Legislature(2003 - 2004)
02/25/2003 01:30 PM Senate L&C
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* first hearing in first committee of referral
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ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
February 25, 2003
1:30 p.m.
MEMBERS PRESENT
Senator Con Bunde, Chair
Senator Ralph Seekins, Vice Chair
Senator Gary Stevens
Senator Bettye Davis
Senator Hollis French
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 47
"An Act extending the termination date of the Board of Nursing."
MOVED SB 47 OUT OF COMMITTEE
SENATE BILL NO. 48
"An Act extending the termination date of the Board of Certified
Direct-Entry Midwives."
MOVED SB 48 OUT OF COMMITTEE
SENATE BILL NO. 72
"An Act extending the termination date of the Regulatory
Commission of Alaska; and providing for an effective date."
HEARD AND HELD
PREVIOUS ACTION
SB 47 - No previous action to consider.
SB 48 - No previous action to consider.
SB 72 - No previous action to consider.
WITNESS REGISTER
Ms. Amy Seitz
Staff to Senator Wagoner
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on SB 47 and SB 48 for the
sponsor.
Mr. Rick Urion, Director
Division of Occupational Licensing
Department of Community & Economic Development
PO Box 110800
Juneau, AK 99811-0800
POSITION STATEMENT: Supported SB 47 and SB 48.
Ms. Nancy Sanders, Chair
Board of Nursing
Department of Community & Economic Development
PO Box 110800
Juneau, AK 99811-0800
POSITION STATEMENT: Commented on SB 47 and SB 48.
Ms. Pat Davidson
Legislative Audit Division
Alaska State Legislature
PO Box 113300
Juneau, Alaska 99811-3300
POSITION STATEMENT: Commented on audit of SB 47, SB 48 and SB
72.
Ms. Kaye Kanne, Executive Director
Juneau Family Birth Center
3225 Hospital Dr.
Juneau AK 99801
POSITION STATEMENT: Supported SB 48.
Commissioner Will Abbott
Regulatory Commission of Alaska
701 W 8th Ave.
Anchorage AK 99501
POSITION STATEMENT: Supported SB 72.
Mr. Wesley E. Carson
Alaska Communication Systems
600 Telephone Ave.
Anchorage AK 99503
POSITION STATEMENT: Opposed SB 72.
Ms. Marie Darlin, Coordinator
Capital City Task Force
AARP
Juneau AK 99801
POSITION STATEMENT: Supported SB 72.
Mr. Eric Yould, Executive Director
Alaska Rural Electric Cooperative Association (ARECA)
703 West Tudor Road Number 200
Anchorage, Alaska 99503
POSITION STATEMENT: Commented on SB 72.
Ms. Dana Tindall, Sr. Vice President
Legal, Regulatory and Governmental Affairs
GCI
2550 Denali Street Suite 1000
Anchorage, AK 99503
POSITION STATEMENT: Supported SB 72.
Mr. Mike Felix, President
AT&T Alascom
210 E. Bluff Drive
Anchorage AK 99501
POSITION STATEMENT: Commented on SB 72.
ACTION NARRATIVE
TAPE 03-6, SIDE A
SB 47-EXTEND BOARD OF NURSING
SB 48-EXTEND BOARD OF MIDWIVES
CHAIR CON BUNDE called the Senate Labor and Commerce Standing
Committee meeting to order at 1:30 p.m. and announced SB 47 to
be up for consideration. All members were present.
MS. AMY SEITZ, staff to Senator Wagoner, sponsor of SB 47, said
the purpose of SB 47 is to extend the sunset date of the Board
of Nursing from June 30, 2003 to June 30, 2011. She explained:
The Board of Nursing was established to insure the
protection of the public's health, safety and welfare.
The Board accomplishes this by setting a minimum of
education and experience an individual needs to become
a licensed professional and also by investigating any
complaints against these professionals. The Division
of Legislative Audit reviewed the board and concluded
that due to their success in carrying out these
responsibilities, the termination date should be
extended until the year 2011.
CHAIR BUNDE said the Division of Legislative Budget and Audit
(LBA) made two recommendations: to develop procedures to notify
the Board of Pharmacy of changes in the status of prescription
authority to various nursing licensees; and to develop a self-
evaluation monitoring check list for organizations that utilize
certified nursing aide training programs. He asked if those
recommendations had been addressed.
MS. SEITZ replied that the Board is working on them now.
SENATOR FRENCH asked if those two recommendations would be the
subject of later legislation.
MS. SEITZ replied that she thought so.
MR. RICK URION, Director, Division of Occupational Licensing,
said he supported both SB 47 extending the Board of Nursing and
SB 48, which extends the Board of Midwives.
CHAIR BUNDE asked if the Board was making progress on meeting
the recommendations of LB&A.
MS. NANCY SANDERS, Chair, Board of Nursing, said that both
recommendations were administrative procedures and were being
addressed by the board.
SENATOR SEEKINS asked if these are relatively minor things that
could be taken care of administratively.
MS. SANDERS replied, "Absolutely."
SENATOR SEEKINS said that it shouldn't take a meeting of the
Board of Nursing to accomplish.
MS. SANDERS agreed that it could be taken care of in-house
fairly quickly.
MS. PAT DAVIDSON, Director of LBA, agreed that no statutory
fixes are necessary. The eight-year extension of the Board of
Nursing takes into account the minor operational deficiencies.
CHAIR BUNDE said there has been an increase in applicant for
licensure. He asked if that increase would begin to address the
nursing shortage.
MS. SANDERS replied that they hope so.
SENATOR SEEKINS moved to pass SB 47 from committee with
individual recommendations and its zero fiscal note. There were
no objections and the roll was called. SENATORS DAVIS, FRENCH,
STEVENS, SEEKINS and BUNDE voted in favor therefore SB 47 was
passed from committee.
CHAIR BUNDE announced SB 48 to be up for consideration.
MS. SEITZ, Staff to Senator Wagoner, sponsor of SB 48, explained
that it extends the sunset date for the certified direct entry
midwives to 2007. They have done a good job according to LB&A.
MS. KAYE KANNE, Executive Director, Juneau Family Birth Center,
said she is a Juneau midwife and served on the Board of
Certified Direct Entry Midwives for eight years. She testified
that the board had done a good job of writing and implementing
regulations and continues to keep them up to national standards.
She pointed out that Alaska certified direct entry midwives
delivered almost 10 percent of Alaska babies last year. That
number has grown considerably since the board's inception in
1992. In the Mat-Su Borough midwives delivered 25 percent of the
babies, in Fairbanks 12 percent of the babies and in Juneau 15
percent of the babies. Nationwide, midwives attend the births of
5 percent or less. She said the midwives have delivered the
babies with really good outcomes.
SENATOR SEEKINS moved to pass SB 48 from committee with
individual recommendations and its zero fiscal note. SENATORS
DAVIS, FRENCH, STEVENS, SEEKINS and BUNDE voted in favor,
therefore SB 48 passed from committee.
SB 72-EXTEND REGULATORY COMMISSION OF ALASKA
CHAIR BUNDE announced SB 72 to be up for consideration but that
he did not intend to pass the bill from committee during this
hearing.
MR. WILL ABBOTT, Commissioner, Regulatory Commission of Alaska
(RCA), said the RCA's mission statement is:
To protect the consumer interests by insuring
affordable, reliable utility and pipeline services and
insuring that the utility and pipeline infrastructure
is adequate to support the community needs.
He was pleased that the Administration had put forward a four-
year extension for the RCA and said an extension is in the best
interests of the state.
MR. WESLEY E. CARSON, Alaska Communication Systems, told
members:
I am here today to emphasize the importance of
deferring any action to reauthorize the RCA until the
state has articulated a clear set of
telecommunications policies to guide the commission.
Although we've long advocated for the development of
such policies to guide the RCA, this issue is of even
more critical importance today. On February 20, the
Federal Communications Commission issued its long
awaited rules to revise network unbundling obligations
for competition in the local telephone market. In
making this decision the FCC took the unprecedented
step of delegating to state commissions broad
regulatory discretion that had previously been thought
to be only exercised by federal authority. This
delegation will allow the RCA to now unilaterally
determine whether incumbent local telephone companies
like ACS must continue to provide elements of their
networks to competitive carriers at below-cost prices.
As the FCC has failed to provide specific instructions
to the states, it's now imperative that the
legislature act to develop appropriate
telecommunications policies to guide the RCA in its
decision-making responsibilities going forward.
There are many telecommunications policy issues that
require your attention. The report to the Senate
appointees to the Task Force on operations of the RCA
submitted on January 30 by Darby Associates makes some
very relevant points including that the regulators
need to fashion rules designed to encourage
investment, that the RCA should review the adequacy
need and rationale for legacy regulations based on an
assumption of incumbent market power and that it is
time to explore a wide range of the less regulatory
options and find ways to substitute market forces for
regulation.
The RCA has currently demonstrated a propensity for
more regulation as the means of promoting competition
rather than allowing market forces to govern. The
Darby Report quite correctly concludes that
'application of old regulatory models based on market
conditions that no longer prevail does a gross
disservice to the people of Alaska.'
As you may know, Anchorage holds the distinction of
being the most competitive local telephone market in
the country. Although open to competition for a much
shorter period of time, Fairbanks and Juneau are
rapidly moving in a similar direction. In all three of
these markets, the RCA has unfairly mandated that the
competitor be allowed to use the ACS networks at rates
that are below our cost. The RCA has also taken an
activist role in terminating the rural exemptions that
Congress authorized to insure that the nation's
smaller markets remain viable, even terminating the
rural exemption in locations as small and costly to
serve as Nenana and Seldovia. The net result of these
regulatory actions has been to compromise the
company's ability to attract and commit capital. This
is clearly not just an ACS opinion, but rather a fact
that's becoming broadly understood. As you are aware,
the State of Alaska contracted with Bering Point,
formerly KPMG Consulting, to produce the
Telecommunications Policy Study and Assessment for the
State of Alaska, which was submitted to the Department
of Administration in November 2002. The report
concluded that the local telephone competition, which
forces incumbent local telephone companies to lease
their network to competitors at the low cost pricing,
'potentially imposes a financial burden on incumbents
and may artificially support competitors at the same
time.'
The RCA, by means of the interconnection terms it
imposed on ACS, has done exactly that. A recent press
release by Standard and Poors addresses the downgrade
of ACS's corporate credit rating as being, 'based on
competitive pressures that have materially weakened
ACS's business profile, impaired operating performance
and resulted in credit measures.'
The press release further explains, 'The rating on ACS
reflects the company's position as the leading local
exchange carrier in Alaska offset by heavy competition
in the local retail access line business due to low
regulatory, mandated, local resale loop rates to the
company's local network a narrow growth market with
limited growth opportunities and high acquisition
capital spending related debt levels.'
Clearly, we're not alone in our judgment that the RCA
has impaired ACS's ability to raise capital. The state
must assure that the RCA does not destroy the economic
viability of Alaska's largest local telephone company
providing the last mile connection to three out of
four of Alaska's consumers. ACS urges the Legislature
to move cautiously in your deliberations on the RCA
extension and to properly sequence your decisions. In
addition to a general review of the RCA structures and
procedures, Alaska's policy makers must carefully
review the commission's ongoing role in the
administration of the Telecommunications Act of 1996.
This was an important consideration at the beginning
of this legislative session. It's been magnified
considerably by the FCC's decision to delegate further
authority to the states on February 20. As the RCA
goes forward to accept the broad new delegation it has
received from the FCC, it should have the benefit of
clear policy guidance that's lacking in the FCC's
ruling.
Then once the legislature has provided that guidance,
the second matter of reauthorizing the commission can
be decided. On behalf of Alaska Communications
Systems, Mr. Chairman, I thank you for this
opportunity to comment.
CHAIR BUNDE thanked him for joining the committee.
1:52 p.m.
SENATOR SEEKINS asked if the Darby Report is available to the
public.
MR. CARSON replied that it is and that he had copies for
committee members.
SENATOR SEEKINS said he also wanted to see the
Telecommunications Policy Study and the FCC report. He asked if
ACS put a new line in his house in Anchorage and it cost $10,
whether [ACS] would be required to lease it to their competitor
for less than that.
MR. CARSON replied yes and explained that in Fairbanks they have
imbedded costs, which is an historical cost based on audited
records. For 2001, the cost was $33.51 per month per line. The
Telecommunications Act suggests that ACS look forward at what it
would cost to build that same line today (rather than taking an
historical look). Some of the FCC rules have suggested that the
commissioners look at an efficient hypothetical network. That
rate would be in the area of $36. The forward-looking economic
rate that was established for Fairbanks by the RCA was $19.19.
So, on average, when a new subdivision goes in, it costs ACS
around $30 plus to actually build and maintain that on a monthly
basis whereas must lease it to the competitor under mandate by
the RCA at $19, which gives a cost of goods sold advantage to
the competitor.
SENATOR SEEKINS asked how they could go to the capital markets
and borrow money on that model.
MR. CARSON said that is the problem they are wrestling with. The
Darby Report strongly recommends that incentives to invest
should be a key policy of the State of Alaska. If you take away
the return on investment, there is no incentive to continue to
invest.
CHAIR BUNDE asked if he thought the Telecommunications Act is
the problem and that the RCA is simply applying the law.
MR. CARSON replied that broad guidelines had been issued
relative to forward looking economic cost pricing (TELRIC), but
not specific to any one state. The states have discretion to
determine how the elements should be priced, such as the local
loop or telephone that connects a person's home or business to
the central office.
He believes that the intent of Telecommunications Act was to use
some mechanisms to open markets to competition initially. Once
it is opened, as in Anchorage where they have barely 50% of the
market, those kinds of considerations have to be changed and it
has to be a policy driven change.
SENATOR SEEKINS asked if ACS had presented that case to the RCA,
but still felt compelled to persist with that regulation.
MR. CARSON replied yes and elaborated that ACS is involved in a
proceeding to try to get new rates established for Anchorage.
SENATOR FRENCH asked how many employees ACS has.
MR. CARSON replied 1,150.
2:02 p.m.
MS. PAT DAVIDSON said Legislative Budget and Audit recommended a
two-year extension given the significant statutory changes that
were put into place last year. Most of LBA's recommendations
were the same as in prior years and were operational in nature.
A twelve-month time frame didn't give enough time for the agency
to take actions that were required to fix them. She suggested
that the RCA come to the legislature if they need some
clarification.
MS. MARIE DARLIN, AARP, stated support for SB 72. She said
people in this state need to have an RCA to go to with their
utility problems. She didn't see how the RCA could get
everything done by June 30. She concluded, "Doing nothing would
not be a good way to go."
MR. ERIC YOULD, Executive Director, ARECA, said he was also
speaking for Golden Valley, Chugach Electric, Anchorage
Municipal Light and Power, Homer and Seward. He explained that
his members decide what issues are important to them so that he
can articulate those issues to the legislature. ARECA has
different problems than the telephone utilities - more in the
area of getting the job on time and cost to the general public.
Recently, the Chugach rate case took more than two years to
complete and cost the utilities $5 million. "That's much too
much process, too much regulation, too much time."
MR. YOULD said as a result of the special session last year, his
utilities were looking to the task force that was appointed to
address some of the problems, but that task force was never put
in place. His group tried to come up with some statute changes
they could eventually give to the task force that would make the
agency more efficient and passed Resolution 3-17, which
basically calls for a one-year sunset extension. It also calls
for a white paper that further articulates some of their
concerns with the RCA and contains a one-page summary of things
they would like to see. The Governor saw the list and dealt with
some of the issues administratively. The bottom line is that
LB&A recognizes the need for a two-year extension and the
governor is asking for four. He said ARECA is willing to work
for a four-year extension if there is a sincere effort to
recognize the problems of the electric utility and adopt some of
the changes it feels are necessary. They do not want the RCA to
go away.
MS. DANA TINDALL, GCI, said she supports extending the RCA for a
full four years.
Since last year there have been two new appointments,
the legislature reaffirmed the RCA for one year with
timelines for the proceedings that had yet to play out
to see how well they've worked. Many of those
timelines, by the way, were requested by ARECA. GCI
believes that it is now time to trust the RCA to deal
with the very complex issues before it and let it get
on with business.
Telecom has very complicated issues. To get an idea of
how complicated they are, all you have to do is watch
Wall Street and watch them try to predict what the FCC
was going to do last week. Folks' stocks were rising
and falling on the predictions and most of them were
wrong. The FCC did make a decision; they did not put
out an order. I will get to that in a minute.
At any time the RCA has a large number of proceedings
before it. In our industry there are specific federal
rules and regulations that the RCA is required to
follow for the pricing of network elements that
competitors lease. There are also specific rules on
the availability of those network elements. That has
not changed under the new FCC ruling.
What the FCC did is they divided up the market. For
the very large, high capacity broad band lines (DSL)
there is a nationwide presumption that those lines
will not have to be made available any longer by the
incumbent local telephone company to a competitor. The
state commissions have 90 days to rebut this national
presumption. This is not an issue as far as I know for
our state commission because GCI does not lease any
high capacity lines from ACS, nor do we plan on it.
For the most part, we have built all of our own
network except for the last line to the home, the
copper residential and small business line and soon we
will be off that and we will be on our own cable
network. For those copper residential lines there has
been no change and the FCC did not take up pricing of
those lines.
For the switching element, the residential switching
element, the FCC has said there is a nationwide
presumption that the incumbent telephone company must
continue to make those available. These are the
guidelines Mr. Carson said are needed. They are there.
The FCC has said there is a presumption there and the
state commissions have nine months to determine
whether or not that national presumption, that burden
of proof, if you will, is consistent with what they
are experiencing in their own state. It sounds very
complicated.
GCI doesn't lease the switching element from ACS. It's
not a big issue. I'm sure the RCA will run a
proceeding. They're required to run a proceeding, but
it won't change anything about the competitive
landscape in Alaska. GCI leases the last loop to the
home for the next two to three years. After that we
will be on our own network. We are investing in
telecommunications in Alaska, in network
infrastructure.
Mr. Carson talked about the pricing of those lines.
The FCC hasn't taken that up in this proceeding. They
are scheduled to take it up next year. There are very
specific rules and regulations for how those lines are
to be priced. It's called total element long run
incremental cost (TELRIC). Economists know that the
long run is a hypothetical network, the most efficient
and least cost network and that's what those lines are
required to be priced at by the FCC. There are all
kinds of national models and all kinds of consultants
getting rich building models to do this pricing
structure. The RCA is required to run an arbitration
to determine the inputs for those models and that's
all. Other than that, they are required to price at
TELRIC. It's all very complicated; it's a complicated
industry. It would be difficult, I think, for the
legislature to try to stand in the place of the RCA
and try to make those decisions itself. We have to
have a state commission to make those decisions and
for the stability of the industry.
As far as where ACS's loop costs have resulted in the
pricing of those...
TAPE 03-6, SIDE B
MS. TINDALL continued:
The ACS is required to charge us, GCI, for those
loops, are high from a nationwide perspective. So,
although, Mr. Carson was able to cite one bond rating
report, if you look state by state at the different
loop rates, ACS prices are actually quite high. I'm
happy to answer any questions you have.... For the
stability of the industry, because these issues are so
complex, because a state regulatory commission is
necessary to protect consumers, GCI respectfully
requests the legislature to extend it four more years.
CHAIR BUNDE asked her to explain what switching elements are.
MS. TINDALL explained:
The local telephone network is much more complicated
than simply the copper line to the home. When Mr.
Carson gives you numbers about what ACS costs are
versus GCI's cost, they are figuring out their total
cost for the network on a per customer basis and
they're simply allocating the cost of the loop that
GCI pays to them as GCI's cost. That's incorrect.
In order to carry a telephone call, there is a switch;
there is feeder cable throughout the community that
branches out into the networks to nodes and then from
there, there's loops that go into the home. There's
also all kinds of overhead and signing customers up
and customers used to pay every time they called their
monopoly telephone company - a $5 service charge every
time they called them. We pay those now to ACS in the
form of recurring charges. There are all kinds of
costs involved. The switching element was an important
cost for the FCC and what the FCC was concerned about,
because that turns out to be a big national issue.
It's not an issue in Alaska because GCI does not lease
that element. We have all of our own switches and we
have all of our own feeder cable. It's fiber and we
have everything, all of our own nodes, except for the
last loop to the home. So, the FCC decision was pretty
much about that switching element.
I don't think AT&T leases the switching element. I
believe they are on resale, but they can speak to that
when it's their turn.
SENATOR SEEKINS asked if she was talking about the two new
members to the commission when she mentioned two new
appointments.
MS. TINDALL replied yes, but they supported the RCA last year so
the two new appointments are not the reason they support the
commission this year. She added, "GCI supports the RCA because
we believe it's doing a good job."
SENATOR SEEKINS asked who the two appointments are.
MS. TINDALL replied Dave Harbour and Mark Johnson. There are
five commissioners altogether.
SENATOR FRENCH asked how many employees GCI has.
MS. TINDALL replied that they have about 1,200.
MR. MIKE FELIX, President, AT&T Alascom, told members:
As you know, AT&T Alascom has a long history of
providing telecommunications services to the state of
Alaska, in fact, the longest history of any
interexchange carrier in the state today. It is from
those very roots and having witnessed the broad
changes in technology and market shift over the years
that we would like to offer our perspective and
respectfully make some requests for the legislature to
consider.
It seems to me that both telecom service providers and
policy-makers alike have a two-fold obligation to the
constituents of this state. Those are ensuring that
basic telecom services remain affordable to everyone
in the state and providing a regulatory environment
that fosters continued investment in the state telecom
infrastructure, thereby ensuring that advanced
services will reach to all parts of the state.
In the early days, Alascom was the only long distance
carrier in Alaska and as such the regulated monopoly.
Regulations were put in place to ensure that Alascom
did not misuse its monopoly power in pricing its
services to consumers. In 1991, when intrastate long
distance competition was initiated, additional
regulations were developed to ensure that Alascom did
not misuse its monopoly power to subvert competition
as well. At the same time new entrants to the long
distance market were granted broad and significant
freedoms and even though the market was highly
competitive in 1995 when AT&T bought Alascom, for the
most part, it bought a company regulated as though it
were a monopoly. As we all know, the regulations
governing utilities with a legal monopoly work in two
directions. They protect the consumer from
unreasonable prices on one side of the equation and
they ensure a reasonable return for the regulated
entity on the other side. Without a reasonable return,
companies do not invest and services, therefore, do
not advance.
Many of the regulations, which restrict AT&T Alascom
today, are vestiges of that monopolistic environment I
spoke of previously only in this highly competitive
marketplace they do not serve as an incentive for
investment. They only serve to add cost and thereby
provide a disincentive for investment. As far as
protection of the consumer on prices, we have almost
20 years of empirical evidence in the long distance
market in the U.S. to show that competition serves the
consumer well. In 1984, when AT&T was first broken up,
the average discounted corporate minute was around
$.45. Today, the average discounted corporate minute
is under $.045. That's a whole order of magnitude
swing and yet, during that same time period the long
distance industry went from approximately $9 to $10
billion to about $90 to $110 billion in revenue. It
was deregulation of the industry and the management of
competition that spurred investment and in 1995 when
AT&T fell below 60 percent market share in the Lower
48, the FCC ceased regulating AT&T as the dominant
carrier and deemed the market for long distance as
competitive.
And yet, here in Alaska where AT&T Alascom now has 42
percent of the long distance business and shrinking
and our largest competitor, GCI, has 46 to 48 percent
of the long distance business and growing, AT&T
Alascom is still considered the dominant carrier
despite a four-year attempt to get relief from this
regulation at the RCA. This regulation adds
substantially to our cost structure for tracking,
journalization and reporting. It also adds regulatory
process that our competitors don't have that keeps us
from being competitive in the marketplace. The whole
situation really begs a definition for dominance.
Additionally, with the increased costs and inability
to compete effectively because of outdated
regulations, our ability to attract capital and invest
in the network is severely hamstrung.
I believe that over the next 12 to 18 months, this
state must wrestle with some difficult issues of
telecom regulation. At stake is the very survival of
an infrastructure that's struggling to keep up with
the rest of the country. In a true free market, there
is less regulation, not more, and competition, not
regulation, becomes the force to shape the market. I
would ask you to carefully and thoughtfully consider
the market dynamics at work here and the definition of
broader market issues such as dominance and
competition. I would also ask you to carefully
consider your role in mandating an environment that
has less regulation, not more, in order to create and
maintain incentives to invest in the modern
telecommunications infrastructure that all Alaskans
desire.
As you consider SB 72 reauthorizing the RCA, please
know that AT&T Alascom could support legislation,
which would extend the RCA for another 2-4 years,
however, as we stated last fall, only if the RCA is
truly committed to bringing about regulatory reform.
Status quo is not an option, if you intend to have a
healthy, competitive telecom market and infrastructure
in Alaska. We are in the process of drafting
appropriate language to assist the legislature in
defining dominance and will be submitting it for your
consideration shortly.
SENATOR FRENCH asked if there are other long distance
competitors in the state besides GCI and AT&T Alascom.
MR. FELIX replied yes and that there are other smaller
interexchange carrier competitors in rural Alaska and ACS.
SENATOR SEEKINS said it sounded like he didn't think the RCA did
a wonderful job and didn't deserve a four-year extension.
MR. FELIX said that was right. He thought the RCA needed market
definitions as guidelines to enact policy.
SENATOR FRENCH asked if it is true that the FCC is going to
defer to the states on more issues and that dominance was one of
them.
MR. FELIX replied that dominance was addressed in the 1990s and
he thought the process they used should be revisited.
SENATOR STEVENS asked what the implications were for Alaska if
the disincentive for investment continued.
MR. FELIX replied that the capital budget within AT&T 5 to 6
years ago was $12 billion per year and that has been cut to $3
billion. Separate subsidiaries within AT&T now contend with each
other for those capital dollars. If he can't show how to earn a
return on the dollars, they go elsewhere within the AT&T network
where they can own sufficient return.
SENATOR STEVENS asked him to explain what was included in
capital investment.
MR. FELIX elaborated that when AT&T bought this network in 1995,
it was not young. A new satellite was built in 2000 for $160
million and that did not include an aging ground station
network, which will require substantial capital investment over
the next few years to upgrade and to reach rural Alaska.
CHAIR BUNDE asked Mr. Abbott to address the concern of
timeliness.
MR. ABBOTT responded that had been a problem in the past and the
RCA has made considerable effort to speed up the whole process.
At the same time, the RCA is trying to beat down its infamous
backlog. When the current commission began, it had over 800
dockets waiting for them. They are now down to 203 and that's
probably as low as they are going to get. The case that Mr.
Yould brought up is not as simple as some people would like to
make it. A lot of parties wanted to take longer, but he is
sensitive to providing due process to all the parties that are
interested. The RCA deals with many things on a much more rapid
basis, but they need to work on how to do the process of
discovery now that they are caught up.
CHAIR BUNDE said he understood and asked if there is anything
the legislature could do to help expedite the process and reduce
the backlog.
MR. ABBOTT replied that he would like to wait to see how the
rules they implemented last year work.
CHAIR BUNDE asked what the RCA does to deal with outdated
regulations.
MR. ABBOTT replied that the RCA has two ways of dealing with
them. First, if a commissioner sees things that need to change,
the commission can start a process. Second, someone from the
public can ask for changes to the commission's regulations. It's
a public process and the RCA could probably work faster without
it, like the legislature, but the RCA wants adequate comment
from everybody who is concerned.
CHAIR BUNDE said it appears that the RCA is applying current FCC
regulations, which pleases some telephone utilities and
displeases others. He asked how much flexibility the RCA has in
applying the regulations and when the new regulations will be
put in place.
MR. ABBOTT replied that the recent vote by the FCC was very
contentious and he thought it would take them three months to
actually get the regulation out so the RCA could see how much it
impacts Alaska. He thought the TELRIC would have the biggest
impact. The telecommunications industry is constantly changing
and the RCA just regulates the copper wire portion of it, not
cable or wireless.
CHAIR BUNDE asked again how much flexibility the RCA has now in
applying FCC regulations.
MR. ABBOTT replied it has flexibility, but he couldn't give a
clear explanation of it.
CHAIR BUNDE said some people feel that the RCA has chosen to
require ACS to sell its service at less than cost and he asked
him to respond to that.
MR. ABBOTT replied that the RCA does not do anything
arbitrarily. There is an arbitrator and the RCA reviews what he
says and then the decision goes to the court.
CHAIR BUNDE asked what the RCA's rate of success has been in the
courts.
MR. ABBOTT replied that it had one decision returned, which was
a procedural question on whether or not the RCA needed to hold a
hearing. The RCA didn't think it had the authority to step into
a contract between two willing parties and the court said it
did.
CHAIR BUNDE asked if the [RCA rulings on] rate issues have been
upheld by the courts in general.
MR. ABBOTT replied yes.
SENATOR DAVIS asked if the dominant carrier issue is before him
and how long it would take to address.
MR. ABBOTT replied that issue is not in front of the commission
now, although it was in the past.
SENATOR DAVIS said Mr. Felix's testimony made it sound like AT&T
is waiting for the RCA to rule on that issue and he even had
language to suggest.
MR. ABBOTT replied that he hadn't seen any suggested language.
SENATOR DAVIS asked if that issue was before them, would it take
a long time to address since the RCA's backlog is so low now.
MR. ABBOTT replied that it would go right out for comment and
take 3 to 8 months.
SENATOR SEEKINS asked what baseball arbitration is.
MR. ABBOTT explained that if both parties can't agree on an
issue, they sit down and simply give it their last best pitch so
to speak and the arbitrator will pick the one that best meets
the regulation or guidelines.
SENATOR SEEKINS asked if it's correct that they have changed
that process.
MR. ABBOTT replied that they aren't using it right now, but it's
generally a lot more expeditious to use it.
SENATOR SEEKINS asked if there would be any difference in the
functioning of the RCA if the Senate granted it a two or a four-
year extension.
MR. ABBOTT replied that it wouldn't impact the way the RCA does
business, but he thought for the stability of the organization
the four-year extension would be better.
SENATOR SEEKINS asked if he thought the legislature should adopt
a wait and see attitude before it goes for the long term, like
they are with some of their issues.
MR. ABBOTT replied the legislature needs to keep pressure on the
RCA.
SENATOR FRENCH asked how the RCA's workload is compared to the
workload of other public utility commissions in comparably sized
states.
MR. ABBOTT replied that he couldn't give a good estimate on
that, but he offered to do some research.
SENATOR FRENCH replied that he would appreciate a base line
comparison.
CHAIR BUNDE thanked everyone who joined them and adjourned the
meeting at 3:00 p.m.
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