Washington— After the roughing up they took in the Senate last week, the Baby Bells probably don't stand much of a chance of convincing lawmakers to pass a bill that would deregulate their high-speed Internet facilities and services.
The Bells — the four dominant local-telephone companies intent on battling cable operators for data subscribers — are the chief proponents of a House bill that would lift a host of restrictions on the provision of Internet service.
The bill (HR 1542) — sponsored by Reps. Billy Tauzin (R-La.) and John Dingell (D-Mich.) — narrowly escaped two committees, leaving House Speaker J. Dennis Hastert (R-Ill.) to decide whether to inflict a divisive vote on the full House in the face of inevitable Senate inaction.
Last week, following his testimony before the Senate Commerce Committee on the status of local phone competition, AT&T Corp. chairman C. Michael Armstrong predicted the demise of the Tauzin-Dingell bill.
"I don't think it's got a chance in the Senate because I think it's bad policy, I think it's bad law and I think it has a bad outcome for consumers," Armstrong told reporters.
At the hearing, several senators said it was premature to overhaul the Telecommunications Act of 1996.
The Tauzin-Dingell bill would do just that by allowing the regional Bell operating companies (RBOCs) into the long-distance data market before those companies open their local networks to competitors and by allowing them to withhold access to data-specific network elements from their rivals.
The theory behind the Tauzin-Dingell bill is that the 1996 law never contemplated the Internet-induced data revolution, or how it would affect the application of legacy monopoly regulations to telcos' data facilities and services in a competitive market.
Sen. Ernest (Fritz) Hollings (D-S.C.) — the new chairman of the Commerce Committee —blasted the notion that he and other authors of the 1996 law failed to take the burgeoning data market into account.
"It's the biggest bunch of nonsense I ever heard of," Hollings said.
Rep. Edward Markey (D-Mass.) told the Hollings panel that the 1996 law was working, though not perfectly, and cautioned against a revision that undermined the goal of eliminating monopolies prior to deregulation of the phone-industry giants.
"We are at the dawn of this local phone competition," Markey said.
After noting that Tauzin was heavily involved in the Bridgestone/Firestone tire-recall debate, Hollings asked Markey to deliver a message to Tauzin: "Tell Billy … the tread is coming off the monopoly tire on the Senate side," he said.
Armstrong accused the Bells of overcharging for voice-network elements and failing to comply with open-market mandates in the 1996 law. He called for stricter enforcement and the break-up of local phone companies into wholesale and retail operations to ensure that incumbents pay the same price for wholesale elements and services as their rivals.
Clark McLeod, chairman and co-CEO of competitive local-exchange carrier McLeodUSA Inc., said the Bells' failure to treat competitors fairly should be addressed through the imposition of stiff monetary damages, rather than fines to the government. Today's fines of $10 million on a phone company with $100 million in market capitalization, are the "equivalent of a parking-meter violation," he said.
Royce Holland, chairman and CEO of Allegiance Telecom Inc., a CLEC that targets business customers, called for the imposition of fines equal to 1 percent of a phone company's quarterly revenue — or between $100 million and $150 million — to compel compliance and awareness of the law at the Bells' highest corporate levels.
"I am a CEO. I know what gets my attention," Holland said.
The lone Bell company representative — BellSouth Corp. executive vice president of regulatory and external affairs Margaret H. Greene — said recent Federal Communications Commission data showed that CLECs are thriving in the business market, where they can make the most money, but aren't faring as well in the subsidy-laden residential arena.
"We have some of our central offices where we have less than 50-percent market share for business customers today," Greene said. "We have 100 percent of the residential rural customers that nobody else wants, because our service is priced well below cost to service those customers."
Greene also defended BellSouth's record in opening its network to competitors.
She said FCC rules allow AT&T and McLeod to lease elements at a 70-percent discount, to ease their entry, but the agency keeps BellSouth out of the long-distance business by adding layer upon layer of requirements onto the original 14-point open-network compliance checklist.
"The 14-point checklist has grown in Georgia to be 1,800 different performance measures that we are required to report," she said.
In backing Tauzin-Dingell, the Bells' strategy is to convince rural lawmakers that deregulation would provide the incentive to deploy broadband facilities with dedicated links to the Internet backbone in low-density areas.
Several senators with rural constituents — including Sens. Max Cleland (D-Ga.) and Byron Dorgan (D-N.D.) — said they weren't prepared to exchange deregulation for the promise of broadband deployment throughout their states.
"In my judgment, Dingell-Tauzin is going to get slowed way, way down when it gets here in the United States Senate and it should get slowed down," said Dorgan. He supports larger subsidies to bring broadband to rural areas.
Senate Minority Leader Trent Lott (R-Miss.), who holds a seat on the Commerce Committee and is seen as an ally of the long-distance industry, surprised some by saying the Tauzin-Dingell bill deserved a fair review.
"I think it's incumbent upon us to see if we need to take a look at the act to see if it, maybe, can be tweaked in some way," Lott said. "I think we need to learn more about what [Tauzin-Dingell] does and decide how we proceed. This is the beginning of a process that will allow us to do that."