Legislature(1997 - 1998)

04/07/1998 01:35 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
         SENATE LABOR AND COMMERCE COMMITTEE                                   
                    April 7, 1998                                              
                      1:35 P.M.                                                
                                                                               
MEMBERS PRESENT                                                                
                                                                               
Senator Loren Leman, Chairman                                                  
Senator Jerry Mackie, Vice Chairman                                            
Senator Tim Kelly                                                              
Senator Mike Miller                                                            
Senator Lyman Hoffman                                                          
                                                                               
MEMBERS ABSENT                                                                 
                                                                               
All Members Present                                                            
                                                                               
COMMITTEE CALENDAR                                                             
                                                                               
SENATE BILL NO. 312                                                            
"An Act relating to animals, to food, to pest control, and to the              
Alaska Food, Drug and Cosmetic Act; and providing for an effective             
date."                                                                         
                                                                               
     - PASSED SB 312 FROM COMMITTEE                                            
                                                                               
SENATE BILL NO. 349                                                            
"An Act exempting services of certain sports officials at amateur              
sporting events from coverage under the Alaska Employment Security             
Act; and providing for an effective date."                                     
                                                                               
     - PASSED CSSB 349(L&C) FROM COMMITTEE                                     
                                                                               
SENATE BILL NO. 346                                                            
"An Act relating to competition in the provision of local exchange             
telephone service; and providing for an effective date."                       
                                                                               
     - PASSED CSSB 346(L&C) FROM COMMITTEE                                     
                                                                               
PREVIOUS SENATE COMMITTEE ACTION                                               
                                                                               
SB 312 - See Labor and Commerce minutes dated 3/10/98.                         
                                                                               
SB 349 - No previous action to record.                                         
                                                                               
SB 346 - No previous action to record.                                         
                                                                               
WITNESS REGISTER                                                               
                                                                               
                                                                               
Senator Gary Wilken                                                            
State Capitol Bldg.                                                            
Juneau, AK 99811-1182                                                          
POSITION STATEMENT: Sponsor of SB 312.                                         
                                                                               
Ms. Beth Hagevig, Staff                                                        
Senator Gary Wilken                                                            
State Capitol Bldg.                                                            
Juneau, AK 99811-1182                                                          
POSITION STATEMENT: Commented on SB 312.                                       
                                                                               
Ms. Janice Adair, Director                                                     
Division of Environmental Health                                               
Department of Environmental Conservation                                       
555 Cordova St.                                                                
Anchorage, AK 99501                                                            
POSITION STATEMENT: Commented on SB 312.                                       
                                                                               
Mr. Dwight Perkins, Special Assistant                                          
Department of Labor                                                            
P.O. Box 21149                                                                 
Juneau, AK 99802-1149                                                          
POSITION STATEMENT: Neutral on SB 349.                                         
                                                                               
Mr. John Renn                                                                  
Anchorage Football                                                             
7014 Saturn Circle                                                             
Anchorage, AK 99504                                                            
POSITION STATEMENT: Supported SB 349.                                          
                                                                               
Ms. Patricia Lillian                                                           
Alaska Amateur Softball                                                        
2850 Drake Dr.                                                                 
Anchorage, AK 99508                                                            
POSITION STATEMENT: Supported SB 349                                           
                                                                               
Mr. Jerry Watson, President                                                    
Farthest North Umpires' Association                                            
P.O. Box 56829                                                                 
North Pole, AK 99705                                                           
POSITION STATEMENT: Supported SB 349.                                          
                                                                               
Mr. Bruce Kemmerer                                                             
Alaska A.S.A.                                                                  
P.O. Box 55088                                                                 
North Pole, AK 99705                                                           
POSITION STATEMENT: Supported SB 349.                                          
                                                                               
Mr. Gary Matthews, Executive Director                                          
Alaska School Activities Association                                           
4120 Laurel St.                                                                
Anchorage, AK 99508                                                            
POSITION STATEMENT: Supported SB 349.                                          
                                                                               
Mr. Lefty Schallock                                                            
Fairbanks, Basketball Association                                              
P.O. Box 80002                                                                 
Fiarbanks, AK 99708                                                            
POSITION STATEMENT: Supported SB 349.                                          
                                                                               
Mr. Bob Walker, President                                                      
Anchorage Softball Umpires' Association                                        
P.O. Box 210504                                                                
Anchrage, AK 99521                                                             
POSITION STATEMENT: Supported SB 349.                                          
                                                                               
Ms. Kim Killion                                                                
Fairbanks Volleyball Association                                               
P.O. Box 10787                                                                 
Fairbanks, AK 99710                                                            
POSITION STATEMENT: Supported SB 349.                                          
                                                                               
Mr. Robert Walkotte                                                            
Fairbanks Football Officials Association                                       
P.O. Box 55784                                                                 
Fairbanks, AK 99705                                                            
POSITION STATEMENT: Supported SB 349.                                          
                                                                               
Mr. Ron Duncan, President                                                      
GCI                                                                            
POSITION STATEMENT: Supported SB 346.                                          
                                                                               
Mr. Jim Rowe, Director                                                         
Alaska Telephone Association                                                   
4341 B Street, #304                                                            
Anchorage, AK 99503                                                            
POSITION STATEMENT: Opposed SB 346.                                            
                                                                               
Mr. Brain Thomas, Director                                                     
Government Affairs                                                             
Pacific Telecom (PTI)                                                          
Vancouver, WA                                                                  
POSITION STATEMENT: Opposed SB 346.                                            
                                                                               
Mr. Mike Notar, Assistant Business Manager                                     
IBEW Local 1547                                                                
Juneau, AK 99801                                                               
POSITION STATEMENT: Opposed SB 346.                                            
                                                                               
Ms. Steve Hamlen, President                                                    
United Utilities                                                               
5450 A Street                                                                  
Anchorage, AK 99515                                                            
POSITION STATEMENT: Opposed SB 346.                                            
                                                                               
Mr. Greg Berberich, Vice President                                             
Corporate Services                                                             
Matanuska Telephone Association                                                
Pouch 5050 S. Chugach                                                          
Palmer, AK 99645                                                               
POSITION STATEMENT: Opposed SB 346.                                            
                                                                               
Mr. Tom Meade, Manager                                                         
Regulatory Affairs                                                             
Telalaska                                                                      
2131 Abbott Rd.                                                                
Anchorage, AK 99507                                                            
POSITION STATEMENT: Opposed SB 346.                                            
                                                                               
Mr. David Fauske, General Manager                                              
Arctic Slope Telephone Coop.                                                   
4300 B St, #501                                                                
Anchorage, AK 99503                                                            
POSITION STATEMENT: Opposed SB 346.                                            
                                                                               
Mr. Ken Trout                                                                  
Summit Telephone Co.                                                           
3225 Purdue St.                                                                
Anchorage, AK 99503                                                            
POSITION STATEMENT: Opposed SB 346.                                            
                                                                               
Ms. Laurie Herman, Director                                                    
External Affairs                                                               
AT&T Alascom                                                                   
210 E Bluff Dr.                                                                
Anchorage, AK 99501                                                            
POSITION STATEMENT: Commented on SB 346.                                       
                                                                               
ACTION NARRATIVE                                                               
                                                                               
TAPE 98-20, SIDE A                                                             
                                                                               
Number 001                                                                     
                                                                               
                SB 312 - FOOD/SEAFOOD/ORGANIC FOOD                             
                                                                               
CHAIRMAN LEMAN called the Senate Labor and Commerce Committee                  
meeting to order at 1:35 p.m. and announced SB 312 to be up for                
consideration.                                                                 
                                                                               
SENATOR GARY WILKEN, sponsor, said this bill consolidates existing             
statutory requirements for food production and services that are               
currently scattered throughout Title 3 and 17 under the Food, Drug,            
and Cosmetic Act (Title 17).  It helped provide greater access to              
laws of Alaska by those who are most directly affected.                        
                                                                               
CHAIRMAN LEMAN asked if it was correct that this was just shifting             
statutes and there is nothing new added.                                       
                                                                               
MS. BETH HAGEVIG, Staff to Senator Wilken, said that is correct.               
                                                                               
CHAIRMAN LEMAN said the Alaska Seafood Marketing Institute (ASMI)              
had some initial concerns about the inspection seal, but this                  
wouldn't require them to do any more than what's in current law.               
                                                                               
MS. HAGEVIG said that is right and it just shifts it from Title 3              
to Title 17.                                                                   
                                                                               
SENATOR HOFFMAN asked where it repeals the obsolete statute related            
to rabies.                                                                     
                                                                               
Number 105                                                                     
                                                                               
MS. JANICE ADAIR, Director, Division of Environmental Health, said             
rabies was repealed in Section 26.  She said in most cases, except             
for the Kenai Peninsula, local governments have adopted animal                 
control powers where they deal with that type of activity.  Kenai              
and Soldotna have done it as cities, but the Borough has not, but              
they are working cooperatively with one another to deal with                   
potentially rabid animals.                                                     
                                                                               
CHAIRMAN LEMAN asked what happens in the unorganized areas of the              
State.                                                                         
                                                                               
MS. ADAIR answered that the village public safety officers and the             
public health nurses work jointly on those issues.  DEC doesn't                
have anyone out there.  She said there is a process they go through            
and the Department of Health and Social Services has a laboratory              
in Fairbanks where they do the testing on the animal to see if it              
is, in fact, rabid.                                                            
                                                                               
CHAIRMAN LEMAN asked to make sure that this was just shifting                  
things from one title to another and not creating any new                      
inspections or labeling that doesn't already exist in statute.                 
                                                                               
MS. ADAIR said that was correct.                                               
                                                                               
SENATOR MACKIE moved to pass SB 312 from Committee with individual             
recommendations. There were no objections and it was so ordered.               
                                                                               
         SB 349 - UNEMPLOY EXEMPT AMATEUR SPORTS OFFICIAL                      
                                                                               
CHAIRMAN LEMAN announced SB 349 to be up for consideration.                    
                                                                               
MR. TIM BENINTENDI, Staff the Senator Tim Kelly, said "SB 349 would            
exempt Alaska amateur sport officials from the unemployment tax                
liabilities, but it does not relieve them of income tax liability.             
This legislation is predicated on successful passage of                        
corresponding federal legislation which is now being worked on by              
Senator Stevens' office.  The two have to go hand-in-hand.                     
                                                                               
"Recreational nonprofessional sports are a large and expanding                 
component of our State's athletic and social life and the role of              
amateur sports officials is vital to its continuation and                      
development.  The essential character of this avocation will be                
adversely impacted if tax pressures on modest stipends is not                  
relieved.  Most amateur sports officials provide their own                     
transportation, uniforms, safety equipment, and other expenses                 
without reimbursement from the nonprofits or the recreational units            
of local government that hires them.  Without modest relief                    
provided by SB 349, there may be a decline in the availability of              
qualified amateur sports officials as they pick up other work or               
worse, force increases in costs to the many nonprofits which                   
sponsor amateur sporting events.  This increase may lead to                    
unavoidable program reductions.                                                
                                                                               
"The Alaska Legislature once did exempt amateur sports officials               
from employment tax liabilities, but the exemption was lifted a                
year later under the threat of losing federal funds at the                     
Department of Labor.  Federal law was not in sync with state law at            
the time.                                                                      
                                                                               
"SB 349 is supported by the Farthest North Umpire's Association,               
the Alaska School Activities Association, and the Anchorage Sports             
Association.  It is not opposed by the AFL-CIO and carries a zero              
fiscal note."                                                                  
                                                                               
Number 215                                                                     
                                                                               
MR. DWIGHT PERKINS, Special Assistant, Department of Labor, said               
the Department is neutral on this.  They are bound by federal                  
legislation until it is changed.  He suggested a technical                     
amendment to make sure they cover the state or any political                   
subdivisions, like Parks and Recreation.  On line 6 to insert "(22)            
services performed in the employee of a State, or any political                
subdivision thereof, or any organization exempt from income tax                
under section 501(a)..." which would make us consistent with                   
federal legislation.                                                           
                                                                               
SENATOR MACKIE moved to adopt the amendment.  There were no                    
objections and it was so ordered.                                              
                                                                               
MR. JOHN RENN, Anchorage Football Association, supported HB 349 and            
said the alternative is for associations to bear the cost and it               
would somehow go back to the youth.                                            
                                                                               
MS. PATRICIA LILLIAN, Amateur Softball Association Commissioner,               
supported SB 349 as it would have good long term effects to the                
cost of doing business.  When they were exempted in 1989, it was to            
declare them as nonemployees.  In 1994 the same situation existed              
when the Legislature exempted them from Workers' Compensation.                 
This has been the intent of the legislature for a number of years              
and this is consistent with that position.  She thought all the                
officials and user groups would support this without question.                 
                                                                               
MR. JERRY WATSON, President, Farthest North Umpires' Association,              
said the legislation would have a dramatic affect on amateur sports            
in the State.  He explained that this is not primary employment for            
most; it is done for love of the sport and for the comraderie.  He             
said that recruiting is difficult and bills like this will only                
help that.                                                                     
                                                                               
MR. BRUCE KEMMERER, Alaska Amateur Softball Association Umpire                 
Chief, said there are 300 softball officials in the State, but it's            
getting harder and harder each year to recruit officials for the               
sport.  Passage of a bill like this would help alleviate that                  
problem, because unemployment and workers' compensation problems               
turned people from officiating at all sports. Officials try to keep            
the cost of doing business down as much as possible.  The game                 
stipends they receive do not cover everything.  There's a lot of               
volunteer work that is done preparing for a season, like going to              
clinics.  Officials are independent contractors and are required to            
file income taxes, but they need this bill to keep the costs down.             
                                                                               
MR. GARY MATTHEWS, Executive Director, said he represents 195                  
member high schools and over 800 certified high school officials               
throughout the State.  He said for most officials it's a labor of              
love and nearly everyone holds down an additional full-time job.               
He explained that in most of the small communities in the State the            
schools contact the officials directly, but in the larger                      
communities, local associations of officials coordinate the                    
scheduling of game assignments and help offer opportunities for                
training.  If officials are determined to be covered by                        
unemployment compensation, the cost to schools will be greatly                 
increased.  It is important from a statewide School Activities                 
Association's perspective to pass this legislation.                            
                                                                               
MR. LEFTY SCHALLOCK, Fairbanks Basketball Association, supported SB
349, otherwise it could increase costs by as much as 30 - 40                   
percent.  In most instances there would be two choices, one for the            
officials organization to disband and the second would be to pass              
the increased costs on to the user groups which means our youth.               
                                                                               
MR. BOB WALKER, President, Anchorage Amateur Softball Umpire's                 
Association, said he represented the largest softball umpire group             
in the State and supported this bill.                                          
                                                                               
MS. KIM KILLIAN, Vice President, Fairbanks Volleyball Officials                
Association, supported HB 349 and said this removes another added              
burden to keeping youth sports on-line.                                        
                                                                               
MR. ROBERT WALKOTTE, Fairbanks Football Officials Association,                 
supported SB 349 because he was concerned that the costs were                  
becoming prohibitive that the officials would probably get out.                
                                                                               
SENATOR KELLY moved to pass CSSB 349(L&C).  There were no                      
objections and it was so ordered.                                              
                                                                               
            SB 346 - LOCAL EXCHANGE TELEPHONE SERVICE                          
                                                                               
CHAIRMAN LEMAN announced SB 346 to be up for consideration.                    
                                                                               
MR. RON DUNCAN, President, GCI, supported SB 346 saying it is vital            
to the future of the telecommunications industry and the economic              
infrastructure of the State.  He said the better our                           
telecommunication infrastructure is in our State, the easier it's              
going to be to develop our intellectual-based resources.                       
Telecommunications creates the opportunity to perform services in              
one location and have them consumed somewhere else.  In many ways              
it is more important in Alaska, because it has always suffered from            
its isolation and remoteness.  It's a tremendous potential addition            
to the Alaskan economy.                                                        
                                                                               
A gentleman from Sitka who was working on economic development                 
issues there told him about a study they had just commissioned for             
identifying new areas of economic development in Sitka and the top             
15 prospects on the list identified the major detriment as the lack            
of a well-established telecommunications infrastructure to allow               
them to perform services in Sitka that could be consumed elsewhere.            
Competition is essential to assure that we have the best possible              
and the most thoroughly developed telecommunication infrastructure             
we can get.  The legislation is necessary because the                          
implementation of competition requires change and some of those are            
complicated.  Incumbent local telephone companies who have                     
monopolies today resist that change, because it forces them to                 
alter the way they do business.  The APUC is overly cautious and               
too slow in addressing this issue which retards the development of             
both competition and the facilities that are necessary for economic            
development.  The APUC doesn't really like competition because it's            
messy and is not as predictable as well-regulated monopoly.  It                
thinks Fairbanks and Juneau are too small for competition.                     
Finally, the APUC won't act as long as there are questions about               
competition.                                                                   
                                                                               
This bill doesn't really do very much, but it says that competition            
is the desirable policy where possible and it tells the APUC to get            
going by setting deadlines for its action and tells them which                 
issues to be resolved.  It establishes a time-frame in which                   
competition can be implemented in Alaska.  It doesn't mandate                  
competition in any particular place or tell the APUC how to resolve            
the rules.  It leaves the expert jurisdiction to the expert agency,            
but it tells them to get on with their job.                                    
                                                                               
He said there are 200 areas where GCI doesn't serve today and the              
only reason they don't is because the APUC still prohibits                     
competition in the smallest areas of the State.  Three years ago               
they asked for permission to serve 50 of those smallest areas to               
prove that competition could work there.  The day that waiver was              
granted, Alascom announced the upgrade of their facilities in those            
same 50 areas and has since gone on to upgrade its facilities                  
statewide.  Six months ago in a presentation to the Anchorage                  
Rotary, the President of Alascom stated that the only reason they              
upgraded the bush facilities was in response to competition.                   
                                                                               
The end result of competition in Alaska is that it has worked                  
spectacularly well.  Nobody's rates have gone up as a result of                
competition and bush Alaska has state-of-the-art service with high             
speed switch data available in communities where two years ago, a              
fax couldn't go through.  Rates are down 25 - 50 percent and                   
Alaskan consumers saved more than $100 million per year compared to            
what they would pay without competition.  Competition has been an              
unqualified success on the long distance side of the business.                 
Given time and the appropriate actions from the PUC, the same thing            
will happen in local service.                                                  
                                                                               
Number 485                                                                     
                                                                               
CHAIRMAN LEMAN asked if he thought increasing the 1,500 or more                
access lines to reduce the pool to the largest market areas would              
be a step in the right direction to try and build consensus in the             
remaining days.                                                                
                                                                               
MR. DUNCAN said they should be real careful, because the bill talks            
about lines by study areas which are a way in which telephone                  
companies are broken up for regulated service. If the lines issue              
was to be addressed, they would work with it, but rather than                  
change the absolute level of lines, they would look at  multiple               
vectors, so that they got the correct set of communities in the                
competitive niche.  Anything that moves competition forward would              
be helpful to them.                                                            
                                                                               
CHAIRMAN LEMAN asked which areas would have priorities in best                 
moving into competition of local exchanges.                                    
                                                                               
MR. DUNCAN replied that GCI's business plan sees local competition             
evolving the same way long distance competition evolved.  They                 
would like to go to Fairbanks and Juneau next and shortly after to             
the urbanized areas along the road system, which would include the             
Kenai Peninsula and the areas surrounding Fairbanks.  Then building            
out from there to the regional centers of Sitka, Ketchikan, Valdez,            
Kodiak, Kotzebue, Nome, Barrow, and then in the final stages                   
building to the very smallest communities.  He thought it was 3 -              
5 years before competition knocks on the door of many of the                   
smaller communities, but the threat of competition, itself, does as            
much good as competition does for keeping rates and costs down.                
                                                                               
CHAIRMAN LEMAN said he didn't mentioned the Mat-Su area.                       
                                                                               
MR. DUNCAN responded that to him the urbanized areas in Alaska are             
everything on the road system.                                                 
                                                                               
CHAIRMAN LEMAN asked if that included Glenallen.                               
                                                                               
MR. DUNCAN said yes, because fiber facilities pass those places now            
and once they do, there is no reason not to extend the full range              
of modern technology of competitive offerings to those areas.                  
                                                                               
SENATOR HOFFMAN mentioned that he left out Bethel.                             
                                                                               
MR. DUNCAN said he didn't mean to leave out Bethel.                            
                                                                               
MR. JIM ROWE, Director, Alaska Telephone Association, said the                 
Telecommunications Act of 1996 does not mandate open market                    
competition in every telecommunications market.  It conditions                 
every competitive section with a restriction that it be consistent             
with Section 254 of the Act which is a mandate to maintain advanced            
universal service.  Congress acknowledged that rural areas present             
a telecommunications environment where competition might put                   
universal service at risk.  Recognizing that risk, the Telephone               
Act provides an exemption for rural carriers from unbundling                   
network elements and collocation.  It specifically says, "The State            
Commission shall conduct an inquiry for the purpose of determining             
whether to terminate the exemption."  Section 870(b)(1) of this                
bill prevents the APUC from making that determination.  This                   
conflict is particularly significant when you consider that the                
Congress was thinking of rural and West Virginia, not Bush Alaska              
when they wrote rural safeguards into federal legislation.                     
                                                                               
The APUC conducted a very lengthy hearing and came to a decision on            
this issue that prompted GCI to take this action.  It could not                
determine that affordable rates could be maintained and refused to             
lift the rural exemption.  This meant that GCI could build                     
facilities to compete, it could resell the local carrier service at            
retail, it could buy the local carrier service at a wholesale rate;            
all GCI cannot do is resell to the local carriers unbundled network            
elements and collocate.                                                        
                                                                               
GCI comes before the legislature asking them to circumvent a public            
policy safeguard that says the State Commission shall conduct an               
inquiry for determining whether to terminate the exemption.  The               
Alaska Telephone Association opposes this bill.                                
                                                                               
SENATOR HOFFMAN asked who the members of his association are.                  
                                                                               
MR. ROWE answered the incumbent local carriers in the State - 23               
members, except for Circle.                                                    
                                                                               
SENATOR MILLER asked if he would classify Fairbanks as rural like              
Virginia.                                                                      
                                                                               
MR. ROWE said it's completely perspective and when he reads                    
national telecommunications publications, their concept of rural is            
Appalachia, not Bethel.                                                        
                                                                               
TAPE 98-20, SIDE B                                                             
He hoped they would be careful with our rural areas as the                     
Congressmen were with Virginia.                                                
                                                                               
SENATOR MILLER commented if Fairbanks was going to be defined as               
rural, he wanted it defined as rural under ANILCA for subsistence              
preference.                                                                    
                                                                               
MR. ROWE added that the bill is very specific about what is rural              
using census bureau blocks.                                                    
                                                                               
SENATOR MACKIE asked why it wouldn't be good for the people of                 
Alaska to not have a competitive environment in terms of better                
rates, access, and technology whether it's in Bethel or Fairbanks.             
                                                                               
MR. ROWE answered that he absolutely believed if competition is                
going to bring better services, lower rates, and more features,                
that's wonderful.  That's what the APUC is supposed to decide.  As             
this bill does, it's incorrect to assume that competition is going             
to bring lower rates.  It's going to move rates toward cost which              
is typically what's done.  Everyone in this state, exclusive of the            
Anchorage area, receives contributions of universal service support            
in the amount of between $40 million - $60 million per year.  In               
rural areas where people are paying $10 or $15 for local service,              
that doesn't mean their service costs that per month to provide.               
It is far more than that.                                                      
                                                                               
MR. ROWE said he talked to a state commissioner in Illinois who                
said he didn't want to support the people in Alaska.  He feels that            
they don't support Alaskans; the people in her state were                      
supporting a national network of telecommunications that is                    
valuable only as a national network.  If competition comes in to               
rural areas, there will be competition for the universal service               
support money and for the business customers.                                  
                                                                               
SENATOR MACKIE asked if anyone under the 1,500 phone lines wouldn't            
be affected.                                                                   
                                                                               
MR. ROWE answered that was correct.                                            
                                                                               
SENATOR MACKIE said he agreed with many of his points; his concern             
is economy of scale and if it would cost more in smaller areas to              
provide a service, like education.  He asked if he would put his               
finger on a particular number that would protect the small areas of            
the State.                                                                     
                                                                               
MR. ROWE said he didn't have an answer and feared that putting a               
number there would be incorrect.  He wanted the APUC to move just              
as quickly as possible to decide where competition would be                    
advantageous to the public.  He thought this bill is trying to                 
circumvent that opportunity for them to make that decision.                    
                                                                               
SENATOR MACKIE asked if this bill mandates them to make                        
competition.                                                                   
                                                                               
MR. ROWE answered yes, absolutely.  He said this bill is not about             
time.  It allows APUPC to make the determination that there shall              
be competition under any method allowed in the federal act and if              
they don't decide within 90 days, by default, there is competition             
by any method under the federal act.  That's on page 2, lines 8 -              
12, the collocation language where you go into the facilities of               
the local company that is already out there and get to use some of             
its space to put your equipment in.  Unbundled services is where               
they break down the elements and sell them that way, he explained.             
                                                                               
Number 512                                                                     
                                                                               
MR. BRIAN THOMAS, Director, Government Affairs, Pacific Telecom                
(PTI) said they oppose this bill.  PTI understands that change is              
forthcoming and inevitable, but when Congress allowed competition,             
they were concerned about its affect on universal service.  That's             
why they created rural exemptions for some of the more onerous                 
requirements of the Telecommunications Act.  This bill is                      
unnecessary and misdirected.  Contrary to the public statements of             
others, local telephone competition in most forms may proceed in               
all of PTI's communities at any time.  SB 346 is misdirected                   
because it attempts to put a definite time frame on matters which,             
to some extent, are outside the scope and jurisdiction of the APUC.            
                                                                               
Today every area that is served by [indisc], including Anchorage,              
Fairbanks, Juneau, and the Kenai Peninsula is open to competition.             
When representatives of other telecommunications entities claim                
that the APUC's decision to retain the rural exemption blocks                  
competition, they are being misleading.  This decision really means            
that three of four forms of local telephone competition may proceed            
at any time in any of Pacific Telecom's service areas.  The fact               
that competition has not progressed, rests not with APUC or Pacific            
Telecom or even other Alaskan telephone companies, but with the new            
entrant's own corporate decision.  The reason is that a new entrant            
may construct its own facilities, resell PTI's local exchange                  
service at retail, resell local exchange services at a wholesale               
discount, or purchase unbundled elements and collocation.  There is            
nothing today stopping anyone from competing on the basis of the               
first two.  The rural exemption applies only to the third and                  
fourth methods of competition.  It is important to note for all                
areas served by PTI, that the third form of competition is also                
available, because they voluntarily waived the exemption.  They are            
in active negotiations with another carrier right now for this form            
of competition in Juneau.                                                      
                                                                               
In the recent rural exemption proceedings, the Commission                      
appropriately found that only the fourth form of competition should            
not be allowed for awhile in rural markets.  The Commission                    
reasonably concluded that until certain state and federal matters              
have been resolved to provide for continued protection of universal            
service, there was sufficient cause to restrict this form of                   
competition.  There remains concern that they wait until access                
charges have been appropriately formed and both federal and state              
universal support mechanisms have been better targeted to provide              
support to those consumers where support is most required.  Because            
unbundling and collocation allow competitors to immediately avoid              
access charges and cherry pick the universal service support,                  
competitive unbundling and collocation would be inconsistent with              
preservation of universal service and would lead to dramatic and               
damaging local rate increases, particularly for residential                    
consumers.                                                                     
                                                                               
At the federal level, the FCC will soon be convening a task force              
to examine and make recommendations regarding future federal                   
funding of rural areas.  Of particular interest to Alaska consumers            
will be both the amount of federal funding to be made to rural                 
areas as well as the means to target such support to the                       
appropriate consumers.  Unfortunately, the fact is that neither the            
Alaska legislature nor the APUC control this process.  Until such              
matters are ultimately resolved at the federal level, the APUC                 
reasonably found that conditions are not appropriate for the fourth            
form of competition.  Premature removal of the exemption for this              
type of competition means the new interest, like GCI, has the                  
ability to use its network for free or at very little cost to skim             
the market immediately by targeting select customers and avoiding              
payment of access charges.  Such a result is inconsistent with                 
preservation of universal service.  While SB 346 is well-intended              
and seeks to put a time-frame on competition by requiring the APUC             
to act on certain matters by the end of this year, the fact is that            
some matters are simply beyond state jurisdiction and the                      
legislature's efforts.  Until they know with certainty how federal             
universal support will be handled and the APUC has had a chance to             
consider and adjust its policies to be consistent with or                      
complementary to the federal approach, it would be careless to                 
proceed with the final form of competition that would occur under              
the time-frame contemplated in this bill.                                      
                                                                               
Number 457                                                                     
                                                                               
CHAIRMAN LEMAN said page 2, lines 9 - 10 provide that the                      
Commission adopt regulations ensuring universal service and                    
provides for access charges compatible with full competition.  He              
said it wouldn't be his intent that the fourth form of competition             
not lead to universal service and he didn't think it said that.                
                                                                               
MR. THOMAS said the problem is that the APUC by the end of the year            
won't necessarily know what the federal mechanism will be in order             
to adjust its policies to be consistent with the federal mechanism.            
                                                                               
SENATOR MACKIE asked how GCI could build facilities.                           
                                                                               
MR. THOMAS said they could construct their own facilities and in               
Fairbanks, they have already been deploying fiber optic cable.                 
They own the cable companies in a lot of communities and can                   
utilize those facilities to provide telecommunications services.               
They also own PCS licenses across the State and they recently won              
the LNBS (for two thirds of the State) auction, which is a new                 
technology that the FCC is making available through an auction                 
process and they could use that as a vehicle for competition.                  
                                                                               
CHAIRMAN LEMAN asked if he considered Juneau to be rural.                      
                                                                               
MR. THOMAS answered that he considered it rural from the                       
perspective that there is a core area and a noncore area.  He                  
changed his mind and said he wouldn't consider it rural.  There are            
rural aspects to serving some customers, like the ones at the end              
of the road, in Juneau.  This needs to be considered as they allow             
the final form of competition to take place, even in Juneau.                   
                                                                               
Number 417                                                                     
                                                                               
MR. MIKE NOTAR, Assistant Business Manager, IBEW Local 1547 in                 
Juneau, opposed SB 346.  They are not sure that the competition GCI            
speaks of in support of this bill is in the best interests of their            
5,000 Alaskan members and Alaskans in general.  The competition GCI            
is seeking creates very complex issues and several items need to be            
addressed prior to this occurring.  GCI now has the ability to                 
compete head-to-head, but is not willing to do so in those ways.               
They believe the APUC has made a prudent decision regarding this               
and that process should be allowed to continue.  They would like to            
see a level playing field of competition where the residential                 
customer doesn't get adversely impacted by either higher rates or              
a degradation of service quality.  They believe the local service              
competition in Alaska requires a more comprehensive look before                
taking the proverbial leap.                                                    
                                                                               
SENATOR MACKIE asked him how this bill would negatively affect the             
members of IBEW.                                                               
                                                                               
MR. NOTAR answered that they see it as a potential job loss and a              
degradation of wages in the State of Alaska and in the                         
telecommunications industry.                                                   
                                                                               
SENATOR MACKIE asked how that would happen.                                    
                                                                               
MR. NOTAR explained that for GCI to go into an area and be able to             
glean off the customers that they wanted would potentially drive               
wages down and eventually drive people out of work to a certain                
extent.                                                                        
                                                                               
SENATOR MACKIE asked if IBEW worked for certain companies and not              
for others.                                                                    
                                                                               
MR. NOTAR answered that IBEW represents a lot of telecommunications            
workers and a lot of local operating companies in the State.                   
                                                                               
SENATOR MACKIE asked if they worked for GCI.                                   
                                                                               
MR. NOTAR answered no, that GCI is an unrepresented company.                   
                                                                               
SENATOR MACKIE asked if he had IBEW people working for GCI, would              
he think this is a good bill.                                                  
                                                                               
MR. NOTAR said he would still want to look at how the competition              
would affect the consumer.                                                     
                                                                               
MR. STEVE HAMLEN, President, United Utilities, said they serve 58              
rural communities and have approximately 5,500 access lines and 100            
employees.  They would like to compete.  The problem is that they              
can't compete effectively and their concern is that the deep pocket            
players can get special legislation and then use their substantial             
financial resources to drive the competition off.  For small rural             
companies, like United Utilities, to compete with GCI and AT&T                 
Alascom, the first thing you find is that there's not a level                  
playing field.  United Utilities, through its affiliate Unicom, has            
had a complaint pending before the APUC for two years.  They have              
not been able to get that complaint resolved and have been told by             
the Commission that it will address the issues in an up- coming                
market structure docket.  Those issues include having access to the            
same rules and capabilities to compete. He suggested deleting on               
line 9 "regulations insuring universal service" and inserting                  
"regulations promoting competition in all telecommunications                   
markets including long distance and local markets and insuring cost            
effective universal services" which would begin to level the                   
playing field and give them an opportunity to compete.                         
                                                                               
CHAIRMAN LEMAN asked how many access lines they have in Bethel.                
                                                                               
MR. HAMLEN answered that they serve 58 villages and the average                
number of access lines in each village is 87.  They do not provide             
local service in Bethel, but they would like to compete in Bethel              
and provide local and long distance services.  If they cannot offer            
both, they are unable to compete effectively.  The rules the APUC              
has right now do not give them the same abilities that GCI has to              
resell unbundles networks to resolve disputes and to operate                   
through a single corporate entity.                                             
                                                                               
MR. GREG BERBERICH, Matanuska Telephone Association, opposed SB
346, because it is a self-serving attempt by some to circumvent a              
specific mandate by Congress that in rural areas state commissions             
will determine on a case-by-case basis whether to allow the rural              
companies exemption to provide interconnection to competitors on an            
unbundled basis.  The Telecommunications Act mandates competition              
in the local exchange market and competitors can enter the market              
in the four ways mentioned.  There are no restriction or approvals             
required.  However, Congress did recognize it may not be                       
appropriate to require collocation and the purchase of unbundled               
elements in rural areas.  That is why it set out in law that state             
commissions review competition through the fourth method.                      
                                                                               
GCI has mounted a campaign that the APUC has stopped competition               
which is just not true.  Rural companies are not exempted from                 
competition.  Congress realized that in rural high cost areas, all             
forms of competition may not be consistent with the universal                  
service provisions of the Act which have two objectives: to open               
the local exchange market competition and to maintain universal                
service that is affordable throughout the country.  Rural companies            
in Alaska currently receive over $50 million in universal service              
and access charge support.  The FCC is currently considering                   
shifting 75 percent of that support to the states and he asked                 
where that support would come from.  He said that support keeps the            
rates as low as they are now and those rates are way below cost.               
This issue and many others need to be resolved before opening                  
markets to unfettered competition.  It is the role of the APUC to              
develop a competitive marketplace while insuring affordable                    
telephone service throughout Alaska.                                           
                                                                               
Number 276                                                                     
                                                                               
MR. TOM MEAD, Telalaska, opposed SB 346.  He said they have about              
5,000 lines in 21 villages and serve little villages from Little               
Diomede to Fort Yukon and Galena to Dutch Harbor.  The bill is in              
direct conflict with federal law and the APUC is already acting to             
meet the requirements of the Telecom Act.  GCI's position in recent            
APUC hearings undercut its own stated objectives of modern,                    
affordable service.  A blanket bill such as this which essentially             
mandates competition for all but 2,700 of the 373,000 lines in the             
State of Alaska goes against the Telecom Act.  The APUC has a                  
schedule to implement changes that are required by the end of the              
year and everyone in the industry, including GCI, agreed that was              
appropriate and they would all work together to get the regulations            
in place by the end of the year.  He did not believe there was a               
legitimate purpose for this bill.                                              
                                                                               
He pointed out that it is APUC's responsibility to protect the                 
public's interest.  Mr. Duncan is protecting the shareholders'                 
interests at GCI which is appropriate for him.  The APUC has a                 
balance to maintain and its caution is justified.  He said that                
rates came down when competition was introduced to the                         
interexchange market because the interexchange market was                      
subsidizing local rates at the time.  When competition was                     
introduced into Tok, local rates went up.  The subsidies that were             
being provided by the telemarket were being driven out.  In                    
Anchorage, alone, they had a twenty percent rate increase in 1988              
and a 50 percent increase in 1992 - purely as a result of                      
competition coming in and driving out subsidies.  Competition                  
doesn't reduce costs, it just drives the price toward costs.  If               
the cost of service is $150 a month per line, competition will                 
drive the price toward that.  When you talk about what size is                 
appropriate and who should be served competitively, he knew that               
for his company, Dutch Harbor, their largest exchange, supports all            
the other exchanges.  If they had to bring their price toward cost             
at Dutch Harbor, it would bring their business line rate down to               
$20, but it would bring the local residential rate in Cold Bay and             
Fort Yukon up to $46 per month.  Competition isn't necessarily in              
the public's best interest.  The new satellite services that are               
available right now through GCI are far less than what's                       
deliverable through the current local exchanges.  Essentially, they            
are the bottleneck.                                                            
                                                                               
MR. DAVID FAUSKE, General Manager, Arctic Slope Telephone Coop,                
opposed SB 346. He wanted to speak particularly to the issue of the            
suggested deficiency in local exchange service.  He wondered why               
this proposed legislation is not expanded to be an omnibus rural               
utility competition bill.  Why focus on only one public service                
utility.  He said the reality is  that the subsidy is what is being            
competed for and the monopoly service would shift from one monopoly            
provider to another monopoly provider.                                         
                                                                               
Number 185                                                                     
                                                                               
MR. KEN TROUT, Summit Telephone Co., opposed SB 346. He said they              
are a small company with 140 access lines and serve Ferry Summit,              
Chena Hot Springs, Coldfoot and Wiseman areas.  Although they would            
be exempt from the competition under consideration in this bill,               
they are concerned about the process of implementing the                       
competition process.  The determination of the public benefit or               
harm done by the competitive market should be done on a case by                
case basis by the APUC.  Summit has three concerns: forcing a due              
date for regulations while federal regs continue to move and affect            
our State, the size of competitive areas, and the lack of                      
protection for the incumbent telephone company universal service               
and reasonable pricing.                                                        
                                                                               
While it's true that the Commission may not be as expeditious as               
everyone would like it to be, its responsibility is to protect the             
interests of the State.  This bill would detract from orderly                  
transition to competition.  The Commission is presently dealing                
with the issues and APUC's concerns are for the consumers and                  
smooth integration of federal regulation.                                      
                                                                               
The cost of serving remote and rural territories is high and the               
support that's given to them is an integral part of the process of             
serving those customers.  While a company may successfully service             
remote areas under current status, allowing competition into small             
areas may be to the detriment of their consumers.                              
                                                                               
MS. LAURIE HERMAN, Alascom, said they do not oppose SB 346 in its              
current form.  She said they look forward to participating in                  
future discussions.                                                            
                                                                               
CHAIRMAN LEMAN asked if they amended the bill to restrict its                  
application to the larger service areas, would that change her                 
recommendation?                                                                
                                                                               
MS. HERMAN said their position is whatever moves competition                   
forward is good for the State and its residents.  She would want to            
see what the magic number was and how it was calculated.  She                  
didn't have any recommendations for that, however.                             
                                                                               
TAPE 98-21, SIDE A                                                             
                                                                               
MR. DUNCAN responded that many of the same arguments were used when            
they proposed competition in 1982.  The process ultimately resolved            
in a way that rates went down and today AT&T operates without a                
subsidy and the network is more efficient.                                     
                                                                               
In talking about the need to reform state access charges and FCC               
action before the APUC can act is a catch-22 situation, since the              
FCC is opposing any reform to current access rules.  Some people               
are suggesting that GCI is the bottleneck in rural Alaska, but                 
that's simply not true. Today the interface speed is not                       
appropriate which is an issue that will be solved soon.                        
                                                                               
Generally, the message the legislature is getting is to go slow and            
be careful.  That's because the incumbents have everything they                
need today and the longer it stays the way it is, the happier they             
are.  There have been suggestions that GCI has the opportunity to              
compete in other ways.  If they believed that was true, they would             
have less incentive to press this bill.  However, if GCI goes back             
to the Commission and asks to compete using its exclusive                      
facilities, they would be told they face the same roadblocks and               
would be back before the legislature next year.                                
                                                                               
CHAIRMAN LEMAN asked him if he thought this bill was in conflict               
with federal law.                                                              
                                                                               
MR. DUNCAN answered that they wrote the bill very carefully because            
it's difficult in light of the comprehensive federal law to provide            
much direction to the PUC without running into that conflict.                  
That's why it's so skinny and says implement competition in any way            
you can that's consistent with the federal act.                                
                                                                               
CHAIRMAN LEMAN said he wanted to clarify the legislative drafters              
wrote the bill.                                                                
                                                                               
MR. DUNCAN agreed with the correction.                                         
                                                                               
SENATOR MACKIE asked if he had a list of phone exchanges in the                
State.                                                                         
                                                                               
MR. MEADE answered that there are 3,541 subscriber access lines in             
Bethel.                                                                        
                                                                               
SENATOR MACKIE moved to amend on page 2, line 16 to change 1, 500              
access lines to 5,000 access lines.  There were no objections and              
it was so adopted.                                                             
                                                                               
SENATOR MACKIE moved to pass CSSB 346 (L&C) from Committee with                
individual recommendations.  There were no objections and it was so            
ordered.                                                                       
                                                                               
CHAIRMAN LEMAN adjourned the meeting at 3:17 p.m.                              

Document Name Date/Time Subjects