Legislature(1995 - 1996)

02/27/1996 08:42 AM House STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 HB 501 - COMPETITIVE LOCAL PHONE SERVICES                                   
 The first order of business to come before the House State Affairs            
 Committee was HB 501.                                                         
 CHAIR JEANNETTE JAMES called on Representative Gene Therriault to             
 present the sponsor statement.                                                
 Number 0055                                                                   
 REPRESENTATIVE GENE THERRIAULT read the following statement into              
 the record.                                                                   
 "This legislation promotes competition in the market for local                
 exchange telephone service.  It is intended to increase the choices           
 available and reduce the cost to customers.  The bill would                   
 authorize competition for local exchange telephone service and                
 encourage the Public Utilities Commission to implement a fully                
 competitive telecommunications marketplace statewide.  The                    
 resulting technological advances, reduced costs and increased                 
 choices would in turn enhance the state's economic development.               
 "The legislation would allow Alaska to take advantage of the newly            
 enacted federal overhaul of the 1934 Communications Act, which was            
 signed into law February 8, 1996.  The Telecommunications Act                 
 establishes competition in all telecommunications markets as a                
 national policy.  In its report the Conference Committee stated               
 that the bill `provides for a pro-competitive, de-regulatory                  
 national policy framework designed to accelerate rapidly private              
 sector deployment of advanced telecommunications and information              
 technologies and services to all Americans by opening all                     
 telecommunications markets to competition...'                                 
 "Under this act all barriers to competition in all market segments            
 are to be automatically removed except in the most rural areas of             
 the United States.  Under the act, telephone companies serving less           
 than two percent of the telephone lines nationwide may petition               
 their state public utilities commission for an exemption from the             
 duty to interconnect with competitive companies if the incumbent              
 telephone company can show interconnection is not in the public               
 interest and it is technologically infeasible or economically                 
 "For the rest of the nation, this provision could mean very small             
 pockets in a state or throughout the country may be granted an                
 exemption from competition in the local telecommunication's market.           
 For Alaska, it could mean the entire state could be exempted from             
 competition.  This proposed legislation establishes the policy that           
 competition in the local telephone market in Alaska is in the                 
 public interest, consistent with the rest of the country.  The                
 Alaska Public Utilities Commission may still grant exemptions from            
 interconnection if it is not technically feasible, or if it is                
 unduly economically burdensome.                                               
 "Establishing this policy guideline is clearly within the                     
 legislature's purview, and will eliminate needless proceedings                
 before the Alaska Public Utilities Commission trying to determine             
 whether or not competition is in the public interest in Alaska.  It           
 will allow the Public Utilities Commission to get on with the                 
 business of establishing regulations for this new world of                    
 competition, and let Alaska get on with being part of the modern              
 telecommunications world."                                                    
 The record reflected the arrival of Representative Scott Ogan at              
 8:45 a.m.                                                                     
 Number 0303                                                                   
 REPRESENTATIVE THERRIAULT explained the intent of HB 501 was to               
 take the issue of competition off the table and turn everything               
 else over to the Alaska Public Utilities Commission (APUC).  He               
 said the federal act required a sweeping piece of legislation to              
 address the policy issues.  However, there was not adequate time              
 left in the session to do that.  Therefore, he asked the committee            
 members to consider the narrow issue of competition.  He stated the           
 issue of competition versus noncompetition could be argued ad                 
 nauseam, and the APUC could be consumed with the question according           
 to the suspension of modification provision in the federal act.  He           
 stated the provision could be used to blanket the state, and not              
 allow competition that fell under the definition of rural.  He                
 stated Alaska was rural in general and had fought the competition             
 versus noncompetition battle before, and the outcome had been                 
 favorable to the state.  Thus, the direction of deregulation to               
 allow the greatest level of competition at the lowest level in the            
 market as possible, was best for the state.  He said he was willing           
 to consider proposals from others as long as the bill remained                
 focused.  He cited the House Labor and Commerce Committee was                 
 considering legislation related to this issue as well.  He                    
 reiterated a sweeping piece of legislation was impossible given the           
 time left this session.                                                       
 Number 0638                                                                   
 REPRESENTATIVE JOE GREEN wondered if HB 501 would help or hinder              
 the possibility of "cherry picking" in the rural areas.                       
 The record reflected the arrival of Representative Ivan Ivan at               
 8:50 a.m.                                                                     
 Number 0716                                                                   
 REPRESENTATIVE THERRIAULT replied he did not have the level of                
 expertise to answer that question.  He stated, however, the federal           
 act prevented the negative aspect of competition Representative               
 Green referred to as cherry picking.                                          
 Number 0757                                                                   
 REPRESENTATIVE GREEN explained there was legislation last year that           
 allowed electric rural cooperatives to form an exclusive                      
 distribution area, and wondered if HB 501 would countermand that              
 Number 0783                                                                   
 REPRESENTATIVE THERRIAULT replied there was a difference between              
 the electric rural cooperatives and the provisions in the                     
 telecommunication services.  He further said the country was moving           
 into a higher level of competition regarding utilities in general,            
 and the passage of the federal act proved that trend would                    
 continue.  Therefore, legislation was needed to help formulate                
 Number 0841                                                                   
 REPRESENTATIVE GREEN commented on the rural aspect of Alaska, and             
 wondered about competition with respect to rural distribution.                
 Number 0904                                                                   
 REPRESENTATIVE THERRIAULT agreed Alaska was rural.  He further said           
 there were parts of rural America that still used party lines. He             
 called the technology in Alaska "on the cutting edge."                        
 Number 0955                                                                   
 REPRESENTATIVE SCOTT OGAN commented he had not received any calls             
 from constituents about high local phone rates.  He explained he              
 was familiar with the investments telephone companies made and the            
 general expenditures related to setting up the equipment due to               
 personal experience in the telecommunication field.  He said he was           
 worried that HB 501 would create an "open season" for the APUC to             
 design whatever it wanted, and wondered if there had been                     
 discussion about attaching parameters to the APUC.                            
 Number 1015                                                                   
 REPRESENTATIVE THERRIAULT reiterated there was room for the                   
 legislature to be involved in the implementation of the federal               
 changes.  He said HB 501 called for the local carriers to still               
 argue and apply for an exemption modification if it was                       
 technologically infeasible and unduly economically burdensome.  He            
 reiterated he did not want the APUC to get "bogged down" in the old           
 argument of competition versus noncompetition.  The state had                 
 answered that question before.  He said the savings might only be             
 a few dollars and he did not expect complaints from constituents,             
 but asserted that was not a reason to keep the competition out of             
 those markets.                                                                
 Number 1135                                                                   
 REPRESENTATIVE CAREN ROBINSON said philosophically she agreed with            
 competition and believed in the direction of HB 501.  She wondered            
 if long distance telecommunication services were exempt from the              
 anti-trust laws, and was concerned about the possibility of                   
 conspiracies.  She further announced there was an emergency meeting           
 right now regarding a possible fiscal note for HB 501 and was                 
 curious about the outcome.                                                    
 Number 1190                                                                   
 REPRESENTATIVE THERRIAULT replied he just learned about the                   
 emergency meeting this morning from his staff.  He said he was not            
 sure what the outcome of the meeting would be.  He further stated             
 the APUC had to respond to the federal act, and HB 501 allowed the            
 APUC to focus on other things.  He reiterated the legislature would           
 have to involve itself in the implementation framework.                       
 Number 1255                                                                   
 CHAIR JAMES wondered if the purpose of HB 501 was to send a message           
 to the APUC to allow competition in the event the Commission                  
 determined it was not in the best interest of the public.                     
 Number 1276                                                                   
 REPRESENTATIVE THERRIAULT replied his fear was that the APUC would            
 be consumed with arguing the competition versus noncompetition                
 question, and never getting to the technical questions.  Therefore,           
 he was asking the legislature to consider that competition was in             
 the public's best interest.  He explained the APUC would still be             
 able to consider the other allowances for exemptions based on                 
 technological feasibility to keep competition from a certain                  
 CHAIR JAMES called on the first witness via teleconference in                 
 Valdez, Jim Gifford.                                                          
 Number 1344                                                                   
 JIM GIFFORD, Operations Manager, Cooper Valley Telephone                      
 Cooperative, said his company provided telephone services to a                
 large geographical region.  He cited Chitna, McCarthy, Mentasta,              
 Titlik, Valdez, Glennallen, the Copper Basin region, from Taneta              
 Pass on the Glenn Highway to Kenny Lake in the south and Salanta in           
 the north.  He explained the universal service funding made it                
 possible for rural and remote areas to have telecommunication                 
 services.  He called for careful consideration of the remote and              
 rural areas to ensure continued affordable telecommunication                  
 services, and did not want competition in the rural and remote                
 CHAIR JAMES called on the next witness via teleconference in                  
 Anchorage, Ted Moninski.                                                      
 Number 1424                                                                   
 TED MONINSKI, Regulatory Affairs Director, AT&T Alascom, said AT&T,           
 the parent company of AT&T Alascom, had been an advocate of opening           
 up the local exchange throughout the country.  AT&T Alascom                   
 similarly supported federal and state legislation that acknowledged           
 the value of competition.  He said the recent federal legislation             
 passed this year included specific references to a number of                  
 operating criteria which AT&T Alascom believed was critical to the            
 on-going consideration of competition in the local exchange.  He              
 cited reasonable interconnection, cost based rates, unbundled local           
 service, and dialing parity.  AT&T Alascom encouraged the                     
 legislature to preserve and protect the cited important elements,             
 and supported the legislature's interest in the desirability of               
 local exchange competition.  AT&T also encouraged a quick                     
 implementation of the 1996 federal act.                                       
 CHAIR JAMES asked Mr. Moninski if he favored or opposed HB 501?               
 MR. MONINSKI replied AT&T Alascom supported local exchange                    
 competition and believed it was in the public's best interest.                
 Therefore, in its current form AT&T Alascom supported HB 501.  The            
 sponsor indicated there were opportunities in the federal                     
 legislation for small world companies to seek waivers and AT&T                
 Alascom believed those waivers needed to be processed on a case               
 specific basis by the APUC.                                                   
 CHAIR JAMES called on the next witness via teleconference in                  
 Anchorage, Ron Zobel, Department of Law.                                      
 Number 1598                                                                   
 RON ZOBEL, Assistant Attorney General, Fair Business Practices                
 Section, Civil Division, Department of Law, said he was here to               
 respond to any questions, and he did not have an initial statement            
 CHAIR JAMES called on the next witness via teleconference in                  
 Kotzebue, Doug Neal.                                                          
 Number 1655                                                                   
 DOUG NEAL, General Manager, OTZ Telephone Cooperative Inc., said              
 his company serviced 11 villages and the Red Dog Mine.  He said the           
 service area was approximately the size of the state of Indiana.              
 He explained his biggest concern was with respect to "cream                   
 skimming."  He cited it would be easy for a telecommunication                 
 provider to come to Kotzebue and take out the large high volume               
 users.  He said his fixed expenses would remain the same in that              
 event, but his rates would need to be raised.                                 
 CHAIR JAMES called on the next witness via teleconference in                  
 Washington D.C., Harry Shooshan.                                              
 Number 1709                                                                   
 HARRY SHOOSHAN, Consultant for ATU, Strategic Policy                          
 Research/Economic and Telecommunications Public Policy Consulting             
 Firm, explained the objective of the new federal act was to open              
 all markets to competition.  He said it aimed to open the long                
 distance and video/cable television markets to competition, and to            
 remove the lines between industries that had balcanized                       
 telecommunications in the United States since the mid 1950's.  He             
 further said the act shifted power to the federal government and              
 the Federal Communications Commission (FCC).  Therefore, the FCC              
 could preempt any state regulation that acted as a barrier to entry           
 or a restraint on competition.  He asserted in several specific               
 areas the federal act left absolute discretion to the states to               
 give state commissions greater latitude, and cited alternatives to            
 traditional public utility regulations, and pricing flexibility for           
 incumbent firms that faced competition from new entrants.  The                
 federal law provided an impetus to move forward to modernize the              
 states' law as other states were doing.  He suggested a broad focus           
 to make certain the APUC had the necessary tools to adapt                     
 regulations that were real to the twenty-first century.  He cited             
 the authority to adopt alternatives to the traditional public                 
 utility regulation style, and the authority to permit pricing                 
 flexibility to benefit the customers, and forbear regulations                 
 altogether when it no longer serviced the public interest.  He                
 stated HB 501 was brave, but deceptively simple.  He described it             
 as too narrow and generally worded.  It did not address the need              
 for alternative forms of regulations, pricing flexibility and the             
 power to forbear a regulation.  It also failed to address the                 
 preservation of universal service.  He further said the bill only             
 addressed local competition, and failed to consider barriers to               
 entry in the long distance market in Alaska.  He cited as an                  
 example, long-term contracts entered into by long distance                    
 companies that might limit competition from new entrants.  In                 
 conclusion, he stated that the removal of inappropriate impediments           
 to entry was admirable, but it should be considered in a broader              
 legislative context as it pertained to the new federal act, and               
 more direction should be given to the APUC.                                   
 CHAIR JAMES called on the next witness in Juneau, Steve Hamlen.               
 Number 1972                                                                   
 STEVE HAMLEN, President, United Utilities, said his company                   
 provided services to 58 rural communities in the state.  It was a             
 native owned company, and served a population of approximately                
 20,000 people.  He referred the committee members to several maps             
 illustrating the Yukon - Kuskokwin service area, the Fairbanks                
 service area, and the Chenega Bay service area in Prince William              
 Sound.  Mr. Hamlen read the following provision from the APUC                 
 operating budget overview into the record.                                    
 "The Commission believes that the legislature should take the lead            
 by setting the statutory framework for utilities regulation.  The             
 Commission is best able to carry out legislative intent concerning            
 the extent of regulation when the legislature's directives are                
 clear in the governing statutes."                                             
 MR. HAMLEN said HB 501 was not needed because it was already                  
 addressed in the federal act.  He cited Section 253 in the federal            
 act titled, "Removal of barriers to entry."  The section stated no            
 state or local statute could prohibit the ability of any entity to            
 provide any intrastate or interstate telecommunication services.              
 He cited Section 251 in the federal act listed the duties of local            
 exchange carriers to implement competition.  The duties included              
 resale of the services to competitors, number portability, dialing            
 parity, access to the right-of-ways, access to unbundled network              
 elements, physical or virtual co-location, interconnection                    
 requirements, illegal changes to subscriber carrier selections,               
 cross-subsidation, procedures for negotiation and approval of the             
 interconnection agreements, and the requirement to provide space in           
 the poles.  He reiterated the federal act already addressed the               
 issue of competition.  The state, however, did need legislation               
 that addressed the areas in the federal act left to the states.  He           
 cited the federal act did not address the duties of interexchange             
 carriers.  He said there was not a level playing field, and in the            
 state of Alaska there were only two long distance carriers.  The              
 state needed the same access to long distance facilities and the              
 use of long distance facilities, as well as to open the                       
 interconnection as local exchange carriers were required to provide           
 to the long distance carriers.  He explained there were two very              
 large carriers in the state that wanted to move into his business             
 on an uneven playing field.  He called them "deep pocket players,"            
 and the legislature needed to take action or companies would be put           
 out of business and there would be fewer consumer choices.  He                
 cited one barrier to entry for a local telephone service to break             
 into a long distance service was Alascom's wholesale rates.  He               
 said Alascom's wholesale rates were higher than their retail rates.           
 The federal act prohibited local exchange carriers from having                
 wholesale rates higher than retail rates.  He said that was not               
 fair.  He also cited call routes directed through Anchorage as                
 another barrier.  He further said the duties to local exchange                
 carriers needed to apply to interexchange carriers as well.  The              
 timetable required regulations in place to provide open                       
 interconnections to local exchange networks by March.  In                     
 conclusion, he said HB 501 only had the potential to put small                
 businesses out of business and suggested changes were needed.                 
 Number 2372                                                                   
 REPRESENTATIVE BRIAN PORTER commented on Mr. Hamlen's testimony               
 regarding the bill adversely affecting small businesses, and                  
 wondered if that was because it did not address the deficiencies in           
 the federal act.                                                              
 Number 2380                                                                   
 MR. HAMLEN replied, "that's correct."  He stated Congress looked at           
 the long distance market nationally and determined there was                  
 competition, but it did not look at Alaska where there were only              
 two carriers.  He reiterated a level playing field was needed.                
 Number 2395                                                                   
 REPRESENTATIVE PORTER asked Mr. Hamlen if HB 501 was redundant?               
 MR. HAMLEN replied, "yes it is."  He also said it was not                     
 Number 2405                                                                   
 REPRESENTATIVE PORTER asked if the federal act prevented cherry               
 Number 2415                                                                   
 MR. HAMLEN responded there would be winners and losers, according             
 to the long distance carriers.  He reiterated a level playing field           
 was needed to be able to compete.                                             
 Number 2424                                                                   
 REPRESENTATIVE PORTER wondered, if under the federal act and                  
 current APUC regulations, would a company be able to come in now              
 and siphon off the major players and leave the utility with a minor           
 Number 2450                                                                   
 MR. HAMLEN replied, "yes."  He further said that was the market               
 place and competition at work.  However, he cited, Alaska received            
 over $50 million a year to provide assistance for carriers serving            
 high cost areas.  The long distance carriers now want to be able to           
 compete for that support.  Therefore, Congress provided those                 
 exemptions for a reason, he said, because there would be a limited            
 amount of money and the public would not want to pay for duplicate            
 TAPE 96-23, SIDE B                                                            
 Number 0006                                                                   
 REPRESENTATIVE GREEN commented on the time table Mr. Hamlen                   
 referred to in his testimony.                                                 
 Number 0019                                                                   
 MR. HAMLEN replied the FCC was required to adopt regulations to               
 open interconnections by August.  He said the point was that when             
 the regulations went into effect, a level playing field needed to             
 be established.                                                               
 Number 0030                                                                   
 REPRESENTATIVE GREEN asked Mr. Hamlen if an amendment was needed to           
 HB 501?                                                                       
 Number 0038                                                                   
 MR. HAMLEN replied there was a bill being proposed in the House               
 Labor and Commerce Committee that addressed the issues discussed              
 today.  He cited HB 501 needed a lot of work.                                 
 REPRESENTATIVE GREEN asked if the bill in the House Labor and                 
 Commerce Committee addressed the concerns discussed today?                    
 MR. HAMLEN responded, "yes."                                                  
 Number 0060                                                                   
 CHAIR JAMES commented it was late in the calendar for this                    
 legislative session, and wondered what would happen if nothing was            
 done this session.                                                            
 Number 0068                                                                   
 MR. HAMLEN replied an advantage would be given to the long distance           
 carriers that wanted to get into the Alaskan market.  The APUC                
 needed the direction from the legislature to create a level playing           
 field, and the best and easiest way to accomplish that was through            
 a piece of legislation.                                                       
 Number 0085                                                                   
 CHAIR JAMES stated legislation was needed, and according to Mr.               
 Hamlen a "big fix" was needed rather than a "little fix" which                
 everyone had admitted would be very difficult to accomplish this              
 session.  She asked Mr. Hamlen if he had any other solutions?                 
 Number 0095                                                                   
 MR. HAMLEN replied it was not as difficult as it seemed.  He said,            
 if Congress could pass a 214 page act, the state could pass a bill            
 that would at least level the playing field.                                  
 Number 0113                                                                   
 REPRESENTATIVE ROBINSON asked Mr. Hamlen why it put his company at            
 a disadvantage to work with the APUC?                                         
 Number 0121                                                                   
 MR. HAMLEN replied the regulations by the APUC required a public              
 notice process creating delay tactics by the long distance carriers           
 enabling the process to be dragged out for months and even years.             
 CHAIR JAMES called on the next witness in Juneau, James Rowe.                 
 Number 0145                                                                   
 JAMES ROWE, Executive Director, Alaska Telephone Association, said            
 he represented the 22 local exchange carriers that were members of            
 the Alaska Telephone Association.  He cited they delivered local              
 telecommunication to almost all of the communities in the state               
 both rural and urban.  He provided the committee members with a one           
 page summarization of the state's responsibility under the federal            
 act.  He said the federal act recognized the rural concerns, but              
 had no perspective about rural Alaska.  He cited the example of the           
 state of New Jersey classified as rural and remote, urban and semi-           
 urban.  He said the act discussed competition and universal                   
 service.  He said universal service was very important to Alaska.             
 He said competition was good, but even the Chair of the FCC,                  
 commented that pure competition and universal services were not               
 compatible goals.  He stated prior to the act being passed there              
 was discussion of jobs creation.  However, in reaction, AT&T cut              
 40,000 employees.  He further said in Alaska there was good service           
 and reasonable rates.  He also cited in the wake of the federal act           
 AT&T announced they would increase interstate rates in 80 percent             
 of their market by 4.3 percent.  He asserted caution was needed in            
 the areas supported by universal service funding.  He was concerned           
 about multiple carriers raising the cost beyond which the federal             
 government would not be interested to contribute to the universal             
 service fund.  He recommended the committee members act with                  
 caution, keep the public's best interest high, and look at the                
 potential if acted upon too quickly.  He further said the issues              
 could not be addressed with a one page bill.                                  
 Number 0383                                                                   
 REPRESENTATIVE OGAN asked Mr. Rowe if there was the possibility of            
 a larger company to come in and subsidize rates to take over the              
 market and unfairly take out the local competition.                           
 Number 0400                                                                   
 MR. ROWE replied it did not have to be a large company.  A small              
 predator company could take out the local competition, if cross-              
 subsidies were used.  He said it was not pure competition, and the            
 APUC needed guidance.                                                         
 Number 0420                                                                   
 REPRESENTATIVE GREEN asked Mr. Rowe if he was akin to fixing HB
 501, subscribing to the legislation in the House Labor and Commerce           
 Committee, or something altogether different?                                 
 Number 0442                                                                   
 MR. ROWE said he supported legislation, but HB 501 did not go into            
 enough depth.                                                                 
 Number 0454                                                                   
 CHAIR JAMES asked Mr. Rowe what the APUC would do if the                      
 legislature did not pass any legislation?                                     
 Number 0465                                                                   
 MR. ROWE said the APUC would be confused and reasonably so.  He               
 said it would make decisions of which the legislature would look              
 back upon and wished it had given guidance.                                   
 Number 0470                                                                   
 CHAIR JAMES wondered if one of those decisions would be to not have           
 competition among the local telephone services.                               
 Number 0475                                                                   
 MR. ROWE replied the state could not make that decision because the           
 federal government already said there could be competition.                   
 Number 0479                                                                   
 CHAIR JAMES wondered if competition was in the public interest in             
 Number 0482                                                                   
 MR. ROWE said the federal government allowed that, and he would               
 like to see the legislature give the APUC guidance regarding the              
 public interest issue.                                                        
 CHAIR JAMES called on the next witness in Juneau, Greg Berberich.             
 Number 0505                                                                   
 GREG BERBERICH, Vice President of Government and Regulatory                   
 Affairs, Matanuska Telephone Association Inc., said there were                
 numerous powers delegated to the state in the federal act that                
 needed to be addressed by the APUC and the legislature.  He said              
 his company believed public interest was one of the issues                    
 addressed in the federal act due to the different high cost                   
 sections in the rural areas.  He further said HB 501 did not                  
 address those concerns and more thoughtful discussion was needed.             
 CHAIR JAMES called on the next witness in Juneau, Jimmy Jackson.              
 Number 0576                                                                   
 JIMMY JACKSON, Regulatory Attorney, GCI, said he favored HB 501.              
 He said the Telecommunications Act of 1996 was passed by an                   
 overwhelming margin supported and largely directed by Senator Ted             
 Stevens.  He explained the central purpose was to open all                    
 telecommunication markets to competition because one segment after            
 another had been opened to competition.  He said in every instance            
 there was opposition but the results were good.  He cited a fax               
 machine was a result of competition, for example.  Therefore,                 
 Congress believed opening other segments would bring the same                 
 benefits.  The act left the implementation to the states, he                  
 explained, which depended on the specific details made by the                 
 people who implemented the policies.  The purpose of HB 501 was to            
 establish that competition and the local exchange market were good            
 and that as the APUC implemented its decisions they would recognize           
 that competition would benefit the market.  He explained it did not           
 take away its discretion, but simply directed it to approach the              
 decision that competition was good for the consumers.  He further             
 said the long distance companies were not exempt from the state               
 anti-trust laws, but other utilities were.  This, he said, was a              
 result of legislation passed about five years ago regarding long              
 distance competition.  He said the findings in HB 501 parallel the            
 legislation passed five years ago.  He cited whole sale rates                 
 needed to be addressed, and reiterated the competition issue was              
 addressed already.  He also cited cherry picking was prohibited by            
 the federal act.  The act allowed the APUC to require a carrier to            
 service an entire area.  He said competition would bring other                
 benefits and not just a reduced cost of service.  He cited a                  
 quicker service line, and faster internet access as examples.  He             
 further said universal service was protected by federal legislation           
 and existing state statutes.                                                  
 Number 0900                                                                   
 CHAIR JAMES commented most of the money was made in the long                  
 distance service, and wondered why a person would want a different            
 local carrier.  She agreed that price was not necessarily the goal            
 of competition, but better service due to the new age of                      
 MR. JACKSON agreed with Chair James.  He further said there was a             
 one stop shopping provider goal.                                              
 Number 0955                                                                   
 CHAIR JAMES wondered if there was the possibility of one company              
 taking over everything in the state.                                          
 Number 0966                                                                   
 MR. JACKSON replied he thought that was not possible because                  
 technology progressed too rapidly.  He cited in wireless the FCC              
 auctioned off six different licenses for cellular type services in            
 addition to the two that existed.  He said there were too many                
 niches in Alaska and too many opportunities, and his company was              
 not concerned about that happening.                                           
 Number 1026                                                                   
 REPRESENTATIVE GREEN asked Mr. Jackson if HB 501 was sufficient to            
 take care of the expressed issues today, or if it would take care             
 of only GCI's concerns?                                                       
 Number 1058                                                                   
 MR. JACKSON said HB 501 gave the APUC direction to face the issues            
 before the next legislative session.  He said more detailed                   
 legislation would probably be necessary in the future, but was not            
 sure what it would address.  He also said HB 501 did not undercut             
 any of the issues expressed today, it simply approached the                   
 competition issue.                                                            
 Number 1105                                                                   
 CHAIR JAMES announced she would like to extend the meeting and                
 wondered if there were any conflicts.  She also announced she did             
 not want to take any action on this bill today.                               
 Number 1116                                                                   
 REPRESENTATIVE IVAN explained he had a 10:00 a.m. commitment today            
 so he could not stay.                                                         
 Number 1128                                                                   
 REPRESENTATIVE OGAN explained he had a bill in another committee so           
 he could not stay.                                                            
 Number 1133                                                                   
 MR. JACKSON commented there was concern HB 501 would cost the APUC            
 money to implement.  He said it would not cost the APUC money to              
 implement HB 501 because it took one argument off of the table.  He           
 said it would cost the APUC money to implement the federal act,               
 CHAIR JAMES explained a quorum was still present, despite the two             
 representative that had to leave, so the meeting would continue.              
 CHAIR JAMES called on the next witness in Juneau, Mark Foster.                
 Number 1192                                                                   
 MARK FOSTER, Consultant, ATU, encouraged the committee members to             
 look at the broader view than what was spelled out in HB 501.  He             
 said there were two key areas for a competitive market place to               
 work.  They were:  pricing flexibility and market flexibility.                
 Pricing flexibility was needed to allow the players involved to               
 compete in a reasonable manner.  Marketing flexibility was needed             
 to allow the market to be tested.  He explained these two areas               
 were left to the states in the federal act and if rules were not              
 adopted, the larger carriers would have an edge over the local                
 phone companies.  He further said the FCC had 80 rule makings to              
 implement.  The legislature needed to implement policies that                 
 addressed Alaska so that the FCC had a clear policy direction to              
 CHAIR JAMES called on the next witness in Juneau, Howard Garner.              
 Number 1392                                                                   
 HOWARD GARNER, Executive Vice President, Alaska Power and Telephone           
 Company, said he represented about 3,500 rural Alaskan customers              
 and about 15 exchanges.  He explained the employees owned about 85            
 percent of the Alaska Power and Telephone Company.  He stated the             
 comments made earlier touched on what his company wanted to say.              
 He announced his company supported the legislation in the House               
 Labor and Commerce Committee and it could be achieved if everyone             
 pushed in the same direction despite the time constraint.  He said            
 his company made large investments in rural Alaska and was                    
 concerned about its ability to continue making those investments.             
 Number 1474                                                                   
 CHAIR JAMES commented rural Alaska should have all of the benefits            
 of pricing and services available.  She said computer services                
 offered the possibility to bridge that gap, and the benefits of               
 competition should give rural Alaska more services.  She asked Mr.            
 Garner if he agreed with her statement?                                       
 Number 1509                                                                   
 MR. GARNER replied, "he did not necessarily agree."  He explained             
 there were incentives in place to encourage investments to keep up            
 with the technological changes.  His company took great pride                 
 because its customers were offered state of the art facilities and            
 services, and competition would not necessarily enhance those                 
 Number 1535                                                                   
 CHAIR JAMES asked Mr. Garner if he wanted competition in local                
 Number 1549                                                                   
 MR. GARNER stated that one answer did not fit all locations and               
 perhaps there should be exceptions for the extremely small and                
 isolated locations.                                                           
 CHAIR JAMES called on the next witness in Juneau, David Fauske.               
 Number 1572                                                                   
 DAVID FAUSKE, General Manager, Arctic Slope Telephone Cooperative,            
 said his company served the North Slope, seven villages in Prudhoe            
 Bay, and Deadhorse.  He commented the previous speakers already               
 addressed most of his concerns.  He said with all due respect to              
 the sponsor of HB 501, it had no utility.  A pure philosophical               
 principle could be accomplished by a joint or separate resolution             
 of the House and Senate.  However, if HB 501 implied ramifications            
 beyond competition, and if the federal act included implications              
 for the state of Alaska, then the legislature was better served to            
 address those issues in the federal act.                                      
 Number 1710                                                                   
 REPRESENTATIVE PORTER asked Mr. Fauske if the federal act required            
 the maintenance of universal service in the rural areas?                      
 Number 1728                                                                   
 MR. FAUSKE replied, according to his understanding, the federal act           
 advocated for the continuation of universal service as a policy.              
 Number 1745                                                                   
 CHAIR JAMES asked Mr. Zobel what he expected the APUC to do in                
 response to the federal act with or without HB 501?                           
 Number 1760                                                                   
 MR. ZOBEL said he could not predict the response of the APUC.  He             
 said it was currently in the process of assessing the impact of the           
 federal act.                                                                  
 Number 1802                                                                   
 REPRESENTATIVE ROBINSON asked Mr. Zobel to respond to the issue of            
 the anti-trust laws.  She wondered if it might cause collaboration            
 between the local exchange companies.                                         
 Number 1820                                                                   
 MR. ZOBEL said the relationship between the anti-trust laws and the           
 regulated industries was complex.  However, if the legislature                
 wanted to create a fully "competitive telecommunication market                
 place" then modifications were logical and necessary to avoid                 
 deregulation.  He explained in 1990 the legislature required the              
 anti-trust laws to apply to long distance telecommunication                   
 services.  Therefore, it was logical to also apply the anti-trust             
 laws to the other areas open to competition.  He said there were              
 three options available, and cited repeal subsection D in AS                  
 45.50.572 in the federal act, take out the words "long distance,"             
 and apply an exemption to public utilities other than                         
 telecommunication utilities.                                                  
 Number 2166                                                                   
 REPRESENTATIVE THERRIAULT explained there was not another piece of            
 legislation introduced in the House Labor and Commerce Committee,             
 but rather it might be introduced.  He said he was willing to look            
 at the possible provisions in the other piece of legislation and              
 work with the testifiers to consider their suggestions today.  He             
 wondered why HB 501 was a problem, even if it was redundant                   
 according to the testimony today, and asked where was the harm?               
 Number 2326                                                                   
 CHAIR JAMES asked Representative Therriault if he would be                    
 interested in a subcommittee to address the issues further?                   
 Number 2338                                                                   
 REPRESENTATIVE THERRIAULT replied he would like to be involved, but           
 was concerned about the remaining time in the legislature.                    
 Number 2371                                                                   
 CHAIR JAMES said she wanted to take a serious look at the issues              
 and asked for volunteers.                                                     
 REPRESENTATIVE THERRIAULT wondered if Chair James was going to                
 reschedule the bill.                                                          
 CHAIR JAMES replied the earliest HB 501 could be heard again was              
 Tuesday, March 5, 1996.                                                       
 TAPE 96-24, SIDE A                                                            
 Number 0000                                                                   
 CHAIR JAMES again asked for volunteers.  No one responded.                    
 Number 0024                                                                   
 REPRESENTATIVE ED WILLIS announced he would be gone all next week.            
 Number 0040                                                                   
 CHAIR JAMES called for a brief at ease at 10:15 a.m.                          
 CHAIR JAMES called the House State Affairs Committee meeting back             
 to order at 10:20 a.m.                                                        
 Number 0130                                                                   
 REPRESENTATIVE ROBINSON announced she would be willing to work with           
 the Chair to move this bill forward.                                          
 Number 0144                                                                   
 CHAIR JAMES explained, based on discussion with the sponsor of HB
 501, and the Chair of the next committee of referral, she would be            
 willing to move HB 501 forward to the House Labor and Commerce                
 Number 0228                                                                   
 REPRESENTATIVE PORTER moved that HB 501 move from the committee               
 with individual recommendations and attached zero fiscal note.                
 Hearing no objection, it was so moved from the House State Affairs            
 Number 0280                                                                   
 REPRESENTATIVE ROBINSON announced that she hoped the House Labor              
 and Commerce Committee would look at the anti-trust issue.                    
 Number 0360                                                                   
 REPRESENTATIVE GREEN announced that he hoped the issues discussed             
 today would be addressed in the House Labor and Commerce Committee.           
 Number 0386                                                                   
 REPRESENTATIVE WILLIS announced that he hoped the cherry picking              
 issue would be addressed in the House Labor and Commerce Committee.           
 He said he would vote against HB 501 as written because it did not            
 address more of the issues.                                                   
 Number 0430                                                                   
 CHAIR JAMES said technology was advancing fast and she was                    
 concerned Alaska would be left out.  She stated competition was one           
 way to address that concern.                                                  

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