Roberts to Hill: Don’t Use an Ax On Telecom Act

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It’s no secret the cable industry was one of the biggest beneficiaries of the Telecommunications Act of 1996.

In that law, which some think is already outdated, Congress stripped away a lot of cable rate regulation within three years, providing a friendly climate to invest $85 billion on upgrades for digital TV, high-speed data and voice-over-Internet protocol (VoIP) services.

So it was no surprise last week when Comcast Corp. CEO Brian Roberts, in testimony before the Senate Commerce Committee, stated at least three times that he opposed a major overhaul of the 8-year-old law. But his testimony did underscore the sense of urgency cable’s establishment feels on the topic.

Sens. Ted Stevens (R-Alaska) and Daniel Inouye (D-Hawaii) — one of whom is going to be Commerce chairman next year — want to open up the law, as do Energy and Commerce Committee chairman Rep. Joe Barton (R-Texas) Telecommunications and the Internet subcommittee chairman Rep. Fred Upton (R-Mich.).

Once that process gets started, it could veer in all sorts of directions that aren’t exactly hospitable to cable, including carriage mandates of local digital television stations and obligations to provide wholesale access to competing high-speed Internet access providers.

“To do a massive rewrite of the Telecommunications Act, I think, would create nothing but instability [and] would destabilize capital markets,” Roberts said.

COMMON VIEW

Although Roberts testified on behalf of Comcast, his views were widely shared within the cable industry.

“Generally, NCTA isn’t seeking changes to the act, and believes that a stable regulatory environment will do more to foster continued investment,” said NCTA spokesman Rob Stoddard.

Many Capitol Hill lawmakers want to revise the law, especially those who want to ensure that expensive-to-serve and sparsely populated areas have access to the most advanced telecommunications services at reasonable prices.

For different reasons, Verizon Communications Inc. supports passage of new legislation that would rework provisions that specifically addressed opening local phone markets to competition.

Verizon chairman and CEO Ivan Seidenberg said his company is bogged down by rules that require his company to lease facilities to competitors at below-cost rates, costing his company money and killing incentive to upgrade the facilities.

Backing Seidenberg’s view was Scott Ford, president and CEO of ALLTEL, an incumbent phone carrier and wireless company based in Little Rock, Ark.

“These rules assume a monopoly on access that no longer exists,” Ford told the Senate panel.

Seidenberg urged Congress to ensure that local phone companies have the same regulatory environment enjoyed by wireless phone companies, cable companies and some VoIP providers.

“If we can’t turn the regulatory quagmire around, the focus is going to continue to be shifted away from the wireline business,” Seidenberg told the committee.

The 1996 act took a decade to produce. Precursor telecommunications analyst Scott Cleland said he doubts Congress is ready to write a new telecommunications law any time soon.

“While there is total consensus that it is abysmally screwed up, there is zero consensus on how to fix it,” Cleland said in a recent interview. “Congress is going to wrestle with this, and it’s going to be a tough wrestle.”

Under current FCC rules, Verizon is required to provide wholesale access to competing Internet-service providers — a mandate that does not fall on cable operators.

“We would ask that Congress take the lead in creating a new legislative framework,” Seidenberg said.

Roberts rejected a one-size-fits-all approach, noting that cable companies cope with local franchising requirements from which wireless providers, satellite carriers and local phone companies are exempt.

VOIP GUIDANCE?

Roberts came armed with a few suggestions in the event momentum to revise the law was unstoppable. Comcast is planning to offer VoIP in three cities this year, at a cost ranging between $300 and $400 per home, Roberts said. Time Warner Cable, Cox Communications Inc. and Cablevision Systems Corp. are also aggressive in the VoIP arena.

But Roberts said the industry does not have clear guidance on the regulatory burdens that VoIP providers will need to shoulder. As a result, he advocated support for VoIP legislation by Sen. John Sununu (R-N.H.) that would bar states from regulating Internet-protocol services. That’s controversial because states have traditionally regulated intrastate local phone carriers.

“We hope these policies will not have to await a comprehensive rewrite of the Telecommunications Act,” Roberts said. “We need them sooner rather than later.”

Like many large cable companies, Comcast is prepared to offer VoIP while complying with regulations that federal and state regulators consider essential.

“We’re prepared to step up to important social responsibilities, like universal service, emergency service and full cooperation [with] law enforcement,” Roberts said.

STAYED ON TOPIC

The two-hour hearing focused on telecommunications, not cable politics. Sen. John McCain (R-Ariz.), the panel’s chairman and a dogged cable critic, didn’t use the occasion to grill Roberts about cable rates, a la carte pricing, indecent programming or program-access issues.

Another point Roberts made was that regulatory uncertainty rattles companies and investors.

His biggest concern now, he said, was the decision by the U.S. Court of Appeals for the 9th Circuit in Brand X Internet Services v. the FCC, which exposed every U.S. cable company in the country to rules requiring wholesale access to competing Internet service providers.

The NCTA is appealing that ruling to the Supreme Court, but it is unclear whether the industry will obtain the support of the Justice Department, which favors a portion of Brand X that promotes law enforcement’s efforts to track criminals that use the Internet.

“The biggest impediment would be regulatory instability, and in our case, that’s here and now and immediate, which would be the so-called Brand X case. It’s under review and … the question is whether [the government] is going to appeal to the Supreme Court,” Roberts said.

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