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National Regulatory Precedents and Trends
| Government has little to do while private companies wire the country for high-speed Internet access... Congress approved the Telecommunications Deregulation Act in 1996 in the expectation it would ignite widespread competition. Now that time has come, and if government makes sure all the companies compete fairly, the spread of high-speed Internet connections will be an unambiguous good. | |
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-- Boston Globe Editorial, March 24, 1999 |
United States Congress:
The U.S. Congress has played an activist role in the telecommunications arena throughout the past century. Today, Congress continues to follow the developments in telecom technologies and markets, and periodically deal with market and regulatory issues through legislative initiatives, the associated deliberations, the resultant legislation, and its aftermath in the real world telecom marketplace. Congress is and will remain a substantial force in the reform and reengineering of the new regulatory environment for Telecommunications Service Providers (TSPs). Starting with the earliest common carrier decisions, the Mann-Elkins Act of 1910 and the subsequent Interstate Commerce Commission (ICC) rulings that established the initial framework for Federal regulation of the telecommunications industry, there have been debatably three watershed telecom regulatory events of the 20th Century.
The Communications Act of 1934:
The Communications Act of 1934 (http://www.fcc.gov/Reports/1934new.pdf) sought to "make available, so far as possible, to all the people of the United States a rapid, nation-wide, and world-wide wire and radio communications service with adequate facilities at reasonable charges." It established dual state and federal regulation of telecommunications services, but limited federal authority primarily to interstate and foreign communications. The 1934 Act provides for FCC regulatory authority over common carriers as to their pricing and classifications, while defining carriers' duties to:
- furnish communications services upon reasonable request to any member of the public
- interconnect with other carriers when in the public interest
- make any charges, practices, classifications, and/or regulations reasonable and just
- refrain from engaging in any unjust and unreasonable discrimination with respect to service
- refrain from giving any undue or unreasonable preference or advantages to any particular person, class, or locality
- file schedules of charges for itself and any connecting carriers with the FCC
- only make agreements with intercarriers that are in the public interest and file them with the FCC
- obtain a certificate of public convenience and necessity from the FCC before constructing lines
- obtain prior FCC approval before discontinuing or reducing services
The Communications Act of 1934 was augmented by the Cable Communications Policy Act of 1984 and the Cable Television Consumer Protection and Competition Act of 1992 to bring cable television providers under federal communications regulation and further define their roles and responsibilities.
The Dissolution of AT&T in 1984:
Alexander Graham Bell invented the telephone on March 10, 1876 and formed the Bell Telephone Company on July 9, 1877. Under the leadership of Theodore Newton Vail, they purchased the Western Electric Company in 1881 and renamed the parent company as American Telephone and Telegraph (AT&T) at the end of 1899. An early Justice Department suit resulted in the Kingsbury Commitment of 1913 to provide interconnection arrangements to all independents. AT&T won a Final Judgement in 1956 allowing it to retain Western Electric, but subsequently lost a series of suits to MCI Communications and others. A lengthy federal anti-trust lawsuit resulted in the Consent Decree of 1982 and the Modified Final Judgement (MFJ) of 1984 by Judge Harold Greene (US District Court in Washington D.C.), mandating the dissolution of AT&T, the world's largest firm worth some $136.8 billion, including the divestiture of its local telephone companies and various technical and equipment manufacturing operations. The existing 22 "Baby Bells" were consolidated into seven independent Regional Bell Operating Companies (RBOCs - originally Ameritech, Bell Atlantic, BellSouth, Nynex, Pacific Telesis, Southwestern Bell, and US West). This marked a major shift in the structure and regulation of the telecommunications industry, addressing predatory pricing and interconnection, as well as enabling the rise of competition in long distance telephony services. The Seventh Circuit's 1983 decision giving MCI Communications access to AT&T's network for long distance telephone service helped advance the anti-trust and monopoly legal view of the "essential facilities doctrine."
In the 1990s, AT&T began to expand again with the 1994 purchase of the largest U.S. cellular service provider, McCaw Cellular Communications, as the foundation of its wireless network. In 1997, AT&T voluntarily split into three separate and independent companies: Lucent Technologies (formerly Bell Labs), NCR (computer consulting services), and AT&T for long distance and wireless telephony as well as Internet services. AT&T's acquisition of Media One Group makes it the largest U.S. cable operator with some 25% market share. And their active trials with Wireless Local Loop (WLL) may yet be widely deployed to help regain a direct access path into American homes and businesses.
The Telecommunications Act of 1996:
After several years of effort, the U.S. Congress passed S.652, The Telecommunications Act of 1996 (http://www.fcc.gov/Reports/tcom1996.pdf). Signed by President Clinton on February 8, 1996, it represents the most comprehensive update of U.S. communications laws and FCC policy in decades. An enormous number of issues for government, business, and consumers arise from it and its implementation. The outcome of many of them won't be clear for years to come. The FCC, state legislatures and public utility commissions, as well as county and municipal governments have been struggling to interpret and implement the tenets of the Act with varying success, at times resulting in court challenges. Technology advances and market forces often outpace the ability of regulatory and oversight agencies to respond. Some highlights of the act and related issues follow and the resources below point to more background and comprehensive treatments of these topics.
The Telecom Act of 1996 identifies various telecommunications service categories and seeks to open markets to participation by the cable industry, while enabling telephone companies to provide video programming, reduce broadcast service regulation, and allow RBOCs to provide long distance services and manufacture telecommunications equipment under certain conditions. All telecommunications service providers have a duty to interconnect with other carriers. Local Exchange Carriers (LECs) must negotiate in "good faith" and provide resale of their services on a nondiscriminatory and reasonable basis, provide for interconnection with requesting LECs at any technically feasible point, lease access to network elements on an unbundled basis, as well as provide access to their poles, ducts, conduits, rights-of-way (ROW), and facilities for collocation to competitive providers at reasonable and nondiscriminatory rates.
ILECs must also support number portability, dialing parity, and reciprocal compensation arrangements for the transport and termination of traffic between providers. Universal service contributions are required of all telecommunications providers outside some FCC determined exemptions while states may adopt regulations consistent with FCC rules to preserve and advance universal service. The Act also provides for disabled persons to have ready access to telecom services, regulates obscene, harassing or wrongful use of telecom facilities, and attempts to address the privacy of communications customer information. Further, the FCC is directed to streamline its practices and procedures, to refrain from implementing and enforcing provision of the Act as necessary to promote and enhance competition, and to consider provider petitions for forbearance. Some selected areas of The Act are further detailed just below.
Telephone Service and Equipment Manufacturing:
All state restrictions on competition in local and long-distance telephone service are essentially overruled and the AT&T and GTE antitrust consent decrees are dismantled. Regional Bell Operating Companies (RBOCs) may provide long-distance service outside their regions immediately and inside their regions after entry barriers for local telephone competition are removed. The RBOCs may manufacture telephone equipment once their application to provide out-of-region long-distance service is approved. Universal service will continue to subsidize rural and low-income subscribers and be expanded to assist primary and secondary schools, libraries and other public institutions with discounts of from 10 to 90% on telecommunication equipment and services.
Cable Television:
Rate regulation requirements on all but "basic tier" services will be removed where competition exists from comparable video services over telephone facilities or in smaller communities and no later than by March 31, 1999 for all providers. Telephone companies or cable companies (under conditions of competition) may offer cable television services or carry video programming via Open Video Systems (OVS), exempted from many "franchise-like" requirements. Other rules of the 1992 Cable Act are relaxed or repealed. Cable set-top boxes will be available unbundled through retail channels and the FCC may not set standards for set-top boxes or restrict computer network services equipment features. Cable franchise and license authority is retained by local government including the right of prior approval of a sale or transfer, but some provisions may override current contract language and terms, such as the definition of gross revenues on which franchise or license fees are calculated.
Radio, Television and Satellite Broadcasting:
The Act relaxes, but does not eliminate, the FCC's national media concentration rules and requires that the FCC consider changing ownership limits within communities. Television broadcasters are allowed "spectrum flexibility" to use additional frequencies for advanced television services (i.e. - high-definition television, data services), but must eventually return some frequencies for reassignment. Television equipment manufacturers must include V-chip technology to allow parental blocking of violent, sexually explicit, or indecent programming. Terms of broadcast licenses are extended and renewal procedures relaxed. The FCC has exclusive jurisdiction over Direct Broadcast Satellite (DBS) services including potential tariff and rate regulation.
Control of Public Rights-of-Way (ROW):
The Act states that "No state or local stature or regulation or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate telecommunications service" and that the FCC shall preempt the enforcement of any such statute, regulation or legal requirement. Local governments retain the authority to "manage the public rights of way or to require fair and reasonable compensation from telecommunication providers on a competitively neutral and nondiscriminatory basis for use of public rights of way on a nondiscriminatory basis, if compensation required is publicly disclosed." Local authorities may still "police" and manage their ROW and generate revenues from ROW access from cable operators, local telephone providers, wireless providers, and other telecommunication entities.
Local Regulation, Taxation, and Zoning Authority:
Local governments may continue to regulate the use of the public right-of-way by telecommunication providers within limits imposed by federal and state law, FCC and Public Utility Commission (PUC) regulation, and court decisions. Municipalities are prohibited from imposing any fee or tax on Direct Broadcast Satellite (DBS) providers, but may otherwise tax services as allowed by state and local law. Local governments retain the authority to regulate the placement, construction and modification of wireless service facilities, except as pertains to the environmental effects of radio frequency emissions. However, the FCC prohibits restrictions that impair a consumer's ability to receive television programming from over-the-air local television broadcast stations, DBS services or Multichannel Multipoint Distribution Systems (MMDS), thus potentially preempting local zoning requirements and community Covenants, Conditions, and Restrictions (CC&Rs) concerning the placement of antennas and satellite dishes on rooftops and in yards for home owners and some multi-tenant residential renters.
Recent Federal Legislative Initiatives Specific to Multitenant Building Access:
A House bill H.R. 3487 (Competitive Broadband Telecommunications Rooftop Access Act) was introduced in November, 1999 "to provide consumers in multitenant buildings with the benefits of competition among providers of telecommunications services by ensuring reasonable and nondiscriminatory access to rooftops of multitenant buildings by competitive telecommunications carriers, and promote the development of fixed wireless, local telephony, and broadband infrastructure, and for other purposes." The legislation requires that the owner of an occupied multitenant building permit a telecommunications carrier reasonable, standardized, and nondiscriminatory access within 15 days of the carrier's request if certain conditions, including a tenant request for services are met. It also provides that the multitenant building owner may demand and receive just compensation, as long as it is reasonable and assessed in a nondiscriminatory manner. It was referred to House subcommittee in December, 1999 and its prospects remain unclear. Such legislation would not only impact wireless competitive telecommunication providers rights to access new customers, but would likely set expectations and precedents applicable to competitive wireline access to multitenant spaces.
The Competitive Access to Federal Buildings Act (H.R. 2891 introduced 9/21/99 and S.1301 introduced 6/29/99) provide that buildings owned or leased by federal government provide nondiscriminatory building access to competitive telecommunications providers. The text acknowledges that several States, including Connecticut and Texas, have already enacted measures to promote non-discriminatory access by telecommunications carriers to rooftops, risers, conduits, utility spaces, and points of entry and demarcation in order to promote the competitive provision of telecommunications services and information services, directing the National Telecommunications and Information Administration (NTIA) to advise the FCC on the development of such policies for commercial property. The proposed legislation is currently referred to House and Senate Committees.
Current Federal Legislative Initiatives on Broadband Services:
The Internet Freedom and Broadband Deployment Act (H.R. 2420) seeks to deregulate high-speed data services and Internet access by largely removing both the States' and FCC's authority to regulate them. ILECs would be able to deploy delivery networks, segment service offerings, and provide advanced services free of the obligation to unbundle network elements for competitive leased access and without regard for whether they have sufficiently opened their local telephony markets to qualify for long distance market entry. This loophole to the Telecom Act of 1996 would tend to remove significant incentives for ILECs to meet their obligations in opening their local markets.
Other bills in the 106th Session include the Internet Growth and Development Act (H.R. 1685), the Internet Freedom Act (H.R. 1686), and the Broadband Internet Regulatory Relief Act (S. 877) also address unleashing the ILECs to offer advanced services and allowing them to compete in the long distance market before opening their monopoly local markets to competition, effectively removing any BOC incentive to cooperate with competitors, and undoing Section 271 of the Telecom Act.
However, Senator Hollings' Telecommunications Competition Enforcement Act (S. 1312) seems designed to foster competition in local markets as it would impose severe penalties on ILECs for non-compliance with the Telecommunications Act. By February 2001, they could face penalties of $100,000. per day if they fail to meet the 14-point "competitive checklist" of section 271 of the Telecom Act in at least half of their regions. By February 2003, the FCC would be further required to order the monopolies to sell off their network facilities in states that are not in compliance.
Federal Legislative Directions for the Future:
There will likely be hearings and further legislation on the structure and function of the FCC, perhaps limiting its role in merger and acquisition review and other matters. Universal Service Fund (USF) and E-rate programs will be reconsidered along with the allotment of their costs among various types of providers, as well as the role of wireless providers and other competitive entrants as both payees and USF recipients. Congress will likely be reviewing and perhaps acting on the FCC's wireless frequency allocations and sales, Digital Television (DTV) public interest obligations, direct broadcast satellite (DBS) local television content rules, the treatment of converged (voice, video, data) service providers and carriage, mega-mergers of major carriers and industry companies, etc. There are also a plethora of broad Internet and telecommunications related matters to consider including taxation, consumer privacy and protection, network security, computer crime, encryption technology for domestic use and export, law enforcement monitoring capabilities, domain name control and management, intellectual property issues, and others beyond the scope of this report to review and detail.
Finally, though the Supreme Court has recently reaffirmed the FCC's powers to carry out the Telecommunications Act of 1996 and issue guidelines to state regulators for wholesale leasing rates to local phone networks, Congress will be likely reconsider the limited success of deregulation under the Act and may choose to redefine the role and mandate of the FCC in regulation of the telecommunications industry with additional legislation.
| It took a decade for Congress to approve legislation designed to open local markets to competition. It has taken over three years for the courts and the regulators to affirm Congress' landmark act. The worst thing Congress can do is to change the rules just after the U.S. Supreme Court has affirmed the principles of the Telecom Act, and the rules implementing the law have been put in place. Competitors are investing a billion dollars every month based on the soundness of Congress' decision in 1996. Those investments would likely stop if the rug is pulled out from under these competitors and the rules are changed. Equally troubling to anyone reading this, any such change in the law would likely mean that you, as consumers, would have fewer options for phone and Internet services and you would pay more for those services. We urge our former colleagues to stand with the many competitive communications companies and Internet service providers that are offering local data and voice services. The fundamental premise of the Telecom Act is sound - the Bells must open their local markets to competition before they can offer any kind of long distance services to their monopoly telephone subscribers. Congress must insist on enforcement of the pro-consumer Telecom Act. Congress should reject the request for special interest legislation. | |
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-- Former U.S. Congressmen Bill Paxon (R - New York) & Vic Fazio (D - California) From Nando's Time to Time (http://www.nandotimes.com/), February 8, 2000 |
| Multitenant Building Telecommunications Access Study | |||
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