HOUSE STATE AFFAIRS STANDING COMMITTEE March 12, 1998 8:05 a.m. MEMBERS PRESENT Representative Jeannette James, Chair Representative Ivan Ivan, Vice Chairman Representative Ethan Berkowitz Representative Fred Dyson Representative Kim Elton Representative Mark Hodgins Representative Al Vezey MEMBERS ABSENT All members present COMMITTEE CALENDAR * HOUSE BILL 416 "An Act relating to competition in the provision of local exchange telephone service; and providing for an effective date." - HEARD AND HELD * HOUSE BILL 462 "An Act relating to the contents of certain state documents." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: HB 416 SHORT TITLE: LOCAL EXCHANGE TELEPHONE SERVICE SPONSOR(S): REPRESENTATIVES(S) KELLY, Therriault, Mulder Jrn-Date Jrn-Page Action 2/16/98 2332 (H) READ THE FIRST TIME - REFERRAL(S) 2/16/98 2332 (H) STATE AFFAIRS, FINANCE 2/18/98 2367 (H) COSPONSOR(S): THERRIAULT 3/11/98 2604 (H) JUD REFERRAL ADDED 3/12/98 (H) STA AT 8:00 AM CAPITOL 102 BILL: HB 462 SHORT TITLE: USE OF STATE MONEY FOR IMAGES/MESSAGES SPONSOR(S): FINANCE Jrn-Date Jrn-Page Action 2/25/98 2429 (H) READ THE FIRST TIME - REFERRAL(S) 2/25/98 2429 (H) STATE AFFAIRS, FINANCE 3/12/98 (H) STA AT 8:00 AM CAPITOL 102 WITNESS REGISTER REPRESENTATIVE PETE KELLY Alaska State Legislature Capitol Building, Room 411 Juneau, Alaska 99801 Telephone: (907) 465-2327 POSITION STATEMENT: Sponsor of HB 416. BRUCE CAMPBELL, Legislative Assistant to Representative Pete Kelly Alaska State Legislature Capitol Building, Room 411 Juneau, Alaska 99801 Telephone: (907) 465-6598 POSITION STATEMENT: Provided information on HB 416. DANA TINDALL, Senior Vice President Legal and Regulatory Affairs General Communications, Incorporated 2550 Denali Street, Suite 1000 Anchorage, Alaska 99503 Telephone: (907) 265-5611 POSITION STATEMENT: Provided information on HB 416 and answered questions. STEVE HAMLEN, President United Utilities 5450 A Street Anchorage, Alaska 99518 Telephone: (907) 273-5210 POSITION STATEMENT: Testified in opposition to HB 416. TOM MEADE, Manager Regulatory Affairs Telalaska 2131 Abbott Road Anchorage, Alaska 99511 Telephone: (907) 267-4149 POSITION STATEMENT: Testified on HB 416. DAVID FAUSKE, General Manager Arctic Slope Telephone Cooperative 4300 B Street, Number 501 Anchorage, Alaska 99503 Telephone: (907) 563-3989 POSITION STATEMENT: Testified in opposition to HB 416. DAVID HOFFMAN P.O. Box 83161 Fairbanks, Alaska 99708 Telephone: (907) 474-2141 POSITION STATEMENT: Testified on HB 416. GREG BERBERICH, Vice President Corporate Services Matanuska Telephone Association Pouch 5050 South Chugach Palmer, Alaska 99645 Telephone: (907) 745-3211 POSITION STATEMENT: Testified on HB 416. SAM COTTEN, Chairman Alaska Public Utilities Commission 1016 West Sixth Avenue Anchorage, Alaska 99501-1963 Telephone: (907) 276-6222 POSITION STATEMENT: Testified in HB 416. BOB LOHR, Executive Director Alaska Public Utilities Commission 1016 West 6th Avenue Anchorage, Alaska 99501-1963 Telephone: (907) 276-6222 POSITION STATEMENT: Answered questions and provided information on HB 416. MARK VASCONI, Director Regulatory Affairs American Telephone and Telegraph, Alascom 210 East Bluff Drive Anchorage, Alaska 99501 Telephone: (907) 264-7308 POSITION STATEMENT: Testified on HB 416. JIM ROWE, Executive Director Alaska Telephone Association 201 East 56th Avenue, Suite 114 Anchorage, Alaska 99518 Telephone: (907) 563-4000 POSITION STATEMENT: Testified and answered questions on HB 416. REPRESENTATIVE GENE THERRIAULT Alaska State Legislature Capitol Building, Room 511 Juneau, Alaska 99801 Telephone: (907) 465-4797 POSITION STATEMENT: Presented HB 462. JACK KREINHEDER, Senior Policy Policy Analyst Office of Management and Budget Office of the Governor P.O. Box 110001 Juneau, Alaska 99811 Telephone: (907) 465-4676 POSITION STATEMENT: Provided information and answered questions on HB 462. NANCI JONES, Director Permanent Fund Dividend Division Department of Revenue P.O. Box 110460 Juneau, Alaska 99811 Telephone: (907) 465-2323 POSITION STATEMENT: Provided information on HB 462. ACTION NARRATIVE TAPE 98-36, SIDE A Number 0001 CHAIR JEANNETTE JAMES called the House State Affairs Standing Committee meeting to order at 8:05 a.m. Members present at the call to order were Representatives James, Dyson, Hodgins and Vezey. Representatives Elton, Berkowitz, and Ivan arrived at 8:06 a.m., 8:11 a.m., and 8:14 a.m., respectively. HB 416 - LOCAL EXCHANGE TELEPHONE SERVICE Number 0006 CHAIR JAMES said the committee would hear HB 416, "An Act relating to competition in the provision of local exchange telephone service; and providing for an effective date." She indicated that she does not plan to move this bill out of committee today. CHAIR JAMES noted that Representative Elton had arrived. Number 0015 REPRESENTATIVE PETE KELLY, Alaska State Legislature, came before the committee to present HB 416. He explained that under the Telecommunications Act of 1996, the Alaska Public Utilities Commission (APUC) was given the flexibility to provide for competitive price structures and mechanisms that will allow for competition among local phone companies. House Bill 416 requires the APUC to complete these regulations by December 31, 1997. He said he thinks it's important to note that these are regulations that exist regardless of any action the legislature takes on HB 416. Once these regulations are completed, the APUC must then make a series of findings to allow a competitor to enter a local phone market. House Bill 416 assists the APUC by finding that the local phone service competition is necessary and required for the convenience of the public. This helps the commission because it is a lengthy process to go through to determine this, and it's his opinion that this is probably something that's better suited for the legislature to make rather than a regulatory body. After the APUC has completed this process, there are still a number of tasks that exist before them before they can allow competition in the market. He said they have to make sure the universal services are provided for, that it is technologically feasible, and that the duties of interconnection are not an economically burdensome process for the incumbent phone company. Number 0068 REPRESENTATIVE KELLY said HB 416 only removes one duty from the APUC and that is whether or not competition is a good thing, HB 416 states that it is. He pointed out that some of the public monopolies came to him with concerns about the bill, and the impact that it may have on their particular phone company, and that they were able to change the bill to address those concerns in the committee substitute. He mentioned one of them is cherry picking, there was a great deal of angst among the phone companies that this would allow for someone to come in and take the best of the system, compete in that market, and then leave the incumbent's company to exist on the tiny ones that are probably subsidized in the system somewhere. UNIDENTIFIED SPEAKER reiterated that it is addressed in the bill. REPRESENTATIVE KELLY remarked that he would specifically point out where that is addressed. UNIDENTIFIED SPEAKER asked if they should move CSHB 416, Version F, 3/6/98, Cramer. CHAIR JAMES replied after Representative Kelly has presented it. Number 0111 REPRESENTATIVE FRED DYSON asked, "Is the amendment, draft Version F, getting incorporated into the committee substitute that's F?" CHAIR JAMES replied no, it's an additional amendment. CHAIR JAMES noted for the record that Representatives Berkowitz is present. Number 0118 REPRESENTATIVE KELLY referred to CS HB 416, page 2, line 9, subsection (b)(1), Version F, and noted that it addresses the universal services concern being provided for in this bill: (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 REPRESENTATIVE KELLY referred to page 2, lines 23-24 of the CS, and noted it addresses the cherry picking concern: The commission may require the applicant to offer service throughout the study area of the existing local exchange telephone utility. REPRESENTATIVE KELLY referred to page 2, lines 27-28. He explained that the Municipality of Ketchikan came to him and said they were afraid that they would lose municipal regulatory authority over their utilities under this bill. He indicated he didn't think it was founded, but nonetheless, the bill was changed to addresses their concerns. (d) A local exchange telephone company, other than a municipally-owned local exchange telephone company... Number 0146 REPRESENTATIVE DYSON said the amendments Representative Kelly is referring to are using the page and line numbers from the original bill and not the committee substitute. He pointed out that the amendment states, "Page 2, following line 30," but it's actually page 2, line 27. CHAIR JAMES said they shouldn't really be discussing the amendment at this time, but as long as Representative Dyson brought it up -- she referred to page 2, following line 30, "Insert a new subsection to read:" she noted it starts with (f), that above line 30, the last subsection was (d) and asked what happened to (e). Number 0171 BRUCE CAMPBELL, Legislative Assistant to Representative Pete Kelly, Alaska State Legislature, came before the committee to explain the amendment. He referred to the Amendment F.2 which was drafted to Version F of CSHB 416, and informed the committee that at the top of page 2, line 1, it states, "Reletter the following subsection accordingly." He said that means that old subsection (d) becomes subsection (e) and the new subsection becomes (f). CHAIR JAMES said she understands. CHAIR JAMES noted, for the record, Representative Ivan had arrived. UNIDENTIFIED SPEAKER asked if there is a sponsor to the amendment. CHAIR JAMES said before we go any further we need to have a motion to bring Version F before us. Number 0194 REPRESENTATIVE MARK HODGINS made a motion to adopt the proposed CSHB 416, LS1568\F, Cramer, 3/6/98, as the working document. There being no objection, CSHB 416, Version F, was before the committee. CHAIR JAMES informed the committee that if they wanted to discuss the amendment, someone will have to make a motion to move it. She asked Representative Kelly why we need an amendment on the CS. REPRESENTATIVE KELLY said, "At this time, I would not even request that we move that amendment. There's one more thing that the CS does, it requires the APUC to find that it is not economically burdensome for the incumbent exchange carrier to connect to the competing one, and that is the level of burden of proof. It is about the connecting to the next system. The APUC does not have to determine who the winners or losers are in competition, it doesn't have to decide that if AT&T (American Telephone and Telegraph), Incorporated, were to come into an area, and GCI (General Communications, Incorporated) were in that area, that GCI would eventually not be able to compete because of prices in marketing and their own internal problems. It is strictly on the cost of connecting." Number 0229 CHAIR JAMES said, "One of the things I understand with the Telecommunications Act, and this whole issue of competition and telephone services, is that the federal law indicates that the state commissions of public utilities on the rural areas, of which everything in Alaska is rural except Anchorage, that they have assigned each individual state PUC [public utility commission] to individually review each one of these areas to see if competition is a good idea. If that's what the federal law says to do, it seems to me like that's what the PUC commissioners should do. And, aren't we jumping a step here for them and saying, 'oh well, we think this is right,' and so therefore, you don't have to make that decision on some areas?" REPRESENTATIVE KELLY said he did not get that same sense from his reading of the Telecommunications Act. He indicated Mr. Jackson could testify to that. Number 0258 DANA TINDALL, Senior Vice President of Legal and Regulatory Affairs, GCI, came before the committee to testify. She explained that the 1996 Telecommunications Act states that each local telephone company that is rural and has the number of access lines below a certain number (150,000) has an exemption from interconnecting their network on an unbundled facility's basis. She indicated that is very important because what that says is they don't have to lease their loops to another carrier until the APUC makes a finding on this exemption. The APUC is not exempt from competition. The Telecommunications Act goes ahead and finds that competition is good nationwide. She said even though these rural telephone companies have an exemption, another carrier is still free to go in and compete with them on their own facilities without access to the incumbent local telephone company. She said the rural exemptions address is one method of competition and ironically it is the method of competition that is necessary to serve every consumer, residential and business alike so that there won't be "cream skimming." With the exemption in place, GCI can still go in and build facilities to the largest companies and most profitable companies. Ms. Tindall stated GCI can't lease loops to serve the residents and no telephone company can deny them interconnection for that. She said the way she understands Chair James rephrased her question was, "Isn't the APUC supposed to decide for each of these local telephone companies whether or not competition is good?" CHAIR JAMES noted that she should have added unbundling because that's what she meant. MS. TINDALL replied, respectfully, the answer is no, that has been decided and mandated by Congress. What the state commissions are to determine is whether or not the rural-local telephone companies have to unbundle their network. CHAIR JAMES reiterated that she should have said unbundling and asked Ms. Tindall isn't that the purpose of this bill, to allow unbundling. Number 0306 MS. TINDALL replied yes, this bill still leaves that decision up to the APUC. What this bill does, without the amendment that Representative Kelly has decided not to offer, is it simply establishes a pro-competitive policy for the APUC and directs them to get in place all regulations so that we can have competition. It does not address the issue of their decision under rural exemptions at all. It doesn't take it away from (indisc.--noise). She explained that the reason for this bill came about is because when GCI requested that PTI, the local telephone company serving Fairbanks and Juneau, terminate their rural exemption, the APUC decided that they could not make a finding on whether or not it was economically burdensome to PTI (Pacific Telephone, Incorporated) because they had not done the rule makings and the proceedings for universal service and access charge reform. She said what this bill does is directs them to put in place a universal service system and an access charge reform system that will work in the competitive market and protect universal service, and then enable competition on an unbundled basis to go forward if the APUC determines there's not uneconomically burdensome problems with it. It does not take that decision away from the APUC. CHAIR JAMES indicated she believes the purpose of this bill is to tell APUC that they only have this much time to do this and make this decision. She asked is that what the issue is. MS. TINDALL explained that there are two purposes of this bill: (1) to put a deadline out there for the APUC, and (2) to let the APUC know that the policy directive of the state of Alaska's legislature is pro-competitive in the local telephone competition. Number 0339 REPRESENTATIVE DYSON asked, why not have the bill just say that, get this rule making done by the end of the year, and the legislature finds that competition is in the best interest of the people in the state everywhere except where universal service is demonstrably in jeopardy. MS. TINDALL replied, "The bill says that except for the last sentence, and what it says instead of the last sentence is, 'put a universal service system in place that protects universal service statewide.' Basically, the bill sets out legislative findings, which is your pro-competitive statement, your policy directives, directs the APUC to finish all rule makings and proceedings by December 31, 1998." She noted Representative Kelly has amended it to make it specifically clear that one of those rule makings is the protection of universal service. And then it states that the APUC shall begin accepting applications and shall look at those applications on a fit, willing, and able basis. Ms. Tindall indicated that is common practice consistent with the congressional determination that competition is a good thing. Public convenience and necessity is an old monopoly term. Number 0361 REPRESENTATIVE DYSON said for clarification, if that's indeed what the bill said, why does the bill need to put the 1,500 line floor under that? Why not just leave that to the purpose directive of the bill as you, I thought, eloquently stated it? MS. TINDALL replied we could, frankly the 1,500 line floor was an arbitrary number basically because they didn't want to have competition in Fairbanks and Juneau, and then have to come before the legislature again requesting new legislation for the next year. But at the same time, they were sensitive to the fact that people were concerned about the very smallest local telephone companies. She concluded that if the committee would like to get rid of the 1,500 line floor that would be fine. CHAIR JAMES said she believes the whole issue of universal services is the first step and then the decision as to whether or not this is a good idea is the second step. She commented that it seems like the second step is getting ahead of the first step. Number 0381 MS. TINDALL said she would agree, except that the PUC used as their reason for not being able to make a determination on this is that they had not done their rule making. Therefore, they felt it was necessary to direct the APUC to go ahead and finish the rule making on universal service and put in place a mechanism. She said there is no doubt that universal service is a policy issue that needs to be maintained in the state of Alaska. Ms. Tindall stressed that they have no quarrel with that, they want a good universal service system. And so this bill directs the APUC to put one in place to protect universal service. Number 0392 CHAIR JAMES asked but you don't think they'll do that without us directing them? MS. TINDALL said, "No, I don't. And call me jaded, but I started out in this business in 1985. In 1983, the Alaska Public Utilities Commission opened a docket to look at the question of long distance competition in the long distance market. Every year there were hearings were held, and we went in and we paid a lot of money to lawyers, and we had hearings for two weeks solid. When the hearings were over, the APUC thanked us asked us all to leave very kindly and we never heard from them again until the next year when we had another two-week hearing. In 1988, the Alaska Public Utilities Commission closed that docket and found that there could not be competition in the long distance market because they didn't have enough data to make that decision, notwithstanding the fact that they never asked for any data. At that time, GCI requested Senator Steve Frank to introduce legislation authorizing long distance competition, the same sort of thing we're looking at today, a pro-competitive statement from the legislature. It didn't pass that year and GCI ran an initiative campaign." MS. TINDALL continued, "Competition in the telecommunications industry is enormously popular among consumers. They want competition. Eighty-five percent of consumers agreed that they wanted long distance competition, and 85 percent of consumers agree now that they want local competition. After an initiative campaign was run, the APUC began looking at regulations for adopting competition. We all came to the table and we worked together to get legislation. Without that legislation, I firmly believe we would not have long distance competition today. The arguments were all the same, GCI will come in and cream skim, they will skim away the profits used to support the rural communities, GCI will cherry pick, rates will go up and the Bush will go dark. None of those arguments have come to pass. What has happened instead is rates have fallen by over 50 percent, people have better service, you have competing fiber optic cables going into the Lower 48, telecommunications is robust and Alascom is carrying more minutes today than they were before competition." Number 0222 MS. TINDALL stated, "We are experiencing the same phenomena again in the local competition market. I think Machiavelli said it, way back in 1490, that the person who was trying to bring about change has the burden always and the enmity of all who would like to preserve the status quo. But the local telephone companies would like to preserve that status quo, they have a monopoly, they have the right to go into the long distance business right now while they retain their monopoly. If I had a monopoly, I wouldn't want to give it up. Competition is a lot of work, you have to think about it all the time, it cuts down on your profits. You have 22 local telephone companies in at the APUC telling them the horrors of what will happen if there's competition in the local telephone market. You have one company, GCI, telling you that we really need competition in the local telephone market because it's really important to the state of Alaska - it's something I'm going to address in my testimony. The APUC is paralyzed, they don't know what to do. So, yes, I do believe..." Number 0444 CHAIR JAMES told Ms. Tindall she makes a compelling argument. She said, "Certainly, I'm a person who really favors competition. I also favor system, and we do have APUC there, and it seems to me like we need to give them some time to work. The other issue is, it seems to me like, that there are some federal regulations that need to be drafted too before they can finalize their work. The other thing, and I know that this is a very important issue with the public because they want reduced charges and better services. The problem is, I do not know that the public actually understands the rural areas, that the rates that they pay are being subsidized, I don't think they understand that. And anything that we might do to threaten how universal service is going to be affected is important to me in the bill that I pay. And I think it's not as simple as it was with the long distance." CHAIR JAMES said, "And I agree that eventually there probably will be competition -- and unbundled competition is some of the more areas that it fits. I'm not totally convinced, that in some of the rural areas, that there is the room for two people to be doing it. There is room for someone else to take them over, but I doubt that there is an opportunity for competition for two services in one area. And I guess I don't feel qualified to sit here and say, 'That is where I want this to go based on a policy.' I think that you have to understand what the universal services issue is and how that's dealt with before you can actually make that policy. That's my problem, not that I don't support the idea and everything that you said, it's a compelling argument. It's whether or not it is premature or timely to make this decision. And then, even further, do we have to make it or will the public cause it to happen." Number 0473 MS. TINDALL informed the committee that the Telecommunications Act of 1996 mandates that all universal service subsidy systems be competitively neutral in order to allow competition. She advised that the current universal system that we have in place is illegal today because it's not competitively neutral. It has to be redone anyway so that it will work under a competitive market. She said Congress has made the determination that competition is in the public interest - Congress has also directed that all public utilities commissions to put in universal service systems that are consistent with competition. The legislature is not taking any decisions away from the APUC by this legislation. Congress has already told them they have to do that. They can put in a universal system. Under the proposed HB 416, APUC can still turn down competition on an unbundled facilities basis. It just tells them to get on with their work and not use the fact that they haven't put in a universal service system and an access charge reform system in place as an excuse not to have competition. Number 0491 REPRESENTATIVE ETHAN BERKOWITZ said, "Madam Chair, it appears that you and Representative Dyson have come to the ground that I wanted, and I just observed it's probably because we've been sitting on the Telecommunications Committee. ... But, I agree competition is good, but I also agree that this committee here probably isn't the appropriate forum to be making the decisions that you're asking us to make in this bill. And in particular, I noticed that the section you indicated we could remove, but that would be section [subsection] (b)(2), mandating competition for 1,500 or more access lines. I will defer any further comments right now." REPRESENTATIVE HODGINS asked if we were going to have anybody from APUC testify. CHAIR JAMES replied yes. Number 0508 REPRESENTATIVE HODGINS gave a brief example. He explained he had a food distribution business in Glennallen, and there were two competing local telephone companies up on the "Alcan" (Alaska- Canadian) Highway, a little bit east of Tok. People, because there were two systems, if a person called from one system to the other it was long distance. And, so there were a number of people who actually had two telephones in their homes because it was cheaper to pay the base rate on two phones than it was to try to call your neighbor across the street which was long distance. He asked if the universal service system would prevent that from happening in an area if you have two local providers and you called someone, that's not on your system, is that long distance? MS. TINDALL replied that as long as you have interconnection between the two local telephone companies, calling between them will be a local call and should be invisible to the consumer. She pointed out that the Federal Act mandates that interconnection and no local telephone company can get out of that requirement. That's a situation that should not happen. Number 0523 REPRESENTATIVE KIM ELTON asked Ms. Tindall what kind of latitude the APUC may have after the passage of HB 416 in making a decision on competition based on what they believe (indisc.--noise) that may be on the consumer. MS. TINDALL responded the only thing that changes in the APUC's latitude is they have to respond to an application in 90 days. REPRESENTATIVE ELTON reiterated APUC can make a decision that in market "X," they're not going to allow competition because of the potential impact of pricing on the consumer. MS. TINDALL replied yes, after the APUC has put in place a universal system and an access charge reform system. If they receive an application for a competing carrier in market "X," if they still feel that unbundled facilities will cause an undo economic burden they can determine not to require the incumbent local telephone company to unbundle their network. She added that they have all the same latitude that they had before. CHAIR JAMES informed the committee GCI is the prime mover of this bill and that she wants to give them the opportunity to present the bill as part of the sponsor's position. Number 0553 MS. TINDALL mentioned she wants to give the committee a feeling for the importance of telecommunications and the importance of competition in the local telephone business throughout the state. She stated, "We are in a new age called the information age. We are going from a manufacturing-based economy in this country to a knowledge-based economy. Telecommunications is the key facilitator in this new age. I was reading an article in the Daily News the other day that was talking about the latest generation, the new 'baby-boomers,' is the first generation who claims computers as their birthright. There is no doubt that we are in a new age, and this new age has ramifications for this country and indeed the entire world. What those ramifications are, is that with broadband telecommunications, if you are a student you can access whatever classroom you want in the world and do an interactive learning program. You can learn from the experts, you can learn at your own pace, and that's the way learning is going to go, that's the way education is going to go. Teachers are going to become facilitators of this rather than sitting and teaching in the classroom. The ramifications, for a state that does not have a modern telecommunication system, is that their children will not be able to access the best. They will still be in one-room classrooms in Bush Alaska trying to teach 12 grades with one teacher, and they will not be able to keep up in the world market, or even in the country. There will be a world of 'have' and 'have nots' and the 'have nots' will be those that don't have modern telecommunications." Number 0578 MS. TINDALL continued, "Modern telecommunications is also essential to Alaska to diversify its economy. I was reading in the paper ... that the legislature's in a spin because of dropping oil prices. We all agree we need to diversify the economy away from dependency on oil. Telecommunications breaks the link between where work is produced and where work is sold. With a modern telecommunications system, you can live anywhere you want and still be able to globally market your product. That has enormous implications for Alaska, it is the key to (indisc.--noise) diversity for Alaska, for Alaska to get away from its dependency on oil revenues. It is the key to economic development in rural Alaska, and it is the key to people in Alaska maintaining their way of life because they don't have to change to get on the computer." MS. TINDALL continued, "Telecommunications is a global issue. Anchorage, Alaska has competition at the local level. We're getting all sorts of new broadband facilities, new services. We're all ready to go for interactive video, tele-medicine, Internet at amazing speeds, but we can't access the rest of the state and the rest of the state cannot access us. We cannot be a modern telecommunication state unless the entire state has modern telecommunication, and it has to be end to end. You can put all of the money into the long distance network you want, and to broadband tele-medicine, and things like that. But, if you get to the local level, and there's a bottleneck of old technology, it won't do you any good. So, competition throughout the state is an Anchorage issue still, even though we have competition in Anchorage, and it should be an issue that this legislature cares very much about. I believe and I submit to you that it is one of the key drivers to Alaska's future." Number 0610 MS. TINDALL stated "A modern telecommunications system can only come about through competition and there are two reasons for this. One, monopolies do not have the incentive to put in new technology. They make their money based on a rate of return on the facilities they have in the ground. New technology is always lowering costs and being able to do more for less. That means less money in the ground that means less money on the rate of return. In addition, as a monopoly company, you don't have competition breathing down your neck, and so you're not out there racing to put out new services to meet consumer demands. In a monopoly environment, the monopolist determines what the consumers need and provide that instead of the consumers determining what they need. The other reason a monopoly environment cannot provide a modern telecommunications system is the pace of evolution is changing too fast. If there's anything we can say about telecommunications is, we have no idea what it will look like in five years, we have no idea of what services will be available. A single monopoly provider cannot keep up. It just can't be done." Number 0620 MS. TINDALL concluded, "The only way we're going to keep up with modern telecommunications is through a competitive market industry and that's what Congress found, and that's why Congress passed the Act that they did. This is important for the legislature to take up. I submit the policy decision on whether or not we have a competitive modern telecommunications system is too important to be left in the APUC's hands. Yes, I believe you should leave the details up to the experts. I believe you should leave the implementation up to the experts. I believe you should let the experts decide where competition will and won't work, but at least put out a policy saying that modern telecommunications, end-to-end at the local level as well as the long distance level, is key to the state of Alaska and the APUC should implement it wherever they can. That is the role the legislature needs to play here." Number 0628 CHAIR JAMES said she agrees with everything Ms. Tindall said, however, as a legislature, we do have a responsibility and that is to our citizens. She said she also agrees that's where we're heading, however, she indicated her problem with this whole issue is, when is it time to make a decision - after it's been reviewed or before it's reviewed. CHAIR JAMES explained they've had problems with garbage in the Fairbanks area for a couple of years. She indicated that she feels garbage companies don't have the same investment as lines and facilities that electricity and telephone companies have. She asked, "Why do we have to have them go through APUC to determine whether or not they can have garbage service somewhere." Chair James mentioned she has a bill that addresses that issue. For example, since last year, a large garbage company has come in and bought out the companies who didn't want competition. She pointed out that it's happened in Fairbanks - they had competition and then they had one. And the rates were not necessarily responsive to what the lower rate would have been. She mentioned there's two issues, there's cost and there's service. Number 0647 CHAIR JAMES said she supports GCI's process and admires them for their forward thinking without a doubt in her mind. She indicated she has anticipation because there are a number of little companies throughout the state who are depending upon their existence, and many of them are even owned by the people they serve. And so the transition is the important part. And for the transition she doesn't believe that the legislature can leave that for the private sector. She said, "We, as a government, have a responsibility to make sure that that is handled in a responsible and timely manner." Chair James indicated she has seen government make mistake after mistake, after mistake, and once a mistake has been made, you can't always go back and remove it because there are people that are dependent on that issue. She stated she is not interested in competition to another monopoly that is the fear she has in some of these areas. Chair James said, "Having said that, I think we have a responsibility to address that issue. In fact, I'm interested in some of my people in my district being able to use a fax machine that they can't now on their telephone." Number 0675 REPRESENTATIVE DYSON referred to Ms. Tindall's testimony where she said that in a monopoly environment, we won't get the technology advances (indisc.). He noted he was informed that ATU (Anchorage Telephone Utility) had the most modern switches and that they were doing better than most people in the country in terms of getting fiber optic (indisc.--noise) to the customers - and doing a number of other things that were apparently kind of state of the art, and so on and so forth. He asked if he was misled. MS. TINDALL replied yes, somewhat. She said ATU has been slow to roll out some services like caller ID (identification), which has been around for five or ten years. They have forced customers to change their telephone number when they moved across town when that wasn't necessary. They charge you for calling up and adding a service to your telephone - your basic service, in addition to giving you a monthly reoccurring charge. They essentially charge you for the right to do business with them. They have dropped those charges with competition, they are starting to allow customers to take their numbers with them if they move across town. They are coming out more quickly with new services and new packages to win the hearts and minds of consumers. And they're rolling out ISDN (Integrated Services Digital Network) and other new technologies because they're in a race now. So, they are probably okay, they've provided a good service. The question is, is it as good as it's going to need to be for the future. REPRESENTATIVE DYSON stated her point is well taken. He said he was asking about ATU's switches and their fiber optic equipment. He asked if that equipment is very modern and up to date. MS. TINDALL replied she didn't know for sure. Number 0701 MS. TINDALL said let me clarify. This legislation is not asking for deregulation, as in the case of the garbage case. We are not asking for any lessening of regulation at all, and GCI is willing to submit and amend any legislation to submit to the full panoply of regulation. This bill doesn't deal with deregulation. It doesn't take any decisions away from the APUC. It simply establishes the pro-competitive guideline. She said the impression that she would like the committee members to leave here with today is think very carefully about the other arguments as you hear them and hear all sides of the questions. She said, "The cream skimming arguments, they'll only provide service to the high-profit customers, rates will go up - are all of the same arguments that we used in long distance, and none of those things happened. Moving from the status quo to a new world can be very scary, but this country has embraced competition as its economic model because we believe it provides the best..." TAPE 98-36, SIDE B Number 0001 MS. TINDALL continued, "...who will have to move from a monopoly world to a competitive world - and you're feeling bad for them. Please think about the consumers, as well. Thank you, very much." CHAIR JAMES told Ms. Tindall that her testimony was excellent and she appreciated her being here today and that she has shown a lot of light on this issue. Chair James said, "The transition is important to me. It is true that these people have to learn what competition is about, and I know that efficiency reduces cost, not necessarily other ways of doing it, and to bring efficiency into our system certainly should be our goal. But there is a transition period and it has human consequences and, therefore, not that I'm saying we shouldn't do it, I'm saying that we need to do it in a way that causes as little trauma as possible. And I am totally depending on APUC, they're the only ones we have to make those real serious decisions. And so, therefore, that's my hesitancy. And thank you very much for your testimony." Number 0029 REPRESENTATIVE HODGINS said in the deregulations of another utility and that would be the gas in the Anchorage area. He said it's his understanding that maybe there's no similarity between the two that there are now a lot of different people supplying gas to different customers in Anchorage - using the same transmission lines. And it appears like some of these people are picking the customers that use the most BTUs (British thermal units) and offering them a price that's attractive for them to go with them. He asked, "And that is not possible under the telephone -- the scenario that we've got here? Is that possible that somebody might come in and say, 'well, geese, I'm going to get the big office buildings,' And then thusly make it more expensive for the residential deal? Is that possible?" Number 0053 MS. TINDALL replied, "Under Representative Kelly's proposed legislation, the APUC has the full authority to require any competitive carrier to serve every consumer." REPRESENTATIVE HODGINS again asked if it would be possible to do what he just said. MS. TINDALL responded no, it is not possible under Representative Kelly's legislation. REPRESENTATIVE HODGINS asked, if APUC grants it? MS. TINDALL replied, "APUC most likely will, and we would encourage them to do so to require any competitive carrier to serve every consumer so that there can't be cherry picking." Number 0064 REPRESENTATIVE HODGINS asked, "Why do they do that with gas and they wouldn't do that with telephone?" MS. TINDALL joking replied that they don't have good guys like GCI advocates. She said she wanted to clarify that without Representative Kelly's legislation, it will happen. GCI will go in and serve the largest consumers on their own facilities. She said, "PTI will have to interconnect with us. We will not be able to serve the consumers and this will happen in 1999." CHAIR JAMES asked Representative Kelly if he has anything further to add. Number 0081 REPRESENTATIVE KELLY stated, "I think most of your concerns are met in this bill. I think universal services are provided for. I think the purview still remains with the APUC to decide the technical issues - to decide how the transition period goes. And I think, if it is the desire to provide competition, this is the best way to do it. As Ms. Tindall pointed out, if cherry picking is a bit of a concern, it can happen now under this bill - it probably won't. I think the idea of a monopoly of one, where in a competitive environment, is a lot different than in a monopoly of one in an environment that is not competitive. Even if you are the only person operating in an area, if you know that someone else can come into your area, you are going to look over your shoulder. And if you're looking over your shoulder, you are going to be looking at every way possible to provide services and lower prices. That simply does not exist under the current system that we have." REPRESENTATIVE KELLY stressed that this bill does not take anything away from the APUC. These regulations are moving, but quite slowly. These are the same kinds of things that had to happen to bring about long distance technology and long distance competition in the state. The legislature had to go through a process of working with the APUC, we had to go through a process of phone companies trying to get into the market and failing. He said, "And it eventually was legislation that was passed. And it was only legislation that moved it along in a manner that made it happen. I don't think, without the legislation, it is going to happen, or certainly not within the foreseeable future. I think technology is moving so fast that we have to keep up. And the only way to keep up is to pass this legislation - so that when the golden age of telecommunications arrives, and Bill Gates and his buddies all get together and provide the kind of amazing services that we've been reading about, that Alaska will be ready to receive it, we are not right now. There is technology available out there that will blow your socks off. We're simply not capable of handling that. We have places in the state that technology just isn't there and it won't be there without competition. So, I think every argument you made, is addressed in this bill." CHAIR JAMES said it's interesting - there already is competition, and it's called purchase. Companies purchase other companies - that's the way they compete. She stated that she agrees that monopoly without competition is totally different from monopoly with competition. Number 0142 REPRESENTATIVE DYSON asked Representative Kelly if he is convinced that he still doesn't want to move to Version F.2. REPRESENTATIVE KELLY replied no, not without further discussion. He pointed out there is a letter, dated March 6, 1998, in the committee member's packet from Ron Zobel, Assistant Attorney General, Department of Law, regarding HB 416. Representative Kelly said he has a general understanding of this, but he thinks there will be some highly technical questions that may come out of this -- offering this amendment, but he would rather have Mr. Zobel explain it. He indicated it would go much better for the committee. REPRESENTATIVE DYSON said, "I think that some efforts that several of us have been making -- and what you've done here is fired a shot across the bow at APUC. And I hope they get the message and get very industrious about writing the rules and citing these issues. And if they don't, I'll be helping you load another cannon next session." Number 0167 CHAIR JAMES announced she just received a fiscal note. REPRESENTATIVE KELLY added that he also just received it and said he couldn't give too much of an analysis on it. He indicated a lot of it looks like they're asking for a fiscal note to do what they're [Department of Commerce and Economic Development (DCED)] already doing. CHAIR JAMES indicated that she hasn't read the narrative either, but after spending two days in a Telecommunications Seminar on this issue for telecommunications, she said she does know that the APUC does need more money to deal with this issue. She said, "They [APUC] live from the payment from the providers -- actually which is paid by the consumers. We don't fund them generally out of general funds, it's their income that they are allowed to spend. And I know that they were talking at that time about needing about $200,000 to hire additional people to be able to get through this maze of things. And this might be that same -- the $173.5 might be that similar amount of money that they were wanting to do -- which they get it from the payments that they get from the providers." Number 0192 REPRESENTATIVE KELLY said that's the kind of the sense that he got by skimming over it briefly. That's why he was thinking it would probably be more appropriate in a separate appropriation. He added that he believes that there's probably some costs associated to this bill. CHAIR JAMES said, "Representative Kelly, I know that there might costs to this bill, but it seems like there's costs anyway - that's my point. And so it doesn't seem to me like that it's appropriate to put the cost on this bill. And you know, I'm not taking a position on the bill to say that. But it doesn't seem to me that the fiscal note is appropriate to be tied to this bill -- as much as is a fiscal note that they need anyway." REPRESENTATIVE KELLY said that was the point he was trying to make. Number 0209 STEVE HAMLEN, President, United Utilities, testified via teleconference to express United Utilities concerns. He noted United Utilities is a Native-owned local exchange company and that they now serve 58 villages - most of these villages are located in Western Alaska. The first thing he pointed out in the bill is the fact that there's 1,500 access lines that are set out in the bill. He said, "If you look carefully, the bill would exempt locations like King Salmon, and locations such as Tanana with 121 access lines, and Whittier with 155 access lines. So these locations are exempted. Yet the bill would apply to locations like Akiak with 69 access lines, Venetie with 41 access lines, and Rampart with 26 access lines. Frankly, we don't understand why the bill targets companies. If the bill had targeted locations with greater than 1,500 access lines, it may have been more acceptable." STEVE HAMLEN continued, "But, we still would want to offer, or suggest additional amendments to the bill. And there's two broad areas here I'll mention. The first area is to broaden the scope of the bill to include long distance services. The provisions contained in this bill, HB 416, to promote local exchange competition can also be applied to the long distance market. Small local exchange carriers like United Utilities cannot now affectively compete with dominant competitors like GCI and AT&T, because the rules that United Utilities has to comply with are now skewed in their favor. For example, United Utilities cannot offer long distance services except through a separate subsidiary. United Utilities cannot bundle long distance and local services. United Utilities, nor its affiliate, Unicom, have access to the same time constrained dispute resolution processes that are now available to the dominant competitors to resolve disputes for their entry into local markets. And United Utilities and Unicom are unable to purchase long distance services at wholesale rates for resale. Nor can we purchase unbundled long distance network elements. The dominant competitors, GCI and AT&T, can take advantage of these rules that clearly favor them." MR. HAMLEN continued, "The implementation of the Telecommunications Act was delegated by Congress to the FCC (Federal Communications Commission) and the APUC. While United Utilities would like to have its own bill to prioritize its interest over others, we believe that the APUC is taking the proper steps to implement the Act, and that HB 416 would interfere in this process and place the interest of large dominant competitors, like GCI and AT&T, over those of smaller companies and consumers in general. United Utilities respectfully requests that the committee not pass HB 416." Number 0284 TOM MEADE, Manager, Regulatory Affairs Manager, Telalaska, testified via teleconference. He informed the committee Telalaska owns Interior Telephone, a small local exchange carrier with approximately 4,000 access lines and Mukluk Telephone, also a local exchange carrier with approximately 1,000 access lines. He said Telalaska serves about 22 villages and are headquartered in Anchorage. Mr. Meade said, "I have a little bit different perspective on the Telecommunications Act than Ms. Tindall. The Telecommuncations Act was written primarily to introduce competition in the Lower 48 - where the Bell companies have enormous markets. And it's appropriate where you have as many access lines in one building, for instance - such as the high-rises at the World Trade Center, as we have scattered throughout the entire state, with the exception of Anchorage. But Congress also recognized that competition was not in the best interest necessarily in rural areas. And that's why they put rural exemption in place for -- an exemption from interconnection for small local telephone companies. And in our particular instance, it costs $150 per month, per line, to provide service. We can't just drive down the street to fill a service order like they do here in Anchorage. In the case of Little Diomede, we have to charter a helicopter to get out there, and there are only 56 access lines to serve. Competition's not going to drive those costs down, it's simply going to add another layer of cost on top of that. Fortunately, the Act requires the state commission to determine, on a case-by-case basis, where competition should be allowed through unbundled interconnection. That's a requirement of the act." MR. MEADE stated, "The APUC has been slammed recently for not having the rule makings done. And while there are people in this room who know I've been on the opposite table with the APUC a number of times, I can't fault them in this case. They don't know what's in the public interest or what's economically burdensome until the FCC finishes its rule makings first." MR. MEADE concluded. "As for the claim by Ms. Tindall that this is denying access, that the people in the Bush can't connect to the rest of the world, we have the band width to connect to the rest of the world, it's the interexchange carriers that don't have the capacity on the satellite to bring the people in the rural areas out (indisc.) the information super highway. We believe that needs to be addressed too." Number 0342 DAVID FAUSKE, General Manager, Arctic Slope Telephone Cooperative (ASTC), testified via teleconference in opposition to HB 416. He informed the committee that their company serves the Arctic Slope Region, which is a very challenging mix of traditional villages and a Prudhoe Bay oil complex and portions of the pipeline. Mr. Fausek said, "We have been in existence since 1980, when we initially brought rural local telephone service to these communities. And we presently serve about 2,300 access lines, or more accurately, we serve less than 1,500 residential lines and villages, and less than 1,500 commercial and business lines at Prudhoe Bay." MR. FAUSKE stated, "ASTC opposes the proposed CSHB 416. We think it represents an approach to a broad and complicated economic issue which implies that a legislative Band-Aid or aspirin will make everything better. I have no doubt that the sponsors of the proposed bill, and the members of this committee in general, share the very good intention of endorsing open market competition as I do and our company does in all areas of Alaska's commerce and industry. I also have no doubt that this committee, and the legislature in general, know that the passage of a brief, generalized, superficial statement on such subjects as fair subsistence, local funding of schools, or permanent fund restructure would satisfy neither the voters, nor the resolution of the issue. Especially if such casual legislation was not preceded by a thorough investigation, public analysis, and hearing of the issues and their consequences." MR. FAUSKE said, "In the case of HB 416, the proper approach to the issue is, I think ironically contained in the text of the draft bill itself." He referred to HB 416, page 2, line 3, subsection (5), which reads: the commission should oversee competition in local exchange telephone service to ensure that the competition is fair to consumers and competitors; MR. FAUSKE continued, "That's exactly what is happening today, and what has been underway for several months. The APUC has several 'R' (regulatory) dockets, which I think the committee members have been referred to, including interconnection access, universal service, and so forth, and local competition. The point being is that the APUC has taken an active and assertive role, maybe at long last, in this process. And that role includes the necessity of addressing the entire gamut of federal legislation, regulation, and increasingly litigation relative to the issue of competition, and the related issues of access, universal service, and interconnection. Since there is a band-aided agency, and the APUC is actively undertaking this process - which thus relieves the legislature of that complex task, the legislative action should be, eventually the result of, and on the basis of this process rather than an inadequate and premature substitute for it." Number 0393 DAVID HOFFMAN, testified via teleconference on HB 416. He noted he's been a professor at operations research and quantitative methods and dealing with computer graphics and high technology issues over the last 25 years. He said he retired from the university and is currently working as a private consultant in Fairbanks. MR. HOFFMAN said, "I have reacted quite strongly - personally to the APUC decision because I've been in Alaska since 1968 and very much an advocate of seeing Alaska stay as progressive and as innovative as the rest of the Lower 48. I work out of my home as a consultant and I deal with companies here in Alaska. But I deal even more so with organizations and companies in the Lower 48. I was very relieved to see HB 416 come to fruition as an opportunity to address this issue. And I think there are two main concerns - which have been already brought up, but I'd like to address them from my perspective. Obviously the economics is part of that and I feel that, if there is competition to local service in areas like Fairbanks and smaller communities, we will see benefits that come from that. The competition does affect the rates - favorably for the individuals - the consumers. And as I talked to many other people about this issue, I find that they feel the same way about it." Number 0414 MR. HOFFMAN continued, "From my perspective, I also feel that there's the issue of what comes with the technology. To site just a simple example of that, two months ago I bought a new computer, and as I was learning to use this new computer I found that there was software on it that I cannot yet use because the resources that are on the computer are not accessible or useable with the current connectivity that I have. And I believe that monopoly in a local service will not bring those capabilities to me any faster. It will, in all likelihood, probably take longer. ... A few weeks ago I was interested in downloading some sample simulation software, after repeated attempts, I finally ended just aborting the process, calling the company and having them send to me the nine computer disks and the manual by UPS. If I was on a faster connectivity, these kinds of things would be routine. Video phones are a possibility. There's software already on these computers when you buy them for white board, for conferencing. You can't do that yet. You really don't get a 56K connection. In the future, I follow what's happening with Internet II, my son designs communication boards in the Lower 48. ... Having worked for the supercomputing center I could see the benefits of being a much faster connectivity - that's something that I just have my doubts is going to come to the home in some time in the future in a monopoly environment. ... On television I see products being advertised that you can't get in Alaska outside of Anchorage, and some of them you can't even get in Anchorage." MR. HOFFMAN concluded, "So with regard to the economic benefits, and for me in particular, the technological benefits, I feel that this is a very important issue. And I would very much like to see the competition happen. I feel that, in the next five years, we're going to see far more innovations than we've seen in the last 50 years in terms of communications. And I would like that to be able to be something that the people of Alaska can have access to. If we wait too long for encouraging innovations and facilitating innovations, we will find that Alaskans are farther and farther behind, when, in fact, in Alaska we should be pushing for these things even faster." Number 0454 GREG BERBERICH, Vice President, Corporate Services, Matanuska Telephone Association (MTA), testified via teleconference on HB 416. He told the committee they serve 11 different local exchanges along the road system from Eagle River to Clear and Anderson, and also the village of Tyonek - across from Anchorage. He complimented Chair James and the committee on their understanding of the issues. He noted that he has worked with the committee for the past year trying to identify those issues, as we transition from a monopoly environment to a competitive environment. MR. BERBERICH said, "We all understand that competition is the law of the land. Specifically, Congress set the Public Utilities Commissions - in the middle of that decision, with regard to the rural companies, as you well know, all the local exchange companies in Alaska - other than ATU, fall into that category. And it is a very high cost area, and the issues that you brought out, I think are the issues that we need to worry about. MTA, I think you honed in on the very specific issue of the problem with a number of the decisions that have to be made at the federal level regarding universal service and access charges, and what we need to do there prior to making any determinations on the state level. I think the APUC has done a good job in getting the number of the dockets that they've got going, but they are dependent on what happens at the federal level. And I think it's important that what we do here as we transition to a competitive environment, is that we don't substitute one competitor for another." Number 0486 BOB LOHR, Executive Director, Alaska Public Utilities Commission, testified on HB 416. He informed the committee Commissioner Sam Cotten, Chairman of APUC, is on his way at this time. He said, "The APUC has no position on HB 416 at this time. As you know, and as you observed, the APUC estimated a fiscal note of $173.5 which declines over time within four years to zero. It is tied specifically to this bill from the 90-day deadline. And the regulatory deadlines do increase the cost of the commission." MR. LOHR referred to page 2, subsection (c). He said, "The 90-day deadline, for the first time, provides that if a certificate application isn't acted upon by that time, then it automatically goes into effect. I urged you to consider the public interest implications of that sort of default - automatic effective provision. The commission does not miss deadlines that are imposed by the legislature, but if we happen to do so, I think there's an issue there as to whether that serves the public interest well in terms of ensuring that those that do provide utility services are fit well and able to provide service - even under a competitive standard." Number 0503 MR. LOHR referred to the fiscal note. He said, "The costs, in this fiscal note may be recoverable directly from the parties rather than from the regulatory cost charge, and that's one reason they're itemized in the bill. But, however you decide to provide the funds would be fine. Frankly we do need the money, and would use it as effectively as possible." MR. LOHR said, "The commission will adopt key new regulations by December 31, 1998. During the summer we went through and detailed some of the key proceedings that are occurring. The access charge reform proceeding -- those regulations will be adopted whether or not this bill passes by December 31, 1998. The Telecommunications Act of 1996 requires those regulations, and requires that the system of access charges be made competitively neutral. Some of the points Ms. Tindall made are certainly valid. The access charge system has to be made workable in a system that has more than one provider of telecommunication services. It was not designed, with that in mind originally, not to serve that purpose as currently established." MR. LOHR continued, "Universal service is another key area. The initial phase of this proceeding will be completed by December 31, 1998. The administrative structure -- the method and source of funding of an instate universal service fund, as well as the services (indisc.) providers to be supported, and the amount of support are key - critical variables. I'll just use this as one example of why these regulations are so difficult. These are complex proceedings. They require the coordination with, and the cooperation of the industry and the public. We need carefully thought-out comments on these regulations in order to be able to advance that quickly. It may not seem that December 31, 1998, is quick, but given the complexity of the regulations and the need to make sure they dovetail with what the federal government is doing through the Federal Communications Commission is extremely important." MR. LOHR stated, "The FCC had a hearing last week on universal service and it was apparent from that on-bank hearing, as they call it, that the FCC doesn't have a clue of what the universal service structure - the subsidy structure for high-cost rural areas is going to look like. It's clear that their predecessors had a very controversial proposal in mind. There's been tremendous turnover within the FCC itself, and the new members are scratching their heads and trying to figure out which direction to go. I won't dwell further on... I will mention the administrative structure of the universal service fund at the federal level, because the FCC did that quickly - they did it wrong and the general accounting office found that they lacked the authority to structure the universal service mechanism - the schools and library's fund, and the health care support fund - the way that they did, and they got in big trouble with the Senate, and especially with Senator Stevens. We'd like to ensure that whatever approach the commission takes, whether or not this is instate universal service fund, that it's fully sustainable, supported and well justified legally. I'm just trying to suggest that these are complex tasks." Number 0545 MR. LOHR referred to refuse deregulation. He said, "Representative James, you referred to refuse deregulation. The interesting pattern - just to update you since then, the company that bought the company that didn't want competition is now proposing to buy every other refuse company in the state, virtually. USA Waste Services is now proposing to buy Star Sanitation in Fairbanks - I don't believe Hite's on the list yet, but virtually -- the companies down in Kenai, all over the state, so convergence is a key factor there. Those applications are in front of the commission at this time." MR. LOHR referenced Representative Hodgins' question regarding the gas industry. He said, "The providers of gas are using tariff services of Enstar - the natural gas provider, and that is under a tariff provision. But they do not own plant or facilities, as a result, they're not certificated entities and, therefore, the commission doesn't regulate them and that's how they're able to operate in that fashion." Number 0563 CHAIR JAMES said, "I wanted to tell you Hite - yes, and Juneau - yes." MR. LOHR remarked that they're going statewide. CHAIR JAMES replied, "I don't think they're going to bother Healy. In any event, I thought you might enjoy that." CHAIR JAMES referred to the statement that APUC is not taking no position on HB 416. She said, "You indicated that you're taking no position on this bill, however, you did indicate that the fiscal note, that you've added is because of the deadlines that are set out in this bill. So are you saying that, okay, we'll do it, but you've got to give us the money to do it. Is that what your response is to this bill?" Number 0569 MR. LOHR replied, "Yes, basically that's correct, Madam Chair. I point out that the commission hasn't taken a position on the bill because there hasn't been a public meeting scheduled with all members present since the bill was introduced. The commission, if you wish, might take a position. In the past, the commission found it more useful to focus on serving as a technical resource to answer questions of the committee and leave the policy question to you." CHAIR JAMES said she appreciates that very much. She said, "I started this meeting saying that I was not planning to move this bill today. But I certainly would like -- have you been listening to all the testimony?" MR. LOHR replied he has. CHAIR JAMES continued, "I certainly would like to have an evaluation of the issue from the perspective of the time lines, as well as whether or not we have to tell you this is what we want you to do." MR. LOHR said he would be happy to tell that to the Chairman of APUC, who just entered the room. CHAIR JAMES asked Mr. Cotten if he has anything to add. Number 0584 SAM COTTEN, Chairman, Alaska Public Utilities Commission, said he doesn't know what's been said, therefore, he said he doesn't have anything to add at the moment. Number 0587 MARK VASCONI, Director of Regulatory Affairs, AT&T Alascom, testified via teleconference on HB 416. He said AT&T Alascom has reviewed HB 416 and stated for the record that they are not opposed to the bill in its current form. MR. VASCONI said, "To the extent that HB 416 places responsibilities on the APUC, we see the APUC acting responsibly. They're on a trajectory to promulgate regulations ensuring universal service and access reform by late 1998. However, if additional resources are required to complete the work required by HB 416, we would certainly support the addition of resources." Number 0609 JIM ROWE, Executive Director, Alaska Telephone Association, came before the committee to testify on HB 416. He stated, "I have a lot of respect for Ms. Tindall and the industry, her presentation, and her manner. You've noticed we haven't had 22 people speaking against her, but I would say, even if we had in the industry, we never depict Ms. Tindall as a small still voice. I would have you refer to one of the last comments she made in particular. And that it, it was ominous, she said, 'If we don't pass this bill, GCI, by the end of 1999, will go in and cherry pick.' And I think that's a very honest statement. I absolutely expect that. And I would say, if you, if you do pass the bill, GCI will go in and cherry pick. So, that's a foregone conclusion. They are a for-profit business, as she mentioned, they're not a cooperative. That's what they're supposed to do, they're supposed to make money for their stockholders. By her statement that in 1999, if you don't pass the bill we'll cherry pick. I also think that speaks for their public policy, it has nothing to do with the customer, it has to do with the bottom line of profit." Number 0626 MR. ROWE said, "Let's go back to the 1996 Act that was passed. And it didn't just happen in 1996, it went on for a number of years and different iterations, and it finally passed and became the 96 Act. This Act was basically looking at most of the telecommunications companies in the United States, the big companies - eight of them that do 95 percent of the access lines. It did recognize, because we're a loud voice in rural areas, that small companies matter - that small companies are serving high-cost areas in difficult terrain and difficult conditions. And because of that, there were protections put in there because it might be different, not because it is different, but because it might be different in those areas. And the protections are that an expert agency in each state, a public service commission, should look at these rural areas and see if indeed the public interest is going to be served or if there might be damage. Now, if they say we have competition everywhere and, gee, if something bad happens, then you go back and you do something about it. That's the opportunity that [HB] 416 is offering. Go in and do this everywhere, except where companies don't have 1,500 lines. It's reactionary and I think GCI was honest about this. They've gotten a couple of decisions they were not happy with lately. But I'll tell you, in general, the industry in the state - the local exchange industry is very impressed with the way the commission has been looking at very tough problems. And they haven't been given the whole game plan yet. The FCC is still struggling. My God they're struggling. Bob Lohr mentioned the universal service hearing (indisc.) last Friday. I was there, I saw things that local exchange long distance companies, here in Alaska - whoever, would not be comfortable with - going on in front of these people. But it's human, I can understand why. They're living within the belt-line." Number 0649 MR. ROWE continued, "When the Telecommuncations Act was passed, the people in Washington, D.C. -- let's face it, only three representatives from our state, passed a bill that worried about rural protections. Within the last month and a half I've seen national publication saying, 'Now chairman, FCC Chairman Kenard (ph.) knows what a rural telephone company is, he spent the day in Roanoke, Virginia looking at such and such a telephone company. ... There's absolutely no relationship to what we're talking about in rural Alaska. And I'd suggest that it's in their wisdom, the people in Washington, D.C., said, 'Rural might be different, rural might need consideration.' Be careful what you do there, that we shouldn't here at this level, disregard the opportunity for expert consideration by the APUC and pass legislation that circumvents their opportunity to make decisions." Number 0664 CHAIR JAMES said the one thing she would say in response to Mr. Rowe's testimony, is that the 1996 Act did pass. All of the things that Ms. Tindall said, about the future in a communications world is different than the one we know. That's true, it's coming, it's going to be here, and we're all going to benefit from that. She indicated her biggest concern is the transition, and to be sure that people are not hurt in the process. Chair James reiterated that she supports competition in every place that it will fit. It is what makes the world go round, it is what makes services get better and it's what makes the prices reasonable. She stressed that she wants to be absolutely sure, before the committee goes forward, that we've covered all the bases and that we're not opening ourselves up for some tragedy along the line that we can't reverse. CHAIR JAMES referred to the statement that APUC needed $200,000 to deal with this, but they were going to deal with that by getting their fees, and now they've got $170 some on this one because of the deadlines. She asked Mr. Rowe for examples of getting decisions out of APUC. The ones she is familiar with are that we're so delinquent, the garbage issue and the sale of the utilities in Fairbanks, which cost Fairbanks a lot of money because it took the APUC a long time to do that. Chair James said, "So I'm sensitive too about things are timely and there's a reasonable amount of time to spending - doing things, and then there's, some times you've got to figure out how to get it done quicker because there's a need. And, people were hurt in that issue, so I'm very sensitive to those issues. And I'm looking forward to everybody participating to see exactly what the right way to approach this is." Number 0689 MR. ROWE replied he absolutely agrees, and he thinks there's the opportunity for a quick decision - to also hurt people sometimes. He said, "I think there's been no louder voice out there than the Alaska Telephone Association in complaining to the APUC about their slumpful movements in the past. And even when we had the telecommunications hearings in Anchorage, in December, I think pretty much, Chairman Cotten agreed. They'd like to see things quicker and we all agreed, speed is very important. We're certainly not saying they're going too fast on anything. But I appreciate the questions they've asked, I see that they've really looked at the issue, and quite honestly, if the FCC hasn't told you all the rules yet, and the rules they have made up - many of them have been overturned and thrown back in court. Right now, Senator Stevens, Senator McCain, and a number of other Senators, are writing letters questioning them of where they are in universal service and how this impacting them. All of the answers aren't out there for us to be able to base state level decisions on. That doesn't mean competition should be stopped..." TAPE 98-37, SIDE A Number 0001 MR. ROWE continued, "...spoke for many people in the state, in that they don't really understand that competition will not necessarily lower your price. The cost is higher. Competition will draw that price you're paying toward the cost. And if the cost is greater that can mean it's going up, we've seen that in pay phones nationwide. Let me also say that, as we talk about the technology that's out there - and Ms. Tindall brought this up, and her statement spoke of the bottleneck of all technology out there. I think we can all be proud that Alaska was the first state in which the state telecommunications modernization plan was approved. And this was demanded by the rural utilities service. And essentially this dealt with the local telephone companies' infrastructure where basically all digital. It's very modern. There's a bottleneck out there, and as Mr. Meade mentioned, the bottleneck is with the long distance carriers. That's why you can't get your Internet access, perhaps out of Anaktuvuk Pass to Seattle as good as you can elsewhere. And, I don't deny that the satellite is a challenge, it is. But there's no more modern telecommunications that can be put in on a local nature that's going to make any difference. So, I would caution you that the disparaging inference that we have old technology out there in the local exchange is incorrect." Number 0042 CHAIR JAMES stated, "The universal services issue itself is distressing to me - because of, what is universal services. And it's very very basic as I understand it. We're talking about going into an era where everybody is going to be able to have this contact with the rest of the world. And I expect, that what we're expecting, is that some of our very rural areas in Alaska are going to be able to be served with that without any subsidy. And that bothers me because I'm not sure, at this point, someone can prove to me that it can happen. ... I have people in my district, on the road service who can't use a fax machine. Now that's distressing to me - when they live only a short distance from town, and that's not part of the universal services. They're not required to have that. And yet now we're proposing to give these people a lot more. And we're giving them a subsidy in the rural areas in order to provide the services we've got. And yet now we're going to do all these more, and we want that subsidy to remain, but we're saying we're going to do it without a subsidy. I hope that's true that we can do that, but what I hope what is even further true, that if we're going to service the whole state, that they service the whole state. No one has proven to me, no one's even discussed it with me that that is the potential, or a time frame, or what can happen. That should be the goal, and getting from here to there should be a plan that gets us there with as little damage to the people as possible so that when they're at the end, the benefit's worth it. And I guess that's the whole selling point that I'm interested in hearing." Number 0089 REPRESENTATIVE ELTON asked Mr. Rowe is there is anything that he sees in this bill that would prevent the APUC from hearing the policy arguments that he [Mr. Rowe] presented to the committee and making a decision on competition based on the policy arguments -- with the exception of the time lines that are provided in the legislation. Number 0097 MR. ROWE replied, absolutely. He said his feeling is, after looking at the legislation, it's telling the commission what their decision will be, and they have 90 days to make it. And it is not giving them the opportunity to make a decision otherwise. He said, "And, I can only really speak comfortably to the initial bill because I didn't see the amendment until about 4:30 last night. And I expect, some of the people who represented the local companies, probably didn't see it until they went into their LIO (Legislative Information Office) this morning. Mr. Rowe referred to page 1, subsection (2) on line 9, which is saying that the legislature finds that: local exchange telephone service should be provided competitively wherever possible; MR. ROWE indicated he would be more comfortable if that had said, "competitively whenever it's in the public interest." There is no feeling for public interest in the bill at all, and that was the feeling he got from it. What he sees this bill saying, is that the public utilities commission shall make a determination that competition will be done. CHAIR JAMES replied without a doubt, the sponsor explained that's what the bill does, that's what it's for. And, the testimony from Ms. Tindall says we've been down this road before. And, the only way we ever got to be in the long distance service was by having a piece of legislation that says the APUC shall do that. Ms. Tindall believes that date is here now, and that if we don't' do this, they won't do this. Chair James indicated she did not know that she agrees with her on that, but it's certainly a compelling argument. Number 0131 REPRESENTATIVE ELTON said, "I can appreciate your concern about the language on line (indisc.--paper shuffling), but it's part of a legislative findings, and it's complimented by lines 3 and 4, on page 2, which is also legislative intent language that says that - should be - that competition is fair to consumers and competitors. And, I would read that as meaning that the APUC can make a decision based on the impacts on the consumer or the impacts on the incumbent." (5) the commission should oversee competition in local exchange telephone service to ensure that the competition is fair to consumers and competitors; MR. ROWE replied, "That's certainly not the ways I'm seeing it, Representative Elton. But I guess I go back then very much to the federal legislators when they passed the Act, and said be careful in rural areas. And I fear this bill is not allowing us the opportunity to be careful." Number 0151 REPRESENTATIVE BERKOWITZ said Section 1 of the bill, even if it's the original bill, seems "pretty motherhood and apple pie." Aside from his concern about public interest not being expressly mentioned, he asked Mr. Rowe if he has any concern with this. MR. ROWE replied, "You know what, if this bill just was -- the first section, subsection (1), we'd all wave the flag for that. We want this in the state." modern, affordable, efficient, and universally available local and long distance telephone service is essential to the people of the state; Number 0163 MR. ROWE referred to subsection (3). technological advances, reduced costs, and increased consumer choices for local exchange telephone service, resulting from the adoption of an appropriate competitive market structure, will enhance the state's economic development; MR. ROWE said that's making a judgement that it will. He suggest it say: a competitive market structure might enhance the state's economic development; MR. ROWE stated, "And that is absolutely what the APUC is supposed to consider. Will a competitive market structure in this rural area be a (indisc.) to those people in the state overall? And I don't think this allows them to do this, this makes the judgment that it will." Number 0078 REPRESENTATIVE BERKOWITZ asked Mr. Rowe, "In (4), (5), and (6). MR. ROWE repled that would be (4): the benefits of competition in local exchange telephone service should be available to consumers throughout the state; MR. ROWE stated it's rather assuming that there are benefits. The impact of competition in local exchange telephone service should be available to consumers throughout the state. He said, "What would happen? Well, the impact is certainly more neutral. The impact could be negative, as well as positive. And the APUC, I think is making the determination that if indeed there are benefits, positive impact - by competition, it should be in those areas. And, I think we would all agree that's absolutely the way it should be. But I would caution us that we're making a statement that saying, 'competition is in the public interest.' And if competition is in the public interest, there was no reason for rural caution in the Federal Act - because it's an absolute." Number 0193 REPRESENTATIVE BERKOWITZ asked, as Representative said, doesn't subsection (5) somewhat allay those concerns. MR. ROWE replied, "I see section (5) as saying, and they shall oversee competition. Which means there is competition, there's no opportunity for less than competition. And I suppose, I am certainly reading this with eyes that are wearing different colored glasses than Ms. Tindall's. But I guess that's human. I'm concerned about what's here, I'm not satisfied that this is a bill that's - at all serving consumers in the state. In fact, honestly I'm scared of it. And I'm not scared of it for the companies. I don't bring the issue of companies before you at all. I bring the issue of the consumers of telecommunication services in the state of Alaska." REPRESENTATIVE BERKOWITZ addressed Mr. Rowe's concerns, he said, "You're worried that there's a predetermination that competition is universally good." MR. ROWE replied, "I think that's an American (indisc.--paper shuffling), yes, and I agree. As a previous position in my mind, that competition is good, yes." Number 0217 REPRESENTATIVE BERKOWITZ asked, "And there might be certain market segments that competition might not be in the best public interest?" MR. ROWE said he agrees. REPRESENTATIVE BERKOWITZ reiterated, "I just wanted to (indisc.), that's your concern with the bill." MR. ROWE replied, absolutely. CHAIR JAMES announced she would take the bill under advisement. Chair James mentioned earlier that she did not plan of moving HB 416 out of House State Affairs Standing Committee today. HB 462 - USE OF STATE MONEY FOR IMAGES/MESSAGES Number 0228 CHAIR JAMES announced the next order of business is HB 462, "An Act relating to the contents of certain state documents." Number 0235 REPRESENTATIVE GENE THERRIAULT, Alaska State Legislature, came before the committee. He read his sponsor statement: House Bill 462 is designed to curtail the increasingly prevalent practice of using state publications to further personal political agendas. HB 462 would place a number of publications off-limits to state officials for personal purposes. In the past, these documents have been used to disseminate legitimate programmatic deadline information, but I believe that they have deteriorated recently into materials used primarily for self promotion. While any elected official would relish the opportunity to send political and personal messages to the electorate at state expense, this sort of message should be restricted to individual stationary or newsletter format purchased through the appropriate budgets. The use of routine publications for this has the potential of politicizing the underlying programs and I think that should be curtailed. Number 0253 REPRESENTATIVE THERRIAULT read the following sectional analysis: Section 1 amends AS 44.99 by adding a new section that prohibits state agencies from placing a picture of a state official on an application form, warrant, or direct deposit notice. It limits the use of messages from state officials on those publications to what is required by law, is necessary for understanding the document, or addresses a seasonal health issue. It allows messages from the commissioner of the department, director of the division, or head of the legislative agency responsible for the program or activity for which the document is issued as long as the message is limited to stating the requirements of the program and providing reminders about deadlines. The bill defines "state official" as the governor, lieutenant governor, a legislator, a state judge, a state justice, the commissioner or deputy commissioner of a state department, the director or deputy director of a state department, a board member of a public corporation of the state, a member of a state commission, board, or the authority, an officer of the University of Alaska, or an employee of the state. REPRESENTATIVE THERRIAULT noted examples of past publications were provided to committee members, he believes some are appropriate messages some are clearly inappropriate. REPRESENTATIVE THERRIAULT indicated he went back and forth with the drafters on the wording of the bill. If the committee has suggestions on alternative wording, he would be willing to consider that. Number 0290 REPRESENTATIVE DYSON made a motion to move HB 462 from the committee with individual recommendations and attached fiscal notes. REPRESENTATIVE BERKOWITZ objected for purpose of debating it. CHAIR JAMES stated for the record that she had a similar concern last year. It had to do with a mailing by governor that had to do with some of his credits and so forth that he was hoping to put through the legislature. She pointed out that it was a fairly large piece, she received as a small business and some of her clients received it as well because it was (indisc.) up business tax. It had a big picture of the governor on it. Chair James indicated it looked so much like a piece of campaign literature that she instructed her staff to call to find out how it was paid for because it didn't say that on it. She said she wouldn't have done that had it looked like something she would have gotten from the governor's office, but the size of the picture, the whole thing looked to me like campaign material that you would see during a campaign season. The ironic twist of the response she received, because the issue was credits against a tax and the question that my staff asked was, how was it paid for, and it was paid for just out of the governor's office funds. She stated, "Then it was paid at the taxpayer's expense, he said no it wasn't because we don't have any taxpayers. And the document itself was the taxpayer's (indisc.--coughing) we're going to get a credit if they did this. So I thought that statement by a staff person that was kind of ironic, not that they had time to think about it, we don't have any personal tax but we do have a tax. We have a corporate income tax, and this was definitely aimed toward them. You know, there are taxpayers out there." CHAIR JAMES reiterated she has never seen such a piece of advertisement on an issue that didn't look so much like a campaign material. Number 0333 REPRESENTATIVE THERRIAULT believes if we had a law that restricted anything that looked like "red light" campaign material, or if there was a law (indisc.--background) the theft of original idea we would probably all would run afoul of that. He believes it's legitimate to differentiate between those things that he sends out on, a piece of stationary, that's purchased with state money. He mentioned "We all get an office account and we can put out newsletters, and certainly in my newsletter, I put my spin on the issues. In letters, it has my political philosophy on a piece of legislation. That's different though than an ordinary state publication that's goes out once a month - and turning that into a personal propaganda piece." Number 0351 REPRESENTATIVE THERRIAULT continued, "There are lots of examples that I think the current Administration has taken the publications to a new all-time high. Very slick, very good, at least this is not something that is once a month sent out to thousands of people in the state of Alaska who are participating in a particular program. Where did the mailing list for these publications come from, I don't know. But this is not an ongoing state program that has been turned into a slick mailing (indisc.), that's what I'm getting at. My concern is that the underlying programs become more and more politicized as that mailing list is used more and more to send out this type of application. I think the previous Administrations have resisted - maybe they just haven't been savvy enough to utilize that means as much as this Administration. But I think with the appearance of a photo of the governor on documents, the growth of that photo on documents - if we keep up this rate of growth pretty soon the yearly dividend application will be an eight by ten glossy. I don't think we want to do that with that particular document and I don't think we should do that." Number 0372 CHAIR JAMES remarked this is a really sensitive issue but really appreciates Representative Therriault bringing it forward because that's what she's heard from the public as well. Regardless of politics, people have been making that statement, "Boy, this governor sure does know how to advertise himself, and I've never seen it before." REPRESENTATIVE BERKOWITZ stated, "There are some good ideas in your bill, but remember this legislative majority report to the people that was paid for by the people. To me I found this probably more offensive than you find in these things, because this is a publication that went out, that repeatedly referred to the Republican led majority accomplishments, it has a web site reference to the Republican organization, that didn't come out of personal office account, but went statewide. Now, it would seem to me, in the interest of fairness, that you would close the door on this type of blatant partisan political advertisement as well. And your bill doesn't do that." REPRESENTATIVE THERRIAULT replied, "I clearly differentiate between that, and if that was attached to a check that you would receive from the government once a month, or a check that you are entitled to apply for once a year, I think both the Administration and the legislative branch have budgeted amounts to send out information in that format. Certainly if you want to introduce legislation to curtail that, that's a step further than what this legislation (indisc.). What this legislation is designed to do is differentiate between those ongoing state programs and attaching any kind of information, that information, this information, to documentation that is sent out in conjunction with an ongoing state program." Number 0403 REPRESENTATIVE ELTON said he was curious about some instances in which he may run afoul of this. He stated, "The way I read this is that it not only covers visage, or photo, ... Would this prohibit me - one of the things that I do is I send a notice to people, in my community, that they have not yet applied for the permanent fund dividend, it's a message. I do it on letterhead, suggesting that if you haven't done this you ought to do it because the deadline is March 31. Would this legislation prohibit me from doing that?" REPRESENTATIVE THERRIAULT responded he didn't believe so, it's not intended to. He asked Representative Elton if he was using his office account to pay for that. REPRESENTATIVE ELTON replied he would be. REPRESENTATIVE THERRIAULT stressed you are not using the mailing of a dividend document and attaching your message to that document. REPRESENTATIVE ELTON referred to page 2, line 4, "program" is defined as "permanent fund dividend program" and "longevity bonus program." He asked if that definition only applies if it's a warrant. Number 0426 REPRESENTATIVE THERRIAULT referred to page 1, line 7, "may not place a message from a state official on or with an application." He explained you can't put the message on the check stub. You can't put the message on the application form. If you're using your own office account and stationary you should be allowed to do that. A newsletter from your office is not on the warrant, not sent out with the application, or any part of the application, so that would not be swept in by this bill. REPRESENTATIVE BERKOWITZ asked what if Representative Elton, or any of us were to send out a PFD (permanent fund dividend) application with a letter. REPRESENTATIVE THERRIAULT replied, "I didn't think that would fall in here because, number one I would suspect that you would be using your own postage, and again the message -- you're right, there might be something here that if you got a blank application and sent it out with the form - I think we could probably craft language if that is a legitimate concern so that it's the mailing coming from the division, so you would not be able to supply the dividend division with ten thousand messages that they would insert in with their mailing. But if you want to get a bunch of blank forms and you send things out yourself that would be fine. But you should not be able to piggyback on the statewide postage." Number 0454 CHAIR JAMES asked if there was any reason HB 462 could be held over. Since no one was left to testify on line to teleconference, she asked if it could be shut down. [Lost sound, didn't pick up full statement]. Number 0462 JACK KREINHEDER, Senior Policy Analyst, Office of Management and Budget, Office of the Governor, came before the committee. He said he would start by answering Representatives Berkowitz' and Elton's questions. His understanding of the bill is that you would not be prohibited from the situation of sending out a PFD application with a message that the deadline is coming up, or what have you, because on line 7, page 1, it says a "state agency may not place a message..." since you're not a state agency, he believed he would be okay there. He noted, "However, that's notwithstanding, we do have some serious concerns about this bill. Our overall concern is that, in addressing a couple of specific instances that legislators may have disagreed with the Administration on the content of messages, that it's casting a very broad net and placing a very broad restriction on helpful communications between state government and the people of the state. A couple of specific examples that they're concerned about -- the 1998 PFD application for example has this information from the Permanent Fund Corporation that provides information about the fund's performance and balance and so on. His reading of the bill is that this helpful information would be prohibited because it's not addressing the requirements of the program or a reminder about the deadline. That's one concern is that this type of information would be prohibited, as he reads it, as well as the brochure that's included with the checks themselves come from the corporation, not from the Administration or a message by the governor. MR. KREINHEDER pointed out other areas of concern is for example with business license applications. As he understands, the Department of Commerce [and Economic Development] doesn't provide routine mailings of this type, that (indisc.) situation where the department might want to provide information about an upcoming small business conference, information on other types of assistance that are available from the department for small business. So, again, the concern is that this is casting a very broad net if there are concerns about particular messages. He thinks that is something they could talk about, but to prohibit any type of mailing, or additional information not related to deadlines or program requirements are accessibly broad. He asked if Nanci Jones had anything to add to that. Number 0511 NANCI JONES, Director, Permanent Fund Dividend Division, Department of Revenue, was next to testify. She indicated she just wants to give a chronology of the dividend booklet. Ms. Jones said, "Governor Hammond, starting in 1979, started endorsing the application process and he had signed letters. Only one time in four years he had, on the outside cover - front and back, he had endorsed letters to each Alaskan. In 1988 the dividend division was borne where all the services, pertaining to the application and the dissemination of the check was under one division - and Governor Cowper then had endorsed them on the outside of the booklet." MS. JONES continued, "Since the history, the booklet has looked like an encyclopedia and it was my desire, as the new division director, to add a little bit of human service into the booklet so people could better relate to us. When we first came in, and you all can share with me that you were getting tons of letters, complaints about the type of service that we were giving to the applicants over in the Permanent Fund Dividend Division. The first booklet had an endorsed letter by Governor Knowles, no pictures, the only picture, again was a survey that the Permanent Fund Corporation sent out asking, 'What do you do with your dividend, do you spend it or do you save it,' that was the first picture. And the next I asked the governor's office to give me a picture because I knew the corporation was going to do pictures, and I, myself, asked the staff to pose for a picture on the outside of the booklet, so again we could have a better relationship - that people can see that we are humans, we're not designed to not give them a dividend. Again, that was the pictorial one 1997." MS. JONES concluded, "In 1998, then the only picture - then again the board of trustees, it has the page explaining what the progress of the dividend's fund (overall fund), and then it has a letter on it which just explains how much is in the fund and reminding people to help other people to file. And I just sent out a letter which you all should have received to ask you to remind your constituents, when you leave on your break, to file by the deadline. I just wanted to make that clear that it was actually for the dividend. It was actually my idea to redesign the booklet, to make it a little friendlier, easier to read, more white space. So I would like to take credit for that." Number 0544 CHAIR JAMES told Ms. Jones she has done a fine job on the booklet. Chair James asked her to hold up the 1997 and 1998 booklets to see the comparison (a little picture in 1997 and a bigger picture in 1998). She noted the perception of the public is what it appears to them to be, that the governor has been, for four years, running for office on government funds. She agreed that they get nit- picky, what we do to solve the problem of the perception with the public is we make innocent things illegal and we do it time after time. Maybe where this belongs is in the ethics bill, the public needs to feel comfortable with the way that their state funds are being spent. REPRESENTATIVE BERKOWITZ said he agrees completely that those kinds of political messages, on government publications, are inappropriate. It doesn't matter whether it's a Democrat or Republican putting them out. MR. KREINHEDER said this is not a political message, he encouraged them to read it. It simply talks about how successful our permanent fund has been, a source of pride and security for all of us, be sure to fill out your application today, if you know somebody who might need help please lend a hand, the deadline (indisc.) filing, etcetera. Number 0591 REPRESENTATIVE BERKOWITZ said he understands that but some of the examples that Representative Therriault sited, whether it's discussion of ongoing or legislative issues, he does find that inappropriate. If you're going to send something out, you send out what you're going to send out, he thinks to some extent rank has its privileges, the governor can put his picture on certain things, he can sign certain things, but it's not fair to log (indisc.) in official publications. CHAIR JAMES noted she gets the Governor's Message every month on the longevity bonus, generally they're compassionate, but we have had some that were very pointed as well. There isn't enough room on there to let seniors know what you're talking about. If there's a hot button in there, that's a political message and is inappropriate. When it comes to ethics, we all know what's ethical, but there's another level and that's what the public suspects as ethical or not. Number 0617 MS. JONES made a plea to not relegate them back to where they are like an encyclopedia and it's all words and no one reads it and it's just a waste of money. She stressed there are some publication people in the small villages won't get except for - unless we put the fund information in with their dividend. CHAIR JAMES asked about closing the fiscal gap. MS. JONES replied it's the insert that was in with your check and it's all about fund transfers and the amount of the earnings... Corporation. CHAIR JAMES asked what's the picture about closing the fiscal gap, what's that issue. MS. JONES reported they wanted your thoughts to establish (indisc.) whether you disagreed, agreed or disagree, it was a survey. There is more about the fiscal gap and the difference between... REPRESENTATIVE IVAN IVAN jokingly said, "Include all 60 legislators in that packet and I'll feel comfortable." Number 0634 REPRESENTATIVE THERRIAULT reiterated, "We went around and around in trying to decide where to draw the line and that's why I said I'm not wedded to any particular language. Maybe the sensible thing is no official holding an elected office. I think that the format of the dividend application - it's much more pleasing to look at now. We've all learned constructive use of white space, I agree with the steps that they've taken. He asked is there any reason why the picture on the front couldn't be a picture of the permanent fund staff, same information, same pleas, get in touch if you have a question. Is there any particular reason why my picture's not on there? How about me having a personal message wishing happy Easter to all the constituents that get a dividend check, or bonus check in my district signed by me. Why can't we have the longevity bonus staff wishing people a Merry Christmas? Let's take it all the way back to the days in, I think Chicago, when your government check was given to the politician and he came around, knocked on your door and gave you your paycheck. Just send all the dividend checks to me, I'll set up a little stand on the street corner, people can stop by and get their dividend check from me. They'll know where the money came from. It came from me. I think that's sort of the message that we put out. I think it's inappropriate for me to have that access to those publications, I think it's inappropriate clearly for any elected official to have access and we know that when you put out a newsletter. The advice you get is put on a picture, don't send anything out, a newsletter format, without putting lots of pictures and use that white space. Any elected official would love to have access to that. I just think it should be completely disallowed." Number 0658 REPRESENTATIVE BERKOWITZ jokingly said the Co-chair of Finance [Representative Therriault] does know that the money does come from him. CHAIR JAMES indicated HB 462 would be brought up at the next meeting. ADJOURNMENT CHAIR JAMES adjourned the House State Affairs Standing Committee at 10:20 a.m.