Legislature(1997 - 1998)
03/26/1998 08:19 AM House STA
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
March 26, 1998
8:19 a.m.
MEMBERS PRESENT
Representative Jeannette James, Chair
Representative Ivan Ivan, Vice Chairman
Representative Joe Ryan
Representative Kim Elton
Representative Mark Hodgins
MEMBERS ABSENT
Representative Ethan Berkowitz
Representative Al Vezey
COMMITTEE CALENDAR
HOUSE BILL 416
"An Act relating to competition in the provision of local exchange
telephone service; and providing for an effective date."
MOVED CSHB 416(STA) OUT OF COMMITTEE
(* First public hearing)
PREVIOUS ACTION
BILL: HB 416
SHORT TITLE: LOCAL EXCHANGE TELEPHONE SERVICE
SPONSOR(S): REPRESENTATIVES(S) KELLY, Therriault, Mulder
Jrn-Date Jrn-Page Action
2/16/98 2332 (H) READ THE FIRST TIME - REFERRAL(S)
2/16/98 2332 (H) STATE AFFAIRS, FINANCE
2/18/98 2367 (H) COSPONSOR(S): THERRIAULT
3/11/98 2604 (H) JUD REFERRAL ADDED
3/12/98 (H) STA AT 8:00 AM CAPITOL 102
3/12/98 (H) MINUTE(STA)
3/26/98 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
SAM COTTEN, Chairman
Alaska Public Utilities Commission
1016 West Sixth Avenue
Anchorage, Alaska 99501-1963
Telephone: (907) 276-6222
POSITION STATEMENT: Provided information and answered questions
on HB 416.
REPRESENTATIVE PETE KELLY
Alaska State Legislature
Capitol Building, Room 411
Juneau, Alaska 99801
Telephone: (907) 465-2327
POSITION STATEMENT: Sponsor of HB 416.
ROGER EVANS, Owner
Computer Cache and
Northern Information Systems, Incorporated
505 Old Steese Highway, Suite 112
Fairbanks, Alaska 99701
Telephone: (907) 457-2665
POSITION STATEMENT: Testified in support of HB 416.
TOM MEADE, Manager
Regulatory Affairs
Telalaska, Incorporated
2131 Abbott Road
Anchorage, Alaska 99511
Telephone: (907) 267-4149
POSITION STATEMENT: Testified in opposition to HB 416.
JIM HAYES, Mayor
City of Fairbanks
800 Cushman Street
Fairbanks, Alaska 99701
Telephone: (907) 459-6772
POSITION STATEMENT: Testified in support of HB 416.
JIM ROWE, Executive Director
Alaska Telephone Association
201 East Fifty-sixth Avenue, Suite 114
Anchorage, Alaska 99518
Telephone: (907) 563-4000
POSITION STATEMENT: Testified in opposition HB 416.
GREG BERBERICH, Vice President
Corporate Services
Matanuska Telephone Association
Pouch 5050 South Chugach
Palmer, Alaska 99645
Telephone: (907) 745-3211
POSITION STATEMENT: Testified in opposition to HB 416.
RICK SOLIE, Member
Fairbanks North Star Borough Assembly
4437 Stanford Drive
Fairbanks, Alaska 99709
Telephone: (907) 474-8084
POSITION STATEMENT: Testified in support of HB 416.
DANA TINDALL, Senior Vice President
Legal and Regulatory Affairs
General Communications, Incorporated
2550 Denali Street, Suite 1000
Anchorage, Alaska 99503
Telephone: (907) 265-5611
POSITION STATEMENT: Provided information and
answered questions on HB 416.
ACTION NARRATIVE
TAPE 98-42, SIDE A
Number 0001
CHAIR JEANNETTE JAMES called the House State Affairs Standing
Committee meeting to order at 8:19 a.m. Members present at the
call to order were Representatives James, Ivan, and Elton.
Representative Ryan and Hodgins arrived at approximately 9:05 a.m.
CHAIR JAMES noted they didn't have a quorum, but since people are
waiting to testify, she began the meeting.
HB 416 - LOCAL EXCHANGE TELEPHONE SERVICE
CHAIR JAMES announced HB 416, "An Act relating to competition in
the provision of local exchange telephone service; and providing
for an effective date," sponsored by Representative Kelly.
CHAIR JAMES mentioned she received a copy of the transcript from
APUC's (Alaska Public Utilities Commission) meeting which was held
in Anchorage yesterday.
Number 0007
SAM COTTEN, Chairman, Alaska Public Utilities Commission, testified
via teleconference on HB 416. He noted that the full transcript of
the Alaska Public Utilities Commission meeting will be ready
tomorrow. He said the intent of the commission was to formalize a
recommendation which is based on the nature of the comments that
were in the material that he faxed.
MR. COTTEN asked if he was correct in assuming that you wanted to
hear what the commission's position was.
CHAIR JAMES replied yes.
MR. COTTEN said, "The bottom line is that the commission would
recommend to the legislature that you wait until next year on
legislation such as this. We are, we believe on track to produce
the regulations that are discussed in the legislation, we've had at
least one experience with a petition to remove the rural exemption
and I think you may be familiar with that particular case. The
commission's concern is centered generally around the potential
changes to the support mechanisms that most rural phone companies
depend on greatly. We feel that, this year our efforts to produce
the regulations dealing with access, charge reform, and universal
service should advance our ability to act with greater confidence
in that area. Obviously this remains a policy call on the part of
the legislature but our recommendation is to let the process work
for at least this year, gage our success and progress, and perhaps
reconsider this again early next session."
Number 0029
CHAIR JAMES referred to Sec. 42.05.870. Competition in local
exchange service, subsection (6) and subsection (b):
(6) The commission should provide for competition in a timely
manner and should adopt regulations that eliminate impediments
to entry for local exchange carriers fit, willing, and able to
provide service.
(b) By December 31, 1998, the commission shall adopt
CHAIR JAMES referenced subsection (b) By December 31, 1998, the
commission shall. She asked, "All of those areas (1) through (6),
in the bill, are not a problem to you."
MR. COTTEN replied, "Those are again -- that's a prerogative of the
legislature to make findings. And none of them stand out to me as
particularly onerous. Number (6) does say that we should eliminate
impediments. I'm sure that could be read many different ways."
Number 0042
REPRESENTATIVE KIM ELTON asked would your further recommendation be
that, if the legislature waited until early next session, that the
date would then be changed to give you 12 months from that date.
Or would you anticipate that there would be a lesser period of time
than 10 or 11 months. The date right now is December 31, 1998.
MR. COTTEN replied his expectation is that they'll have the
regulations done this year in any event. And that the legislature
could gauge the progress that the commission has made, and the
Federal Communication Commission has made to determine whether the
legislation is even necessary. He said he wouldn't expect that
they'd ask for another 12 months to produce those regulations. His
expectation is that they're going to make good progress on them,
and hopefully finish them this year.
Number 0055
CHAIR JAMES expressed that she is concerned with the requirement by
the federal regulations that these rural areas be evaluated
individually to determine the effect on the consumer. She
indicated her other underlying concern she has with this piece of
legislation is how far it covers - and it appears it would preclude
that deliberation process by the APUC.
MR. COTTEN stated they discussed that topic at the APUC public
meeting yesterday. He said there appears to be more than one
opinion on that as well, but their read of it was that it did
affect that and took away that process. The other thing that was
discussed was the -- and the Attorney General agreed that there was
a lingering legal question as to whether, and how - if the
legislature is able to step in and make this change. And if so,
how must they do it in order to comply with federal law. There
were a couple of points that, again, seemed to have the potential
for more than one interpretation, and certainly there was a legal
question he believes remains unanswered.
Number 0075
REPRESENTATIVE PETE KELLY, Alaska State Legislature, indicated that
he was under the impression that the legal questions were resolved.
He asked if Mr. Zobel (Assistant Attorney General, Department of
Law) was present (Anchorage Legislative Information Office,
Anchorage) to perhaps address some of those.
MR. COTTEN replied he's not here at the moment -- he did appear
yesterday. Mr. Cotten mentioned Mr. Zobel outlined some answers to
questions Representative Kelly had and noted he had referred him to
Mr. Zobel for that purpose.
MR. COTTEN said he guesses the point remains, If the legislature is
going to act, it's a matter of - in what form. He mentioned, at
yesterday's hearing, Mr. Zobel allowed that, "Yes, there was a
lingering legal question as how that would have to happen."
Number 0083
REPRESENTATIVE KELLY said, "I guess the thing we do - is that how
we're going to act, and then it goes through the process, and that
is determined." He referenced page 2, line 9, and mentioned he may
have misunderstood what Mr. Cotten said. But if you are allowing
the APUC to make regulations ensuring universal services, what
you've done is you've given them the ability to address the impact
on the consumer. What this bill does, is it allows us to make the
policy call that Mr. Cotten was telling us about. Representative
Kelly said he thinks the APUC is very capable of engaging in
regulatory process, it needs to follow this legislation. He said
he constructed this bill in such a manner that it allows them to,
they will still be able to ensure universal services, which is on
page 2, line 9. It just gives them a deadline for the regulations
that they are already working on for the universal services. He
said he believes that deadline could be somewhat important and
reiterated that Mr. Cotten stated they'll be done with that anyway.
He explained, we saw long distance deregulated, that was the
problem - is that they weren't able to act, and it went on year
after year. It was until the legislature -- the legislature did
exactly what we're doing right now which took away the question of
competition. That was the policy call that they were sticking on.
They were trying to do what we are best at doing.
REPRESENTATIVE KELLY added he doesn't want to get into the business
of doing what they're best at doing, that's why we have a provision
in the bill for cream-skimming, that's why there's a provision in
the bill to protect universal services. He indicated that what
we're left with is that we've made the policy call and that
competition is good. And then we go to the APUC and we say, "You
still have the regulatory authority to determine if the price
structure. You have the regulatory ability to determine if someone
is fit, willing and able, if they want to come into this
competitive environment. You have the ability to determine whether
it is technologically feasible. Whether cooking up will even work,
or if it is maybe so expensive that it'll be an economic burden on
the incumbent carrier." Yes it is.
Number 0107
REPRESENTATIVE KELLY gave an example, he said if you had someone
who had a copper system - copper wires, and you had someone else
with fiber optics, the APUC could make the determination. He noted
that we're not going to force that (indisc.) carrier to hook up to
the fiber optics - it's just going to be so expensive, it's going
to break that company. He said he believes we still leave the
regulatory questions in the control of the regulatory body.
REPRESENTATIVE KELLY said, "I think what this bill asks for, is
give us the policy making decision to say competition is good so
that Fairbanks and Juneau -- and I don't think, with the bill as it
is - with the 1,500 line cutoff it's going to impact the really
small companies. Well, it's not. But it's going to allow some of
the larger communities to get into the electronic age, to allow us
to access to some of the services that we're currently being
denied. ... I have to admit that I haven't had time to read these
over to know exactly what these services are and said. But I look
at Fairbanks, on the list of services, and I see that there's a
whole lot of NA's (not applicable), and there should be backup
paper to tell you what those services would mean to the consumers
of Fairbanks and Juneau, and other communities as well."
Number 0122
REPRESENTATIVE KELLY pointed out that it's keeping us out of the
electronic age. He said, "And I think it is exactly - all the
arguments we hear against this bill are the same arguments that we
heard with the long distance, that it's going to drive prices up.
In fact, what we've seen with long distance is that the prices have
gone down. It's going to hurt services, in fact we have more
services, and the people are thriving in a competitive environment.
Not only the consumers are thriving in a competitive environment,
but the companies that are in that market are thriving as well."
REPRESENTATIVE KELLY concluded he believes some of the testimony
overstates what could potentially be the downside. He said people
had some legitimate concerns, they came to his office saying,
"We've got a problem with this in the bill and here's our problem."
He immediately went to drafting and said, "Change that because it's
a legitimate concern." And as a result of those discussions,
universal services ensured cream-skimming is not allowed, and local
municipal regulatory bodies are held intact. Those were the three
biggest complaints that he heard, and they've been addressed in the
bill.
CHAIR JAMES asked him to point them out.
Number 0135
REPRESENTATIVE KELLY referred to page 2, line 9. It allows the
regulatory body to make the determination on universal services.
No one's taking that away from them.
(1) regulations ensuring universal service and providing for
access charges that are compatible with full competition in
the provision of local exchange telephone service using all
methods allowed by 47 U.S.C. 251 - 276 (Telecommunications Act
of 1996); and
CHAIR JAMES asked where does it eliminate (indisc.).
REPRESENTATIVE KELLY referenced line 22.
In accordance with 47 U.S.C. 253(f), the commission may
require the applicant to offer service throughout the study
area of the existing local exchange telephone utility.
REPRESENTATIVE KELLY explained that they can't come in and take the
hospital or the government agency, they've got to take on the whole
system. If you can't compete on the whole system, you can't
compete.
Number 0142
REPRESENTATIVE KELLY referred to page 2, line 27, subsection (d):
A local exchange telephone company, other than a municipally-
owned local exchange telephone company, that is exempted in who or
in part from complying with all or a portion of this chapter may
not be regulated by a municipality under AS 29.35.060 or 29.35.070.
REPRESENTATIVE KELLY said, "If I had to explain that, bit by bit,
it'll be a little tough. It applies mostly to Ketchikan. They
have the unified municipal utilities, and they were afraid that the
regulatory authority would be taken away from them if this bill
passed. This was to address them - they said it does."
Number 0147
CHAIR JAMES noted she wants to make it perfectly clear that she is
supportive of this concept and understands that getting into the
competition with long distance was a much harder job than this is.
But, she is not totally convinced that the same situation exists
now - on this issue as it did then. She said, "I'm not sure, even
if we pass this, that it's going to speed up the process even all
that much. ... And if that was the case, why am I concerned. But,
I just have this nagging concern that there are some issues that
haven't been addressed, and I don't know what they are. And so,
therefore, that is part of my hesitancy. I have no problem with
moving this bill out, when we have enough votes here to move it
out. But, I just want to be sure that those concerns are heard and
that they're part of the end all process that we have here. And I
certainly am looking forward to having better service. I know that
in comparing some of these prices, on this comparison here, that it
might be very well to note that we have universal services funds
subsidy in Fairbanks, that they don't have in Anchorage. And it
looks like most of our prices of normal universal services are the
same. So we're enjoying the subsidy because we're a rural area.
I don't want to lose that in any way, shape or form. And I'm also
interested, and I believe that the federal government is in the
process of redefining universal services. And I hope they do. I'm
supportive of that. And I want to be sure that we don't do
anything that precludes us from having even a better description of
what universal services ought to be in this technological age that
we're coming into. I understand you're comfortable with this. You
have to understand I'm not. And it has nothing to do with the fact
that we don't have the same basic belief and philosophy."
Number 0169
REPRESENTATIVE KELLY said he believes they do have the same basic
belief and philosophy because he spoke with her a number of times
on this issue and many others. He said, "I think, many times a law
is passed there are going to be some questions. I think the
federal communications arena is one where we can say there's always
going to be questions. We have technology that is changing - right
now there's someone in a lab changing how we think about
telecommunications and, as a result, the federal government is
probably going to have to address that. And I think it is going to
be in a state of flux from here till our kids are grown. So I
think if we wait to make sure that the environment stabilizes -
that the federal government finds themselves in it, I don't know if
that will ever happen."
REPRESENTATIVE KELLY told Chair James he thought she made a good
point on the long distance services and drawing too tight a
comparison between the long distance service and this service. He
said, "I don't say it's necessarily the same thing. You're right,
it was a bigger battle, it was more complicated, it was also the
first step so it was very difficult. It makes this bill a little
easier to write for one thing. But the fact is, all I'm really
saying on the comparison with the long distance is that the
arguments are the same. We have two things that are similar, maybe
not exactly alike, but they are similar and the arguments are the
same. Those arguments didn't prove out, and we find too that the
arguments (indisc.), but also the process is the same that it was
taking time and that their regulatory body is very capable of
making regulatory decisions. I think Ms. Hanley, and Mr. Cook and
Cotten, and ... all the APUC members, I think they're capable of
coming up with the regulations that this bill leaves them with.
But again, it's a policy call and what we've done, is we've said,
'We want you guys to make a policy call here.' They're not
equipped to do that, and they weren't equipped back then in the
long distance fight either. And finally, when somebody stepped
forward and said, 'Here's a policy call we'll make for you guys, it
was able to have them. And I think that's what we're trying to do
here. And I agree with you, there's always room for question about
the future of a bill like this, particularly because of the
environment that is in such a state of flux, the federal
government. You make a good point, but it's changing and I don't
think it's going to stop changing."
Number 0193
ROGER EVANS, Owner of Computer Cache and Northern Information
Systems, Incorporated, testified via teleconference in support of
HB 416. He noted his business is a local computer retail and
computer network services corporation. Mr. Evans provided the
following testimony:
"My support for HB 416 started several years ago when our local
exchange carrier, in some of their ratings, would charge more for
a second phone line than my first phone. If you wanted two, you
have to pay more for the second one. Their reasoning for that was,
if you need two lines, you must use it a lot so we'll have to
charge you more. In the real world, you lose a lot of customers
with explanations like that and with pricing practices like that.
"The original scope of a local exchange carrier is much different
then the needs of today's phone systems. Back then, phones meant
the voice, multiple voice line, PBX (private branch exchange)
consoles and phone switches - a fairly simple technology that was
changing, but it was not changing at break neck speeds. There were
so many new technologies that one company could not keep up with
all of them.
"Today whole businesses depend on voice and data infrastructures
for many or all of their business functions, and you have only one
choice to get you business going or to keep it going. You can only
hope that the one company has the technology, the price, and the
level of service that you need. This is too big of a risk to take
because, if that one company is not right for you, then you have to
be right for them. You have to pay for them to retro fit a
technology that they offer to fit your needs, and you have to pay
whatever they charge. Today most companies and whole industries
place large portions of their infrastructure on their voice and
data systems. These systems are constantly changing and expanding,
and like all expenses costs must be controlled.
"Many new and some old technologies have not been brought to
Fairbanks, ISDN (integrated systems digital network), Fractional
'T-1', 'OC-3' [both different measurement of transmission speed] to
name a few, are technologies used in Anchorage and most areas of
commerce throughout the United States. With competition in price
and product, these services would have been available here giving
Fairbanks businesses the infrastructure that they need to complete.
Health Care Finance and Retail are just a few of the industries
that depend on voice and data infrastructures to provide acceptable
levels of service today and tomorrow.
Number 0212
"We need competition in our local phone services not just for a
choice in like services, but for a choice in technologies, to have
the option to choose a technology that one company decided not to
offer or to choose a different company for a different level of
service and customer support. Having one company that data
services must be channeled through is an unfair advantage in a very
competitive field. Fairbanks has a lot of information technology
advancement growth at this time. The longer we wait, the harder it
is for these companies that are competing on fringe services like
cabling, high speed data configurations and network configurations.
All these peripheral services can be unfairly won by a local
exchange carrier through delays in hooking up services for
competing companies and wining these peripheral services by
supplying a more favorable time line for implementing the whole
data system. I urge support for HB 416."
Number 0221
TOM MEADE, Manager, Regulatory Affairs, Telalaska, Incorporated,
testified via teleconference in opposition to HB 416. Telalaska
owns Mukluk Telephone Company and Interior Telephone Company which
operate approximately 20 Bush exchanges from Little Diomede to Fort
Yukon, to Dutch Harbor, to Port Lions.
MR. MEADE said, "I'm here today to speak against HB 416. Yes, we
believe that it's impossible to ensure universal service until we
know how much funding we're going to get through the federal
mechanisms. Until the FCC (Federal Communications Commission)
finishes its rule making, you simply can't ensure that universal
service is going to be accomplished if you put regulations in place
before that. I think, if you pass this bill, you've given the APUC
an impossible task. I know you've discussed this at some length.
We believe that, because there is a company by company
determination in the Federal Telecommunications Act, simply ruling
that competition is in the public interest in all places over 1,500
lines is illegal."
MR. MEADE continued, "And furthermore, one of our concerns is cream
skimming, and we keep hearing that the bill has been corrected to
prevent that. We don't believe that it has at all. If you read
the language of the bill, it simply says, 'using all methods
allowable by 47 U.S.C. 251-276.' That includes -- in order to
provide service to everyone through the service area, that includes
service through the local exchange carrier that's already in
existence. That means, essentially that GCI can continue to cream
skim as they've been doing, and then meet the requirements of the
bill simply by using the facilities and local exchange carrier.
That will essentially put us into a death spiral. And, GCI, in one
of their hearings, on the PTI (Pacific Telecommunications,
Incorporated) rule exemption, said, 'That's okay because we can
simply provide service when they go out of business by buying their
assets at the bankruptcy sale.' So, I don't believe that's good
telecommunications policy for the state."
Number 0244
MR. MEADE concluded, "We keep hearing about the IHC (interexchange
carrier) example - the competition in the interexchange market.
While, with competition in the interexchange market did was drive
the rates toward cost - toll was subsidizing local. When
competition came in, competition cream skimmed the toll and drove
local rates up. I was with ATU when we put in a 50 percent rate
increase simply as a result of competition in the interexchange
market. I do not believe this bill is in the public interest, I
don't believe that it's legal, and don't believe that it is
necessary."
Number 0251
JIM HAYES, Mayor, City of Fairbanks, testified in support of HB 416
via teleconference. He said, "I wish to offer my support for HB
416 and urge its passage from this committee. Fairbanks sold the
utilities going through the APUC process based on the argument that
the sale would result in lower prices and increased services. Now
we would like to see the bill pass because it will help make this
come true. We have already made good on this sale. HB 416 will
allow us to make good on the promises be made about lower prices
and increased services. The advances happening in the world of
electronics awaits the interest of competition who have the
incentive to invest in these new services, HB 416 important to
prevent Fairbanks residents from losing out to other communities
and the opportunities that the information age will bring."
Number 0260
JIM ROWE, Executive Director, Alaska Telephone Association,
testified in opposition to HB 416 via teleconference. He said,
"You've heard my comments, somewhat at length in a prior meeting
and I'll not belabor those points today. But I assure you that the
Alaska Telephone Association still opposes HB 416."
MR. ROWE said, "I want to thank you, Madam Chair, particularly for
the concern and caution you've voiced today about this bill. I
think it's very appropriate. I would also like to say we've spent
a lot of time in both meetings talking about the speed of the APUC
moving. Among the states, the Alaska commission is in the
forefront of complying with the telecommunications Act. And in
being the forefront doesn't mean they're always putting competition
in anywhere it's asked for. It means that their concern,
considering and moving, and they have been doing that. However,
the speed, the timetable, is red herring. What this bill does is
say that the public interest will not be a consideration, the
ramifications of having unbundled competition anywhere in the state
shall not be a consideration. The impact on the consumers will not
be a consideration when you make that determination. It says, 'You
will have unbundled competition anywhere, that a competitive entity
has to have it.'"
Number 0268
GREG BERBERICH, Vice President, Corporate Services, Matanuska
Telephone Association, testified in opposition to HB 416 via
teleconference. He noted he has already testified before the
committee and stated they are opposed to this bill.
MR. BERBERICH said, "We believe that the policy issue has been
decided with the Telecommunications Act, competition is the
reality, something that we're all going to face. I think, Madam
Chair, you hit the nail on the head when you said that the issue
really is in the support mechanisms and those determinations have
yet to be made at the FCC level. I believe it would be very
premature for the legislature to force the APUC in a position where
it couldn't make those considerations. And we believe that this
House bill is not in the best interest of the public. We think the
commission is working diligently and we believe that they will come
out with regulations this year."
MR. BERBERICH said he believes there is a legal question - whether
this state legislature, in this particular bill, is doing the right
thing or whether there would be a legal challenge to it.
Number 0283
RICK SOLIE, Member, Fairbanks North Star Borough Assembly,
testified in support of HB 416 via teleconference. He said, "I
worked for Senator Frank during the passage of the long distance
telephone competition bill that was passed in 1990, Chapter 93, I
believe it was, SLA 1990. And I guess what I hear, much of the
arguments today are very similar to the ones that we heard a few
years back. I support this legislation because I believe the
benefits of competition will approve in the local exchange market
to Fairbanks residents and others as it has in the interexchange
market. It is a philosophical decision, but I think you can help
base that on empirical evidence. The benefits of competition, are
lower rates and better service. We heard from Mr. Evans before -
talking about some of the technological advances that he would like
to see. The mayor articulated quite well our community's desire to
see private oriented telecommunications services here in the
community and that the community is expecting some of these things
to occur."
MR. SOLIE continued, "And finally, if you remember, there was an
initiative about seven years ago in which the people said they
wanted to have phone competition. So I think that there is a much
imperical evidence that can indicate that we would not have what
the doomsayers would say. They said seven years ago that prices
would go up, that service would go down, and we'd have this
downward spiral, we would loose a federal subsidy, and life would
be terrible. Well, I think that has not been the case, I think
that clearly the opposite has happened. My rates have come down,
my service has gone up and I think that overall the public has
benefited from long distance competition. There's no reason this
can't happen in the local exchange market in communities with more
than 1,500 lines. And I think that this legislation would give the
APUC a power to set up the necessary safeguard so that there
wouldn't be concerns over cream skimming and things of that nature.
That is what the APUC is enable to do is to oversee some of that.
But I think it's appropriate for the legislature to make this
policy call."
MR. SOLIE said, "And I'll, I guess at the risk of sounding
redundant, talk a little bit about seven years ago. The APUC at
the time said they were dealing with competition and that they
wanted more time. Well, I don't' think at that point they were set
up to deal with competition and make that policy call. It wasn't
until the legislature acted that they followed through with the
regulations and such to implement competition. And so I think
we're in a similar situation today and I would urge you to pass
this legislation, let the public enjoy the benefits of competition
at a local level. The notions of subsidies, frankly the new
competitors in the long distance are providing service without
those subsidies and we need to be able to do that, and I think - to
the extent that we can eliminate cross subsidies, between the
interexchange and the local exchange market, that will provide a
better mechanism for service as well."
Number 0319
DANA TINDALL, Senior Vice President, Legal and Regulatory Affairs,
General Communications, Incorporated, came before the committee.
She noted she will respond to the other testimony that's been
offered today since she has already provided her direct testimony
at a previous committee meeting.
MS. TINDALL said, "I would first like to address Chairman Sam
Cotten's testimony on the need for more time, and the fact that
there is no need for legislation. In response to that I would like
to say that the Telecommunications Act of 1996 was passed over two
years ago. In August of 1996, the APUC issued an omnibus order
detailing the regulations that they would need to put out to be in
compliance with the Telecommunications Act of 1996. Almost two
years later, out of some ten different rule making and regulation
proceedings, to my knowledge, they have concluded one. They have
argued to the FCC that the FCC should complete the works of the
larger Bell operating companies for access charge reform before
they get to the rural telephone companies. This further delays FCC
Acts as charge reform in Alaska. The local telephone companies
argued the same. The fact that the APUC is using an excuse as to
why we can't have competition in local telephone services that they
have not completed their work in rule making and regulation
proceedings is a travesty. It is the regulatory and bureaucratic
catch 22."
MS. TINDALL continued, "The legislation before you today does not
impact the APUC's deliberation on consumer impacts. The
legislation before you today does not decide the issue, it
establishes a procompetitive guideline, but it does not decide the
issue of whether competition is in the public interest. That has
already been decided. What it does is it establishes that the
legislature believes competition is a good idea and that the APUC
should get on with it, that the APUC should finish its work. The
APUC should remove the excuses it itself has used to hold up
competition. The APUC should enact regulations to protect
universal service for all consumers throughout the state. This
does not remove the APUC's ability to determine impact on
consumers, it enhances it, it requires them to do it."
Number 0338
MS. TINDALL continued, "I'd like to address an issue that came up
when Representative Kelly was testifying and, Madam Chair, I
believe you made the statement,' that the long distance fight on
competition was a bigger fight.' And that's true. And that it
true for one reason, that's because the subsidies were bigger in
that fight. Alascom was receiving $100 million per year from AT&T
(American Telephone and Telegraph). That was not a fight about
competition that was a fight about retention of subsidies. The FCC
finally put out an order saying they're beginning to believe that
the problem in Alaska is not a high-cost problem but rather a high-
profits problem. When the FCC finally terminated the $100 million
subsidy, per year to Alascom, Alascom decided it did not want to be
in the long distance business any more."
MS. TINDALL stated, "There are two types of telephone companies.
There are competitive telephone companies and there are companies
who gained the subsidy system - PTI was a subsidy gainer. Since
they no longer had a subsidy, they chose to sell their company to
AT&T. In a competitive environment, in long distance, and it was
sold in 1994, AT&T has managed to reduce the internal subsidy
flowing from the Lower 48 to Alaska to almost zero. They have cut
back their employees from almost over 700 to 350, they're providing
service at lower costs and better services today, and their
revenues are just as fine."
MS. TINDALL said, "I submit to you that the problem today is the
same. This is a retention of subsidy problem. We're not arguing
that the subsidies be taken away. We're not arguing that anybody
go out of business. GCI believes very firmly the subsidies are a
bad idea when they're not needed, but we're not taking that battle
on. The PUC (public utility commission) has before it several
proposals for universal service system that would continue to
subsidy and allow for the benefits of competition. What is the
problem? The problem is the same problem Alascom has. When you
have a competitor who's providing service without a subsidy, it
starts to look like that subsidy's no longer necessary. And people
start to talk about making it go away, they start doing things like
making subsidies explicit and the jeopardizes them further. We had
the same problem here today, but again, GCI is not attacking the
subsidy problem. The reduction and need for subsidies is an
inherent spinoff of the competitive process. People have to get
their cost down, they bring in new technologies - and costs go
down, service improves, consumers buy more (indisc.) and subsidies
are no longer necessary. That is an inherent spin off of the
process. But GCI is not attacking that today. We believe today
you can have the same subsidies and you can have the benefits of
competition."
Number 0363
MS. TINDALL concluded, "In summary, I'd like to say to you today
that there has been a lot of claims laid on the table of what will
happen if there's competition. Rates will go up, service will go
out, there will be cream skimming. All of those issues have been
addressed in this bill. The APUC has been given full authority to
deal with all of those issues. What hasn't been fully brought out
is what will happen if there won't be competition. In the two
pages that Representative Kelly gave to you, as you can see, there
is not advanced technical services offered in Fairbanks. We know
what we have under a monopoly system. It's not perfect by a long
shot. We can move to a better world under a competitive system and
put into safeguards to protect everybody. It is a philosophical
decision and it is a decision the legislature should make."
Number 0373
CHAIR JAMES thanked Ms. Tindall and thanked GCI for being the
aggressive company that they have been. She said, "Or we wouldn't
be where we are today, you wouldn't even be sitting there asking
for this if you hadn't gone this task before. And I recognize
that, and so for that we're all thankful. And they certainly have
contributed an awful lot to the good services and the prices that
we have. And my hesitancy has nothing to do -- I would jump right
on that bandwagon in a second if I didn't have all these other
concerns. And it's very difficult for me to even put my thumb on
exactly what they are."
CHAIR JAMES noted she is willing to move the bill out, but there
isn't a quorum. Chair James was informed members would be here
shortly. She asked for a brief at ease at 9:05 a.m.
CHAIR JAMES called the meeting back to order.
Number 0384
REPRESENTATIVE JOE RYAN referred to page 2, line 9, subparagraph
(1) of (b). He asked, "On the universal service access charges, is
that going to affect any way the program the federal government has
for subsidy for rural areas in Alaska for schools, libraries and
telecommunications?"
MS. TINDALL replied currently we do not have a state universal
service system for local telephone companies. We have access
charge pooling and that is all. If the federal universal service
funds are reduced then the state will kick in with its own
universal service program and make up the difference. What you're
hearing are the local telephone companies and the APUC are waiting
to hear whether those funds will be reduced and whether we need to
kick in - and all you have to do is change the amounts of the
universal service system if they are kicked in. GCI is advocating
that there should be a state universal system put in place now, and
that both amounts can be changed then if the federal amounts get
reduced, but no, the two work hand in hand to keep the whole. She
asked if that answered his question.
Number 0400
REPRESENTATIVE RYAN responded, "Kind of. My understanding is GCI
has been setting up there -- there's and application period which
is in progress now for the rural subsidy for those three things I
mentioned, telemedicine, schools and libraries. And part of the
plan is you have to go to a provider who will provide Key-1 line to
the area and then you have to say what the charges will be from
that provider, and when service can be installed, and what the on-
going is, and the FCC has set aside, out of $2.7 billion, some
'piddley' amount, $100 million, $400 million, or something like
this, throughout the country to provide a parody for. And
Anchorage is the only one that is a core city - over 50,000, so the
rest of the state's going to get a 90 percent subsidy. And I guess
perhaps I didn't explain that law the first time. I want to know
how..."
TAPE 98-42, SIDE B
Number 0001
REPRESENTATIVE RYAN made a motion to move HB 416, with individual
recommendations and attached fiscal note.
REPRESENTATIVE IVAN IVAN objected.
Number 0004
CHAIR JAMES asked for a roll call vote. Representatives Elton,
Ryan, Hodgins and Chair James voted to move HB 416. Representative
Ivan voted against it. Therefore, CSHB 416(STA) moved from the
House State Affairs Standing Committee by a vote of 4-1.
ADJOURNMENT
Number 0011
CHAIR JAMES adjourned the House State Affairs Standing Committee at
approximately 9:17 a.m.
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