural areas in Alaska for schools, libraries and               
telecommunications?"                                                           
                                                                               
MS. TINDALL replied currently we do not have a state universal                 
service system for local telephone companies.  We have access                  
charge pooling and that is all.  If the federal universal service              
funds are reduced then the state will kick in with its own                     
universal service program and make up the difference.  What you're             
hearing are the local telephone companies and the APUC are waiting             
to hear whether those funds will be reduced and whether we need to             
kick in - and all you have to do is change the amounts of the                  
universal service system if they are kicked in.  GCI is advocating             
that there should be a state universal system put in place now, and            
that both amounts can be changed then if the federal amounts get               
reduced, but no, the two work hand in hand to keep the whole.  She             
asked if that answered his question.                                           
                                                                               
Number 0400                                                                    
                                                                               
REPRESENTATIVE RYAN responded, "Kind of.  My understanding is GCI              
has been setting up there -- there's and application period which              
is in progress now for the rural subsidy for those three things I              
mentioned, telemedicine, schools and libraries.  And part of the               
plan is you have to go to a provider who will provide Key-1 line to            
the area and then you have to say what the charges will be from                
that provider, and when service can be installed, and what the on-             
going is, and the FCC has set aside, out of $2.7 billion, some                 
'piddley' amount, $100 million, $400 million, or something like                
this, throughout the country to provide a parody for.  And                     
Anchorage is the only one that is a core city - over 50,000, so the            
rest of the state's going to get a 90 percent subsidy.  And I guess            
perhaps I didn't explain that law the first time.  I want to know              
how..."                                                                        
                                                                               
TAPE 98-42, SIDE B                                                             
Number 0001                                                                    
                                                                               
REPRESENTATIVE RYAN made a motion to move HB 416, with individual              
recommendations and attached fiscal note.                                      
                                                                               
REPRESENTATIVE IVAN IVAN objected.                                             
                                                                               
Number 0004                                                                    
                                                                               
CHAIR JAMES asked for a roll call vote.  Representatives Elton,                
Ryan, Hodgins and Chair James voted to move HB 416.  Representative            
Ivan voted against it.  Therefore, CSHB 416(STA) moved from the                
House State Affairs Standing Committee by a vote of 4-1.                       
                                                                               
ADJOURNMENT                                                                    
                                                                               
Number 0011                                                                    
                                                                               
CHAIR JAMES adjourned the House State Affairs Standing Committee at            
approximately 9:17 a.m.                                                        

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