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Let us not forget the context in which the 1996 Act was passed. When Judge Greene in the 1990s broke-up Ma Bell, the agreement limited the service areas that the Regional Bell Operating Companies could enter. Judge Greene understood the significant market power of the Bell companies who had no competitors in their local markets and had complete access to the customer. Clearly, under such conditions, if Bells were allowed to enter new markets, they could quickly decimate their competitors by leveraging their monopolies in their local markets. Consequently, in an effort to protect competition in other areas, Judge Greene restricted their access to other markets. For these reasons, the Bell companies came to Congress for a solution that would eliminate their service restrictions. After many years of hard work, numerous hearings, and tons of analyses, Congress in an agreement with all the relevant parties including the Bells, long distance service providers, cable companies, and consumer organizations put together a framework that met the needs and requests of all involved parties and one that gave the Bells what they most coveted, entrance into all markets. In doing so, however, Congress also put in place provisions to preserve competition. Under these conditions, the Bell companies worked with Congress to draft and pass the 1996 Act, and when the Act was finally passed, the Bell companies stated that they would quickly and aggressively open their local markets to competition. On March 5, 1996, Bell South-Alabama President, Neal Travis, stated that ``We are going full speed ahead ..... and within a year or so we can offer [long distance] to our residential and business wireline customers.'' Ameritech's chief executive officer, Richard Notebaert on February 1, 1996, indicated his support of the 1996 Act by stating that, ``[T]his bill will rank as one of the most important and far-reaching pieces of federal legislation passed this decade. ..... It offers a comprehensive communications policy, solidly grounded in the principles of the competitive marketplace. It's truly a framework for the information age.'' On February 8, 1996, US West's President of Long Distance, Richard Coleman, predicted that USWest would meet the 14 point checklist in a majority of its states within 12-18 months. Unfortunately, the Bell companies have not kept their promises. Instead of getting down to the business of competing, the Bell companies chose a strategy of delay. In doing so, they have litigated, they have complained, and they have combined. In other words they have done everything except work to ensure competition in local markets. When the Bells first filed applications with the Federal Communications Commission, FCC, to enter the long distance market, contrary to their assertions, the FCC and the Department of Justice, DOJ, found that the local markets were not open to competition, and on that basis denied the companies entry into the long distance market. Once the Bells realized that they were not going to get into the long distance market before complying with the 1996 Act, they began a strategy of litigation which had two effects: 1. to delay competition into their local markets and 2. to hold on to their monopoly structure as they entered new markets in order to demolish their competitors. They appealed a series of the FCC's decisions to the courts and challenged the constitutionality of the 1996 Act even taking the case to the Supreme Court. Having lost in the courts, the Bells have now returned to Congress complaining about the 1996 Act, the very Act that they had previously championed. Many of the Bell companies have been meeting with Senators and Representatives, often accompanied by the same lawyers who helped write the 1996 Act. But this time their message is different. Instead of embracing competition, the once laudable goal they had proclaimed to be seeking, they now want to change the rules of the game and move in the opposite direction. Specifically, they now want to offer lucrative high-speed data services to long distance customers without first opening their local markets to competition, and they want to block their competitors from using their networks to provide high speed data service. As a result of these efforts, the Bells have successfully convinced some members of Congress to introduce bills that in essence allow them to offer such service while protecting the Bells against competition and slowing the delivery of affordable advanced service to consumers by gutting the 1996 Act. Bell companies claim that because no one contemplated the growth of data services that they should be permitted to continue their hold on the local customer as they provide broadband services. To state it plainly, they are wrong. The technology to provide broadband data services over the Bell network has been around since the early 1980s, but the Bells were slow to deploy service until competition prompted them to do so. Furthermore, recognizing the great potential of broadband services, Richard McCormick, then CEO and Chairman of USWest, in 1994 testifying before the Senate Commerce Committee stated the following: I want to touch briefly on USWest's business plan. We have embarked on an aggressive program both within our 14-state region and outside to deploy broadband. We want to be the leader in providing interactive, that is, two-way multimedia services, voice, data, video. In addition to the Bells realizing the importance of broadband service, Congress recognized the importance of broadband services when it passed the 1996 Act and included section 706 which is dedicated to promoting the development and deployment of advanced services. To quote the Act, ``advanced telecommunications capability'' is defined as ``high-speed switched, broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology.'' Also a search of the legislative debate on the 1996 Act reveals that the word ``Internet'' appears 273 times. Even the preamble to the 1996 Act refers to ``advanced telecommunications and information technologies and services.'' With this evidence before it, the FCC also concluded that the competitive provisions of the 1996 Act included high-speed, advanced data and voice services. Today, all Bell companies are providing DSL service to customers. In fact, in October of 1999, SBC announced it would spend $6 billion over 3 years on ``project Pronto'' which is the company's initiative to become the largest single provider of advanced broadband services in America. And on that point, I certainly commend SBC on its efforts. Through 2000, the four Bell companies invested 3.3. billion in DSL deployment and are expected to spend $10.3 billion through 2003. This investment is expected to payoff as earnings from their DSL investments are expected to be positive by late 2002 as market penetration hits 10 percent. By the end of the first quarter of this year, SBC and BellSouth reached about 50 percent of their customer base while Verizon reached abut 42 percent with DSL service offerings. Additionally, reports indicate that broadband service is being effectively deployed. In an August 2000 report, the FCC concluded that overall, broadband service is being deployed on a reasonable and timely basis. It also found that there has been ample national deployment of backbone and other fiber facilities that provide backbone functionality. In October of 2000, the FCC issued another report in which it determined that high speed lines connecting homes and small businesses to the Internet increased by 57 percent during the first half of 2000. These developments effectively demonstrate why there is no justification for further deregulation of the Bells at least not until competition in the local markets is acheived. A major issue in this debate is how to serve rural and underserved ares. However, there it is no demonstrated commitment by the Bells to serve the rural markets. In fact, there behavior would lead you to the opposite conclusion. Qwest/USWest has sold nearly 600 smaller exchanges representing about 500,000 access lines and GTE has sold $1.6 milion access lines. Joe Nacchio, Chief Executive Officer of Qwest stated, ``I would have not qualms selling seeral million access lines if [I] could find the real deal.'' He also noted that ``we have about 17.5 million access line--we really like 11 [million].'' While expending a great deal of resources litigating and complaining, Bell companies also have expended a fair amount of their energies in another area, that is merging and combining. In August of 1997, Verizon acquired NYNEX and in June of 2000 acquired GTE. First, SBC acquired Pac Bell, and in October of 1999, acquired Ameritech. The combined company now controls one-third of all access lines in the United States. In March of 2000, Qwest acquired USWest. At the same time, Bell Atlantic acquired Vodafone. In September of 2000, Bell-South Wireless and SBC Wireless entered into a joint venture, Cingular. Yet the local phone markets remain largely closed to competition. Even though there are many companies working to build a business in the local market, the Bells have met the 271 checklist in only six States, New York, Texas, Oklahoma, Kansas, Massachusetts, and Connecticut. Undoubtedly, if they cannot obtain real access to the local phone markets, competitive companies will not be able to make a go of their businesses. My grave concern is that they will not be able to survive the Bell strategy of delay. Today, CLECs are struggling to survive. Of the 300 CLECs that began providing service since 1996, several have declared bankruptcy or are on the verge of failing and several others have scaled back their buildout plans. CLECs are faced with a significant downturn in the marketplace, tremendous difficulty in raising capital, and local markets that remain largely closed to competition. From the standpoint of capital, CLECs are particularly sensitive to the financial market since the vast majority of them are not profitable and rely on the capital markets for funding. Relying on the marketplace, CLECs have raised and spent $56 billion in their attempts to compete in the local market. Of the publicly traded CLECs in 2000, only 4 CLECs made a profit. Additionally, as a result of the market downturn, the market capitalization of CLECs fell from a high of $86.4 billion in 1999 to $32.1 billion in 2000. In Congress, we hear about the continued problems faced by competitive carriers trying to obtain access to the Bell network. Between December 1999 and April 2001, both the FCC and state regulators have imposed fines on several Bell companies for violations of their market opening and service quality requirements and other rules. For BellSouth, these fines totaled $804,750, for Qwest, $78.6 million, for SBC, $175 million, and for Verizon, $233 million. However, while these fines may be substantial to most businesses, many in the industry believe that they simply represent the cost of doing business for the Bell companies which over the past year had annual revenues in the range of tens of billions of dollars. Specifically, BellSouth's total revenues were $25.6 billion, Qwest, $18.3 billion, SBC, $50.1 billion, and Verizon, $66.4 billion. Chairman Powell has stated that in order to make fines a more effective tool, Congress should increase the FCC's current fine authority against a common carrier for a single continuing violation from $1.2 million to at least $10 million and extend the statute of limitations for violations which currently stands at 1 year. In order to get local competition going, the Pennsylvania PUC mandated the functional separation of the retail and wholesale functions of Verizon. Petitions have been filed to impose structural separation in, Alabama, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, New Jersey, North Carolina, South Carolina, Tennessee, and Virginia. Legislation has also been introduced in the State legislatures of Maryland, Michigan, Minnesota, and New Jersey on the issue of structural separation. In September of last year, Chairpersons of the Commissions in Illinois, Indiana, Michigan, Ohio, and Wisconsin, issued a joint statement asserting that although the Commissions had taken repeated and sustained actions over the past months to address operating deficiencies with respect to SBC-Ameritech, CLEC customers had experienced a marked decline in service quality in purchasing network elements from SBC-Ameritech. In addition to these actions by regulators, the courts also have taken action. In California in 1997, Caltech International Telecom Corporation sued SBC-Pacific Bell claiming that SBC was violating antitrust laws by acting anticompetitively and blocking competitors from their local phone market. Last year, a Federal district court ruled in favor of Caltech. Covad has sued SBC, Verizon, and BellSouth and already has obtained a $24 million arbitration ruling against SBC. Consumers have filed suit in the Superior Court of D.C. alleging that Verizon signed up over 3,000 new customers per day knowing that the company would be unable to provide high-speed service as promised and that its customers would experience significant disruptions and significant delays in obtaining technical support. Regrettably, as Bells seek to block their competitors from entering their markets, many consumers are suffering through poor quality of Bell service. In New York, the Communications Workers of America issued a service quality report in which it stated that ``Verizon has systematically misled state regulators and the public by falsifying service quality data submitted to the PSC'' and ``60 percent of workers have been ordered to report troubles as fixed when problems remained.'' 91 percent of field technicians surveyed reported that they were dispatched on repairs of recent installations only to find that dial tone had never been provided. Additionally, consumers with inside wiring maintenance plans were not receiving the services for which they were paying. Concerned about competition and service quality, the FCC as well as state Commissions have opposed legislative efforts to further deregulate the Bell companies. In response to such measures, former Chairman of the FCC, William Kennard, stated that such legislation would only upset the balance struck by the 1996 Act, ..... [and] would reverse the progress attained by the Act.'' Mr. Kennard went on to state that ``the Telecommunications Act of 1996 is working. Because of years of litigation, competition did not take hold as quickly as some had hoped. The fact that it is now working, however, is undeniable. Local markets are being opened, broadband services are being deployed, and competition, including broadband competition is taking root.'' More recently at a hearing before Congress in March, Chairman Powell of the FCC counseled against reopening the Telecommunications Act of 1996. He stated that ``any wholesale rewrite of the Telecom Act would be ill-advised.'' The Former Assistant Secretary for Communications and Information, Greg Rhode also stated that ``[d]espite the progress being made under the procompetitive approach of the Telecommunications Act of 1996, some in Congress are talking about changing directions. Under the veil of `de-regulation for data services' some are talking about stopping the progress of competition ..... competition, structured under the 1996 Act, is the model that will best deliver advanced telecommunications and information services, such as high-speed Internet access. Walking away from the Act's pro-competitive provisions at this point would be a serious mistake.'' Recognizing the importance of the 1996 Act, the National Association of Regulatory Utilities Commissioners adopted a resolution opposing federal legislation that would deregulate the Bells and restrict the ability of State public utility commissions from fulfilling their obligations to regulate core telecommunications facilities that are used to provide both voice and data services and to promote deployment of advanced telecommunications capabilities. Given the lack of competition in the local markets, the intransigent behavior of the Bell companies, and concerns about poor service quality, we are left with no choice but to adopt measures that will ensure Bell compliance with the 1996 Act. This will have to include not only fines, but also the separation of a Bell's retail operations responsible for marketing services to consumers from its wholesale operations responsible for operating and selling capacity on the network. Bell companies continue to have substantial profit margins and revenues in the billions of dollars. In contrast, Bear Stearns has stated that it expects half of the CLECs to disappear because of bankruptcy and consolidation. Unquestionably, I do anticipate that competition will weed out poor competitors. However, it does not serve consumers well for competitors to be weeded out because monopolies are not playing fair. I strongly believe that the power that the Bell companies have wielded to block their competitors from the local markets must be curbed. That's why I rise to introduce legislation today. Under my bill within one year after passage of the legislation, a Bell company is required to provide retail service through a separate division. If a Bell company has to resell or provide portions of its network to its division on the same terms and conditions that it provides to its competitors, then it will quickly and affordably make its network available to competitors. Requiring a company to separate functions or divest property is not a novel concept. In 1980, the court decided that the only way to introduced competition into the long distance market was to require Ma Bell to divest the Baby Bells. This has worked well and now the long distance market is competitive. More recently, the Pennsylvania PSC has required Verizon to separate its retail operations from its wholesale operations. These decisions are all based on concerns about the ability of a company to distort competition because the company has significant market power. Also, my bill clarifies that a carrier may bring an action against a Bell company to comply with the competition provisions of the 1996 Act at the FCC or at a State commission, and has the option of entering an alternative dispute resolution, ADR, process to enforce an interconnection agreement. The FCC is required to resolve such a complaint in 90 days and issue an interim order to correct the dispute within 30 days upon a proper showing by the carrier bringing the dispute. My bill requires the FCC to impose a penalty of $10 million for each violation and $2 million for each day of each violation. The FCC can treble the damages if the Bell company repeatedly violates competitive provisions of the 1996 Act. I have chosen to include hefty fines, because the fines at the FCC are too small to have any real effect. I am also struck by the fact that for the Bells, fines seem to be just a cost of doing business and not a punishment that deters or positively affects their behavior. As Chairman Powell has stated, the FCC's ``fines are trivial and the cost of doing business to many of these companies.'' My bill would also require the FCC to establish performance guidelines detailing what Bell companies must do in order to allow CLEC's to interconnect with the Bell network. Today, our communications network remains the envy of the world and the development of innovative advanced services is accelerating rapidly. Last year in a discussion about the lead America has over Europe with respect to the technology revolution, Thomas Middlehof, chief executive of Bertlemann, which is Europe's largest media conglomerate stated that ``Europe just doesn't get the message ..... [g]overnments are still trying to protect the old industrial structure.'' The article also noted that ``many [European] leaders now acknowledge a basic policy failure of the past decade [was] subsidizing dying industries.'' With that said, it is unfortunate that the rollout of local and broadband services on a competitive basis to all Americans is being thwarted by the failure of Bell companies to open their markets to competition. These same monopolists told us their markets would be open years ago. This legislation seeks to hold them to their word. I ask unanimous consent that the text of the bill be printed in the RECORD. There being no objection, the bill was ordered to be printed in the RECORD, as follows: |