Commerce Committee Chairman Ted Stevens Addresses the National Association of Regulatory Utility Commissioners

February 13, 2006

WASHINGTON, D.C. – As the Senate Commerce Committee continues its hearings on various communications issues, Committee Chairman Ted Stevens (R-Alaska) focused on the future role of states in telecommunications while addressing the National Association of Regulatory Commissioners today in Washington, D.C.

Following are Chairman Stevens’ remarks:

Thank you very much, David. It’s nice to be with you here today, and I do hope that I don’t cause you too much consternation with what I am going to say.

Last week marked the 10th anniversary of the 1996 Telecommunications Act. That Act brought unprecedented competition, increased consumer choice, cut consumer costs, and spurred a new era of innovation.

While Congress clearly contemplated the existence of the Internet, we could not have anticipated the role that it would play in American life in just a decade. Ten years ago, email was in its infancy. Now iPods, blackberries, and cell phones are becoming part of the American lexicon.

Senator Inouye and I, and the Commerce Committee, are in the process of reviewing this Act to decide if it should be updated. One of the key issues we will consider is the role of the states in the future.

Communications industries across the board have complained that the patchwork of American laws created by 50 state legislatures, 50 state PUCs, 30,000 franchise authorities, and even more municipalities – not to mention Congress and the FCC – make it nearly impossible to enter this business.

For example, when a national cell phone company cannot print a standard bill for its customers because different states require different font sizes, it increases the cost of doing business. Other states regulate how long a contract can last. These different standards make nationwide marketing extremely difficult.

In the video marketplace there are 50,000 communities with cable franchises and 30,000 franchise authorities. Verizon recently told me it takes about a year to negotiate one of these agreements. If one franchise agreement is signed each day, it will still take 40 years and tens of millions of dollars to complete the franchising process.

Competition reduces costs to consumers. When Texas adopted a statewide franchising law, cable companies cut rates in half in order to compete with the new Bell companies entering the market. When new entrants have to negotiate with 30,000 franchising authorities, competition is delayed and consumers pay the price.

This process must be simplified, but there is also an important role for local government. Who knows better how to manage the “rights of way” than local government? And local government should receive similar franchising fees – whether it is cable or phone companies providing the service.

But local governments can go too far. Some cities have required cable operators to build playgrounds, fix street lights, and install traffic signals in order to get a franchise. Such demands border on extortion and ought not be permitted as part of any negotiation. Other cities have demanded a large number of public channels – up to 14 in some cases. To me that hardly makes sense when even New York City has only four or five.

Many argue that the telecommunications industry is no longer just a local or state enterprise – it is national in scope. I had one of the first cell phones on the Hill and used it only to make local calls in D.C. – calling my office when I was off the Hill to find out when votes were scheduled. Today it’s a ubiquitous device. My Eskimo friends in Alaska call me from a walrus skin boat in the Arctic Ocean to tell me they are celebrating that they just harpooned a whale. When I am in Iraq, and I was in Iraq last August, with our troops, I checked in with my wife to make sure she had fed the cat.

The telecommunications industry is now a totally worldwide enterprise. It demands freedom from multiple levels of regulation. Cell phone records are an example. Criminals lie about who they are to steal a person’s cell phone records. Those records are then made available on the Internet for purchase by anyone around the world. The FCC is exploring this issue. Congress is also considering legislation on the issue. State legislatures and PUCs around the country are also working on new rules – 51 sets of new rules will not advance the goal of protecting consumer’s records.

Municipal broadband is another important issue our Committee is considering. Some cities argue they can provide better broadband service at a lower cost than the private sector. Cities like Philadelphia believe that high speed Internet should be just another city service. City services to me were things like picking-up the trash or making sure the water operated. Some companies believe that any government provision of communication services constitutes unfair competition with the private sector.

In case you don’t realize it, there is no group of Americans that are more for states rights than Alaskans. If you think about that for a minute, just think about the bridges. You know, I got a lot of publicity about that, but we didn’t argue about paying for the Lake Ponchatrain bridge. We argued that only one state should not pay for it. As a matter of fact, I bet you don’t know that the amendment I offered would have provided that every state that had funding for bridges would have contributed to the cost of replacing the Lake Ponchatrain bridge – that was defeated.

We’re exploring some of these issues at a hearing tomorrow, but I want you to understand that Senator Inouye and I are basically pro-states rights people, particularly with regard to the rights of state governments to handle things like communications.

We are interested in how Congress can simplify regulation of national companies without sacrificing the benefits of state regulation. There are a number of other questions to pursue, including how to ensure that the goals of consumer protection are finally met. One option our Committee has discussed with your leadership is the idea of creating Joint Boards to work out common national standards on key issues. A Joint Board made up of the FCC and state regulators could develop a national standard outlining how cell phone bills should be printed. The FCC could adopt the standard but leave it to the states to enforce it at the local level. That may be the best of both worlds – state involvement in creating national standards that are enforced locally. I hope you’re willing to pursue those conversations.

In my view, consumer issues should generally be implemented at the local level. And my Eskimo friends, and they are my friends, I talk about them a lot, they shouldn’t have to call Kevin Martin because their cell phone service is spotty when temperatures fall below 60 below. I don’t think Kevin Martin wants those calls. I’m happy to get them, but you know what – I refer them to the local people.

The FCC has already taken the position that VoIP –Voice over Internet Protocol – is an interstate service and should be regulated at the federal level. That decision could be reversed by the Courts, so Congress may have to clarify exactly how VoIP should be regulated. Our VoIP hearing will explore this issue and how consumers and providers can be protected at the same time.

Another measure to be considered will include Universal Service reform. You may not know it, but we started universal service concepts back when Senator Inouye and I got tired of seeing ads on the television that said, “These rates apply everywhere but Alaska and Hawaii.” We started rate integration and rate integration led to Universal Service.

The current contribution mechanism of assessing only interstate revenue is broken and it needs reform. Senators Burns and Smith have introduced separate bills that authorize the FCC to do one of three things: either assess all revenue – intrastate and interstate alike; assess phone numbers, which the FCC estimates would be about $1 per phone; or assess connections, which would charge more for a T-1 business line than the line to your grandmother’s house.

Chairman Martin is also considering, I’m told, with the FCC, a numbers based approach, and our Committee will meet to discuss that and other options.

I hope you’re familiar with the recent report issued by Norm Augustine and a group of distinguished Americans entitled, “Rising Above the Gathering Storm.” It particularly regards maintaining our global competitiveness, and calls on Congress to ensure universal broadband. Both the Burns bill and the Smith bill call for high speed broadband for rural America through the Universal Service Fund. I endorse that principle. Without it, rural America will never make it onto the on-ramp of the information superhighway. Rural people could be left on a dirt road with dial-up Internet if they are not included in broadband through USF.

A related issue is inter-carrier compensation reform. I applaud the efforts of your group and others to reform the complex system of inter-carrier compensation. But I am told the working group hopes to transfer the payments now made between carriers for handling each others’ traffic to the Universal Service Fund.

There are estimates that this could cost the Fund in the neighborhood of $1 billion. Until contributions to the Fund are stabilized and well-defined, I question how transferring that burden to the Fund can be considered? I am also informed that under one proposal now on the table, it will cost more to call rural parts of America than urban areas, and that the negotiators may seek an amendment for geographic rate averaging. Living where I do that would be a pretty tough thing for us and the same thing for Hawaii. Our state is one-fifth the size of the United States. If you want to base it totally on the number of acres I’ll take the solution, but if you talk about the number of people per acre, we lose out entirely. This morning my staff was asked how much flexibility there is to repeal or revise portions of the ’96 Act that Senator Inouye and I drafted to ensure nationwide rates from nationwide carriers. I don’t know who asked the question, but the answer is zero – no flexibility at all.

The days of "these rates do not apply in Alaska or Hawaii" are over and we do not want to see them start again. Our whole Committee wants to work with you to produce a bill that joins federal and state regulators in the process to protect consumers and minimize government red tape and bureaucracy. We can work together and I am here to offer you our full support if you are willing to work with us. Thank you very much.