Legislature(1999 - 2000)
04/07/1999 08:01 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 52
"An Act relating to competition in the provision of
local exchange telephone service; and providing for an
effective date."
CS FOR SENATE BILL NO. 52(L&C)
"An Act relating to competition in the provision of
local exchange telephone service; and providing for an
effective date."
Senator P. Kelly explained that SB 52 would require the
Alaska Public Utilities Commission (APUC) to adopt
regulations permitting the local telephone competition in
areas having 5,000 or more lines by July 1, 1999. History
has proven competition gives consumers lower costs,
increased technology and more choices.
He continued, in 1996, Congress passed the
Telecommunications Act allowing and promoting local
telephone competition nationwide. The APUC exempted
Fairbanks and Juneau from full local competition because of
fears that competition might harm the existing phone
monopoly (PTI). PTI was purchased in 1997 by Century
Telephone which has its headquarters in Louisiana. The
purchased of PTI made Century the 10th largest phone company
in the United States. Century has since sold its local
telephone services to Alaska Communication Systems and
affiliated companies (pending regulatory approval).
Senator Kelly continued, the fears that promoted the APUC
to delay full competition in Fairbanks and Juneau are the
same fears that cause the APUC to delay long distance
competition in Alaska for many years. As we have all seen,
those fears were unfounded and long distance competition
produced better quality, new services and lower prices for
consumers throughout the State.
Co-Chair Torgerson questioned the use of "should" on Page
2, Line #6. He recommended it be changed to "shall".
Senator P. Kelly replied that concern had been addressed in
the intent language.
Co-Chair Torgerson inquired if study areas would be
established. Senator P. Kelly noted that Mr. Jackson from
GCI was available on teleconference to answer those
questions.
Senator Adams stated that even without the present
legislation, APUC would still be able to provide full focus
on this matter. He questioned the need for the
legislation. Senator P. Kelly explained that APUC had not
been able to make regulatory decisions and receive
compensation until legislation had been passed in 1990.
Senator Adams reiterated that the proposed legislation was
not essential.
Senator Wilken referenced Page 2, Lines 13 through 16,
questioning which portions of the State would be affected.
Senator Kelly replied Juneau, Fairbanks, Mat-Su and a
portion of Kenai.
JUDY WARWICK, Regional Manager for External Affairs, GCI,
Anchorage, testified via teleconference. She noted that
Senator Steve Frank introduced the original legislation.
The State Regulatory Commission was assigned the
responsibility to promote instate competition. GCI applied
every year and in 1991, long distance in State became a
reality. Because of the success with in-State long
distance, GCI assumed that there would be no "hurdles" with
local competition. With the exception of Anchorage, all
local exchange carriers are designated rural exchange
carriers. The rural designation automatically exempts the
incumbent carriers. Congress and the FDC did find and
established the criteria for terminating the rural
exemption.
Ms. Warwick stated that on September 10, 1997, GCI
requested that APUC terminate the exemption for the local
exchange carriers serving Fairbanks and Juneau. On October
23, 1997, APUC denied the request of termination. They
denied the request even though they did not find that the
request was technically unfeasible or that it would result
in economic injury beyond that associated with competitive
entry.
TAPE SFC-99 #80, SIDE B
Ms. Warwick continued. She noted that the
Telecommunications Act was implemented to promote
competition. Only major markets have been available for
competition in the State of Alaska. Ms. Warwick stressed
that the bill does not mandate competition. She emphasized
that the consumer will choose what is in their best
interest. Ms. Warwick stated that Jimmy Jackson, Corporate
Council, GCI, was available in Anchorage via teleconference
to answer any questions of the Committee.
Senator Adams referenced Page 2, Lines 29 and 30, and asked
why GCI would want to change the timeline. Ms. Warwick
stated that nothing has occurred since the
Telecommunications Act was passed. She recommended that
the Committee speak with Mr. Jackson to better explain this
concern.
Co-Chair Torgerson noted that question would be held until
Mr. Jackson could testify.
TOM MEADE, Vice President of Regulatory Affaires, TEL
ALASKA, Anchorage, testified via teleconference from
Anchorage. Mr. Meade testified in opposition to SB 52. He
noted that his company provides local exchange telephone
service in rural locations across the State. He commented
that Mr. Jackson, the attorney from GCI, would probably
disagree as to the legality of the bill.
Mr. Meade stated that the bill goes contrary to the
Telecommunications Act, in that it ignores the process that
is required by the Act for rural exemption. He suggested
that the legislation had been offered under false premises.
He emphasized that the propaganda has suggested that
service would be improved and that rates would be reduced.
He stressed that it is misleading information to believe
that toll rates will decrease.
Mr. Meade questioned how large would the market need to be
to support competition. The year before GCI went into
local competition in Anchorage, it had a net income of $7.5
million dollars. During local competition for two years,
the current financial statement indicates that it lost $6.8
million dollars. He acknowledged that after GCI came into
the market, toll rates did drop because most costs were
shifted to the local exchanges. He stated that if the bill
does pass, it would be subject to court challenges, which
would not be in the public's best interest. Mr. Meade
urged Committee members not to pass the legislation.
Senator P. Kelly commented to the time frame, noting that
most of the regulations were in place before the act was
implemented. He emphasized that there have been many
delays on the bill. Senator Adams stated that APUC does
not have a time line even with the functions of the bill.
He pointed out that APUC does not acknowledge that the bill
is necessary.
JIMMY JACKSON, Regulatory Attorney, GCI, testified via
teleconference from Anchorage. He stated the study area is
well defined by the Federal Communication Commission (FCC),
and that it is a construct of that Commission. In most
cases, the study area is the same as the local utility
service area. However, there are a few companies in Alaska
that have their service areas divided into more than one
study area. Mr. Jackson noted that the proposed bill would
not change the procedures under Federal law. In terms of
what the bill does, the Attorney General testified before
the Commission that there would not be a conflict. The
bill would bring in competition in order to keep prices
down. In those areas where there is only one carrier, that
carrier would continue to be subject to the regulations of
the APUC.
Senator Adams questioned if all telephone companies in
Alaska receive Federal subsidy to help with upgrading and
buying new equipment. Mr. Jackson explained that all local
phone companies in Alaska outside of Anchorage, receive
universal service funds, which are paid based on their
investment after the fact.
Senator Adams noted that he was familiar with the telephone
universal fund. He asked if GCI received a Federal subsidy
to help with competition. Mr. Jackson responded that GCI
did not get a subsidy from the Federal government. There
is a slight exception in the Life Line Program, where when
GCI provides service in Anchorage to a welfare recipient,
that request receives a monthly reduction to their phone
bill. He emphasized that is a very small program and that
GCI gets no other federal subsidies.
GREG BERBERICH, Vice President of Corporate Services,
Matanuska Telephone Association (MTA), Mat-Su, testified
via teleconference from Mat-Su. He said MTA was a member
owned cooperative serving over 32,000 customers. He spoke
in opposition to SB 52.
Mr. Berberich stated that the legislation was targeted at
specific companies and communities and is not in compliance
with the spirit or intent of the Telecommunications Act.
The legislation would apply to MTA even though they are
classified as rural. He concluded that all Alaskans should
have access to affordable telephone service which this bill
would circumvent. [Testimony on File]. He urged a no vote
on passage of the legislation.
JIM ROW, Director, Alaska Telephone Association (ATA),
Anchorage, spoke in opposition to the legislation. He
stated that the term "rural exemption" makes it sound like
any area conceived as rural is exempted from the
opportunity of telecommunications competition. Every area
in the United States has the opportunity for competition
under that Act. That competition should bring benefit to
the public.
Mr. Row noted that the concern is how competition works in
rural areas. He asked, would people in rural areas be able
to have affordable access to telecommunications. He
explained the rural exemption language. He warned that it
is important to be careful in making this decision.
Precautionary language should be added to make sure that
the public is going to benefit. Mr. Row stressed that the
intent is that individuals have access to affordable rates.
Mr. Row urged Committee members to vote against passage of
the proposed legislation.
Senator Wilken inquired why this bill would negatively
affect those living in rural Alaska. Mr. Row replied that
if an artificial number is added to the Federal Act, those
below that number will receive the benefits of competition.
If the APUC procedure is in place, the rates would still be
affordable. He spoke to the conflict within the Federal
Act.
Senator P. Kelly commented that if the bill should pass,
the APCU would continue to be involved. That Commission
would determine regulations and whether they work. They
will no longer be responsible for making a policy call.
The competition would be either "good" or "bad". Senator
P. Kelly reminded members that the bulk of the regulations
are already adopted and that the people of Alaska will
benefit from the competition.
Co-Chair Torgerson stated that SB 52 would be HELD in
Committee for further consideration.
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