David Carney publishes the Tech Law Journal Daily E-Mail Alert and the Tech Law Journal web site, which cover legislative, legal and regulatory developments affecting the Internet, communications and computing. He can be reached at [email protected] .
I. History of the Regulation of Communications
To start with, to understand the current debate over HR 1542, the Tauzin Dingell bill, one must have a basic understanding of the current state of regulation of the communications industry, and how it got to be the way it is.
A. The Bell System Monopoly
There are a few basic principles about communications upon which almost everybody involved in the communications industry and in policy making process has always been able to agree. There should be innovation in communications technologies; communications services should be relatively ubiquitous; and, services and equipment should be affordable. That is, consumers should benefit. However, there has always been debate about how to achieve these goals.
Technical Terms
Broadband. This term has different meaning to different people. In the least, it is something that can transport data at a rate faster than a 56 kpbs phone modem.
Central Office . A local exchange carrier’s facility where customers’ lines are connected to switching equipment. Aka CO.
CLEC . Competitive Local Exchange Carrier. A company that competes with the ILECs in the provision of local phone service. CLECs follow different business models. Some lease local loops from the ILECs. Other build their own local facilities. The CLEC industry was launched as a result of the Telecom Act of 1996. Most CLECs are threatened by, and oppose, the Tauzin Dingell bill.
Copper . An inexpensive metal that conducts electrical currents. Local phone networks are made of this stuff. The wire connecting most residential phones is unshielded twisted pairs of copper wire. It is durable, easy for technicians to install and repair, and low tech. Hence, it was ideal for the old fashioned voice only PSTN designed a century ago. However, it has limited usefulness today for carrying large quantities of data. Other lines, including coaxial cable and fiber optic cable can transport far more data.
Data . A term used to describe any form of communications traffic, other than voice traffic. From both regulatory and technical standpoints, it is becoming increasingly impossible to distinguish between voice and data.
DSL . Digital Subscriber Line. A collection of technologies used by local exchange carriers (phone companies) to provide broadband Internet access over copper phone lines to customers. One important characteristic is that DSL signals degrade rapidly over distance, meaning that currently subscribers must be located within about 15,000 feet of the phone company’s central office to obtain DSL service. Another important characteristic is that most DSL service is asymmetric, with most of the increase in bandwidth being dedicated to traffic that is downstream to the subscriber.
DSLAM . Digital Subscriber Line Access Multiplexer. Equipment installed in a local exchange carrier’s central office to facilitate the provision of DSL service.
Downstream . The flow of information to a location. For a person using a computer and phone modem to access the Internet, the transfer of data to the user’s computer is downstream. For the web surfer who visits web sites to read or shop, most of the data is downstream to the web surfer.
FCC . Federal Communications Commission . A large body of lawyers located Washington DC who regulate phone, cable, television, radio, satellite, and increasingly, Internet, services. Michael Powell is its Chairman.
Fiber . Fiber optic cable. A technology that uses light transmitted through narrow strands of transparent fiber to transport data. Fiber optic cable is more difficult to install that copper wire. However, it can carry vastly more data.
ILEC . Incumbent Local Exchange Carrier. This is the company which was historically franchised to provide local phone service. For most people the ILEC is also a RBOC. However, there are also independent local exchange carriers. Most people think of the ILEC as “The Phone Company”. ILECs are still significantly regulated by the Communications Act and the FCC.
In Region . The 1984 Modified Final Judgment (MFJ) divided the country into seven state based geographic regions, in which one RBOC would provide local phone service. In region is a term used to describe services provided by an RBOC within its region. § 271 of the Telecom Act of 1996 treats in region services differently from out of region services.
interLATA . A regulatory category for a telecommunications service that originates in one Local Access and Transport Area (LATA) and terminates in another. What the ordinary phone customer thinks of as a long distance phone call is one example of an interLATA service. However, the language of the 1996 Telecom Act, and FCC rules, provide that interLATA service includes both voice and data communications.
kbps . Kilo Bits Per Second. A rate of transfer of digital data. Most standard telephone modems are rated at 56 kpbs, but actually provide transfer rates slightly lower. HR 1542 contemplates broadband as 384 kbps downstream only.
Last Mile . A reference to the line connecting a customer’s home or business phone or computer to some network. For most residential and small business customers, the only “last mile” connection is a copper line owned by an RBOC.
LATA . Local Access and Transport Area. The U.S. is divided up into almost 200 geographic LATAs.
Packet Switched . A technology for sending communications, whereby the communication is broken up into packets which contain data (which could represent video, voice, images, or anything) and headers (routing information). The packets are reassembled at their destination. This technology, which is fundamental to the Internet, makes far more efficient use of network resources than circuit switched communications, which is used by PSTN.
POTS . Plain Old Telephone Service.
PSTN . Public Switched Telephone Network. It is public in the sense that the phone companies are common carriers: anybody can use them. It is switched in the sense that two or more users are connected by circuit switching: the entire channel between the users is devoted to that communication. This is an inefficient use of network resources, and is in contrast to the packet switching of the Internet. It is a network in the sense that anyone connected can communicate with anyone else who is connected. The PSTN was designed for carrying continuous voice traffic.
RBOC . Regional Bell Operating Company. One of the seven local phone companies created by the breakup of the Bell System by the 1984 Modified Final Judgment. There originally were NYNEX, Bell Atlantic, Bell South, Ameritech, SBC, US West, and Pac West. However, as a result of mergers permitted by the Telecom Act of 1996, there are now four. NYNEX, Bell Atlantic and GTE have merged and been renamed Verizon. SBC, Ameritech, and Pac West have merged into SBC. Qwest has acquired US West. The RBOCs, and especially SBC, Verizon and Bell South, are the main proponents of the Tauzin Dingell bill.
Upstream . The flow of information away from a location. For a person using a computer and phone modem to access the Internet, the transfer of data from the user’s computer is upstream.
Voice . Human conversation.
Legal Provisions
Communications Act of 1934 . A “New Deal” era statute that imposed federal regulation upon phone and broadcast communications. It has been significantly amended many times over the years. For example, the Telecom Act of 1996 amended it; and, the Tauzin Dingell bill would also amend it. The body of federal statutory law, found in Title 47 of the U.S. Code, regulating communications is known as the Communications Act. Aka, the Act, and CA.
Modified Final Judgment . The 1984 order of U.S. District Court Judge Harold Greene which broke up the Bell System into AT&T and the RBOCs. Aka, MFJ.
Section 271 . § 271 of the Telecom Act of 1996 provides that no RBOC may provide in region interLATA services until it has first satisfied the FCC that it has met a 14 point checklist contained in § 271. This list includes interconnection in accordance with the requirements of § 251 , nondiscriminatory access to network elements in accordance with the requirements of § 251, nondiscriminatory access to the poles, ducts, conduits, and rights of way owned or controlled by the RBOCs at just and reasonable rates, and local loop transmission from the central office to the customer’s premises, unbundled from local switching or other services, and other things. So far, the FCC has approved applications made under § 271 with respect to five states, including Verizon’s application in New York and SBC’s application in Texas. RBOCs are free to go out of their own region and provide interLATA services; however, they are doing very little of this.
Section 251 . § 151 requires telecommunications carriers to interconnect with other telecommunications carriers. It also specifies things which ILECs must do with respect to their competitors. They have the duties to negotiate, to interconnect, to provide unbundled access to its network elements, to offer communication services at wholesale rates, and to allow collocation of equipment of CLECs in their central offices For example, under § 151(c)(3), ILECs have “The duty to provide, to any requesting telecommunications carrier for the provision of a telecommunications service, nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory …”
Telecom Act of 1996 . The Telecommunications Act of 1996, aka 1996 Act, 96 Act, and TA).
Tauzin Dingell bill . HR 1542, a bill introduced in the U.S. House of Representatives on April 24, 2001 by Rep. Billy Tauzin (R-LA), and cosponsored by Rep. John Dingell (D-MI), and others. It is highly unlikely that it will ever become law.
Key People
Baxter, Bill . Former Assistant Attorney General for the Antitrust Division, during the first Reagan Administration. The man who sought and obtained the breakup of the Bell System, and terminated the government’s antitrust suit against IBM.
Dingell, John . Congressman from Detroit, ranking Democrat on the House Commerce Committee, and cosponsor of HR 1542.
Green, Harold . Former Judge of the U.S. District Court for the District of Columbia who issued the 1984 Modified Final Judgment compelling the breakup of the Bell System.
Hollings, Ernest . Senator from South Carolina, Chairman of the Senate Commerce Committee, and adamant opponent of HR 1542.
Tauzin, Billy . Congressman from Cajun country in Louisana, Chairman of the powerful House Commerce Committee, and lead sponsor of HR 1542.
For a very long time person to person communications simply meant telephone service — plain old fashioned telephone service (POTS) provided over the wires of the public switched telephone network (PSTN). The prevailing view was that the most efficient, indeed, the only way to provide it was through a monopoly. This monopoly, in turn, was regulated at both the state and federal levels to ensure that it provided services in the public interest.
That monopoly — the Bell System — argued phone service was a natural monopoly. It also argued that to make a national telephone network work required unified control. If multiple players were involved, the entire system would break down. Unfortunately, the government bought these arguments. Hence, for a long time, government not only allowed a monopoly — it promoted it. Some policy makers today are still trying to undo the remaining aspects of this monopoly system.
The Bell System’s phone service achieved near ubiquity, in the sense that well over 90% of households had a phone. It was reliable, especially when compared to service in almost any nation other than Canada and those in western Europe. Moreover, for local calls, it was affordable. However, long distance calls were expensive. Innovation was limited. Push button phones were the biggest development in two generations.
The Bell System was a protected monopoly, quite comfortable being a monopoly. Federal and state government regulators, which generally enjoy regulating things, were happy too. Things did not change for a long time.
But eventually, over time, others argued the system would be better with competition between multiple players.
B. MFJ
The impetus for ending the monopoly Bell System did not come from within the Bell System (it viciously opposed any tampering with its monopoly), nor from the regulators at the Federal Communications Commission (FCC) or legislators in the Congress. Rather, the Department of Justice’s Antitrust Division began to seriously examine whether the Bell System violated the antitrust laws. It filed a complaint under the Sherman Antitrust Act in 1974. However, the final end to the Bell System began when, in 1981, Ronald Reagan named Bill Baxter, a law professor from Stanford University with a strong free market bent, to head of the Antitrust Division.
Baxter sought and obtained the breakup of the Bell System monopoly. Under the Modified Final Judgment (MFJ) issued by U.S. District Court Judge Harold Greene in 1984, local and long distance service were separated. AT&T hence forth provided long distance service, while seven separate Regional Bell Operating Companies (RBOCs) provided local phone service. Each RBOC was regionally based: NYNEX in the northeast, Bell Atlantic in the mid Atlantic states, Bell South in the old south, Ameritech in the Midwest, SBC in Texas and nearby states, Pac Bell in California, and US West in much of the rest of the west.
One rationale for the structural change was that so long a one company provided both long distance service and the local facilities, it had little incentive to interconnect with other long distance phone companies. Why would such a company want to cooperate with competing long distance providers? It would only take away revenues from its own long distance operation. Under the MFJ the RBOCs were now separate companies from AT&T, and were prohibited from providing long distance service themselves. Hence, the RBOCs no longer had any disincentive to interconnect their facilities with those of any long distance service provider. As a result of the MFJ, long distance competition thrived. And over time, prices of long distances services, adjusted for inflation, dropped significantly. In addition, despite the decades of predictions of network failure, the various services providers and equipment manufacturers were able to make everything work together.
The MFJ also ended the Bell System’s monopoly control over equipment manufacture. Under this monopoly there was little innovation (remember the ubiquitous black dial phone), and everything had to be leased from the Bell System. The result of the MFJ was competition, innovation, and lower prices.
Baxter and Greene achieved a great success
However, there were limits on their accomplishments. Most notably, each RBOC retained monopoly control over local phone service. It owned the local facilities, including the central offices and the copper wires that run from the local offices into homes and businesses. There was little competition, little innovation, and prices were not dropping.
C. 1996 Telecom Act
In 1996 the Congress passed a major piece of legislation reform a wide array of communications laws. In particular, it sought to end the monopoly of the RBOCs.
Hypothetically, a competing company could build its own network, running lines down streets, and into homes. However, the cost of building a second wire network was just too expensive to be feasible in most places.
The 1996 Telecom Act was not just a legislative enactment. It was the result of a long negotiating process involving the various companies and groups with interests in communications. The product was a complex, carefully worded, and curious compromise.
§ 151 requires telecommunications carriers to interconnect with other telecommunications carriers. It also mandates many specific things which incumbent local exchange carriers (ILECs) must do for their competitors. ILECs have the duties to negotiate, to interconnect, to provide unbundled access to their network elements, to offer communication services at wholesale rates, and to allow collocation of equipment of competitive local exchange carriers (CLECs) in their central offices.
For example, under § 151(c)(3) ILECs have “The duty to provide, to any requesting telecommunications carrier for the provision of a telecommunications service, nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory …”
However, the Telecom Act of 1996 did not impose any serious sanction upon the RBOCs for failure to comply. The affected CLECs and the FCC were left substantially powerless to enforce the requirements of § 251.
The Telecom Act took a carrot approach, instead of a stick approach. The RBOCs desperately wanted to be allowed to provide long distance phone service. The bargain which they struck, which is codified in § 271, was that they would be allowed to provide in region interLATA service in a state once they had satisfied the FCC that they had opened up their facilities to their competitors in that state.
The phrase “in region interLATA service” warrants examination, because the Tauzin Dingell bill deals with this. First, “in region” means within the territory of an RBOC as established by the MFJ. That is, the Telecom Act allowed RBOCs to immediately provide interLATA services in the territory of another RBOC. However, as things have turned out, the RBOCs have done very little of this. They are just not competing with each other.
Second, the term “interLATA” means service that originates in one LATA and terminates in another. The U.S. is divided up into about 200 Local Access and Transport Area, or LATAs. What the ordinary phone customer thinks of as a long distance phone call is one example of an interLATA service.
Third, the term “service” means that all communications services are covered. That is, there is nothing in the Telecom Act that limits the scope of § 271 to old fashioned voice phone calls. The language of the 1996 Telecom Act, and FCC rules, provide that interLATA service includes both voice and data communications. (The Tauzin Dingell bill would distinguish between the two, and provide for different regulatory treatment.)
Of course, the RBOCs do not like many of the requirements imposed upon them by § 251. Nor do they like the § 271 requirements. A monopoly is a nice thing to have. §§ 251 and 271 are an attempt to force the RBOCs into the cold shower of competition.
The RBOCs have done their level best to avoid, delay, and limit the implementation of these two sections. And today, promoting the Tauzin Dingell bill is a part of this continuing effort.
II. Content of the Tauzin Dingell Bill
There is a lot of rhetoric describing this bill as promoting “broadband deployment”, making the Internet take off, and freeing the Internet. But first, one must examine the actual contents of the bill.
After two mark ups sessions by the Telecom Subcommittee, and by the full Commerce Committee, the bill is long and complex. Even the bills’ top lobbyists refer some questions from the reporters to their lawyers.
Nevertheless, the bill has several key provisions.
First, it would provide relief from the regulatory provisions discussed above for “high speed data service”. That is, § 271 applies to all interLATA services. Under the Tauzin Dingell bill, “high speed data service” would be exempted, while voice service would remain regulated. Specifically, the bill provides that:
“… neither the Commission, nor any State, shall have authority to regulate the rates, charges, terms, or conditions for, or entry into the provision of, any high speed data service, Internet backbone service, or Internet access service, or to regulate any network element to the extent it is used in the provision of any such service … .”
Hence, it removes a major aspect of the carrot offered to RBOCs to open up their facilities to competitors.
Second, it would amend § 251 by providing that “neither the Commission nor any State shall require an incumbent local exchange carrier to provide unbundled access to any network element for the provision of any high speed data service …” and by removing the requirement that ILECs provide resale of high speed data services.
Hence, the RBOCs could deny interconnection to CLECs with respect to its new “high speed data service”.
To give meaning to these provisions, the bill also defines the term “high speed data service”. The bill provides that it is,
… any service that consists of or includes the offering of a capability to transmit, using a packet-switched or successor technology, information at a rate that is generally not less than 384 kilobits per second in at least one direction. …”
III. Broadband Deployment Debate
The bill is titled the “Internet Freedom and Broadband Deployment Act of 2001.” Like many bills introduced in the Congress, the title misrepresents the content of the bill. What the bill does is alter the regulatory environment in which the RBOCs operate. It is an RBOC deregulation bill, or regulatory relief bill. It is a tremendous leap to argue that the bill is a broadband deployment bill.
A. Incenting Broadband Deployment Argument
The RBOCs, and their supporters in Congress, argue that the Tauzin Dingell bill will incent, and cause, the buildout of DSL facilities by the RBOCs.
First, this argument is inconsistent with history. The RBOCs possessed DSL technology for a decade, but did not deploy it. Then, following the passage of the 1996 Telecom Act, their CLEC competitors obtained access to the RBOC’s facilities, and started to offer it. The cable companies also started to offer broadband access. These competitive threats prompted the RBOCs to jump into the business of offering DSL service. Passage of the Tauzin Dingell bill would deprive these CLECs access to certain RBOC facilities, thereby driving them out of business. This is hardly a convincing record of commitment to DSL deployment.
Second, the proponents of HR 1542 have all but conceded that the deregulatory provisions of the bill will not cause the rapid buildout of DSL facilities. They did this by conceding during the mark up sessions that language had to be added to the bill to actually require build out. The point is, if the deregulatory provisions of the bill would cause buildout to occur, why would it be necessary to add language to the bill that actually mandates buildout?
The language had to be added because, even among the supporters of the the deregulatory provisions of the bill, there was skepticism that it would actually result in buildout. Then, the debate was not over whether to require buildout, but rather what language would be used.
The subsequent debate was over whether to adopt a modest amendment offered by Rep. Tom Sawyer (D-OH) and Rep. Bobby Rush (D-IL), and backed by Tauzin and Dingell, or a more serious amendment offered by Rep. Bart Stupak (D-MI). The Sawyer amendment, which was adopted, sets year by year requirements for the deployment of DSLAMs in central offices (COs). The Stupak amendment would have measured deployment beyond what has already been deployed. Stupak argued that the levels set by the Sawyer amendment for the next few years have already been met by most RBOCs, and hence, impose no real requirement. The Stupak amendment also would have measured buildout based upon all local loops of up to 150,000 feet, while the Sawyer amendment would cover only those of up to 15,000 feet. Stupak argued that most customers in urban areas are within 15,000 feet of their COs, but that in rural districts, such as his, many customers are far beyond 15,000 feet. The committee rejected the Stupak amendment by a vote of 17 to 37, and then approved the Sawyer amendment by a voice vote. The bill, as amended by the Sawyer amendment, would impose no obligation to deploy DSL service to customers who are beyond 15,000 feet from their COs.
B. Economic Development Argument
Another main argument of the supporters of the Tauzin Dingell bill is that without broadband deployment in all regions of the country, the left behind regions will lag economically. Businesses will not locate in areas without broadband because its absence will put them at a competitive disadvantage with respect to competitors in areas with broadband Internet services.
The bill’s definition of “high speed data service” undermines this argument. It provides that the broadband service contemplated by the bill is merely 384 kpbs one way. This means downstream, to the customer. Upstream service is increased little under the DSL service being offered by the RBOCs to most customers. Moreover, for many businesses, 384 kpbs is not enough downstream capacity.
This is not useful for businesses. You cannot run a web server with the limited upstream capacity provided by the RBOCs. You cannot quickly send large data files, which is an important requirement for many businesses today.
During mark up by the House Commerce Committee Rep. Tom Davis (R-VA) offered an amendment that would have defined “high speed data service” as at least 1.5 million bits per second downstream, and at least 128 thousand bps upstream. Rep. Ed Markey (D-MA) spoke in support: “They are promising us a superhighway, but we are only going to get a bike path.” Rep. Tauzin argued against it; and, it was defeated by the supporters of HR 1542.
While this lopsided asymmetry is not useful for businesses or most teleworkers, it is maximized for online shopping and receiving entertainment.
C. Broadband and Consumer Choice
Finally, there is the matter of consumer choice. An underlying premise of the Tauzin Dingell bill is that the government needs to step in to promote broadband deployment so that consumers will be able to obtain broadband service. This ignores the facts that broadband services are already widely available, and that consumers are largely determining of their own free will not to obtain broadband access.
Broadband Internet access involves a new set of communications technologies. They are being adopted by the public at a very fast rate when compared to the adoption of other communications technologies in history. Moreover, the main impediment to more widespread use of broadband services is the customer’s decision not to buy it, not its unavailability.
Already, almost anyone anywhere in the U.S. has access to faster Internet access via one of many satellite providers of Internet access. It may be only downstream, and it may be expensive, but it is faster, and available to all. About 80% of households could sign up for broadband access via cable modem service. About 50% of households could get access to DSL service through their ILEC or one of the CLECs. Some people have access in multi unit dwellings to broadband via fixed wireless technologies.
The point is this: if there are already many options for people to obtain broadband access, yet most people choose not to pay for it, why should the government be passing legislation to promote its development?
IV. Deregulation Debate
There is a common strategy for communications companies, and their trade groups. Every company and industry sector asks the Congress, the courts, the FCC, and local regulators to deregulate them, but regulate their competitors.
While computer and software companies have historically competed by trying to make better products, and market them more effectively, communications companies have hired legions of lawyers, lobbyists, and flaks to wage combat in the regulatory arena. The RBOCs are some of the best at the game.
The RBOCs argue that Tauzin Dingell is a good bill because it will bring about a degree of deregulation. While the bill carries the inappropriate title of “Internet Freedom and Broadband Deployment Act”, the key subsection of the bill carries the very accurate heading of “FREEDOM FROM REGULATION.” This is correct description of the bill. Moreover, it has inherent merit. Consumers have suffered from unnecessary regulation of the communications industry. And, as the RBOCs assert, the cable industry, which is also deploying broadband Internet access service, is largely unregulated.
However, four points regarding this argument warrant mention.
A. Abuse of Market Power
First, while consumers have suffered as a result of over regulation, they have also suffered as a result of abuse of market power by the Bell System, and now, the RBOCs. The regulation from which the RBOCs seek relief, is the regulation put in place by the 1996 Act to address this market power problem.
One of the major reasons that CLECs are getting any of the interconnection aspects required by the 1996 Act is that the RBOCs have to convince the FCC that they are providing it to be allowed into the interLATA services market. If you remove this provision as to high speed data services, you decrease the incentive of the RBOCs to comply with the Act.
On the other hand, the FCC is now approving § 271 requests, and may have substantially completed the process within a few years, so this consideration may soon be irrelevant.
B. Intellectual Inconsistency
The second point to be made about the RBOCs’ deregulation argument is that they have been intellectually inconsistent in their pleas for deregulation. They want deregulation for themselves in the Tauzin Dingell bill; and they argue that it is unfair for RBOCs, but not cable companies, to be regulated in the provision of broadband Internet access services. On the other hand, the RBOCs have also been arguing that the cable industry should be regulated through mandating “open access”, or as the cable industry prefers to call it, “forced access.” The RBOCs have been lobbying local cable franchising authorities to impose open access requirements; they have been filing amicus curiae briefs with the courts when the cable companies challenge open access requirements; and, they have been filing documents with the FCC.
C. Impossibility of Distinguishing Voice and Data Traffic
The RBOCs argue that they seek deregulation only of high speed data service with the passage of the Tauzin Dingell bill. The regulatory provisions would remain in effect with regard to voice services, they say. For this distinction to be effective, regulators will have to be able to enforce it. This means that regulators will have to be able to promulgate rules that distinguish between the two, and then be able to apply those rules to actual network traffic. If not, the practical effect of the Tauzin Dingell bill may be to deregulate both voice and data traffic.
Rep. Chip Pickering (R-MS), an opponent of the bill, offered an amendment during the Telecom Subcommittee mark up session that would have required ILECs to “obtain an outside, independent certification that such carrier can separate voice traffic from data traffic carried over its network and that it is capable of blocking interLATA voice traffic.” Rep. Tauzin responded that the bill would not take effect if this amendment were adopted. He stated that voice and data cannot be distinguished, and therefore, if the amendment were adopted, ILECs would not be able to comply.
Pickering introduced the amendment for the purpose of forcing Rep. Tauzin to make this admission. Rep. Ed Markey (D-MA) also threw a jab at the bill’s data voice dichotomy by offering a comic amendment that would have required the ILECs to appoint a senior employee to watch every digital bit that moves on its networks, and identify whether it is a voice bit or a data bit. The Pickering amendment failed 10 to 21, and Chairman Fred Upton (R-MI) ruled the Markey amendment out of order. While the amendments failed, the debate over them made the point: while the bill literally states that only data traffic is deregulated, the practical effect will be that ILECs will likely pass off voice traffic as data traffic.
D. New Technologies
Finally, there is another development which is relevant to the deregulation debate. The 1996 Act sought to create competition in local phone service, in large part, by compelling the RBOCs to open their facilities to competitors, who would provide competing local phone service over the same PSTN. This has not worked out very well.
However, if one views the market as communications generally, significant competition to the RBOCs is developing. Not all person to person communication is by wire based phone facilities. First, wireless phone service — cell phones — are becoming cheaper. People are increasingly using cell phones to make calls that they previously would have made over copper systems. For some consumers in some geographic markets cell phones are now fungible with wireline phones. And now, about 3% of households have cell phones as their only phone system. This number will continue to grow. Moreover, the technology of mobile communications is evolving rapidly. Secondly, people are increasingly using Internet e-mail and instant messaging to communicate. Moreover, technologies are evolving that will allow people to use IP to instantly send verbal communications. That is, while the § 271 carrot approach to promoting competition has not succeeded, the development and adoption of new technologies is providing the competition sought by the 96 Act.
V. House Committee Consideration
There have been five public events in the House of Representatives regarding the Tauzin Dingell bill. The Commerce Committee held a public hearing. The Telecom Subcommittee held a mark up session. Then, the full Commerce Committee marked up the bill. Then the Judiciary Committee, which was given very limited jurisdiction over the bill, held a hearing and a markup session. These events exposed some of the weaknesses in the arguments being advanced by the proponents of the Tauzin Dingell bill. These policy arguments were addressed above. These committee events also demonstrated the extent and nature of opposition to the bill.
A. House Commerce Committee Mark Up
The RBOCs have a longstanding relationship with members of the Commerce Committee. They have showered its members with contributions, and their districts with special telecom projects. Some of the biggest supporters of the RBOCs sit on this Committee. Not surprisingly, it is the Chairman and ranking Democrat on this Committee who are sponsoring the bill. The RBOCs, through Tauzin and Dingell, were able to push the bill through the Commerce Committee’s Telecom Subcommittee on April 26, and then the full Committee on May 9.
However, the outcome was a close vote. The final roll call vote was 32 to 23. This vote demonstrated that if the RBOCs faced serious opposition from its strongest support group in the House, it would have serious troubles with the House as a whole.
However, the debates also demonstrated much about who is opposing the bill.
1. Corrrelation Between Vote and Seniority. The more senior members of the Commerce Committee tended to support the bill, while the junior members tended to oppose it. There are 31 Republicans on the Committee. Of the Republicans from the top half in seniority, 13 voted yes, 2 voted no, and 1 was absent. Of the bottom half in seniority, 8 voted yes, 6 voted no, and 1 was absent. On the Democratic side, the telling statistic is that 8 of the 9 most junior members voted no. The junior members have not been on the Committee long enough to have experienced much beneficence of the RBOCs.
2. Regional Opposition The bills supporters are concentrated in the South, North, and Midwest. There is very little support either on the Commerce Committee, or in the list of cosponsors of the bill, from west coast and western representatives. For example, on the Commerce Committee, of the seven Californians, five voted no (Eshoo, Cox, Waxman, Capps, and Harman), and two voted yes (Bono and Radanovich). The mountain state representatives — Shadegg (AZ), DeGette (CO), and Wilson (NM) — all voted no. The upper midwest representatives — Luther (MN) and Barrett (WI) — voted no. Also, representatives from districts with widely dispersed populations (including many beyond the 15,000 foot range of DSL service) tended to oppose the bill. Notably, Stupak (upper Michigan), Strickland (Appalachian Ohio), and Largent (who represents Tulsa, but seeks to become governor of Oklahoma) were vocal opponents of the bill. Also, if the vote is broken down by the territories of the original Regional Bell Operating Companies, representatives from PacBell and US West tended to oppose the bill, while representatives from SBC, Ameritech, BellSouth, Bell Atlantic, and Nynex tended to support the bill.
The regional trend also holds up if one examines the list of sponsors of the bill. 113 out of 435 members of the House were sponsors of the bill, as of the writing of this article. This is 26% of the membership of the House. Yet only 5 out of 52 members from California (or 9.6%) are sponsors. And one of these 5, Rep. Gary Condit (D-CA), won’t be in the Congress much longer.
3. Technology Supporters’ Opposition . Members from districts with new technology companies, or who have been advocates of the Internet, tended to oppose the bill. For example, Reps. Eshoo (Silicon Valley), Davis (Northern Virginia), and Markey (suburban Boston) all represent tech heavy districts, and were leaders of the opposition to the bill during the Commerce Committee’s mark up sessions.
4. Gender Gap . There is also a gender gap in support for the Tauzin Dingell bill. In the Commerce Committee six of the eight women voted no. Reps. Eshoo, Wilson, DeGette, Harman, Capps, and McCarthy voted no; Bono voted yes; and Cubin was absent. Similarly, there is a gender gap in the bill’s sponsors. 7 out of 113 sponsors (or 6%) are women, while in the full House, 64 out of 435 members (or almost 15%) are women.
B. Judiciary Committee Mark Up
The bill did not fare well in the Judiciary Committee. It passed an major amendment opposed by the RBOCs, and then gave the bill an unfavorable rating. This demonstrated weakness of support for the bill in the House.
The Judiciary Committee, which has jurisdiction over antitrust matters, was given a sequential referral granting it only limited time and jurisdiction over HR 1542. The Committee was not permitted to rewrite the bill. Rather, it had authority only over the Attorney General’s consultative authority under § 271. Pursuant to this limited grant, Rep. James Sensenbrenner (R-WI), the Chairman of the Committee, offered an amendment with two specific provisions. First, while HR 1542 removes certain regulation of RBOCs by the FCC and state regulatory commissions, the Sensenbrenner amendment would then replace it with antitrust regulation of the RBOCs by the Department of Justice.
The amendment states that “Section 271 … is amended by adding at the end the following: … Neither a Bell operating company, nor any affiliate of a Bell operating company, may begin providing high speed data service or Internet backbone service in any in-region State … unless it files with the Attorney General of the United States an application to provide such service; and … the Attorney General … approves such application …”
The Sensenbrenner amendment would also reverse the opinion of the U.S. Court of Appeals in Goldwasser v. Ameritech, in which the Court addressed the application of antitrust law to RBOCs. Proponents of HR 1542 argued against the amendment. The Committee then adopted the amendment by a voice vote.
VI. Prospects for Passage by the House
The bottom line is, this bill is not going to become law as it is written. It is very hard to pass a bill into law. There are so many ways that a bill can be killed, that even widely popular bills are often blocked. There is considerable and adamant opposition to the bill. It opponents can stop it from becoming law.
As has been discussed above, the mark up sessions in the House exposed some of the weaknesses of the policy arguments of the proponents of the bill, and demonstrated opposition to the bill.
The next step would be for the bill to go to the House floor for consideration. But first, the Rules Committee would adopt the rule defining how the bill would be considered. Rules Committee Chairman David Dreier (R-CA) is both a Californian, and a techie.
The bill’s supporters wanted to get a floor vote after the Judiciary Committee mark up, and before the July 4 recess. House Speaker Denny Hastert (R-IL), did not schedule a floor vote. The bill’s supporters now want a floor vote before the long August recess. Time is running out.
Both Republican and Democratic leaders in the House have full agendas of matters that they want to bring to the floor. There is not enough time to consider all pressing items. So, why spend days in an angry, divisive debate, that will produce no legislation, and produce no campaign issues for the next election?
Even if the bill did make it to the House floor, and passed the House intact, it would then have to pass the Senate. The RBOCs have been focusing their lobbying effort on the House of Representatives. There is little support for the bill in the Senate.
One key player is Sen. Ernest Hollings (D-SC), the new Chairman of the Senate Commerce Committee. He is a senior member of the Senate, and one of its master legislative strategists. No telecom legislation passes without major input from Sen. Hollings. He is dead set against this bill. Many other Senators share his view.
VII. Why is There a Tauzin Dingell Bill?
If the bill is not going anywhere, this begs the question: Why are the RBOCs and their supporters in Congress trying so hard to push a dead bill?
The RBOCs have been fighting §§ 271 and 251 of the Telecom Act of 1996 almost since the day President Clinton signed the bill into law. The promotion of this legislation is a part of this continuing effort.
The RBOCs participated in years of negotiations leading up to the passage of the Telecom Act. They participated in the drafting of the bill. They obtained many benefits from the bill. But then they asserted that § 271 is unconstitutional. Like the French police officer, Louis, in the movie Casablanca, they were “shocked shocked” to learn that the bill they had just negotiated imposed an unconstitutional restraint upon them. SBC filed a suit in Wichita Falls, Texas, asserting that § 271 is a Bill of Attainder. Similarly, the RBOCs challenged the rules promulgated by the FCC implementing § 251. The RBOCs have also failed to comply with the interconnection requirements of § 251, often preferring to accept FCC fines, rather than comply.
Even though the bill will not become law as it is written, the best defense is often a good offense. The debate over this bill is putting the RBOCs competitors onto the defensive. It is diverting their resources to fighting this bill, rather than seeking regulatory or legislative relief in enforcing § 251.
There is also a more sinister motive that has been advanced by some economists. They argue that the debate over HR 1542 has created uncertainty in the market, and dried up the flow of investment capital to the CLECs. Under this argument, it does not matter if the bill does not pass. Simply by introducing the bill, and fighting for its passage, the bill’s supporters have created uncertainty that it will become law. This uncertainty is driving out of business the CLECs whose business models include use of ILEC facilities. The argument continues that this is also a reason why the RBOCs are promoting this legislation. This argument is hotly rejected by other economists, who argue that there is no evidence for the proposition that the Tauzin Dingell bill has decreased the share prices of CLEC stocks.