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