Legislature(1995 - 1996)
02/27/1996 08:42 AM House STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE February 27, 1996 8:42 a.m. MEMBERS PRESENT Representative Jeannette James, Chair Representative Scott Ogan, Vice Chair Representative Joe Green Representative Ivan Ivan Representative Brian Porter Representative Caren Robinson Representative Ed Willis MEMBERS ABSENT All members present. COMMITTEE CALENDAR * HOUSE BILL NO. 501 "An Act requiring competition in local exchange telephone service." - HEARD AND HELD * HOUSE BILL NO. 434 "An Act relating to unclaimed property; and providing for an effective date." - PASSED CSHB 434(STA) OUT OF COMMITTEE HOUSE CONCURRENT RESOLUTION NO. 25 Declaring May 15, 1996, 381st Intelligence Squadron Logistics Division Day. - PASSED OUT OF COMMITTEE * HOUSE BILL NO. 365 "An Act relating to the offense of possession of tobacco by a minor." - SCHEDULED BUT NOT HEARD HOUSE BILL NO. 354 "An Act relating to a retirement incentive program for certain employees of school districts under the teachers' retirement system and the public employees' retirement system; and providing for an effective date." - SCHEDULED BUT NOT HEARD (* First public hearing) PREVIOUS ACTION BILL: HB 501 SHORT TITLE: COMPETITIVE LOCAL PHONE SERVICES SPONSOR(S): REPRESENTATIVE(S) THERRIAULT, Martin, Mulder, Toohey, Vezey JRN-DATE JRN-PG ACTION 02/12/96 2726 (H) READ THE FIRST TIME - REFERRAL(S) 02/12/96 2726 (H) STATE AFFAIRS, LABOR & COMMERCE, JUD 02/27/96 (H) STA AT 8:30 AM CAPITOL 102 BILL: HB 434 SHORT TITLE: UNCLAIMED PROPERTY SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 01/19/96 2486 (H) READ THE FIRST TIME - REFERRAL(S) 01/19/96 2486 (H) STATE AFFAIRS, LABOR & COMMERCE, JUD 01/19/96 2486 (H) ZERO FISCAL NOTE (REV) 01/19/96 2486 (H) GOVERNOR'S TRANSMITTAL LETTER 02/27/96 (H) STA AT 8:30 AM CAPITOL 102 BILL: HCR 25 SHORT TITLE: 381ST INTELL.SQUADRON DIVISION DAY SPONSOR(S): SP CMTE MILITARY & VETERANS AFFAIRS JRN-DATE JRN-PG ACTION 02/05/96 2627 (H) READ THE FIRST TIME - REFERRAL(S) 02/05/96 2628 (H) MLV, STATE AFFAIRS 02/14/96 (H) MLV AT 5:00 PM CAPITOL 17 02/14/96 (H) MINUTE(MLV) 02/15/96 2773 (H) MLV RPT 5DP 1NR 02/15/96 2773 (H) DP: FOSTER, IVAN, KOTT, WILLIS, MULDER 02/15/96 2773 (H) NR: DAVIES 02/15/96 2773 (H) ZERO FISCAL NOTE (GOV) 02/27/96 (H) STA AT 8:30 AM CAPITOL 102 WITNESS REGISTER REPRESENTATIVE GENE THERRIAULT Alaska State Legislature State Capitol, Room 421 Juneau, Alaska 99801-1182 Telephone: (907) 465-4797 POSITION STATEMENT: Sponsor of HB 501. JIM GIFFORD, Operations Manager Copper Valley Telephone Cooperative P.O. Box 337 Valdez, Alaska 99686 Telephone: (907) 835-2231 POSITION STATEMENT: Provided testimony on HB 501. TED MONINSKI, Regulatory Affairs Director AT&T Alascom 210 East Bluff Drive Anchorage, Alaska 99501 Telephone: (907) 264-7876 POSITION STATEMENT: Provided testimony in favor of HB 501. RON ZOBEL, Assistant Attorney General Fair Business Practices Section Civil Division Department of Law 1031 West 4th Avenue, Suite 200 Anchorage, Alaska 99501-1994 Telephone: (907) 269-5100 POSITION STATEMENT: Provided testimony on HB 501. DOUG NEAL, General Manager OTZ Telephone Cooperative Inc. P.O. Box 324 Kotzebue, Alaska 99752 Telephone: (907) 442-3114 POSITION STATEMENT: Provided testimony on HB 501. HARRY SHOOSHAN, Principal Strategic Policy Research/Economic and Telecommunications Public Policy Consulting Firm 7500 Old Georgetown Road Bathesda, Maryland 20814 Telephone: (301) 215-4027 POSITION STATEMENT: Provided testimony on HB 501. STEVE HAMLEN, President United Utilities 5450 "A" Street Anchorage, Alaska 99518-1291 Telephone: (907) 273-5210 POSITION STATEMENT: Provided testimony on HB 501. JIM ROWE, Executive Director Alaska Telephone Association 4341 "B" Street, Suite 304 Anchorage, Alaska 99503 Telephone: (907) 563-4000 POSITION STATEMENT: Provided testimony on HB 501. GREG BERBERICH, Vice President of Government and Regulatory Affairs Matanuska Telephone Association, Inc. 1740 South Chugach Street Palmer, Alaska 99645 Telephone: (907) 745-3211 POSITION STATEMENT: Provided testimony on HB 501. JIMMY JACKSON, Regulatory Attorney GCI 2550 Denali Street, Suite 1000 Anchorage, Alaska 99503 Telephone: (907) 265-5545 POSITION STATEMENT: Provided testimony on HB 501. MARK FOSTER, Consultant Anchorage Telephone Utility (ATU) 625 West 10th Juneau, Alaska 99801 Telephone: (907) 586-5702 POSITION STATEMENT: Provided testimony on HB 501. HOWARD GARNER, Executive Vice President and Chief Financial Officer Alaska Power and Telephone Company P.O. Box 222 Port Townsend, Washington 98368 Telephone: (360) 385-1733 POSITION STATEMENT: Provided testimony on HB 501. DAVID FAUSKE, General Manager Arctic Slope Telephone Cooperative 4300 "B" Street Anchorage, Alaska 99503 Telephone: (907) 563-3989 POSITION STATEMENT: Provided testimony on HB 501. BOB BARTHOLOMEW, Deputy Director Central Office Income and Excise Audit Division Department of Revenue P.O. Box 110420 Juneau, Alaska 99811-0420 Telephone: (907) 465-2320 POSITION STATEMENT: Presented HB 434 for the Department of Revenue. SYBIL SKELTON 15 Eleanor Fairbanks, Alaska 99701 Telephone: Not available. POSITION STATEMENT: Provided testimony on HB 434. GEORGE DOZIER, Legislative Assistant to Representative Pete Kott State Capitol, Room 432 Juneau, Alaska 99801-1182 Telephone: (907) 465-3777 POSITION STATEMENT: Presented sponsor statement for HCR 25. ACTION NARRATIVE TAPE 96-23, SIDE A Number 0017 The House State Affairs Committee was called to order by Chair Jeannette James at 8:42 a.m. Members present at the call to order were Representatives Robinson, Willis, Green, Porter and James. Members absent were Representatives Ivan and Ogan. 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 burdensome. "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 allowance. 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 policies. 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 market. 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 areas. 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 prepared. 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 necessary. Number 2405 REPRESENTATIVE PORTER asked if the federal act prevented cherry picking? 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 player. 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 facilities. 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 Alaska. 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 technology. 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, however. 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 consider. 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 services. Number 1535 CHAIR JAMES asked Mr. Garner if he wanted competition in local areas? 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 Committee. 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 Committee. 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. HB 434 - UNCLAIMED PROPERTY The next order of business to come before the House State Affairs Committee was HB 434. CHAIR JAMES announced HB 434 and HCR 25 would be heard today but HB 354 would not be heard until Tuesday, March 5, 1996. CHAIR JAMES called on Bob Bartholomew, Department of Revenue, to present HB 434. Number 0615 BOB BARTHOLOMEW, Deputy Director, Central Office, Income and Excise Audit Division, Department of Revenue, said HB 434 addressed the unclaimed property program. The objective was to improve the program. This was the first revisit of the program, he explained, for both the state and the businesses it affected. He said the workload grew every year, and part of the legislation reduced the workload in-order-to continue to operate the program. He explained the statutes placed the state as the custodian of unclaimed property and was in charge of finding the owner. If the owner was not found, he stated, the proceeds went to the general fund. He further said HB 434 defined a mutual fund as other property so businesses could turn it over to the state as unclaimed property. The bill also clarified the combined reporting requirements, and unified the small property value to read $100 to reduce administrative workload and duplication. The bill also required the division to advertize one time per year saving about $20,000. The bill also required fee finders to disclose the value of the found property of which 90 percent was returned to the owner and 10 percent retained. MR. BARTHOLOMEW explained the amendments to HB 434 based on an audit. He explained the amendment to Section 1 clarified the language. The amendment to Section 5 changed the publication duplication. The amendment to Section 10 added the word "warrants" for clarification. He called the amendments technical. He announced several insurance companies, banks and the court system supported the amendments to HB 434. Number 1150 REPRESENTATIVE PORTER asked Mr. Bartholomew if HB 434 affected HB 295, allowing the municipalities to deal directly with their own property? Number 1165 MR. BARTHOLOMEW replied the amount of property concerned in HB 295 was small and would not affect the unclaimed property program. He explained HB 295 addressed property claimed in the law enforcement agencies as a result of an arrest, so it would not fall under the unclaimed property program. CHAIR JAMES called on the first witness via teleconference in Fairbanks, Sybil Skelton. Number 1260 SYBIL SKELTON expressed her personal opinions regarding HB 434. She stated she did not know if her oldest son was dead or alive and alleged he would be unclaimed property and feared he would be kept from her. In conclusion, she stated she was tired of being left out and treated like she did not know anything. Number 1378 REPRESENTATIVE ROBINSON moved to adopt Amendment 1 9-GH2025.A. Hearing no objection, it was so adopted. Number 1408 REPRESENTATIVE ROBINSON moved that CSHB 434(STA) move from the committee with individual recommendations and attached zero fiscal note. Hearing no objection, it was so moved from the House State Affairs Committee. HCR 25 - 381ST INTELL.SQUADRON DIVISION DAY The next order of business to come before the House State Affairs Committee was HCR 25. CHAIR JAMES called on George Dozier, Legislative Assistant to Representative Pete Kott, to present the sponsor statement. Number 1477 GEORGE DOZIER, Legislative Assistant to Representative Pete Kott, said HCR 25 declared May 15, 1996 as the 381st Intelligence Squadron Logistics Division Day. The Division was stationed out of Anchorage and had received numerous awards. He cited the Air Force Outstanding Logistics Plans and Program Award, the Lieutenant General Leo Marquez Award, the General Thomas P. Gerrity Award for Outstanding Logistics, and the Honorable Dudley Sharp Award. He said the Division was outstanding in its field and deserved a day to set aside for it. Number 1530 REPRESENTATIVE WILLIS moved that HCR 25 move from the committee with individual recommendations and attached zero fiscal note. Hearing no objection, it was so moved from the House State Affairs Committee. Number 1555 REPRESENTATIVE PORTER said contrary to his military experience "military" and "intelligence" were not contradictory terms. Number 1569 ADJOURNMENT CHAIR JAMES adjourned the House State Affairs Committee at 10:48 a.m.