[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
INCREASE PENALTIES FOR COMMON CARRIER VIOLATIONS OF THE COMMUNICATIONS
ACT OF 1934
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
on
H.R. 1765
__________
MAY 17, 2001
__________
Serial No. 107-27
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
U.S. GOVERNMENT PRINTING OFFICE
72-835 WASHINGTON : 2001
_______________________________________________________________________
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Mail: Stop SSOP, Washington, DC 20402-0001
COMMITTEE ON ENERGY AND COMMERCE
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia SHERROD BROWN, Ohio
STEVE LARGENT, Oklahoma BART GORDON, Tennessee
RICHARD BURR, North Carolina PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
GREG GANSKE, Iowa ANNA G. ESHOO, California
CHARLIE NORWOOD, Georgia BART STUPAK, Michigan
BARBARA CUBIN, Wyoming ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois TOM SAWYER, Ohio
HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York DIANA DeGETTE, Colorado
ROY BLUNT, Missouri THOMAS M. BARRETT, Wisconsin
TOM DAVIS, Virginia BILL LUTHER, Minnesota
ED BRYANT, Tennessee LOIS CAPPS, California
ROBERT L. EHRLICH, Jr., Maryland MICHAEL F. DOYLE, Pennsylvania
STEVE BUYER, Indiana CHRISTOPHER JOHN, Louisiana
GEORGE RADANOVICH, California JANE HARMAN, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
David V. Marventano, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Telecommunications and the Internet
FRED UPTON, Michigan, Chairman
MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas BART GORDON, Tennessee
CLIFF STEARNS, Florida BOBBY L. RUSH, Illinois
Vice Chairman ANNA G. ESHOO, California
PAUL E. GILLMOR, Ohio ELIOT L. ENGEL, New York
CHRISTOPHER COX, California GENE GREEN, Texas
NATHAN DEAL, Georgia KAREN McCARTHY, Missouri
STEVE LARGENT, Oklahoma BILL LUTHER, Minnesota
BARBARA CUBIN, Wyoming BART STUPAK, Michigan
JOHN SHIMKUS, Illinois DIANA DeGETTE, Colorado
HEATHER WILSON, New Mexico JANE HARMAN, California
CHARLES ``CHIP'' PICKERING, RICK BOUCHER, Virginia
Mississippi SHERROD BROWN, Ohio
VITO FOSSELLA, New York TOM SAWYER, Ohio
TOM DAVIS, Virginia JOHN D. DINGELL, Michigan,
ROY BLUNT, Missouri (Ex Officio)
ROBERT L. EHRLICH, Jr., Maryland
LEE TERRY, Nebraska
W.J. ``BILLY'' TAUZIN, Louisiana
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Halprin, Albert, Partner, Halprin, Temple, Goodman, and Maher 17
Holland, Royce J., Chairman and CEO, Allegiance Telecom, Inc. 23
Jacobs, Hon. Leon, Chairman, Florida Public Service
Commission................................................. 32
Sarjeant, Lawrence, Vice President, Regulatory Affairs, U.S.
Telecom Association........................................ 35
Solomon, David H., Chief, Enforcement Bureau, Federal
Communications Commission.................................. 39
(iii)
INCREASE PENALTIES FOR COMMON CARRIER VIOLATIONS OF THE COMMUNICATIONS
ACT OF 1934
----------
THURSDAY, MAY 17, 2001
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Telecommunications
and the Internet,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2123 Rayburn House Office Building, Hon. Fred Upton
(chairman) presiding.
Members present: Representatives Upton, barton, Stearns,
Deal, Largent, Shimkus, Pickering, Fossella, Davis, Ehrlich,
Terry, Tauzin (ex officio), Markey, Engel, Green, McCarthy,
Stupak, Harman, Sawyer, and Dingell (ex officio).
Staff present: Howard Waltzman, majority counsel; Yong
Choe, legislative clerk; and Andy Levin, minority counsel.
Mr. Upton. Good morning. Today's hearing is an important
one to both sides of the broadband issue, and I believe that
consumers are best served by competition in the free
marketplace.
I support the deregulatory goals of the Tauzin-Dingell
bill, but I also believe that enhanced enforcement is an
important ingredient in the mix. My door has been open to
everyone since I became chairman, and in many meetings with
CLECs and long distance providers over the past number of
months one note that they consistently sounded was enforcement,
enforcement, enforcement.
I took that to heart and as chairman I have set about to
strengthen the FCC's enforcement authority as the debate over
the Tauzin-Dingell bill unfolded. And I am pleased that today
the question is not any more if Congress will strengthen the
FCC's enforcement, but when and how much.
Today my goal is to seek consensus on what I believe is a
common sense measure. It is a measure that I believe is firm,
and it is also fair. We need to put this in proper context.
While I strongly believe that we need to enhance the FCC's
enforcement authority, it is important to recognize the
entirety of enforcement regulation which ILECs currently face
at both the Federal and State levels, none of which are
mutually exclusive.
Take the ILECs for example. At the Federal level, there is
Section 208 of the Communications Act, which enables any
company or person to file a complaint at the FCC against an
ILEC for damages due to alleged violations of the Act.
If damages are awarded by the FCC, the ILEC cuts a check
directly to the aggrieved party. There is no cap on those
damages, and the same goes for long distance companies.
Then, there is Section 503, which deals with forfeiture
penalties. These cases are brought by the FCC. If the FCC finds
that an ILEC has violated the Act, rules, or regulations, the
FCC can order a forfeiture penalty against the ILEC. And in
these cases the check is cut by the ILEC to the U.S. Treasury.
The same goes for long distance companies.
In addition to this, certain ILECs have conditions imposed
by the FCC as a result of mergers, which have mandated
requirements and fines. Often these fines are an amount which
exceed the forfeiture caps found in Section 503, which H.R.
1765 would substantially increase.
On top of this, the ILECs have obligations imposed on them
by the States, and there are literally millions of performance
measures which if not met result in automatic payments by the
ILECs to the CLECs and/or the State treasury in a given State.
All of this swirls around companies which by and large are
good corporate citizens engaged in certainly a highly
competitive, highly complex business, with massive regulatory
obligations. They employ thousands of people in communities
throughout our country trying to deliver a quality service to
consumers at affordable rates.
These are complex issues, and I wish there was a silver
bullet. But I do know this: we need to give Chairman Powell and
his colleagues more ammo to do the jobs, so that they can
enforce the law.
As everyone here knows today, my bill increases tenfold the
current forfeiture authority of the FCC, from the current
$100,000 up to $1 million per violation, and $1 million up to
$10 million for a continuing series of violations, and for
repeat offenders these penalties are increased up to $2 million
per violation and up to $20 million for a continuing series of
violations.
And we also expand the statute of limitations for FCC
enforcement actions from 1 to 2 years and provide the FCC with
a cease and desist authority as an additional enforcement tool.
We have added language that streamlines the State PUC
procedures for resolution of disputes regarding interconnection
agreements, and this language is identical to the amendment
which Mr. Terry offered.
In this important provision, however, I think there may be
some misunderstanding, so I want to set the record straight. To
the extent that carriers disagree about their obligations under
interconnection agreements, H.R. 1765 would provide a fast
track process through which the State PUCs would determine what
the obligation of the carriers actually are.
In the absence of State action, the FCC is still permitted
to step in and act in this regard. Moreover, for the record,
and most importantly to today's debate, this provision would
not in any way limit the FCC's authority to enforce the Act,
and we will clarify that further in the bill if we need to do
so.
As many of you know, I will seek to make an enforcement
amendment in order in conjunction with the Tauzin-Dingell bill,
H.R. 1542, makes its way through the legislative process with
the Rules Committee.
And I certainly appreciate the strong support of Chairman
Tauzin and ranking member Dingell for that effort, and I am
anxious to seek the input of all members as we move this
process along.
And I yield to my friend and colleague, Mr. Markey, for an
opening statement.
Mr. Markey. Thank you, Mr. Chairman, very much, and thank
you for having this very important hearing.
It is very clear that the current forfeitures and penalties
available to the Federal Communications Commission are woefully
inadequate to act as a deterrent to multi-billion dollar
enterprises. As FCC Chairman Powell noted in his testimony to
the subcommittee recently, the current fines are merely a cost
of doing business for many of the companies in question.
In other words, the corporate calculation appears to be
that it is often cheaper to pay the fine than to do what the
law requires, because to do what the law requires may actually
result in more competition, and that is more costly to dominant
carriers than paying puny fines every quarter for non-
compliance.
The first issue when looking to give the FCC additional
tools to focus on enforcement is whether we are prepared to
give the Commission the human resources necessary to make any
increase in forfeitures or enforcement of standards meaningful.
Will we assure Chairman Powell that he will have adequate
skills, staffing, to act as a cop on the beat?
We can have all the fines and penalties in the world, and
it will do little good, in my view, if there isn't anyone
available to investigate a violation or adjudicate a dispute.
If we are going to increase fines, penalties, and forfeitures,
I think we need to explore further what level of fines actually
acts as a deterrent to the already high rate of recidivism
amongst several carriers.
It makes little sense to take action merely to raise fines
from trivial to paltry. In addition, we ought to explore
whether enforcement action can be carried out on an expedited
basis and if any applicable fines should be payable to the
aggrieved party in a dispute. It does entrepreneurial companies
little good if many months or years after a violation or
serious dispute they are posthumously vindicated.
The marketplace simply moves too fast, and slow enforcement
in many cases may wind up being the same as no enforcement in
many emerging markets. I think it would be much better if these
fines went into the pockets of the entrepreneurial companies
which were injured rather than into the pockets of bureaucrats
in the Federal Government.
I think that that would be a much greater threat to the
large carriers across the country. If they harm someone, the
government found them to be liable, and then those
entrepreneurial companies received the fines. That would be a
real threat and completely I think eliminate the likelihood in
many instances that these large carriers would try to destroy
the small companies.
Moreover, we must explore as well the relationship between
fines and penalties levied at the State level and those at the
FCC. Our fines and penalties at the FCC should be considered in
addition to any action a State takes, to take precedence over
State action, and do monetary damages capped at the Federal or
State level count fines levied by the other jurisdiction? This
needs to be clarified.
And, finally, I just want to mention a procedural point.
This legislation represents a series of proposals on which
subcommittee members may find a great deal of consensus. I am
concerned that this bill has been described as a floor
amendment to the Tauzin broadband legislation on which there is
little consensus in the committee and no apparent interest in
the Senate.
Moreover, that legislation has the effect of
decriminalizing many of the rule violations that are today in
need of enforcement in order to ensure fair competition. I
would hope that if we truly aim to increase enforcement of our
laws and to be responsive to Chairman Powell's suggestion that
we should attempt to get these proposals enacted into law, then
perhaps we should move this bill separately and swiftly, so
that the penalties at least are on the books, and the small
companies are protected even as we debate the Tauzin bill I
think for a very long period of time.
So, again, I want to commend you, Mr. Chairman, and at this
point I yield back the balance of my time.
Mr. Upton. Thank you. Does that mean we can list you as a
co-sponsor?
Mr. Markey. As long as all these corrections are made
exactly as I detailed them, yes.
Mr. Upton. We recognize the chairman of the full committee,
Mr. Tauzin.
Chairman Tauzin. Thank you, Mr. Chairman. Mr. Chairman, I
would like to observe this is the first time I have heard a
deregulation bill described as a decriminalization bill. H.R.
1542 deregulates; it doesn't decriminalize. It simply
deregulates the provision of broadband service, and I want to
make that clear on the record.
And I want to thank you for this common-sense approach to
address concerns that were expressed throughout the telecom
industry and by the FCC. The current enforcement regimes of the
FCC and the State commissions do not adequately police bad
conduct on the part of common carriers.
Enforcement of the 1996 Communications Act provisions with
respect to obligations of common carriers is critical for
competition to survive and to thrive. And the Act imposes
responsibilities on common carriers that are indeed designed to
ensure that the markets for both local and long distance
telephone service are open and competitive.
The problem is that the enforcement of those obligations is
generally considered as a part of the common carrier's desire
to enter a long distance business under 271 provisions.
Currently, I think there are only two applications before the
Commission. I think it is SBC's application for Missouri and
Verizon's application in Connecticut. So that is the only place
the Commission has any interaction with provisions of the Act
designed to open the local markets in Missouri and Connecticut.
The rest of the States lack that constant enforcement of
the Act's provisions until the Bell companies in those States
actually make application for long distance entry. So as we
move the bill that was passed through our full committee, H.R.
1542, which does in fact deregulate, not decriminalize, the
provision of broadband services by telephone companies to
Americans, it is important that we consider this measure to
strengthen the enforcement rules that underline telephone
service and the telephone infrastructure.
The reason that becomes more important, obviously, is
because the critics of 1542 argue that to deregulate broadband
takes away one of the incentives from the common carriers to
properly deregulate the local loop.
Well, regardless of what incentives exist or don't exist,
if we impose upon the Commission both the obligation and the
authority to enforce the rules of open entry in the local loop,
we are going to get that situation corrected. In fact,
hopefully much sooner than later.
The Upton bill does that. The bill increases the penalties
that the FCC may impose on common carriers to a level that is
far beyond just the cost of doing business. Some of the
opponents of the broadband bill have attempted to dismiss the
penalties as paltry and compare them to the annual revenues of
the Bell operating companies. That argument is disingenuous at
best.
The Upton bill would increase the penalties tenfold for
each violation of each day of a continuing violation. While the
cap on a continuing violation is set at tenfold the current
limit, I think the opponents of the bill fail to recognize that
the cap only affects any single act or failure to act. Multiple
violations would be accompanied by multiple million-dollar
penalties.
The total amount of these penalties could certainly far
exceed what the opponents of this bill would like people to
believe. The legislation also provides a shot clock for the
resolution of disputes that arise out of interconnection
agreements, and this is extremely important.
The State commissions are currently charged by the
Telecommunications Act with arbitrating interconnection
agreements if parties cannot reach those agreements themselves.
Interconnection agreements are critical for opening up local
loop competition. And, therefore, the State commissions are in
the best position to resolve interconnection disputes once they
have been agreed to.
If the parties disagree about their obligations under an
interconnection agreement, then the States should, on a fast
track basis, tell the parties what their obligations are. And
the Upton bill makes the State commission the exclusive
administrative remedy, so that a party that loses before a
State commission does not prolong the dispute by appealing to
the FCC for a different outcome.
It empowers the State commissions to open up the markets
much sooner. And this type of forum shopping that currently
goes on undermines the enforcement of these interconnection
agreements. The bill still preserves the authority of the FCC
to take action in the absence of State action, but it gives and
empowers the States with more authority to get the ball moving.
In addition, the FCC would still have the authority to
impose fines or violations of the Commission's Act and the FCC
rules. Critics of this bill argue that this bill is meaningless
because H.R. 1542 deregulates everything, and, therefore, there
are no regulations left to enforce. That is simply not true.
H.R. 1542 only applies to broadband services. It doesn't
apply to telephone exchange services, nor to the facilities
used to provide telephone exchange services. So even after the
enactment of the broadband bill, there are plenty of rules for
the FCC and the States to enforce--in fact, the most important
rules, to open up those local markets in telephone service.
And what critics of H.R. 1542 also know, but they won't
tell you, is that a CLEC can use the underlying telephone
infrastructure to provide broadband services. And the rule
governing the availability of that infrastructure to CLECs has
not been undermined by H.R. 1542.
Mr. Chairman, I applaud you for introducing the legislation
and holding a hearing. I am extremely disappointed that the
critics of the broadband bill have lashed out now against your
bill in a thinly veiled attempt to derail the broadband bill.
Opponents of 1542 recognize that marrying the broadband
bill with your bill on the floor, which I am committed to ask
the Rules Committee to do, will give members an even stronger
reason to vote for H.R. 1542. So instead of offering Chairman
Upton constructive recommendations of how this bill could be
improved, too many opponents have simply criticized the bill
without those recommendations.
We welcome recommendations on how to make this a better and
a stronger provision. If the critics of H.R. 1765 are serious
about improving enforcements of the Communications Act, they
should do so.
And, Mr. Chairman, I want you to know that I intend to
continue to work with you as we move forward to the Rules
Committee to ensure that the language you so carefully drafted
with so many other members of this committee is, in fact,
improved to the point where we can ask that it be added to the
broadband bill, and will make that bill a much stronger bill
and, more importantly, will serve as an underlying authority
and responsibility on the FCC to open up local telephone
markets the way they should have been opened up for many years.
Thank you, Mr. Chairman.
Mr. Upton. Thank you. I recognize for an opening statement
ranking member of the full committee, Mr. Dingell.
Mr. Dingell. Mr. Chairman, I thank you. And, Mr. Chairman,
I commend you for holding this hearing on H.R. 1765 and for
your leadership in offering that legislation. I commend you and
all of the original co-sponsors for taking such quick action on
what is a very important issue.
Chairman Powell has indicated that he has grave need of
additional authorities and additional penalties. This confers
upon the Commission the necessary authority to properly enforce
the rules and regulations which they lay forth.
It also affords us an assurance that people will listen
with respect when the Commission addresses problems, and will
perhaps enable us to substitute real, meaningful penalties for
the kind of foolish constraints that have been imposed on the
development of not only the broadband but internet and all the
rest of telecommunications, because of the inability or
unwillingness of the Commission to do the things that it was
supposed to do under the Telecommunications Act.
For years this committee has heard a tirade of complaints
and accusations leveled against companies on both sides of the
telephone wars. The new entrants to the telephone market accuse
incumbent carriers of violating Telecom Act by not opening
their markets to competition.
Incumbents, in turn, charge the new entrants with bad
faith, claiming that they cherrypick their best customers, and
purposely don't serve residential customers in order to keep
the bells from getting approvals to enter long distance. I
suspect that there is substantial truth to both, but
particularly to the last part.
I sincerely doubt that either side has a monopoly on the
truth. Thankfully, it is not our job to adjudicate the
situation. Rather, it is our job to correct a situation which
is impeding a number of important goals of this Congress. The
first is competition. The second is broader service. The third
is that we will see the law--the Telecommunications Act
implemented as we had intended.
However, we are now addressing this morning one important
aspect, and that is we can make sure that if and when the law
is broken it is remedied in a meaningful fashion and that
penalties can be brought forward by the FCC in a way which will
enable them to carry out their important mission.
H.R. 1765 does, then, what we want. It substantially
increases penalties for all common carriers for wrongdoing. It
gives the FCC more authority and more flexibility to pursue
violators, and I challenge anybody to come forward with a
meaningful criticism or complaint about that.
The bill provides ample deterrent to protect all
telecommunications companies from anti-competitive behavior in
the marketplace. And just as important it provides consumers
with additional protections against slamming, against cramming,
against telecommunications marketing abuses, and many other
violations of the Act--something which currently the FCC lacks.
The bill is a good one. I support it. However, there is one
significant improvement which can be made to the bill, and I
hope that you and the other co-sponsors will work with me to
incorporate those changes that would implement that as the bill
moves forward.
I would note that violations of the Telecommunications Act
ultimately harm telephone consumers. I believe it is only fair
that the fines paid by the violators should flow back to
benefit the consumers, and I would note that the consumers have
great difficulty in terms of getting redress for wrongdoing
which is done to them.
I note that the CLECs have their hot little hands out to
get this money themselves. I see no reason why the CLECs could
not be enabled to continue to function as they can by a proper
lawsuit against other wrongdoers in the telecommunications
industry as opposed to having us confer upon them a large wash
of money and the opportunity to generate new and frivolous
complaints against others in the telecommunication industry.
Therefore, I would propose that all fines and penalties be
earmarked to reduce dollar for dollar the amount of the
universal service surcharge that is currently collected from
residential telephone consumers. I would like to note that this
universal service surcharge is an extremely important part of
assuring universal service, of seeing to it that the things
that need to be done by our telecommunications service and
system are available to everyone at an affordable cost,
something which has made this country unique in terms of the
availability of service to our users.
To be clear, and I want to make that so, this proposal will
not in any way reduce the amount of funding available for the
e-rate program. It would simply reduce the amount of money that
is collected from our constituents to pay for it by seeing to
it that the fund is enriched by fines collected from
wrongdoers.
In this way, monthly telephone bills can still go down
while still funding this important program. I hope we can work
together to flesh out the details of this provision. I
recommend its inclusion as an amendment on the floor.
And, Mr. Chairman, I thank you for holding this hearing. It
is a valuable one. And I yield back the balance of my time.
Mr. Upton. Thank you. I would recognize for an opening
statement Mr. Stearns.
Mr. Stearns. I thank the chairman and commend you for
holding this hearing on H.R. 1765. I am proud to be an original
co-sponsor of this bill.
And also, Mr. Chairman, I would like to recognize one of
our witnesses this morning, the Chairman, Leon Jacobs, Jr., of
the Florida Public Service Commission. I want to thank him for
coming here. I understand it was pretty short notice, so we
appreciate your coming here and welcome you.
The Telecommunications Act, as we all know, is over 10
years old now. It is now half a decade old. And during that
markup we thought we had solved all these problems. And we are
coming back, and I think rightfully so, with legitimate
enforcement mechanisms.
This bill that we are marking up now I support. It is a
similar bill that Mr. Upton and I offered during the
consideration of H.R. 1542, the broadband deregulation bill.
The committee accepted one of my amendments creating specific
and severe penalties totaling up to $10 million for failure to
comply with specific legislation, but the amendment that Mr.
Upton and I offered enhancing the FCC's enforcement authority
under Title V of the Communications Act was determined not to
be germane.
So I am glad that Mr. Upton has put this together in a
separate bill, and so I look forward to the hearing today. I
would say to my colleagues I don't think this bill in any way
is intended to favor ILECs or CLECs or IXCs over one another. I
think it is something that Mr. Powell, the Chairman of the FCC,
has called for, and I think we should go ahead and go forward.
I think many on both sides of this issue will complain
about the bill. And whether it should be part of the broadband
bill, as the chairman indicated, I think is prudent, and I
think it would help his bill. But as Mr. Markey has indicated,
maybe it is a bill that we should mark up separately and get
through and get moving, and I think that would be dependent
upon how quickly this broadband goes to the Rules Committee and
comes on the House floor.
So, Mr. Chairman, I commend you for what you are doing. I
think that we are moving in the right step forward here, and I
yield back the balance of my time.
Mr. Upton. Thank you. I would recognize for an opening
statement Ms. McCarthy.
Ms. McCarthy. Thank you, Mr. Chairman, for holding this
important hearing on enhancing enforcement mechanisms in the
Communications Act of 1934. I look forward to the testimony of
the witnesses on this issue and the dialog that will follow.
One of the promises of the 1996 Telecommunications Act was
competition in the local phone service market. Congress removed
many regulatory barriers, with the expectation that it would
promote competition and benefit the public interest. Sections
251, 252, and 271 of the Act were designed to give competitors
access to incumbent local exchange carriers' facilities as well
as provide incentives to incumbents to open their networks up
to competitors. Despite our efforts to create a competitive
local phone service market, most consumers have no choice in
local phone service providers. Notwithstanding the efforts of
Birch Telecom in my district, in my home State of Missouri,
less than 1 percent of residential and small business consumers
are provided service by a competitive local exchange carrier.
Nationally, only 3 percent of residential and small business
consumers receive local phone service from a CLEC. Clearly,
competition is not flourishing.
When Congress drafted the Telecommunications Act of 1996,
it recognized how difficult it would be to foster competition
in a former monopoly market. Incumbent phone companies have
little incentive to open up their networks to competitors even
when provided with incentives such as those provided under
Section 271. CLECs have complained repeatedly that incumbents
have used a variety of tactics to stymie competition. Failure
to pay reciprocal compensation payments, long delays in orders
for provisioning unbundled network elements, and charging
above-market rates for wholesale services are just some of the
actions used by incumbents to hinder the ability of CLECs to
operate. FCC Chairman Michael Powell recently stated in a
letter to the leaders of this subcommittee that ``CLECs may
have been stymied by the practices of incumbent local exchange
carriers that appear designed to slow the development of local
competition.'' In that letter, the Chairman goes on say that
current FCC authority is insufficient to enforce the local
competition provisions of the Telecommunications Act. As Mr.
Markey noted, anti-competitive behavior is not deterred, and
fines are incorporated into business plans as a cost of doing
business. These costs are inherently borne by consumers who end
up paying higher bills.
I am interested in hearing from the witnesses on what
sections of the Communications Act need to be revised to give
the FCC and the State public utility commissions the authority
they need to stringently enforce the Act's market-opening
provisions.
My PSC commissioners have several reservations about the
bill that Mr. Jacobs will comment upon. My questions concern
whether the changes made are really enough to deter anti-
competitive behavior by incumbent phone companies. What other
areas should this legislation address, if any, to make it
stronger? Does Congress need to appropriate additional moneys
to the FCC for its enforcement responsibilities?
There is a general consensus among many of the members of
this subcommittee that the FCC and State public utility
commissions need greater authority to enforce the provisions of
the Communications Act. I have heard from many in the
telecommunications industry, as well as from consumer groups,
but neither the FCC nor State public utility commissions have
the enforcement tools they need to uphold the provisions of the
Communications Act or regulations and orders stemming from it.
I want to commend Chairman Upton for introducing this
legislation and holding a hearing on this important matter. I
hope the subcommittee will hold additional hearings on
enhancing enforcement tools and move this legislation as a
stand-alone bill. This issue is too important to be
incorporated into H.R. 1542, the Internet Freedom and Broadband
Deployment Act, a bill whose future is uncertain.
Thank you, Mr. Chairman. I yield back the balance of my
time.
Mr. Upton. Thank you. I would yield to Mr. Terry for an
opening statement.
Mr. Terry. Thank you, Mr. Chairman. I want to express my
appreciation to you for the way that you have handled these
issues, molding them into a single bill and holding this
hearing today. It is rare that I actually engage in an opening
statement and have a formal statement.
Well, it is almost 11, and we haven't yet come close to
hearing from the witnesses. So if you will allow me, I am going
to submit the formal statement and yield back the rest of my
time.
[The prepared statement of Hon. Lee Terry follows:]
PREPARED STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF NEBRASKA
Mr. Chairman, I want to commend you for holding this hearing on
H.R. 1765.
Last week during our markup of H.R. 1542, we discussed the
importance of enforcement and giving the Federal Communications
Commission (FCC) what they need to make the fines they levy no longer
trivial. A number of good ideas surfaced during the markup not germane
to H.R. 1542. I commend Chairman Upton for taking our ideas and
crafting H.R. 1765, a bill that will put the ``teeth'' back into FCC
enforcement.
I want to bring to the attention of the committee a situation that
happens all the time between the Incumbent Local Exchange Carriers
(ILECs) and the Competitive Local Exchange Carriers (CLECs). In order
for a CLEC to offer service over an ILEC's lines, the two parties must
develop an interconnection agreement. In that agreement, both parties
will agree to they types of services and facilities, and the prices at
which services and facilities will be provided CLECs. For example, as
part of an agreement, the ILEC will agree to provide loops to the CLEC
within a certain timeframe. If they fail to do so, they would be in
violation of the interconnection agreement.
When a violation occurs, both parties must come together to solve
the problem. However, if no resolution occurs, then the issue is sent
to the state public utilities commission (PUC) and waits for the
commission's decision. The problem is that the state PUC does not have
to rule in a timely manner, which can be devastating to the CLECs, some
of who do not have enough money to endure a protracted investigation or
hearing.
Mr. Chairman, you have addressed this concern in Section 2, by
including the remedy that will bring disputes between the ILECs and
CLECs to a quick resolution. Section 2 will give those CLECs, who find
themselves in front of a state PUC, hope that in 60 days, a decision
will be made. Granted, the decision may not be in their favor, but
nevertheless, a decision will be made.
Mr. Chairman, this enforcement section will allow any party to
petition the State commission to arbitrate a dispute that has occurred
from the interconnection agreement. The non-petitioning party may
respond to the other party's petition and provide additional
information to make their case. The State Commission may ask for
additional information if necessary. If any party refuses or fails to
respond in a timely basis to the request, the commission may proceed
with the information they have before them. Once the petition is filed,
the State Commission will only have 60 days to resolve the dispute. It
is that simple.
I believe very strongly in the need to establish limits on
resolving disputes between the CLECs and the ILECs. Section 2 of H.R.
1765 is an effective way of doing just that.
Mr. Chairman, thank you again for this hearing. I yield back the
balance of my time.
Mr. Upton. Without objection, all members of the
subcommittee will be afforded the opportunity to introduce
their opening statement as part of the record.
Ms. Harman?
Ms. Harman. Thank you, Mr. Chairman. I am sorry that I
won't be able to stay for all of the testimony because of a
conflict, but I did want to come to say that I applaud you for
trying to add penalties to the Telecom Act of 1996, a bill I
voted for and I think the cornerstone of our telecommunications
policy.
I know there may be some issues relating to this amendment,
but I think it is important that if Congress carefully fashions
a law we provide adequate penalties to enforce it. And in that
regard I truly applaud you for taking advantage of this
opportunity to get that job done.
Fines and penalties cannot be a cost of doing business.
Fines and penalties have to hurt enough so that they deter
wrongful conduct. I know that is what you are trying to
accomplish here, and I want to work with you and with the
committee to ensure that penalties and regulations are
effective.
Thank you very much.
Mr. Upton. Thank you.
Mr. Largent?
Mr. Largent. Thank you, Mr. Chairman. I will make brief
remarks, too, and just say that this is important legislation.
My only concern is knowing that Chairman Tauzin intends to
include H.R. 1765 as an amendment to H.R. 1542, and when it is
considered on the floor, my concern is is that if for some
reason something doesn't happen with the broadband bill in the
Senate or on the floor, whatever, that we don't ever get to
H.R. 1765.
And so my hope is is that we would be able to introduce
this independently if, for whatever reason, the broadband bill
stalls out, because it is important.
And I also want to make a note that yesterday in a speech
to the National Press Club Ed Whittacker, the Chairman and CEO
of SBC, stated that SBC has to comply with over 3 million
performance measures on a daily basis to stay in compliance.
And I will be interested in hearing from Mr. Solomon, the Chief
of FCC's Enforcement Bureau, how many of those 3 million
performance measures do we really need.
And with that, Mr. Chairman, I will yield back my time.
[The prepared statement of Hon. Steve Largent follows:]
PREPARED STATEMENT OF HON. STEVE LARGENT, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF OKLAHOMA
Mr. Chairman, thank you for holding this morning's hearing to
examine legislation which will grant the Federal Communications
Commission (FCC) greater enforcement penalties and fines in an effort
to achieve compliance with the Communications Act of 1934. In a perfect
world there would be no need for a Section 503(b)(2)(B) or a Section
208 to act as a deterrent for anti-competitive behavior by common
carriers. However, to my knowledge that type of perfect world doesn't
currently exist in the communications industry. Therefore, it is
incumbent upon Congress and the FCC to play the role of an honest
broker to maintain an even playing field and to preserve a modicum of
competition.
I believe H.R. 1765 is a good faith attempt to put all carriers on
notice, be they incumbent local exchange carriers (ILECs), long
distance carriers, and/or competitive local exchange carriers (CLECs)
that strong and effective enforcement is critical to implement the '96
Telecom Act. It appears that the FCC's current ability to levy fines
and penalties are insufficient to discourage ILEC anti-competitive
behavior. To quote from Chairman Powell's May 4, 2001 letter to
Chairman Tauzin, ``Given the vast resources of many of the nation's
ILECs, this amount is insufficient to punish and deter violations in
many instances.''
I believe that the enactment of this legislation will enhance the
FCC's ability to police the '96 Act; however, I do have serious
reservations linking the success of H.R. 1765 to the success or failure
of H.R. 1542. It defies logic to link these two bills at the Rules
Committee. H.R. 1542 is an Internet broadband deployment bill which
precludes any State or federal regulatory or enforcement authority.
H.R. 1765 is a circuit-switch voice enforcement bill. These conflicting
bills, if combined, will only cause greater confusion to an already
contentious issue.
Enforcement is important--but enforcement needs to be based on
reasonable and fair standards. SBC, the incumbent local carrier in
Oklahoma, tracks nearly 3 million measures of its performance each
month to comply with Sections 251, 252, 271 in its 13 state service
territory region. This effort requires 172 full time personnel and
millions of dollars in compliance costs. Clearly, it is virtually
impossible to maintain a 100 percent compliance rate with 3 million
performance standards.
Southwestern Bell-Oklahoma's performance in providing wholesale
service to CLECs, as measured by the FCC and endorsed by Justice in the
Texas, Oklahoma, and Kansas Section 271 proceedings is consistently the
best performance turned in by all of the SBC service territory states.
SBC-Oklahoma average performance this past year has been 93.5%, a truly
commendable achievement.
In closing, it's imperative that Congress grant the FCC effective
and meaningful enforcement tools to implement the '96 Act. But it's
equally important to allow the Bell companies to have a reasonable and
manageable number of performance standards with which they will have to
comply. Otherwise, we are doing nothing more than creating a lot of
busy work.
I look forward to hearing from our witnesses.
Mr. Upton. Thank you.
Mr. Sawyer?
Mr. Sawyer. Thank you, Mr. Chairman, not only for holding
this hearing but for your insightful one-panel policy. It is a
benefit to everybody.
Let me associate myself with the remarks of the gentleman
from Nebraska with regard to his opening statement and keep
mine brief as well, associate myself with the comments of the
gentleman from Michigan, particularly with regard to his
thoughts on the universal service fund and the way in which
that might take advantage of the efforts that we undertake here
today.
With that, I would yield back the balance of my time.
Mr. Upton. Mr. Fossella?
Mr. Fossella. No statement.
Mr. Upton. Mr. Pickering?
Mr. Pickering. Thank you, Mr. Chairman, for this hearing.
And as we look at enforcement and opening the access to the
local network to promote competition, I am still concerned that
with this provision or this legislation, 1765, when you pair it
with the legislation that we passed in the last week, the
broadband bill, it is still fundamentally flawed, because you
are removing the elements through interconnection and
unbundling.
We are cutting off capital. We are cutting off access to
the network. We are undermining the core elements of the 1996
Act that would promote local competition.
So if you remove the elements with one hand and then say,
``We are going to enforce something'' on the other hand, there
is nothing there left to enforce to open the markets for local
competition. So until that fundamental flaw is repaired and
corrected, the enforcement provisions that we are talking about
today are somewhat meaningless.
The other problem that we see is if you cap at $10 million
the penalties for companies that are in the $60- and the $70-
and the $80 billion, in revenues per year, a $10 million
insurance policy in an $80 billion a year business is basically
a free path to say we can violate every law there is and just
pay $10 million.
So the penalties are insufficient, and we need to look at
how we can strengthen not only the FCC authority on penalties,
but what are some of the other non-monetary things that can be
done to strengthen the FCC's hand, whether it is prohibitions
on marketing, other types of prohibitions that would not
disrupt the consumers' service but would be something that
would be a true incentive for companies to comply--performance
matrixes and performance contracts, looking at treble damages,
if companies are violating these laws, everything that we can
do to promote competition.
And until we repair that side of it, it is hard to discuss
entry into new markets without compliance of 251, 252, 271.
When we get that balance, then I think that we are on the right
path. But until then, we are still operating in a context
which, in my view, is unworkable. I look forward to making it
workable and making something that is both on the enforcement
side and the local competition side, and then we can look at
entry for the Bells.
I do want to see competition in local markets. I want to
see competition in the data market. I want to see competition
in long distance. But we have got to--but we have to make sure
that we have a balanced and sound framework to be able to do
so.
With that, I yield back, Mr. Chairman.
Mr. Upton. Thank you.
Mr. Engel?
Mr. Engel. Thank you, Mr. Chairman. I very much appreciate
the work that you and our other colleagues have done on
enforcement issues of the FCC. I think that we all recognize
that the existing fines are meaningless to the multi-billion
dollar per year industry.
Of course, we all wish that the common carriers met their
obligations without such threats, but in this industry there
must be a referee, and the referee must have the power to send
a player into the penalty box.
I also appreciate that we are actually having the hearing
on this. I am supportive of changing these enforcement
provisions to better reflect today's situation. But when these
questions came up at the recent markup, I felt as if I didn't
have enough information to judge what the proper level should
be. So this is my opportunity to learn more, and I think it is
very, very helpful.
My overriding principle, Mr. Chairman, is that these
enforcement provisions be applied to all common carriers. I
know that some believe we should have a different, higher set
for the RBOCs, but I believe that just isn't fair. The Federal
Government is not supposed to choose sides in the marketplace.
The bill offered by my friend, the chairman, also
streamlines the procedures that the States use to resolve
disputes regarding interconnection agreements. I believe giving
the States more authority is necessary. The FCC does not have
the resources it needs to do all that we ask.
With such higher penalties, I suspect that challenges will
increase and that demands on the time of the FCC staff will
increase. Bringing the States into this earlier and granting
them greater authority will relieve the FCC of some of the
burden we have placed upon it.
So I thank you, Mr. Chairman, for giving us this
opportunity. I do think it is necessary. I just want to make
sure that we are doing it right.
Thank you.
Mr. Upton. Thank you.
Mr. Ehrlich?
Mr. Ehrlich. Real briefly, Mr. Chairman, I thank you for
the hearing. It is timely and important. I also want to give a
kudo to the chairman. I think the process he has adopted here
does make sense, subject to some of the caveats expressed by my
colleagues here.
I do want to associate myself with the remarks made by my
colleague from Oklahoma and particularly Mississippi, and
hopefully the testimony will focus on the FCC and what the FCC
needs in the way of additional enforcement. This has been a
very difficult issue for all of us, and I will yield back.
Mr. Upton. Mr. Green?
Mr. Green. Thank you, Mr. Chairman. As the original co-
sponsor, I support and believe this legislation will be a real
benefit to any consumer with a phone line. Back in March when
Chairman Powell came before our subcommittee and told us that
the FCC needed expanded enforcement authority, I and you and a
number of other members agreed with him.
The current cap on common carrier fines are too low to
serve as an effective barrier against anti-competitive behavior
by our common carriers. Consumers don't care whether it was a
CLEC or an ILEC that they just were slammed or crammed by. They
care about fixing the problem and making sure that it doesn't
happen again, and that the companies conducting these illegal
practices are held accountable.
After reading the testimony today of the witnesses, there
is clearly differing opinions on whether the legislation goes
too far or not far enough. This bill encompasses the vast
majority of the suggestions put forth by Chairman Powell and is
a reasonable compromise, giving the FCC new powers for
competition.
In addition, Mr. Chairman, I want to thank you for working
with us and including reporting language in the bill that is
part of the bill that we put in. Chairman Upton proposed
increasing the levels of fines against common carriers. And I
believe it is important to closely monitor whether our actions
have a positive impact on the industry.
Reporting provisions, including this legislation, require
the FCC to report to Congress where there are increasing or
decreasing--decreases in common carrier violations as a result
of the passage of this bill. If reporting shows increases in
common carrier violations, I would hope we consider raising the
fines again to promote better compliance.
My Mississippi colleague is correct that we need to make a
good point that penalties should be enough to stop the improper
activity. And, again, I am glad, Mr. Chairman, that we have
this bill, and hopefully we will be able to deal with it in an
expeditious manner. Thank you.
Mr. Upton. Thank you.
Mr. Deal?
Mr. Deal. No statement.
Mr. Upton. Mr. Davis?
Mr. Davis. Thank you, Mr. Chairman.
We thank you for your willingness to work with us on the
issue we have before us today. I think it is clear that in
introducing H.R. 1765 you are committed to changing the current
practices of telecommunication providers who view the threat of
monetary penalties under the Communications Act as small speed
bumps on their violative actions rather than a concrete wall
that would actually deter illegal business practices.
For that reason, and in light of Chairman Powell's May 4
letter on this matter, I applaud your bringing this issue
before the subcommittee so quickly.
I remain troubled by the fact that this important
legislation which applies to all common carriers is being
linked to legislation that directly benefits only one segment
of carriers. These are companies who would not even be subject
to the provisions of H.R. 1765 by virtue of their exemption
from FCC and State authority under the operation of H.R. 1542.
Certainly, a fair discussion of enforcement and the
appropriate level of deterrent penalties is needed, but I
wonder whether a single hearing with no opportunity to further
study H.R. 1765 beyond today is giving it less than the
attention it deserves.
Since we are discussing a universe of telecommunications
carriers that differs from those affected by H.R. 1542, I
really believe its impact requires a much better understanding
by members of this subcommittee than we are going to be able to
gather just at this hearing. And to bring this bill to the
House floor without further debate I think is a little
premature.
As you know, Mr. Chairman, I offered an en bloc amendment
last week during our full committee markup of H.R. 1542 that
would have achieved two things. First, it would have required
the FCC to adopt clearly discernable performance metrics that
will create standards by which we can determine whether an
RBOC, for example, is cheating.
However, these standards would have deferred to State laws
and rules if a State commission had performance standards in
place. And, second, the amendment would have increased
significantly the monetary penalties for a Bell companies
violation of these standards.
I would note that the motive for directing these penalties
to the Bell companies only was based on the fact that the
underlying objective of H.R. 1542 was to provide deregulatory
relief that would singularly benefit the Bells. While I think
it is prudent for the subcommittee to heed Chairman Powell's
request that the FCC be given the authority to levy forfeiture
penalties of at least $10 million, the numbers themselves are
not necessarily the most critical part of the debate.
The most important point for us as legislators is to
explore an analyze the current landscape of regulatory
enforcement that has produced an environment where a $10
million penalty translates into simply a cost of doing business
with respect to a carrier's bottom line.
As I noted last week, the RBOCs together have encouraged
over $492 million in Federal and State penalties since December
1999. I think we need to understand better, Mr. Chairman, why
carriers are willing to incur these enormous costs, and I am
not certain that a single hearing with a four-member panel is
going to be able to give us enough information to make that
determination.
Aside from your intention to offer H.R. 1765 as an
amendment to H.R. 1542 on the House floor, it is my hope this
issue is one that the subcommittee will be able to flesh out
further. I look forward to helping you in any way in making
this possible.
Thank you.
Mr. Upton. I thank the gentleman from Virginia. For a
little while I thought I was listening to that Fed Ex
commercial the way that you went through that statement in
quick order.
I look forward to working with all members of the
subcommittee. This legislation may, in fact, change based on
the hearing today, in terms of stronger penalties, a number of
things that are certainly open to me. But I look forward to
listening to the testimony, interacting with the witnesses, and
working with both sides of the aisle to have a better--even a
better proposal.
[Additional statement submitted for the record follows:]
PREPARED STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF WYOMING
Thank you, Mr. Chairman, for convening this legislative hearing
today on your bill, H.R. 1765.
As many have done already, I commend the intent of this
legislation.
For too long we've heard the complaints from various common
carriers regarding competitive violations of the Telecommunications Act
of 1996.
Recently we heard from newly installed Federal Communications
Commission Chairman Michael Powell regarding his desire to levy greater
fines and receive greater enforcement tools to better enable his agency
to combat these anti-competitive violations.
As usual, this committee is quick to act. Unfortunately, in our
haste to legislate a solution, as is usually the case, we've ignored
some important provisions that make sense and hopefully will find their
way into the final product.
Mr. Chairman, beyond the fact that I'd like to see this bill
enacted into law as a stand alone bill and not part of a larger
package, I'd also like to see some consideration given to small and
mid-size carriers be they incumbent local exchange carriers (ILECs) or
competitive local exchange carriers (CLECs).
A tiered system of fines or possibly a percentage of yearly revenue
would make sense instead of a fixed amount geared mainly toward those
large companies that seem to get the most attention.
I think most would agree that it is absurd to force small
businesses like RT Communications, Dubois Telephone, WyoCom or
SilverStar operating in rural Wyoming that may only have a few hundred
or a few thousand access lines to be lumped together with Qwest or AT&T
in this regard.
I would like to work with you, Chairman Upton, and with the
Chairman of the Energy and Commerce Committee to craft a solution to
this all too prevalent problem: treating small and mid-size companies
the same way as we treat the telecommunications giants.
Again, thank you for holding this hearing and I yield back the
balance of my time.
Mr. Upton. This concludes the opening statements by
members. Our panel today includes Mr. Albert Halprin, partner
of Halprin, Temple, Goodman and Maher; Mr. Royce Holland,
Chairman and CEO of Allegiance Telecom; The Honorable Leon
Jacobs, Chairman of the Florida Public Service Commission; Mr.
Lawrence Sarjeant, Vice President, Regulatory Affairs, from the
U.S. Telecom Association; and Mr. David Solomon, Chief of the
Enforcement Bureau of the FCC.
As many of you heard, the buzzers have sounded. We have a
vote on the House floor. We are going to take a brief recess
and come back to Mr. Halprin's testimony at about 11:25.
[Brief recess.]
Mr. Upton. More members are coming back.
I also note that there are a number of subcommittees that
are meeting all at the same time. And we do have a full
committee markup early this afternoon, and there are a couple
more votes expected on the House floor before we get there.
So, Mr. Halprin, welcome. We have the 5-minute clock up
here. If you can--all of your statements are made part of the
record in their entirety. And if you could limit your remarks
to 5 minutes, that would be terrific.
Mr. Halprin?
STATEMENTS OF ALBERT HALPRIN, PARTNER, HALPRIN, TEMPLE,
GOODMAN, AND MAHER; ROYCE J. HOLLAND, CHAIRMAN AND CEO,
ALLEGIANCE TELECOM, INC.; HON. LEON JACOBS, CHAIRMAN, FLORIDA
PUBLIC SERVICE COMMISSION; LAWRENCE F. SARJEANT, VICE
PRESIDENT, REGULATORY AFFAIRS, U.S. TELECOM ASSOCIATION; AND
DAVID H. SOLOMON, CHIEF, ENFORCEMENT BUREAU, FEDERAL
COMMUNICATIONS COMMISSION
Mr. Halprin. Thank you very much, Mr. Chairman, members of
the subcommittee. I very much appreciate the invitation. It is
a pleasure to appear before you and with this distinguished
panel.
The proposals in H.R. 1765 to revise the enforcement
penalties available to the FCC constitute a commendable and
necessary first step toward safeguarding the pro-competitive
mandates of the Act. Congress, however, should also take this
opportunity to enhance consumer protection for residential and
small business customers.
As the FCC continues to eliminate traditional regulation of
competitive markets and services, including eliminating all
prior review of rates and practices, it is more important than
ever that the Act provide deterrence from unlawful conduct
which may escape regulatory notice or action for years.
Because Congress is probably quite unlikely to engage in
multiple amendments of the Communications Act to address
various different types of carrier violations, I would hope the
subcommittee could now consider a broader approach to enhanced
enforcement which would add three additional mechanisms in
addition to those contained in the bill not currently included
in the language.
First, the FCC should have the right and ability to
delegate consumer protection authority over interstate rates
and services involving residential and small business customers
to State regulators who are better suited to determine whether
such rates and terms of service are just and reasonable and to
monitor and enforce remedial action.
Second, the FCC and the States under delegation should have
the ability to levy penalties on wilful violators that are
equal to the amount a carrier wrongfully or excessively
received as a result of their violation, plus an added penalty
factor.
And, third, the Commission and the States under delegation
should be able to handle class complaints brought by consumers
and small businesses who have been victimized through a pattern
of rule violations by a carrier.
Placing these arrows in the quivers of Federal and State
regulators, in addition to the stepped up penalties that the
chairman has proposed, would increase the ability of regulators
to protect those small customers.
The need to protect those customers has become all the more
acute in an era when Congress and the FCC have properly
deregulated most of the telecommunications industry. Detailed
regulation, while appropriate in markets still in transition to
competition, reduces competition and harms consumers in
geographic or service markets which are meaningfully
competitive.
The FCC should, of course, continue to extend its
deregulatory approach, as should Congress, to all competitive
markets and services. But as it implements these policies, it
no longer reviews in advance the rates or practices employed in
virtually all cases involving long distance carriers and
competitive local carriers.
Now, policymakers are correct to eliminate these advance
obligations and rules in order to allow the market to work
properly. However, this kind of deregulation must be coupled
with adequate provisions and enforcement tools to ensure that
when abusive behavior exists it is brought to regulators'
attention and stopped.
Regulators must then be able to come down hard on carriers
that seek to take advantage of a free market environment to
engage in anti-consumer or anti-competitive practices.
Deregulation without adequate enforcement or monitoring of the
parts of the marketplace where competition has not extended or
has broken down amounts to advocating responsibility to protect
consumers.
Laudably, through the legislative process, this
subcommittee is addressing its responsibility to protect
customers and competition. However, in my judgment, even the
enhanced penalties in H.R. 1765 will not be a sufficient
deterrent to an unscrupulous or a desperate carrier that
recognizes it can still make substantial sums through excessive
charges or unlawful practices, even if it pays the maximum
fine.
I am not, of course, suggesting reregulation of the widely
advertised prices with which various carriers try to attract
willing customers, and that constitutes the very large majority
of offerings. Your competition has and will continue to
discipline the market and protect and serve customers. Rather,
I am addressing the limited areas of market failure,
particularly those that involve a lack of consumer knowledge of
or consent to a rate or practice.
While limited, however, these can and have involved
millions of customers and hundreds of millions of dollars. It
is plain to me that State officials are aware of the magnitude
of enforcement problems. They are concerned about fractured
responsibility to confront anti-consumer activities,
particularly involving residential and small business
customers.
I am certain that they would be delighted to work with this
subcommittee and the FCC to develop new mechanisms to address
this, and I would add in my last 8 seconds that this would have
the salutary effect of freeing up existing resources without
new money at the FCC to address competitive matters.
Thank you, Mr. Chairman.
[The prepared statement of Albert Halprin follows:]
PREPARED STATEMENT OF ALBERT HALPRIN, PARTNER, HALPRIN, TEMPLE, GOODMAN
& MAHER
Introduction
The Federal Communications Commission (``FCC'') plays a crucial
role in implementing Congress' mandate, through the Telecommunications
Act, to introduce competition, protect consumers, and ensure universal
service. However, it is becoming increasingly evident that the
Commission cannot do so without enhanced abilities to enforce laws and
regulations by imposing adequate penalties upon violators and granting
adequate relief to consumers, particularly residential and small
business consumers. It also appears that the protection of these small
consumers can be improved by involving the states as well. Through the
proposals for stepped-up penalties in H.R. 1765, the Subcommittee has
undertaken an excellent start in a process of bolstering the FCC's
enforcement abilities. This process is necessary and highly desirable.
The FCC, under the leadership of Chairman Michael Powell, and
Congress led by this Committee and Subcommittee are forging a path to
greater welfare through competition for consumers large and small.
Based on over 20 years in the field, including hands-on regulatory
experience, I have no doubt that American consumers will be the
beneficiaries of these actions enabling telecommunications carriers to
fully and fairly compete. Competition, rather than the micromanagement
of market entry terms via regulators' negotiations, will best serve
American consumers. Therefore, rule number one is that competition, not
pervasive regulation, best serves the public interest. Its necessary
corollary, discussed here today, is that unlawful acts by competitors
must be deterred by effective, well understood enforcement mechanisms.
Because Congress is unlikely to engage in multiple amendments of
the Communications Act to address various types of carrier violations,
the Subcommittee should now consider a broader approach to enhanced
enforcement, which would add three additional mechanisms not currently
included in the language of H.R. 1765. There are three different
categories of violations that currently test the FCC's enforcement
capabilities: (1) those that harm competitors; (2) those that harm
major customers, such as large corporations and institutions; and (3)
those that hurt residential and/or small business customers. It is the
last category that is addressed the least by current procedures.
Protecting residential and small business customers must be of at least
equal concern to Congress and the FCC at this juncture as the
protection of competitors. Residential and small business customers,
who are the backbone of the U.S. economy, are the most vulnerable to
anti-consumer practices, and they have the least ability to defend
themselves when they are victimized by rule violations.
This is particularly true in our era of deregulation (which I
wholeheartedly support), when Congress and the FCC are properly
reducing or eliminating prior review of carriers' rates and practices
as markets grow more competitive. In line with the policy of Congress
and the FCC, deregulation must be coupled with adequate enforcement for
those limited areas where competition itself cannot adequately protect
customers. This is particularly necessary to protect residential
consumers and small businesses from violators seeking to take advantage
of relaxed market regulation.
Three legislative enhancements are necessary to boost enforcement:
The FCC should have the right and ability to delegate consumer
protection authority over interstate rates and services
involving residential and small business customers to state
regulators, who are better suited to determine whether such
rates and terms of service are ``just and reasonable'' and to
monitor and enforce remedial actions.
The FCC (and the states under delegation) should have the
ability to levy penalties on willful violators that are equal
or equivalent to the value or amount a carrier wrongfully or
excessively received as a result of the violation, plus an
added penalty factor (perhaps 25 percent).
The Commission (and the states, under delegation) should be
able to handle ``class'' complaints brought by consumers and
small businesses that have been victimized through a pattern of
rule violations by a carrier.
Placing these arrows in the quivers of federal and state
regulators--in addition to the stepped-up penalties already
contemplated in H.R. 1765--would increase the ability of regulators to
protect all consumers as well as competitors in the rapidly changing
environment of growing market-based competition.
The Proposed Legislation Is Necessary and Desirable
This Subcommittee is to be commended and encouraged in turning its
attention to the issue of whether the FCC currently has the proper and
sufficient enforcement tools to protect the interests of consumers and
business owners in the United States. With the proposals in H.R. 1765
to increase penalties for violation of common carrier laws and
regulations, this Subcommittee is making an excellent start in a timely
effort to update and give teeth to the FCC's enforcement capabilities.
Such an enhancement is both clearly necessary and highly desirable at
this time, as the FCC works to implement the pro-competitive provisions
of the Telecommunications Act of 1996.
There is no question that the FCC must have the ability to levy
meaningful penalties when common carriers violate the laws, rules, and
orders that have been put in place to ensure that consumers and
businesses receive high-quality telecommunications services and enjoy
the full fruits of Congress' actions to introduce competition. The
monetary caps on penalties contained in the Communications Act, while,
perhaps, at one time sobering and strict, are inadequate to provide
sufficient deterrence in today's era, when rule violators stand to gain
either an improper competitive advantage or windfall profits as a
result of their actions. If Congressional intent is to be realized
through complete implementation of the Telecommunications Act,
companies that violate the nation's laws concerning competition and
consumer protection must be punished in a meaningful way. Even more
important is deterring such conduct in the first instance. Put simply,
the limits on fines and forfeitures that the FCC can impose under
current law are out of date and certainly need to be revamped to
provide any meaningful deterrence.
Moreover, the Commission has all too often applied pressure or
threats of penalties in an informal manner rather than through explicit
enforcement processes. This has bred an atmosphere in which the FCC has
conducted long, burdensome proceedings, during which it has used its
limited authority to review license transfers and other functions as a
pretext to engage in informal ``enforcement'' relating to actual or
potential future anti-competitive conduct. The result frequently has
been detailed, private-channel negotiations between the FCC and
carriers, in which the Commission tries to achieve policy goals that
may have little to do with the narrow purpose of its review in the
first place. Nowhere has this become more prevalent than during the
FCC's public interest reviews of mergers and acquisitions. Providing
adequate enforcement tools will help in narrowly defining the
Commission's role in overseeing such transactions which, as Chairman
Powell has rightly made clear, are not, and should not be, substitutes
for rulemaking or enforcement actions. Providing the FCC with
sufficient explicit tools to enforce Congress' pro-competitive and pro-
consumer legislation would also help obviate the need or opportunity
for the Commission to attempt to implement policy through informal
threats, pressure and cajolery.
Congress is taking the right step, at this juncture, to address the
FCC's need for strong enforcement tools that will be applied through a
more transparent and effective process, rather than through unseen
negotiations with carriers, conducted through merger reviews and other
proceedings. Through legislation, Congress can restore accountability
and transparency, giving the public and the telecommunications industry
more assurance that Congress' goals for competition, service quality
and universal service will be met.
However, even these enhanced penalties--while appropriate for the
still pervasively regulated activity of providing facilities and
services to competitors and the essentially competitive business of
providing service to the largest of business customers--are not
sufficient to deter all improper conduct by deregulated carriers such
as long distance and competitive local carriers. In the past, some of
those carriers--well aware of the lack of interest or ability in
enforcing the Communications Act against them--have virtually ignored
residential and small business complaints. Every state commission and
the FCC has heard the frequent voices of customers who cannot even get
some carriers to listen to their complaints or who lack the ability to
correct problems even after determining that they exist.
A Comprehensive Approach Is Needed
While the proposed legislation (H.R. 1765) marks a very good first
step, it addresses only a portion of the current enforcement problems.
Since it is highly unlikely and perhaps undesirable that Congress
should continually revisit this issue through multiple and repeated
amendments of the Communications Act, the Subcommittee should, at this
time, address enforcement issues in a comprehensive manner. There are,
in fact, three types of violations that can harm the public:
Violations that harm competitors--These violations, through
which primarily incumbent local exchange carriers aim to
hamstring the ability of new market entrants (or existing
competitors) to operate effectively, will certainly for some
time be addressed through a combination of proscriptive rules
and enhanced penalties, such as those proposed in H.R. 1765. A
speedy and fair resolution of any and all complaints about such
conduct--once again, as addressed by H.R. 1765--is the most
important factor here.
Violations that harm major customers--Such violations tend to
be less frequent than the other two types, since these
customers are better protected by the presence of competition
itself. Large customers' own market power as buyers provides
them with numerous choices of carriers and service packages and
tends to police bad behavior by any single carrier or group of
carriers. It is these customers who have certainly benefited
the most from the detariffing ordered by the FCC, as authorized
by the Telecommunications Act of 1996. The effects of
competition and detariffing should be backed up through the
formal complaint mechanism provided in the FCC's rules,
bolstered by stiff, enhanced penalties for violations and the
award of sufficient damages to justify filing a complaint.
Violations That Harm Residential and Small Business
Customers--Such customers are the most in need of protection
from unjust and unlawful practices of carriers, because, as
individuals, they lack any power whatsoever in the market and
frequently have little recourse when confronted by clear
violations of laws and regulations. Despite laudable efforts at
the federal and state levels to increase protection and
consumer education in recent years, many such customers have
continued to be victimized by anti-consumer and anti-
competitive practices, and many have little experience or
knowledge of how to seek help and compensation. This is even
more daunting since the resources necessary to prosecute a
complaint are far in excess of any possible recovery under
current rules. The need to protect residential and small
business customers is the area where enhancement of existing
enforcement tools is most clearly needed.
Even the proposed enhanced penalties may not be sufficient
deterrence to an unscrupulous or desperate carrier that
recognizes it can make substantial sums through excessive
charges or unlawful practices even if it pays the maximum fine.
I am not addressing the widely advertised prices with which
various carriers try to attract willing customers which
constitute the very large majority of offerings. Here
competition has, and will, continue to discipline the market
and protect and serve customers. Rather, I am addressing
limited areas of market failure, particularly those that
involve a lack of consumer knowledge of, or consent to, a rate
or practice. While ``limited,'' however, these can involve
millions of customers and hundreds of millions of dollars.
Enforcement in an Era of Deregulation
The need to protect consumers and small businesses in these areas
where competition itself is insufficient has become all the more acute
in an era when Congress and the FCC have properly deregulated most of
the telecommunications industry. As it implements and promotes the pro-
competitive policies mandated by Congress, the Commission has stopped
the prior review of the rates and practices employed in the market in
almost all cases involving long distance and competitive local
carriers. Moreover, certain carriers fought tooth-and-nail to prevent
efforts by the FCC in recent years to implement mandatory detariffing,
seeking to hide behind the protection afforded to them by the filed-
rate doctrine, at the expense of all consumers. These carriers sought
to protect their own legal and market positions, but in the process
they avoided providing consumers full and fair rights of protection
under the provisions of contract law. The final implementation of
detariffing by the FCC pursuant to the Telecommunications Act of 1996,
coupled with the changes which would be made by H.R. 1765, should mean
that major telecommunications customers will be sufficiently protected.
Congress and the FCC are appropriately concerned about the
potential for abuse that deregulation brings for some consumers.
Deregulation starts by eliminating ex ante regulations that spell out
in detail, in advance, all of the rules, reports, requirements and
obligations that apply to carriers--and often prove to be a burden and
barrier to free operation of the market. Detailed regulation, while
appropriate in markets still in transition to competition, actually
reduces competition and harms consumers in geographic or service
markets which are meaningfully competitive. The FCC should continue to
extend a deregulatory approach to all competitive markets and services.
With the growth of competition, policy-makers are correct to reduce
these ex ante obligations and rules in order to allow the market to
work properly. However, this kind of deregulation must be coupled with
adequate ex post provisions--enforcement tools--which ensure that,
where abusive behavior exists, it is brought to regulators' attention.
Regulators must then be able to come down hard on carriers that seek to
take advantage of a free-market environment to engage in anti-
competitive or anti-consumer practices. Deregulation without adequate
enforcement or monitoring of the parts of the marketplace where
competition has not extended or has broken down may amount to simply
abdicating responsibility to protect consumers. Laudably, through the
legislative process, the Subcommittee is addressing its responsibility
to protect customers and competition, and it is seeking to shore up the
FCC's ability to live up to its enforcement responsibilities, as well.
In my judgment, three enhancements are needed to bolster the FCC's
ability to protect consumers and small business customers. Those are
the following:
Right of Delegation to the States--This is perhaps the most
important change involving residential consumers which Congress
could make at this time. The FCC is not, and never has been,
well equipped to decide whether particular rates for
residential or small business customers--or the practices that
go with those rates--are ``just and reasonable,'' or, in many
cases, to even be actively aware of what those rates and
practices are. State regulatory commissions, which are much
more attuned to activities in their own jurisdictions, are much
better equipped to investigate and act in those instances, and
to adopt procedures which will give residential and small
business customers meaningful access to the complaint process.
The FCC should have the right (and, perhaps eventually, even
the obligation) to delegate to state regulatory commissions its
authority to review complaints involving rates charged to
residential and small business customers for interstate
services, including local carrier rates such as surcharges and
interexchange (long distance) rates, as well as practices
involving these rates. The FCC should have this delegation
authority either on a permanent basis or, if need be, on a
trial basis, to determine the effect that any such delegation
would have on the regulation of interstate rates. The FCC could
also retain some form of appellate review--on a fast track
basis--of findings of violations.
Meaningful Penalties--Where the economic benefits of trying to
``sneak'' a violation past regulators may, in fact, result in a
gain of hundreds of millions--or even billions--of dollars to a
violator, a fine of $10 million or $20 million can hardly be a
significant deterrent. In the case of such a mammoth violation,
it may be a useless exercise to try to estimate or set, in
advance, a monetary figure to use as a cap on penalties.
Clearly, for certain companies, the benefits of engaging in a
massive violation--even if caught red-handed--can exceed the
costs of even the maximum penalties, making the ultimate pay-
off well worth the risk. A better structure for assessing
penalties in the case of willful consumer fraud would be to
fine the company an amount equal or equivalent to the value or
amount received by the company as a result of its illegal
action, plus a penalty factor (perhaps 25 percent).
Class Complaints--The FCC (and state regulators, through
delegation) must have the ability to deal with ``class''
complaints brought by groups of affected consumers or small
businesses that have been victimized by rule violations or
anti-competitive practices. Violators should not have the
ability to divide and conquer, isolating small businesses and
residential customers and defeating their complaints one by
one. Virtually no individual will invest the money or resources
in pursuing a complaint for an amount which is a tiny fraction
of the cost. Millions of such violations add up to huge sums of
money, however. Therefore, where there is a pattern of anti-
competitive practices affecting significant numbers of end
users, consumers should have the ability to unite in opposing
the practices that have harmed each of them. While the U.S.
District Courts currently may hear class action complaints, a
regulatory rather than a judicial solution is preferable. The
nation's communications expert agencies should be empowered to
protect consumers and small businesses.
State Regulators' Role
Recent informal discussions with state commissioners and officials
of the National Association of Regulatory Utility Commissioners
(``NARUC'') have made it plain to me that state officials are aware of
the magnitude of enforcement problems facing federal and state
governments. Moreover, they are concerned about fractured
responsibility to confront anti-competitive and anti-consumer
activities in the industry. I believe that officials at NARUC and in
many state regulatory commissions would be willing--indeed, eager--to
work with the FCC in order to step up the level of consumer protection
and to implement legislation designed to replenish regulators'
enforcement toolboxes. As I have stated, state regulators have a role
to play and are perhaps the best suited, where residential and small
business customers are concerned, to apply enforcement policies. And
there is undoubtedly a federal interest in crafting and applying a
sensible approach to ex post enforcement actions nationally. Only
through coordination between federal and state jurisdictions can the
expertise and capabilities found on both levels be brought to bear both
efficiently and effectively.
In closing, this Subcommittee and its Chairman should be lauded for
introducing and considering legislation to step up enforcement powers
in the era of developing competition and substantial deregulation. The
Subcommittee should ensure that it approaches this task in a
comprehensive manner at this point in time, since the chances to
revisit enforcement issues in the future may well be few and far
between. I would be delighted to respond to any request by the
Subcommittee and its staff to work on the language of legislation that
would provide such a comprehensive boost to common carrier consumer
protections. Thank you for your gracious invitation to speak before the
Subcommittee today on this issue.
Mr. Upton. Thank you.
Mr. Holland?
STATEMENT OF ROYCE J. HOLLAND
Mr. Holland. Thank you, Mr. Chairman, for inviting me to
testify on this very important matter involving the FCC's
enforcement.
I am the Chairman and Chief Executive Officer of Allegiance
Telecom. We are headquartered in Dallas, Texas, and we are a
facilities-based competitive local exchange carrier that
provides a wide array of voice and data services to the medium
and small business sector.
In my prior life I was Chairman of MFS Communications
Company, which was one of the early stage competitive access
providers in the pre-Telecom Act era.
First, let me start by saying that I believe the
Telecommunications Act of 1996 is one of the most significant
pieces of commercial legislation enacted by Congress in the
last 30 years, but stricter enforcement of this landmark
legislation is truly needed if we are going to have a truly
competitive marketplace for medium and small businesses and
residential customers.
Unfortunately, we have often found that when the incumbent
is found liable for violations the punishment given is not
severe enough to deter such behavior. In a hockey parlance,
they get sent to the penalty box for 2 minutes. We need to see
game misconducts and ten-game suspensions, the equivalent of,
to get it done.
I am really encouraged by what Chairman Powell has been
doing at the FCC. I know he has gotten some bad press. It is
totally unjustified. I was tremendously encouraged by his
recent statement that when companies break the law he will hurt
them and he will hurt them bad. But he also went on to say that
he has inadequate tools to get that done.
I applaud our new Chairman of the FCC for doing all he can
with what he has, but what he needs is a much bigger stick to
really get the job done in the right way.
First, let me give you a few examples of the anti-
competitive conduct that we are dealing with on a day-to-day
basis in the marketplace, and I will use Exhibit A, Verizon,
the largest provider of local wireline telephone services in
the country.
No. 1, Verizon has consistently overcharged us for a
variety of tariff services and then drags their feet and
resists and refuses to reimburse us for those overcharges.
No. 2, Verizon has withheld payment on a consistent basis
pursuant to our interconnection agreements and tariffs.
And, No. 3, Verizon has consistently used our own order
information for cutting over a customer to our network to block
those prospective customers from switching to Allegiance. This
constitutes illegal self-dealing between our supplier and our
competitor, who are both owned by the same company I might add.
In addition, I think it is important for the members to
understand that the success of competition in the small
business and residential market is not solely threatened by the
ILECs. AT&T, the original Ma Bell, has done more than its fair
share to try to strangle the competition by unilaterally
refusing to pay CLECs for the use of their networks to
originate and terminate its long distance traffic.
AT&T's predatory conduct is just as harmful to CLECs as its
offspring. I would say that the rotten fruit all falls from the
same dominant carrier tree when you get right down to it.
Now, I am a businessman, and many of these problems boil
down to the fact that I don't have the desire, the time, or the
resources to file lawsuit after lawsuit to just get deadbeats
to pay their bills.
Now that I have laid out some of the problems, I would like
to highlight a few recommendations that I have for the
committee to consider. I will just hit these briefly, because
they are discussed in more detail in my written testimony.
One, don't limit the FCC's forfeiture authority to $10
million, $10 million doesn't get it done with a company like
Verizon that has $15 billion in quarterly revenue. Something
more like 1 percent of revenue would be a more adequate
measure. That is very consistent with what is done with the
universal service fund.
No. 2, is authorize the FCC to hire 25 special masters to
adjudicate carrier-to-carrier disputes on an expedited basis,
much the way that the Cannon-Conyers bill on the ADR processes
limit the amount of lawsuits that can be done on that, kind of
like major league baseball.
No. 3, adopt measures to deal with the deadbeat dad
syndrome, which seems to plague AT&T and its offspring, and
there are other measures.
Just in conclusion--I know my staff wrote this. They didn't
realize my Texas accent moved a little slower. So let me just
conclude by saying that I feel compelled to respectfully
address the neutron bomb that is really lurking in the back of
the room, and that is the Tauzin-Dingell measure reported by
this committee last week, which will essentially reestablish
the local loop bottleneck and preclude competition in most of
the small- and medium-sized business markets and the mass
market.
Now, these bills should be joined. I think that would be a
real problem, because I do need to qualify my testimony by
basically saying that you could invoke everything I have
suggested today, and you could even hire Judge Roy Dean, the
hanging judge, and the famous law west of the Pecos, as the
FCC's Enforcement Bureau Chief--no disrespect to Mr. Solomon--
but I still couldn't support this bill if H.R. 1542 were also
enacted because, as Congressman Pickering pointed out, it would
be a whole lot less to enforce because competition SME and
residential markets would be bad.
Let me just conclude by saying I have been somewhat of an
outlier in that I am one of those rare people that have
actually supported a couple of 271 applications by Verizon and
withdrew opposition to one by SBC. I am not trying to keep them
out of long distance. I know the 271 process can work. I have
seen it work. It gives the ILECs everything they need.
Also, the FCC has all the authority it needs in the Telecom
Act to forbear from regulation when market conditions warrant.
So I would say that we do not need other incentives for these
companies. They don't need to cheat, and they don't need a
government handout. Instead, I ask you respectfully to give
Chairman Powell the enforcement tools he needs to make
competition work for all Americans, not just for the Fortune
1000.
[The prepared statement of Royce J. Holland follows:]
PREPARED STATEMENT OF ROYCE J. HOLLAND, CHAIRMAN AND CEO, ALLEGIANCE
TELECOM, INC.
Mr. Chairman and Members of the Subcommittee, I am Royce J.
Holland, Chairman and Chief Executive Officer of Allegiance Telecom,
Inc. Allegiance is a facilities-based, competitive local exchange
carrier (CLEC) headquartered in Dallas, Texas that offers the small and
medium sized enterprise (SME) market a complete package of
telecommunications services, including local, long distance,
international calling, high-speed data transmission and advanced
Internet services including high speed dedicated access, web hosting,
virtual corporate intranets, and an E-commerce platform. I appreciate
this opportunity to testify before the Subcommittee on H.R. 1765. I
wish to address one of the most daunting challenges affecting my
industry: effective enforcement of Congress' mandate to open
telecommunications markets to competition.
Before I do so, let me provide the Subcommittee with some
background about Allegiance. Since its founding in 1997, Allegiance has
expanded its operations to serve 31 markets across the country with
almost 4,000 employees. We had revenues of $285 million in 2000, an
increase of 188% over the prior year. Allegiance has designed our
networks using a ``smart'' build approach. We use a combination of our
own network facilities, unbundled network elements leased from the
incumbent telephone companies and, where it is available, fiber leased
from third parties to provide service to small and medium sized
businesses. To date we have installed more than 730,000 lines,
approximately 90% of which are ``on switch.'' We have collocated in 636
incumbent local exchange carrier central offices across the nation, and
when we add five more markets this year to complete execution of our
current fully-funded 36 market business plan, we will be addressing 57%
of the total addressable U.S. business communications market.
Prior to co-founding Allegiance, I was President and co-founder of
MFS Communications Co., one of the pioneers in the competitive local
telephone industry even before the passage of the Telecommunications
Act of 1996. MFS grew from a privately held start-up operation to one
of the Nasdaq 100 Index companies serving 52 markets in North America,
Europe and Asia, with annual revenue of about $1 billion. MFS was
purchased by WorldCom in 1996.
The Telecommunications Act of 1996 was landmark legislation that
offered consumers the promise of a choice of local telephone service
providers for the first time in any of our lifetimes. No one expected
that competitors would find it easy trying to break the monopoly
strongholds controlled by the Regional Bell Operating Companies (RBOCs)
and GTE. Nonetheless, five years after you so astutely determined that
developments in technology and the public interest demanded that the
government sanctioned protection for local telephone monopolies should
be lifted, competitors have been able to capture a mere 8% of local
telephone lines. At the same time, the RBOCs and GTE have joined forces
to increase their size and domination of the nation's local telephone
market, with the former Bell Atlantic acquiring New York Telephone, New
England Telephone and GTE to become the behemoth Verizon and
Southwestern Bell acquiring Pacific Telephone, Nevada Telephone and
Ameritech. While Congress concluded that it would only be fair to open
the long distance market to the RBOCs once they had opened their local
markets to competitors and for that reason overrode the MFJ and Judge
Harold Greene's oversight of the RBOCs, an unfortunate by-product of
life without the MFJ and Judge Greene has been the concentration of
control of the nation's local telephone market in the hands of 4
megamonopolies, rather than the 8 that dominated the market in 1996.
What this means for CLECs is that the Goliaths they must battle for
both customers and network access have grown bigger, more powerful and
more cocky about using their market power to keep their competitors at
bay.
Take Verizon as an example. According to its Year 2000 Annual
Report, the Verizon companies are the largest providers of wireline
communications in the United States with nearly 109 million access
lines in 67 of the top 100 US markets and 9 of the top 10. Verizon
serves one-third of the nation's households, more than one-third of
Fortune 500 company headquarters and the Federal Government. Verizon
has proudly trumpeted to Wall Street that it lost 29% fewer lines to
competitors in the second half of 2000 than it did in the first half of
the year. Statistics like these demonstrate that further deregulation
of the RBOCs is not appropriate, and indeed would be extremely
detrimental to the struggling competitive industry, at this time. The
increase in concentration of control of the nation's local access lines
since the passage of the 1996 Act means that more, not less, regulatory
enforcement is needed if the pro-competitive goals of the Act are to be
realized.
In order to provide service to customers, CLECs need access to the
networks and facilities of the incumbents, especially to the unbundled
loops connecting customers to the network (also known as the last mile)
and colocation space in the incumbents' central offices. In passing the
Act, Congress recognized that competitors could not duplicate the
ubiquitous facilities of the incumbents overnight and indeed that in
most instances, the last mile could never be duplicated for the SME and
residential mass markets. Sections 251 and 252 provide CLECs with
access to the interconnection, unbundled network elements, colocation
and wholesale pricing that we need to get into the local telephone
market, but the rights afforded by the Act are ephemeral unless they
can be expeditiously enforced without expensive and drawn out
litigation. Although CLECs are big customers of the RBOCs as purchasers
of interconnection trunks, colocation and UNEs, CLECs use those tools
to compete for the same end users as the RBOCs. This inherent conflict
between their roles as suppliers and competitors significantly
diminishes the incentive the RBOCs have to open their markets. Even the
carrot of Section 271 has not proven sufficient to compel strict
compliance with the market opening provisions of the Act as evidenced
by the fact that the RBOCs have filed for Section 271 relief in so few
states.
To help ensure that local telephone competition becomes a reality
for all American consumers, Congress must give the FCC the resources to
implement a regulatory scheme that has certainty and an enforcement
program that has teeth. I appreciate this opportunity to make some
suggestions about improving enforcement of the Act.
CLARIFY THE FCC'S AUTHORITY TO ENFORCE SECTION 251
A shortcoming of lax enforcement has been a perception by some of
the ILECs that compliance with Section 251 of the Act is somehow
voluntary and only to be achieved in order to receive Section 271
authority to enter the inter-LATA market. Congress should make clear
that the FCC has authority pursuant to Section 251 of the Act to
resolve inter-carrier disputes and enforce interconnection agreements,
statements of generally available terms and state tariff provisions
that codify the RBOCs' obligations to provide interconnection, UNEs and
colocation. While many state commissions have been vigilant in
resolving interconnection disputes, the decisions have no precedential
value outside of the state where the dispute was brought and the RBOCs
often take the position that the decisions are applicable only to the
parties to the dispute. For example, over the past several years, the
Texas PUC has issued several decisions directing SBC to pay reciprocal
compensation to CLECs. Despite these decisions, Verizon continued to
resist its obligation to pay reciprocal compensation arguing that the
PUC's rulings applied only to SBC. Even after the PUC issued a decision
last fall specifically holding that Verizon was subject to the same
reciprocal compensation obligations as SBC, Verizon has continued to
withhold full payment of amounts owed to Allegiance on the grounds that
the decision applies only to the CLEC that brought the action.
Reinforcing the FCC's authority to enforce compliance with section
251 and to decide interconnection disputes would allow for the
development of precedent that has nationwide applicability and would
relieve CLECs of the financial burden of bringing multiple complaints
against every RBOC in every state in which they operate. The
substantial financial resources that are currently being diverted to
litigating interconnection rights on a state by state basis could be
far better spent by the CLECs on developing and expanding their
networks.
PROVIDE THE FCC WITH ADDITIONAL RESOURCES TO ADJUDICATE COMPLAINTS
The FCC has devoted enormous time and energy to promulgating rules
to implement the market opening provisions of the Act. The FCC needs
additional resources, however, to fund the staffing necessary to
enforce those rules. The threat of enforcement must be constant enough
and the penalties for noncompliance must be high enough to effectively
deter anticompetitive behavior. Congress should appropriate sufficient
funds to enable the FCC to double the size of the Market Disputes
Resolution Division of the Enforcement Bureau and to hire 25 special
masters with relevant legal and industry experience to hear and
adjudicate complaints between incumbents and competing carriers.
PROVIDE THE FCC WITH AUTHORITY TO REQUIRE PAYMENT PENDING THE
RESOLUTION OF BILLING DISPUTES AND TO AWARD PUNITIVE DAMAGES
One very effective method RBOCs have employed to harm their
competitors is to withhold or delay payments of amounts owed and to
resist or delay providing credit for amounts overcharged under
interconnection agreements or tariffs. Allegiance has faced this
situation time and time again with Verizon. For example:
Allegiance has been attempting for months to resolve a billing
dispute with Verizon East relating to the jurisdiction of local
and intra-LATA toll calls and to secure the payment to which it
is entitled. Allegiance has complied with Verizon's every
request to provide call detail records and other information
and has repeatedly requested meetings to respond to any
questions Verizon may have about the manner in which Allegiance
jurisdictionalizes minutes. Last week, Verizon informed
Allegiance that it disagreed with the methodology Allegiance
used to jurisdictionalize 287 out of the 124,000 minutes of use
being analyzed (i.e., less than 0.25%) and for this reason
would not make any payment pending further study.
Since 1999, Verizon Texas has withheld payment of close to
$4.5 million in reciprocal compensation owed to Allegiance.
Allegiance has provided full call detail records to Verizon to
support its bills, but Verizon continues to withhold payment.
Verizon's most recent contention is that it cannot complete its
analysis until Allegiance supplies the street addresses of all
of its end users.
Last year, Allegiance discovered that Verizon New York was
overcharging us approximately $38,000 per month for a tariffed
billing platform service. After months of discussion, Verizon
finally acknowledged its error and made partial reimbursement
in December. To this day, however, Verizon still has not
corrected its billing systems and continues to overcharge
Allegiance for the billing platform service.
A recent audit of the colocation bills Allegiance receives
from Verizon revealed that Verizon has overcharged us over $3
million for DC power that we did not order. Despite escalation
of this issue to senior management, Verizon has made no
commitment to reimburse or credit Allegiance for the
overcharges.
CLECs do not have the luxury of withholding payment as an offset to
amounts owed or delaying payment to the RBOCs because the consequence
of doing so is being cut off and denied access to the essential
facilities we need to provide service to our customers.
It is not only the RBOCs that have resorted to self-help to
withhold payment to CLECs. CLECs all across the country have been
forced to bring lawsuits against AT&T to collect payment of access
charges for the use of their networks to originate and terminate the
long distance calls of AT&T's customers. AT&T complained for years
about the ILECs' access rates, but never withheld payment as it has
done with the CLECs. The FCC repeatedly has ruled that carriers are not
entitled to engage in self-help to withhold payment, but instead must
pay amounts billed pursuant to tariff under protest and then bring an
action to challenge the billings. Unfortunately, AT&T has ignored these
rulings and continues to use the CLECs' networks to complete their
customers' calls without payment, benefiting as it does from the delays
involved as the complaint cases wend their way through the courts and
the public utility commissions.
If the CLEC industry is to survive, CLECs must have access to a
forum that can resolve payment disputes on an accelerated basis and
that can provide relief while the actions are pending. Congress should
give the FCC authority to hear complaints arising under interconnection
agreements or tariffs on an expedited basis and provide relief in the
nature of a ``Deadbeat Dad'' remedies. If one party to the dispute has
failed to pay charges billed by the other party, the FCC should be
given authority to require payment of the full amount billed within 30
days of the filing of the complaint unless the nonpaying party can show
by clear and convincing evidence that the billing is fraudulent or
otherwise invalid on its face. Such immediate relief is necessary to
remove the benefits the RBOCs and AT&T currently realize by delaying
payment and depriving CLECs of the revenues necessary to fund their
operations.
The Commission should also be given authority to process all such
complaints under the Accelerated Docket rules set forth in 47 C.F.R.
Part 1 Subpart E. The FCC should be required to resolve disputes on the
merits within 60 days of the filing of the complaints and should have
the authority to grant all relief necessary to remedy violations of the
agreement or tariff, including, but not limited to, injunctive relief,
compensatory damages and punitive damages.
THE FCC SHOULD BE DIRECTED TO ADOPT PERFORMANCE STANDARDS AND
REGULATIONS TO IMPLEMENT ITS 271 ENFORCEMENT AUTHORITY
The FCC should be directed to adopt a comprehensive set of self-
enforcing performance standards governing the provision of
interconnection and unbundled network elements. While the carrot of
entry into the long distance market provides some incentive for the
RBOCs to provision interconnection and unbundled network elements at an
acceptable level of performance in the months immediately prior to the
filing of their Section 271 applications with the FCC, the performance
standards that they are required to meet vary state by state. In
addition, the RBOCs have shown a proclivity to backslide once 271
relief has been granted and the carrot has been eaten. For example, in
March 2000, just 3 months after it was granted authority to enter the
long distance market in New York, the FCC found that Verizon had failed
to meet its obligations under the Act to process orders from CLECs
during the 2 months immediately following its 271 approval. Verizon had
lost or mishandled orders submitted electronically by CLECs during
January and February 2000, which seriously delayed the ability of CLECs
to initiate service to their customers. In December 2000 and January
2001, Verizon was forced to pay a total of $7.3 million in penalties
for failure to provide CLECs with the minimum level of service required
by the New York Commission. Although $7.3 million seems like a lot of
money, RBOCs often view such penalties simply as a cost of doing
business. The penalties currently being assessed against incumbents
have not proven sufficient in size to deter discriminatory and
anticompetitive behavior as Allegiance can attest.
Verizon recently prevented Allegiance from processing orders for
customers served by our New Rochelle, New York colocation facility for
almost one month. We turned up the colocation in December of last year.
On February 14, Verizon rejected Allegiance's orders for service that
designated DSO pairs that Allegiance had installed in the New Rochelle
colocation facility. Upon investigation, we learned that Verizon had
moved 2600 Allegiance DSO pairs without warning or notification to
alleviate congestion on its main distribution frame. Because Verizon
had not updated its databases, its technicians were unable to find the
new location of Allegiance's DSO pairs and claimed that they could not
process our customer orders for that reason. On February 15, Verizon
informed us that it had a frame to frame connectivity problem that
prevented Allegiance's DSO pairs from being loaded into its databases.
On February 20, Verizon informed us that our DSO pairs had been moved
again--this time to an area of the central office where there was an
ongoing union dispute prohibiting technicians from doing the wiring
necessary to process Allegiance's customer orders. It was not until
March 12, after daily calls and escalation of the issue to Verizon
management, that Verizon finally moved the pairs to another location
and rebuilt its databases so that Allegiance's orders could be filled.
In the meantime, Allegiance was unable to initiate service to its
customers.
Allegiance currently has 80 orders for unbundled loops pending with
Verizon in New York and Massachusetts for which it has been unable to
obtain firm order commitment or installation dates from Verizon. Some
of the orders for these loops were submitted as long ago as February
and March. Verizon's delays in providing access to Allegiance mean that
Allegiance cannot provide service to its customers on a timely basis.
It is worth emphasizing again that New York and Massachusetts are the
two states in which Verizon has been granted Section 271 authority to
offer long distance service.
CLECs cannot succeed in the marketplace unless they can offer their
customers a level of service comparable to what those customers can get
from the RBOCs. National self-enforcing performance standards would
create an invaluable tool for monitoring RBOC compliance with their
obligations under the Act and detecting incidences of discriminatory
behavior. The FCC should be directed to adopt minimum performance
benchmarks which RBOCs must meet in providing service to their CLEC
customers with automatic monetary penalties to be paid to CLECs when
the RBOCs' performance falls below the benchmarks. To monitor
compliance, the FCC should require the RBOCs to publish monthly
performance statistics on a state-by-state basis for installation and
maintenance of interconnection trunks, UNEs and any other services
CLECS purchase. The performance reports should compare the intervals
within which the RBOCs actually install and repair similar facilities
for themselves, their retail customers and their affiliates and the
intervals within which they provide such services for CLECs. The
reports should also compare the frequency and duration of service
outages suffered by the RBOCs' retail customers and those suffered by
CLECs. If, over a 12 month period, the reports reveal a deterioration
in service quality in any state in which they operate, the RBOCs should
be required to show cause why their rates for interconnection and UNEs
should not be reduced on a going forward basis by an amount
proportionate to the deterioration in service quality.
In addition, the FCC should be directed to adopt rules that require
RBOCs to provide automatic discounts on interconnection trunks, UNEs
and special access services in any state where the actual installation
and repair services they provide to CLECs are inferior to the services
they provide to their retail customers and themselves. A sliding scale
of discounts should be established based on frequency and extent of
delays. For delays in installation of new services, the discounts would
be applied to non-recurring charges. The RBOCs should not be permitted
to assess any non-recurring charges for installation if service is not
installed within the retail installation interval. For delays in
repairing services, the discounts would apply to monthly recurring
charges for the affected facilities. Self-enforcing penalties are
imperative both because they will provide the right incentive for RBOCs
to improve their performance and because CLECs receiving poor
performance should not be required to pay full price.
The FCC should also be directed to adopt rules to implement the
enforcement authority granted in Section 271(d) and to deter
backsliding from compliance with the competitive checklist once the
RBOCs are allowed into the long distance market. Such regulations
should incorporate a range of penalties for violations of 271 and
should include mandated rate reductions for wholesale services and
network elements, suspension of 271 authority, the imposition of
material fines and revocation of 271 authority.
INCREASE THE FCC'S STATUTORY FORFEITURE AUTHORITY
We appreciate Chairman Powell's recognition that CLECs have often
``been stymied by practices of incumbent local exchange carriers that
appear designed to slow the development of local competition'' and
applaud his request for increased forfeiture authority.1 But
more is necessary. H.R. 1765's cap of $10 million dollars should be
removed altogether or increased significantly to the point where the
fine would significantly impact the quarterly financial results of an
RBOC or AT&T. The FCC should also be authorized to require that all or
a portion of a forfeiture assessed for violations of the Act or the
FCC's rules be paid to the carriers injured by the violations, rather
than to the Treasury, in an amount sufficient to compensate them for
the damages caused by the violations.
---------------------------------------------------------------------------
\1\ May 4, 2001 letter from Chairman Michael K. Powell to the
Members of the House and Senate Commerce and Appropriations Committees.
---------------------------------------------------------------------------
I also understand that H.R. 1765 contains a Cease and Desist
provision, but I believe that provision is duplicative of the FCC's
existing authority. The FCC has previously exercised its Cease and
Desist authority in various slamming cases, in cases where cell towers
violate height restrictions and also in the context of Qwest's illegal
marketing of long distance services in-region.
We have had additional experiences that we believe warrant Cease
and Desist action as well. The RBOCs have the ability to thwart CLECs'
efforts to attract and retain customers in a myriad of ways other than
poor provisioning of the facilities needed to provide service. It has
come to Allegiance's attention that Verizon appears to be engaged in a
systematic attempt to thwart Allegiance's sales efforts by, among other
things, calling our prospective customers after we submit orders to
Verizon to switch the customer's service to Allegiance and offering the
customers a better deal if they cancel their orders with Allegiance.
This is an example of where the FCC should exercise its existing Cease
and Desist authority to prevent Verizon or any other RBOC from engaging
in this predatory practice.
A few current examples will illustrate what I mean:
We recently learned from a customer who cancelled his order
with Allegiance before his service had been switched from
Verizon that a Verizon representative called him shortly after
he signed on with Allegiance and offered to match Allegiance's
rates. Section 222(b) of the Act prohibits carriers that
receive proprietary information from another carrier from using
such information for their own marketing purposes. The only way
Verizon could have learned of the customer's impending
cancellation of service was through the order Allegiance
submitted to Verizon to convert the customer's service. This
was not an isolated incident. During the fourth quarter of 2000
and the first quarter of this year, more than 10% of the
customers who had signed up for Allegiance service in New York
and Massachusetts cancelled their orders before their service
was converted from Verizon.
We learned from another customer who called Verizon to lift
his PIC freeze so that he could switch his service to
Allegiance that the Verizon representative responded, ``Are you
sure you know what you are asking me to do? Let me fax you over
a list of the problems Allegiance has caused and then you
decide if you still want me to remove the freeze.'' The FCC has
specifically determined that Section 222(b) prohibits a carrier
executing a customer's request to change carriers from using
such information to convince the customer not to make the
switch. This has not stopped Verizon.
Competition is clearly harmed where an RBOC such as Verizon
exploits the advance notice of a customer's impending cancellation of
service that it receives in its position as the underlying network
facilities provider to market its own services and win the customer
back. Such conduct is clearly prohibited by the Act and I believe if
the Enforcement Bureau would take a serious look at this situation,
they would find it ripe for a Cease and Desist action. It is also not
clear that carriers injured by such conduct have a private right of
action for damages. To the extent that the FCC finds a carrier guilty
of the misuse of carrier to carrier proprietary information and
assesses a fine, it should be authorized to share a portion of that
fine with the carrier injured by the violations.
Under the FCC's new slamming rules, carriers that receive
allegations from customers that they have been slammed are required to
notify the unauthorized carrier of the customers' allegations. All
carriers are required to file a report with the FCC twice a year
stating the number of slamming allegations made against them and
whether the allegations were valid, as well as the number of slamming
allegations they received against other carriers and the identity of
those carriers. Since the notification rules have become effective,
Allegiance has received a disproportionate number of slamming
notifications from Verizon New York and Verizon New Jersey. For
example, during the week of April 23-27, 2001, 66% of the slamming
notifications Allegiance received were generated by Verizon New York
and Verizon New Jersey. Almost every notification we have received from
Verizon bears the fax line of the Verizon General Business Services Win
Back Group. The Win Back Group apparently takes a very liberal approach
to the definition of a slam as we have learned when we contact the
customers to investigate the slamming allegations and discover that a
substantial majority are unfounded. Verizon's Win Back Group seems to
categorize any instance where a customer decides to return to Verizon
as a slam no matter what the circumstances. We have received slamming
notifications on customers who have reported to us that they never told
Verizon they were slammed. We received one slamming notification from
Verizon on a former customer who had called Verizon to complain about
its Verizon bill.
Allegiance takes slamming very seriously and immediately terminates
any employee found to have engaged in slamming. Allegiance does not
believe, however, that the FCC intended for carriers to classify any
instance where a customer elects to go back to its former carrier as a
slam. Verizon's apparent abuse of the FCC's slamming notification rules
has caused Allegiance to devote considerable staff time and resources
to investigating allegations that have no basis. We have no means to
recoup these resources. Again, to the extent that the Commission could
assess substantial fines against carriers for such abuses, and share a
portion of those fines with the victimized CLECs, CLECs could be
compensated for the damages they incur.
STATE ARBITRATION AND SAVINGS CLAUSE PROVISIONS OF H.R. 1765
The state arbitration provision of H.R. 1765 does not go far
enough. It requires states to arbitrate interconnection disputes within
60 days. It may be helpful in some states to have a 60 day limit on
decisions but in Texas, there are some proceedings that are dealt
within a week. This is authority that states probably already have the
discretion to exercise on their own. The language is also unclear as to
whether the state decision is final and enforceable in state or federal
court and sets no penalties for violating interconnection agreements.
Further, the parties should be allowed to waive the deadline if it is
mutually agreed upon.
The final section is a savings clause for service quality
enforcement, but it appears to be undermined if H.R. 1542, the Tauzin-
Dingell bill, were to become law. H.R. 1542 would strip away the
service quality reports and with the defeat of the amendment offered by
Congresswoman Eshoo these reports would disappear. It also appears this
savings clause is limited to Section 252. Other provisions of H.R. 1542
limit the state's authority to enforce the interconnection agreements,
by taking away the states' rights to regulate high-speed services.
Since these provisions are in section 292, not section 252, they are
unaffected by this savings clause.
CONGRESS SHOULD CONSIDER A REQUIREMENT FOR STRUCTURAL SEPARATION OF THE
RBOCS
As I noted above, the RBOCs have the ability and the incentive to
deny their competitors full, fair and nondiscriminatory access to their
networks. If the increased penalties do not sufficiently alter their
behavior then I would suggest the only plausible solution at the end of
the day would be for Congress to require structural, or at least
functional, separation of the RBOCs' retail and wholesale operations.
If the retail side of an RBOC's company was forced to purchase service
for their customers under the same terms and conditions that CLECs are,
the wholesale division would have significantly stronger incentives to
improve provisioning and performance standards.
CONCLUSION
The robust competition envisioned by the Telecommunications Act of
1996 has been painstakingly slow to develop on a broad scale in the SME
and residential mass markets. I believe that this is due primarily to
the following three reasons:
Instead of invading each other's monopoly service territories
and competing for each other's customers, the RBOCs have
focused on combining their forces to form even larger
monopolies and have devoted scant effort to complying with
Sections 251 and 252 of the Act. The RBOCs have abused their
dominant market power in many ways, including illegally
withholding payments for exchange of traffic with CLECs.
AT&T, which was expected to become a significant competitor to
the RBOCs, has focused primarily on acquiring its own cable TV
monopoly, and has eschewed significant deployment of local
facilities except in the large corporate enterprise market.
AT&T has also used its dominant position in the long distance
market to favor the ILECs over new entrants in terms of paying
its access bills, thereby causing significant financial harm to
a number of CLECs.
Despite good intentions, the FCC's enforcement authority,
enforcement resources and cumbersome and bureaucratic processes
are not geared to a dynamic competitive environment, and have
facilitated the constant delays and violations of the Act by
the RBOCs and AT&T.
The bottom line five years after passage of the Act is that (1)
competitive choices are available to you if you are a large
corporation; (2) far more often than not you remain at the whim of the
local monopolist if you a small or medium-sized business; and (3) most
residential subscribers are still stuck with the same monopoly
providers they had in 1996 for local phone and cable TV service. There
is nothing that Congress can do to make the reluctant monopolists (the
RBOCs and AT&T) compete with each other. However, Congress can
significantly improve the opportunity for competition to develop in the
SME and residential mass markets by arming the FCC with greatly
increased enforcement powers. I urge you to strengthen the FCC's
enforcement powers to help ensure that as the RBOCs and AT&T get
bigger, the strides made by CLECs in providing consumers with
competitive choices are not reversed. It is imperative that Congress
make the penalties for noncompliance with the Act steep enough to serve
as a deterrent as opposed to just a cost of doing business for the
monopoly providers.
Mr. Upton. Thank you.
Mr. Jacobs?
STATEMENT OF HON. LEON JACOBS
Mr. Jacobs. Good morning, Chairman Upton and members of the
committee. As Congressman Stearns indicated, I am Chairman of
the Florida Public Service Commission. But today I come
primarily as Chairman of the Consumer Affairs Committee of the
National Association of Regulatory Utility Commissioners,
acronym NARUC.
I first want to thank you for the opportunity to come
today. And along with you and co-sponsors, including
Congressman Stearns, I applaud your foresight in promoting this
measure.
It is an honor to be here and particularly the recognition
implicit in your invitation of the critical role State
commissions play in the transitions to a more competitive
telecommunications market under the scheme Congress adopted in
the 1996 legislation.
I come here to give you my preliminary thoughts on H.R.
1765 today. Because of the short time that has elapsed since
the bill has been introduced, NARUC has not had an opportunity
to form a consensus on this legislation. Similarly, the Florida
Commission has not adopted a position.
However, given the collective experiences of NARUC member
commissions, I can assure you that there is a need for ongoing
enforcements in these markets. And I can assure you also that,
in principle, NARUC would embrace public policy that further
empowers both the States and the Federal Communications
Commission to effectively address improper business practices.
In my opinion, the adoption of this bill is consistent with
current collaborative enforcement efforts that are underway
between the States and the FCC.
We continue to see progress in the State and national
action plan group. This is a group that was formed in
conjunction with the FCC, and it consists of staff from NARUC
committees, and the FCC's enforcement and consumer information
bureaus, and the National Regulatory Research Institute.
SNAP was formed with the mission of fostering a partnership
between the FCC and State commissions to enhance consumer
protection education, enforcement, and regulatory initiatives.
Through SNAP, the FCC and States share the results of
investigations and questionable business practices that may
proliferate around the country.
Through these efforts, the FCC and the States have
demonstrated their desire to work collaboratively, to be more
attentive to the needs of consumers and the concerns of our
congressional leaders.
As you are aware, NARUC has sent several letters opposing
H.R. 1542, and I am not here to speak to that bill today,
except to emphasize that the bill before us is a stand-alone
bill, and, as you indicated, with some desire to deal with that
later. I would encourage you and caution the committee to
consider these enforcement measures separately and distinct
from H.R. 1542.
Speaking as Chair of the Consumer Affairs Committee, I feel
obligated to relate two points. First, NARUC has established a
consensus position opposing any legislation that undermines the
market-opening components of the Act. Second, in attaching a
progressive measure such as those found in H.R. 1765, it would
not diminish NARUC's concerns and opposition to the
diminishment of those market-opening measures.
Therefore, as stand-alone legislation, I support the goal
of increasing the penalties at the national level against
companies found violating the FCC's rules and orders. Florida
continues to receive complaints against companies that have
already been fined or have settlements accepted by the FCC.
In addition, I might add we receive complaints over matters
that we find difficult to enforce at times, and as part of the
dialog I will give you input on that. It appears that under
certain circumstances the current level of penalties is not
adequate in removing the incentives to violate current law.
Chairman Powell's proposals for additional fines suggests
that the FCC's current fining mechanisms are also inadequate.
Finally, I suggest to the sponsors that they consider
clarifying that all penalties assessed on carriers are taken
what we call below the line, and be excluded from customer
rates. While I applaud also the sponsor's recognition of the
need for States to arbitrate interconnection agreements, there
is a brief concern. Many States are trying to expedite these
complaint resolution proceedings, but they present very complex
issues requiring very important insight into the actual data
that is occurring at the State level.
A 60-day timeline would prove a bit tight. Currently, in
Florida, we address complaints regarding interconnection
agreements, and we have found that often issues involved in
these cases are very complex. And in such cases substantial
testimony and a full discovery process is vital.
Let me conclude simply by saying that in addition to the
service quality measures that you place in it, we applaud those
as well, and we support increasing the penalties at a national
level, working together with the FCC to protect consumers from
companies involved in deceptive business practices and having
States resolve disputes in a timely manner.
Thank you.
[The prepared statement of Hon. Leon Jacobs follows:]
PREPARED STATEMENT OF HON. LEON JACOBS, CHAIRMAN, FLORIDA PUBLIC
SERVICE ON BEHALF OF THE NATIONAL ASSOCIATION OF REGULATORY UTILITY
COMMISSIONERS
Good morning. My name is Leon Jacobs, and I am here as the Chairman
of the Consumer Affairs Committee of the National Association of
Regulatory Utility Commissioners (NARUC). I am also the Chairman of the
Florida Public Service Commission.
Chairman Upton, I'd like to begin by thanking you and the other
subcommittee members for the invitation to speak to you today. It is
both an honor and a privilege to be here. I also sincerely appreciate
the recognition, implicit in the subcommittee's invitation, of the
critical role State commissions play in the transition to a more
competitive telecommunications market under the scheme Congress adopted
in the 1996 legislation.
I have come here today to give you my preliminary thoughts
regarding H.R. 1765.
Because of the short time that has elapsed since the bill was
introduced, NARUC has not had an opportunity to form a consensus view
on this legislation. Similarly, the Florida Commission has not taken an
official position on the bill. However, I can assure you that in
principal, NARUC would embrace public policy that further empowers both
the states and the Federal Communications Commission (FCC) to
effectively address improper business practices.
PROPOSED INCREASE IN FCC FINING AUTHORITY
In my opinion, the adoption of this bill would not cause a
deviation from the current collaborative enforcement efforts that are
underway by the states and the FCC. We continue to see progress in the
activities of the State and National Action Plan (SNAP) group, which is
comprised of staff from the NARUC Staff Subcommittee on Consumer
Affairs, the FCC's Enforcement and Consumer Information Bureaus, and
the National Regulatory Research Institute.
SNAP was formed at the NARUC's 110th Annual Convention, and its
mission is to foster a partnership between the FCC and state
commissions for the purpose of strengthening consumer protections in
the telecommunications marketplace. Specific focus areas include
cooperation in consumer education, enforcement, and regulatory
initiatives. Through SNAP, the FCC and states are able to share results
of investigations into questionable business practices involving
companies in the telecommunications industry. Through these efforts the
FCC and the states have demonstrated their desire to work
collaboratively to be more attentive to the needs of consumers and the
concerns of our congressional leaders.
As you are aware, NARUC has sent several letters opposing H.R.
1542, the ``Tauzin-Dingell bill.'' While I do not wish to address this
bill at this hearing, I simply want to note that I am testifying on the
bill before us as a stand alone bill.
Therefore, as stand alone legislation, I support the goal of
increasing the penalties at the national level against companies found
violating the FCC's rules and orders. Florida continues to receive
complaints against companies that have already been fined or had
settlements accepted by the FCC for various violations. It appears
that, under certain circumstances, the current level of penalties is
not adequate in removing the incentives to violate current law.
Chairman Powell's proposals for additional fines suggests that the
FCC's current level of fining authority is not sufficient to make some
activities unprofitable. Finally, I suggest to the sponsors of this
legislation that they consider clarifying that all penalties assessed
on carriers be taken ``below the line'' (as required by the current FCC
rules) and be excluded from customer rates.
STATE ARBITRATION DEADLINES
While I appreciate the sponsor's recognition of the need for states
to arbitrate interconnection agreements, I am concerned that this bill
provides only 60-day time frame for States to resolve these disputes.
My concerns relate primarily to due process and the ability to build a
clear record needed to render a fair decision. Currently, in Florida,
when we address complaints regarding interconnection agreements, we
have found that often the issues involved in these cases are very
complex. In such cases, substantial testimony and a full discovery
process may be needed to resolve these issues. Requiring that these
cases be processed in just 60 days may impair our ability to address
issues in a reasoned and well-informed manner.
The Florida Commission and its staff have been exploring ways to
handle these types of complaints in a more expedited manner. The
complexity of the issues involved in a complaint is one factor that
will likely be taken into consideration when deciding whether a case
should be "fast tracked." Even if a case is ``fast-tracked,'' the time
frame under discussion for such an expedited process is a minimum of
approximately 100 days.
RESERVATION OF STATE AUTHORITY
Finally, I appreciate the critical reservation of state authority
in proposed section 252(e)(3) of the legislation to prescribe methods
to ensure timely and effective compliance with any interconnection
agreement, including the imposition of service quality performance
requirements. The critical role service quality performance data plays
in the transition to a more competitive environment is highlighted by
NARUC's current position before the FCC opposing the elimination of
service quality reporting requirements on the incumbent telephone
companies.
CONCLUSION
In summary, I support increasing penalties at the national level;
working together with the FCC to protect consumers from companies
involved in deceptive business practices; and having states resolve
disputes in a timely manner, but recommend that the 60-day time frame
be increased to at least 100 days.
Mr. Upton. Thank you, Mr. Jacobs.
Mr. Sarjeant?
STATEMENT OF LAWRENCE E. SARJEANT
Mr. Sarjeant. Good morning, Mr. Chairman and members of the
subcommittee. Thank you for giving the United States Telecom
Association the opportunity to testify and present its views on
H.R. 1765, your recently introduced bill to increase penalties
for violations of the Communications Act by common carriers.
My name is Lawrence Sarjeant, and I am USTA's Vice
President for Regulatory Affairs and General Counsel.
Although its roots are in the local exchange industry, USTA
has evolved into an association of multi-service telecom
providers. Its members are ILECs, CLECs, IXCs, ISPs, CMRS
providers, and video service providers. USTA's members service
America's remote and rural communities from Alaska to Georgia,
as well as its urban centers from New York to Los Angeles.
USTA believes that regulators, competitors, and customers
have at their disposal today sufficient vehicles through which
they can pursue penalties, damages, performance adjustments,
and remedial conduct from common carriers when it is proven
that a common carrier has violated the Communications Act or
the Federal Communications Commission's rules.
For example, Section 209 damages provisions prescribe no
cap on monetary damage awards in favor of complaining parties
who successfully bring complaints against common carriers
pursuant to Section 208.
Notwithstanding our belief, though, USTA understands that
you and other public policymakers believe that there is a need
for greater enforcement and increased penalties for common
carrier violations of the Communications Act and the FCC's
rules. Therefore, I would like to offer several observations
and suggestions concerning modifications to the enforcement
process that are intended to ensure that procedural fairness
accompanies any enhancements to existing enforcement and
penalty provisions.
If forfeiture penalties are to be increased, greater
formality or structure should be incorporated into the
proceedings leading to the assessment of a forfeiture penalty.
A common carrier that is the target in a forfeiture proceeding
should be entitled to an evidentiary hearing before a hearing
examiner that is independent of the FCC staff that investigates
the alleged violation and the FCC staff that brings the alleged
violation forward for adjudication.
All testimony should be taken under oath, and the target
common carriers should have the right to call witnesses and
cross examine those witnesses called to present testimony
against it.
Penalties in the amounts being considered should not be
imposed without the accused having maximum due process
protections. Penalties that are predicated upon a finding of
wilful conduct require that ``wilfully'' be defined. The
definition of ``wilfully'' should explicitly state that the
alleged violator intended to violate the Act or the FCC rule.
In other words, the FCC must be made to prove that the
alleged violator knew it was acting unlawfully. It should also
be made clear that the FCC bears the burden of proof. Where
wilful conduct must be shown, it should be proven by clear,
cogent, and convincing evidence.
This higher burden of proof is warranted when sizable
monetary penalties such as those presented in the bill are to
be assessed as a way to punish common carriers for wilfully and
repeatedly failing to comply with the provisions of the Act.
This is particularly true when wilful conduct must be
determined in a dynamic environment where rules are frequently
changing in response to court decisions and changes in the
telecommunications market.
Section 2 of H.R. 1765 provides for a dispute resolution
process with respect to those matters that are subject to
interconnection agreements approved by a State commission
pursuant to Section 252. We agree that this is the best
approach as these interconnection agreements are within the
State Public Service Commission's jurisdiction, and no other
regulatory agency is in a better position to resolve disputes
concerning local interconnection agreements.
Finally, USTA is concerned about parity and
proportionality. To the extent that forfeiture penalties in
H.R. 1765 apply only to common carriers, it disregards the fact
that communications firms that have historically not been
treated as common carriers are now providing common carrier
services.
Regardless of the labels attached to them, firms that
provide services that are functionally equivalent to those
provided by traditional common carriers should be subject to
the same forfeiture provisions. Consideration should be given
to having one forfeiture penalty schedule for all entities
subject to the Communications Act.
Further, the FCC should be clearly instructed that the size
of the common carrier, the number of residential subscribers it
has, its service area, and other relevant factors, must be
taken into consideration when determining the amount of the
penalty to be assessed. The penalties are intended to be a
deterrent to violations of the Communications Act, not a
deterrent to a common carrier's ability to continue providing
service to its customers.
Thank you.
[The prepared statement of Lawrence E. Sarjeant follows:]
PREPARED STATEMENT OF LAWRENCE E. SARJEANT, VICE PRESIDENT REGULATORY
AFFAIRS AND GENERAL COUNSEL, UNITED STATES TELECOM ASSOCIATION
Thank you Mr. Chairman and Members of the Subcommittee for giving
the United States Telecom Association (USTA) the opportunity to testify
and present its views on HR 1765 your recently introduced bill to
increase penalties for common carrier violations of the Communications
Act of 1934. I am Lawrence E. Sarjeant and I serve as Vice President
Regulatory Affairs and General Counsel of USTA. I appear at the hearing
today on behalf of the entire Association, which comprises of over
1,100 members, including local exchange carriers ranging from the very
smallest and most rural telephone company to the Bell Operating
Companies, as well as non-ILEC affiliated CLECs.
Of course, I am not here today to say that we warmly welcome and
embrace you and your co-sponsors' efforts to increase enforcement
penalties. Having said that, we realize that policymakers such as
yourself and your co-sponsors believe that there needs to be more
enforcement and increased penalties for violations of the Act or the
Federal Communications Commission (Commission) rules when the
deregulation contemplated by H.R. 1542 occurs. Under those
circumstances, it seems that the purposeful thing for us to do is to
provide you with the benefit of our thoughts and observations regarding
the enforcement process and to make suggestions to you concerning how
it can be modified to better ensure fairness and equitable outcomes.
First, let me say that one of the reasons that we believe that this
effort to increase penalties is not warranted is that effective
enforcement provisions already exist in the Act. They have been there
since 1934, but the focus seems always to be on the forfeitures under
Section 503, with little attention given to Sections 207, 208 and 209.
Section 207 provides that any person, meaning CLEC, DLEC,
interexchange carrier, ISP, etc., may make a complaint to the
Commission or bring suit against the common carrier in the United
States District Court.
If an aggrieved person brings the complaint to the Commission, then
Section 208 becomes operative. Section 208 provides that if a common
carrier does or has omitted to do some act in violation of the
Communications Act, then the Commission takes up this petition. This is
now done through a newly created Enforcement Bureau established under
Chairman Kennard to place more emphasis on enforcement.
After an investigation of not more than 5 months and a hearing, the
Commission shall under Section 209 award damages if it determines the
injured, complaining party is entitled to damages. There is no
statutory limit on damages and the Commission has asserted its right to
award permanent injunctive relief. Why is this not more effective than
any forfeiture under Section 503?
Process
Let me start my process suggestions with the one that I believe is
the most important. Today, the Commission process for imposing
forfeiture penalties is what I would call an unstructured one. There
are usually no evidentiary hearings, no testimony taken under oath and
no witnesses to be cross-examined. The Commission does have the
statutory discretion to present these matters to an Administrative Law
Judge pursuant to Section 503(b)(3)(A), but it rarely, if ever,
exercises this discretion. A hearing before an Administrative Law Judge
should be made mandatory if the alleged violator requests such a
hearing, especially when the action may result in a substantial
forfeiture.
H.R. 1765 does not require such a hearing before an Administrative
Law Judge, and we respectfully believe that it should. It is
inappropriate and inconsistent with accepted principles of fairness for
the Commission staff to serve as investigator, prosecutor and judge
with respect to the adjudication of allegation sufficient to trigger a
notice of apparent liability (NAL). Your bill follows the approach in
current law of giving the Commission the discretion to present the
issue to an Administrative Law Judge. Your bill, H.R. 1765, increase
the penalties for some repeated violations to up to $20,000,000. A
penalty in this amount requires, in our view, greater procedural due
process, thus giving the accused at least a fair hearing before an
impartial trier of facts and a fair opportunity to present its case,
including the right to confront its accusers.
H.R. 1765 also will increase other penalties to up to $10,000,000.
We believe that for these forfeitures, as well, there should be a right
to a hearing before an Administrative Law Judge, at the option of the
alleged violator. Section 554 of the Administrative Procedures Act
governs the procedures for such a hearing. What we are seeking here is
not novel--it is common practice in state regulatory enforcement
proceedings. Penalties of any significant amount should not be assessed
without there having first been a judicatory hearing.
Second, another process issue is the burden of proof. We would
suggest that it be clearly established in your bill that the burden of
proof be placed upon the government. The government should be required
to prove its case by clear, cogent and convincing evidence, the
standard applied in matters such as civil fraud where intention is
required to be proven.
Willfully
Section 503(b), which H.R. 1765 amends, provides that forfeitures
will be assessed against common carriers that willfully and repeatedly
fail to comply with the provisions of the Act. We strongly urge you to
define willfully. In a recent enforcement proceeding, the Commission
issued a Notice of Apparent Liability in which it said the following:
``It has been long established that the word `willfully' as
employed in Section 503(b) of the Act, does not require a
demonstration that . . . knew it was acting unlawfully. Section
503(b) requires only a finding that . . . knew it was doing the
acts in question and that the acts were not
accidental.11
---------------------------------------------------------------------------
\1\ IN THE MATTER OF SBC COMMUNICATIONS, INC., DA 01-680 (March 14,
2001) at B1., 2001 WL 253187 (F.C.C.)
---------------------------------------------------------------------------
We have examined how the various Federal Courts 22 have
interpreted the term willful in other federal statutes, and they all
seem to have at least one common theme, which is that the alleged
violator must have intended to violate the Act. The Commission says
that if you did it, you therefore did it willfully unless it was an
accident. The Commission, therefore, reads the word ``willfully'' out
of the Act. This notion of intent to violate the Act must in our view
be an essential part of your enforcement reform bill. Second, we would
also urge that some allowance be made in this definition for ambiguity
in the rules of the Commission which change so often. Since 1996, the
Commission's rules regarding unbundled access to network elements have
changed at least a dozen times not counting merger and Section 271
conditions imposed by the Commission. At this time, two Notices of
Proposed Rulemaking are pending in the Advanced Telecommunications and
Local Competition dockets, which will be the Sixth Further Notice of
Proposed Rulemaking in that docket alone. The reason that they change
so often is that the Commission most continually modify and reinterpret
the law based on changing market conditions. While we haven't always
agreed with the changes made by the Commission or its evolution of
market conditions, increasing competition requires that the FCC
consider obligatory action where market condition warrant it.
---------------------------------------------------------------------------
\2\ See, Valdak v. OSHRC, 73 F.3d 1466, 1466-1469 (8th Cir.
1996)(willfulness is an act done voluntarily with either intentional
disregard of or plain indifference to the requirements of the Act);
Printy v. Dean Witter Reynolds, 110 F.3d 853, 859 (1st Cir.
1997)(willfull means deliberate or intentional).
---------------------------------------------------------------------------
Dispute Resolution
Section 2 of H.R. 1765 provides for a Dispute Resolution process
with respect to those matters that are subject to interconnection
agreements approved by a State pursuant to Section 252. This provision
makes common sense. We believe that under the 1996 Act that these
interconnection agreements are within state Public Service Commission
jurisdiction, and we welcome prompt resolution of disputes.
Section 252(c) requires that every interconnection agreement
adopted by negotiation or arbitration must be submitted to the State
Public Service Commission for approval. The Public Service Commission
has the authority to approve or reject any agreement. In other words,
there is no regulatory agency in a better position to resolve these
issues than the State PSC that may have arbitrated the agreement and
had to approve it.
Section 2's Dispute Resolution process follows the model for
disputes arising during the agreement negotiation process provided for
in Section 252 (b). The State PSC is given sixty days to resolve a
dispute. This seems to us to be ample time. H.R. 1765 adopts the same
approach Judicial review of a State Commission actions as is in current
law regarding other interconnection agreement determination, namely the
right of any aggrieved party to bring an action in Federal District
Court to determine whether the agreement is in compliance with Section
251.
Parity and Size of Common Carrier
The increased forfeiture penalties in H.R. 1765 apply only to
common carriers. Why should penalties be increased only for common
carriers? Why not all persons subject to the Act's jurisdiction such as
cable companies and broadcasters. We must begin to bring greater focus
to comparable treatment for functionally equivalent services and not be
driven to disparate treatment based on the old and irrelevant labels
applied to today's multi-services communications companies. What is in
the bill now applies to all carriers, but at the end of the process
will it apply only to incumbent local exchange carriers or will it
apply to just Bell Operating Companies. Singling out only segments of
those regulated under the same Act is a concern to us.
Second, Section 503(b)(2)(D) of current law will be applicable to
the increased and new penalties to be assessed under H.R. 1765. This
subparagraph (D) requires the Commission to take into account the
violators ability to pay among other considerations. Under this
subparagraph; we would urge you to make clear to the Commission that
this means that smaller carriers would have their size, number of
residential subscriber and service area taken into account when
prescribing a penalty. While intended to be a deterrent, revisions to
the caps on penalties should not have unintended result of compromising
the ability of any carrier to operate as on going business providing
quality services to its customers. Forfeitures should be proportionate
and the actual affect on consumers and competition should be taken into
account.
Mr. Upton. Thank you.
Mr. Solomon, welcome.
STATEMENT OF DAVID H. SOLOMON
Mr. Solomon. Thank you, Mr. Chairman. Good morning, Mr.
Chairman and members of the subcommittee. We appreciate the
opportunity to testify before you today, and particularly
appreciate your interest in enhancing the FCC's enforcement
tools, or, as you said this morning, Mr. Chairman, in giving us
more ammo.
I also want to comment just how much we at the FCC
appreciated the visit that you and Chairman Tauzin had earlier
this week. People at the Commission were--their morale was very
much increased by the sense from you and Chairman Tauzin that
you are interested in helping us do our job better, and we
appreciate that.
Strong and effective enforcement is critical to
implementation of the 1996 Telecom Act. Chairman Powell has
indicated on numerous occasions that he views enforcement as a
central part of his vision for a more effective FCC dedicated
to the deregulatory and pro-competitive mission of the 1996 Act
as envisioned by Congress.
Within the scope of the responsibilities that Congress has
delegated to the FCC, he has charged us in the Enforcement
Bureau with moving quickly to respond to either formal
complaints that we get from carriers or competitors, and to
requests for investigations, as well as reviewing our own
information to look for possible areas for investigations.
And in partnership with the States, we continue to be
strongly committed to doing our best to make sure that we can
facilitate implementation of the local competition provisions
of the 1996 Act.
And I want to mention with Chairman Jacobs here how much we
at the FCC have appreciated the work he and others at NARUC
have done in working with us to try to join resources so that
when we work on consumer protection issues we are not
overlapping with the States but we are working in concert.
As Chairman Powell recently indicated in his letter to you
and other members of the leadership, we do believe that our
ability to enforce the 1996 Act and other provisions of the
Communications Act could be enhanced by giving us additional
enforcement tools. And we are very pleased that H.R. 1765
incorporates some of Chairman Powell's proposals.
I am going to focus on two of those proposals. One is the
increase in the statutory caps for forfeitures, and the second
is the increase in the period for the statute of limitations.
On the statutory caps, as several members have indicated this
morning, and some of the witnesses, the current caps of
$120,000 and $1.2 million really don't serve as a sufficient
deterrent or sanction for large companies that have income of
billions of dollars.
We think the increase tenfold to $1 million and $10 million
will give us a significantly increased ability to have a
deterrent effect from our actions and from the existence of the
authority itself as well as impose serious sanctions in
particular cases. And we strongly support that provision as
well as the additional provision to have doubling of the fines
in cases where a carrier has violated a cease and desist order
by the FCC or has engaged in a repeated violation that harms
competition.
On the statute of limitations, let me explain a little some
of the practical effects of the existing 1-year statute of
limitations. We usually start an investigation in one of two
ways. Either a competitor or another entity will come to us
informally with information suggesting that there may be
violations, or we will do a self-started investigation, perhaps
based on reports that are filed by the carriers.
In either case, it is often several months into the 1-year
statute of limitations period when we really get started. If
someone is bringing us information, it takes them some time to
put together--to notice that violations may be occurring, to
put together information sufficient to us to convince us to
look into it. So it may be several months into the period when
they bring us what they think is strong evidence of a serious
violation or a pattern of violations.
In addition, when we are looking into possible
investigations based on reports we get from the carriers,
typically the reports come in several months after the relevant
period. For example, in June we might have a requirement that a
carrier report on the first quarter from January to March. So
if we get the report in June and it suggests violations in
January, we have already eaten up about 5 months of the statute
of limitations period.
Then, once we start an investigation, we look to the
carrier to give us additional information. And we typically
issue an inquiry letter that leads to interrogatories or a
request for documents. That information has to be evaluated,
and we also have had experiences where the carriers may have
incentives to engage in delay tactics in dealing with us, such
that we have to issue additional letters.
So we have had situations where, as we approach the end of
the statute of limitations period and contemplate enforcement
action, we either have to leave out some of the potential
violations, have to go negotiate with the carrier potentially
for an extension of the statute of limitations period, or have
to work extremely quickly at the end to put our case together
to beat the statute of limitations.
So while it doesn't sound exciting, the increase from 1
year to 2 years can have a significant practical effect.
So in summary, again, we appreciate your efforts to look at
increasing our enforcement tools and look forward to continuing
to work with you.
[The prepared statement of David H. Solomon follows:]
PREPARED STATEMENT OF DAVID H. SOLOMON, CHIEF, ENFORCEMENT BUREAU,
FEDERAL COMMUNICATIONS COMMISSION
Good morning Mr. Chairman and members of the Subcommittee. I am
pleased to appear today on behalf of FCC Chairman Michael K. Powell
regarding H.R. 1765. We appreciate the interest of Chairman Upton and
others on the Subcommittee and the full Committee in enhancing our
enforcement tools.
Strong and effective enforcement is critical to implementation of
the Telecommunications Act of 1996. Chairman Powell has emphasized on
numerous occasions his strong commitment to enforcement as a central
part of his vision for a more effective FCC dedicated to implementing
the competitive and deregulatory vision of Congress in the 1996 Act.
Within the scope of responsibilities Congress has delegated to the
Commission, he has charged the Enforcement Bureau to move quickly to
respond to complaints or requests for investigations that we receive.
Only in partnership with the states can we facilitate compliance with
the local competition provisions of the 1996 Act and we will continue
to work with the states to do so.
Our common carrier enforcement efforts generally take place in one
of three contexts. First, through the formal complaint process set out
in section 208 of the Communications Act, the Commission decides formal
complaints between private parties. These are generally the equivalent
of private law suits filed in court. Second, as an adjunct to the
formal complaint process, Enforcement Bureau staff provides mediation
assistance to litigants or potential litigants in an effort to help
them reach a private settlement of their disputes where feasible.
Third, the FCC conducts informal investigations pursuant to sections
218, 403 and 503(b) of the Communications Act. These investigations may
lead to monetary forfeitures or consent decrees. While outside entities
sometimes informally bring information to our attention in connection
with such investigations, they are not parties to the investigation or
any subsequent forfeiture proceeding. The only party to this type of
FCC investigation is the subject of the investigation.
As Chairman Powell recently indicated in a letter to the leaders of
the House and Senate Commerce and Appropriations Committees, which I
have attached to my testimony, the effectiveness of the Commission's
enforcement efforts could be increased with the help of Congress. We
are pleased that H.R. 1765 incorporates certain proposals made by
Chairman Powell and, not surprisingly, we strongly support these
measures.
Specifically, I'd like to focus my remarks on two provisions of
H.R. 1765 that would amend section 503(b) of the Communications Act:
(1) the increase in the caps on the Commission's forfeiture authority
for common carriers; and (2) the lengthening of the statute of
limitations period for such forfeitures. Both of these provisions
relate to the informal investigation process I mentioned before.
I. STATUTORY FORFEITURE CAPS
Right now, under section 503(b) of the Communications Act and the
inflationary adjustments provided for under the Debt Collection
Improvement Act of 1996, the Commission can fine common carriers only
$120,000 per violation or per day of a continuing violation. In the
case of a continuing violation, the total fine cannot exceed $1.2
million. Given the vast resources of the nation's large common
carriers, including incumbent local exchange carriers and long distance
carriers, this amount is an insufficient sanction or deterrent in many
instances.
H.R. 1765 would increase the statutory caps 10-fold to $1 million
per violation or per day of a continuing violation and $10 million for
continuing violations. We think these statutory increases would
significantly strengthen our enforcement authority against incumbent
local exchange carriers and other common carriers. Through deterrence
as well as the impact of sanctions that we impose, we believe
compliance with the Act and the Commission's rules should be increased,
to the overall benefit of consumers. We thus strongly support this
provision. For similar reasons, we also support the proposal to
increase the caps to $2 million and $20 million in situations where a
carrier has violated a cease and desist order or where there has been a
repeated violation that has caused harm to competition.
II. STATUTE OF LIMITATIONS
In addition to setting out forfeiture caps, Section 503(b) of the
Communications Act spells out the procedure for the imposition of
forfeitures and the timetable for the initiation of such actions. Under
the statute, the Commission may impose a forfeiture through a hearing
that begins with a Notice of Opportunity for Hearing or through a paper
process that begins with a Notice of Apparent Liability. Under either
process, the Commission may not impose a forfeiture penalty unless the
carrier is notified of the charges and provided an opportunity to
respond. For common carriers, the requisite notice must be issued
within one year of the violation or violations at issue.
As Chairman Powell has noted, this one-year limitations period has
often proved an impediment to the Commission's enforcement actions.
While it is certainly important that the Commission commence forfeiture
proceedings before the evidence relating to the alleged violations
becomes stale, it is imperative that the Commission have enough time to
conduct a meaningful investigation into the matter before issuing a
publicly available notice charging the carrier with apparent
misconduct.
Let me explain some of the practical constraints that the one-year
limitation creates. In some situations, the Commission first hears
about a violation from information informally provided by a competitor
that has been harmed by the alleged violation. This can take several
months as the harmed competitor determines whether there is a serious
violation or pattern of violations at issue. In other instances, we are
first notified of potential violations through incumbent carriers'
required filings with the Commission, which often cover time periods
dating back many months. Thus, when the Commission receives these
reports, we are often already fairly deep into the limitations period.
Moreover, once we start an investigation, much of the evidence relating
to the alleged violation resides with the carrier whose conduct is
under investigation. Accordingly, in both types of situations, to
determine whether there is sufficient evidence of a violation to
proceed, the Bureau is often required to send a letter to the carrier
requiring the submission of relevant information and documents, and
then await the carrier's response. Moreover, because some carriers
employ mechanisms to slow the progress of our investigations, the
Bureau is often required to send follow-up letters to the carrier
before obtaining the information sought. This cuts still further into
the limitations period.
Because of the one-year statute of limitations for forfeiture
proceedings, there have been instances in which the Commission has been
constrained from commencing forfeiture proceedings. In other instances,
we have been put in the unfortunate position of requesting that the
subject carrier enter into an agreement to toll the running of the
limitations period. While carriers often agree to such arrangements
when they believe it is in their interest to do so, they do sometimes
refuse. When they refuse, the Commission is left racing against the
clock to make a decision on whether or not to initiate a forfeiture
proceeding before the limitations period expires.
These problems would be largely solved if the Congress were to
extend the statute of limitations in Section 503(b)(6)(B) of the
Communications Act to two years. Thus, we thus strongly support this
provision in H.R. 1765 as well.
Thank you again for this opportunity to testify. I would be happy
to answer any questions you may have.
Mr. Upton. Well, thank you very much. I appreciate all of
your testimony. And I would just note for the record that as
members are on other subcommittees, a number of folks have
asked that they might be able to submit questions in writing,
and we will take that opportunity to do so.
Mr. Solomon, you and I have had a chance to talk a little
bit about this legislation earlier in the week, and we did, by
the way, appreciate very much our visit to the FCC. I know that
I look forward to going down again, and also we will visit a
number of sites particularly close by here in the future.
Do you believe that the 2-year time limit is, in fact,
adequate and sufficient on the statute of limitations?
Mr. Solomon. I certainly think it will help give----
Mr. Upton. Does it need to go beyond 2 years, or do you
think 2 years is----
Mr. Solomon. I think it will help give us the flexibility.
Certainly, if Congress believes it should be somewhat longer,
that would give us additional flexibility. Ultimately, it is a
balance that Congress has to make between giving us the
flexibility and ensuring that basically violations don't become
stale in a way that is unfair to the target involved. But 2
years should certainly help.
Mr. Upton. A number of folks have come to us and suggested
that your enforcement team doesn't have enough bodies. It needs
more individuals, particularly as you look at all of the
complaints that are filed. What is the size of your enforcement
staff?
Mr. Solomon. The size of the Enforcement Bureau is about
285 people, although that includes enforcement across the broad
areas of responsibilities. About 150 of those people are in
field offices and focus pretty exclusively on technical
enforcement, and then about half are in Washington.
Certainly, as a government bureaucrat, we always like more
resources. But we are heartened that Chairman Powell has
allocated additional resources to enforcement and has charged
us to go out and hire some people with litigation and
investigatory experience that will be able to help us.
Mr. Upton. Well, one of the things I want to make clear is
not only should you have the proper tools in your arsenal to go
after those that violate the rules, but you also have the
sufficient staff.
And I know that I look forward to working with the FCC,
Chairman Powell, all the commissioners, yourself, as we look at
having hearings later this year on FCC reform once we have the
full complement of commissioners on board that, in fact they
can help identify for us areas where you may need some more
resources, and certainly I am prepared to try and help. Help is
on the way, as I said the other day, to make sure that your
resources--your human resources are adequate.
But I am interested in learning more about the Section 208
process. Could you describe how it works, how much time it
often takes for those claims to get through, the amount of
money that the FCC might have, in fact, recently assessed for
Section 208? And also, confirm that it does go directly to
aggrieved parties.
Mr. Solomon. Right. There are two distinct processes, just
to back up for a second. The Section 208 process is the formal
complaint process. In that, essentially we act as a judge in a
private lawsuit. And if damages are awarded, those damages do
go directly to the parties.
In the Section 503(b) forfeiture proceedings, those
payments go to the Treasury, not into our pockets but to the
Treasury.
In a Section 208 complaint proceeding, it is a formal
complaint. It is like a lawsuit. There are opportunities for
discovery in various stages of the proceeding. We have been
trying to move very fast on these complaints. Historically, the
FCC did not act as fast as it should have. When we started the
Enforcement Bureau in November 1999, there was a backlog of
about 180 formal complaint cases, many several years old, but
the worst that we acted on was from 1989.
So one thing we have done is we have attacked that backlog,
and there are a few cases still left but we have gotten out
about 90 percent of the backlog, so that we are in a position
to act more quickly on the new complaints.
The length of time that they take to some extent varies on
the complexity. Some cases are subject to statutory deadlines,
and obviously we meet those deadlines. We did have one case so
far----
Mr. Upton. Is there a statute of limitations on 208,
Section 208 complaints?
Mr. Solomon. There is a 2-year statute of limitations on
Section 208 complaints. So, actually, there would be a
consistency if the forfeiture statute of limitations was
increased to 2 years.
So the length of time depends on the complexity, but we are
certainly proud of the fact that we are getting to the point
where we can say that our complaints are decided in a matter of
months rather than, historically, it was in a matter of years.
Mr. Upton. And in recent months, how many 208 settlements
have been reached? And, in fact, do you have details of some of
the fines and who those parties might have been, or where those
dollars might have gone?
Mr. Solomon. I don't know off the top of my head cases
where we have awarded damages.
Mr. Upton. You might be able to submit that for the record.
Mr. Solomon. Okay. I will do that.
Mr. Upton. That might be sufficient.
My time has expired. Mr. Stupak?
Mr. Stupak. Thanks, Mr. Chairman.
On the Section 208, if it is 2 years now, should that be
extended longer, that statute of limitations?
Mr. Solomon. Again, that is a judgment call of balancing
various figures.
Mr. Stupak. So how do you define it in trying to--in your
Enforcement Bureau in trying to process these cases? Do you
find you have enough time, you don't have enough time? I guess
we have to ask you, because you are the guys who deal with it.
Mr. Solomon. I think in the damages context for private
complaints we have not found the 2-year statute of limitations
to be a particular problem. One of the procedures we have is
that in the first instance a complainant can file an informal
complaint, which basically meets the statute of limitation.
So if they are running up against the 2-year period and
haven't been able to get enough information to put together a
formal complaint that meets our rules, they can essentially
file a letter that basically serves for statute of limitations
purposes, that is an informal complaint.
It doesn't get adjudicated; it gets served on the other
party, and there is potentially an attempt for them to settle
it. So I don't think that has been a major problem.
Mr. Stupak. Okay. When Chairman Powell testified, he asked
for an increase of the forfeiture amount to about $10 million,
and an increase in the statute of limitations, which is 1 year,
to 2 years. I would assume that the Chairman's recommendation
would serve as a floor and not as the ceiling?
Mr. Solomon. Yes. He said at least those amounts.
Mr. Stupak. Okay. In hopes of ensuring that we don't need
to come back here again in a year or 2 to increase the FCC's
enforcement power, shouldn't we give--attempt now to give the
FCC more authority on forfeiture amounts and the length of time
to pursue proceedings?
Mr. Solomon. Well, the legislation certainly is a positive
step, and I don't know that there is a magic number of what is
the right amount. But, I mean, our main goal at this point is
seeing an increase. And if Congress chooses to make it higher
than the 2 million, that presumably would increase the
deterrent effect even further.
Mr. Stupak. And besides the statute of limitations and the
$10 million, is there anything else in your Enforcement
Bureau--you said it has been up since, what, 1999, I believe
you said?
Mr. Solomon. Right. Right.
Mr. Stupak. Anything else you can think of that is not in
H.R. 1765 that should be included, or some other ways to help
you do your job?
Mr. Solomon. Some other possibilities that were mentioned
in Chairman Powell's letter that the subcommittee might want to
consider--these provisions focus on the Section 503 forfeiture
process.
In the formal complaint process, currently we can award
damages, but it is limited to compensatory damages, which
essentially means that if after we adjudicate the complaint we
find that, for example, if the rate should have been one rather
than 10, the damages would be nine.
So, in essence, the violator pays interest but nothing has
really happened to him other than he has to give back what the
other party deserved to begin with. So we have suggested the
possibility of punitive damages, sort of similar to the treble
damages in the antitrust laws, which would serve as an
additional penalty and deterrent against carriers.
Some other possibilities would be giving us the authority
to award attorneys costs or fees in cases where we think there
may have been particularly strong misbehavior or misbehavior in
the litigation process itself.
And then another possibility would be some sort of
requirement for liquidated damages in the interconnection
agreements to basically say that, if certain requirements
aren't met, it is guaranteed that the incumbent LEC in this
case would pay to the CLEC a certain amount to make up for that
problem, without having an adjudication. It would be just
automatic.
Mr. Stupak. Thanks.
Mr. Holland, Chairman Powell indicated that the need for
increased enforcement authority is necessary in part to deter
the violations that are leading to the demise of the CLECs. The
Chairman specifically refers to measures to compensate harmed
CLECs, besides cease and desist measures and the potential
deterrent effects of increased penalties.
In your view, does the bill provide such increased
compensation to CLECs that suffered the effects of these
violations? Is it adequate? That is what I am asking.
Mr. Holland. I do not think it is adequate in that regard,
because to be adequate it has to be something that gets the
attention of senior management. I will just give you an
example: $10 million would get my attention because that is
almost 10 percent of my quarterly revenue, $1.2 million would
also get my attention, as Chairman and CEO, because that is
about 1 percent of my revenue.
You know, $12,000, that wouldn't make much difference.
Likewise, if you apply that same test to a large ILEC with
about $15 billion in quarterly revenue, $10 million gets lost
in the accounting in a quarter. I mean----
Mr. Stupak. Just a part of doing business.
Mr. Holland. Yes. It is truly just a cost of doing
business. I mean, they spend more on that on local--more than
that on local advertising or something, because that is less
than one-tenth of 1 percent.
Now, if you raise that limit up to 1 percent, like I was
talking--like what $1.2 million would be to me, that is $150
million. I can guarantee you with--let us take Verizon as an
example. The Bells would be ringing with--at high decibel
levels in the executive suite if the FCC were even threatening
Verizon with a $150 million fine. You would get the chairman's
attention, and I guarantee you resources would be brought to
bear and heads would roll.
That is what it really takes. And it is the type of thing,
you know, almost like those nuclear weapons that sit--used to
sit in the silos in North Dakota. You really didn't have to
fire them, but the deterrent--the fact that they were there has
some effect.
But, really, it has to be sufficient enough to impact
quarterly results. And 1 percent of revenue will impact
quarterly results; .1 percent will not.
Mr. Stupak. Thank you.
Thank you, Mr. Chairman.
Mr. Upton. Thank you, Mr. Stupak. I neglected to say from
the great State of Michigan.
I recognize the gentleman from Illinois, Mr. Shimkus.
Mr. Shimkus. Thank you, Mr. Chairman.
Although this hearing is on 1765, we all know it is sort of
tied to our last week's activities. And I had an e-mail from my
brother-in-law last night. He was updating his e-mail address,
and he said, ``Here is my new e-mail address. I now have high-
speed internet access through the cable. It is a little more
expensive, but it is''--and he is--affectionately I call him--
he is a computer geek, so he is----
Mr. Upton. Did he ask you about 602(p)?
Mr. Shimkus. No, he did not. And he, in essence, said,
``This is exciting, but it is a little more costly.''
So I want to start out and just ask Chairman Jacobs, what
regulatory authority do you have over the cable industry?
Mr. Jacobs. Let me start with Florida. We have none at the
State commission level. And, generally, around the country you
will find that State commissions have little, if any,
authority. I know there is one State, and I can't remember
which State it is, that has some authority.
Mr. Shimkus. Thank you.
Mr. Solomon, what regulatory authority does the FCC have
over the cable industry?
Mr. Solomon. Basically, we have the regulatory authority
that is set out in the Cable Act of 1984, and in 1992, which is
a series of discreet issues. It is not sort of comprehensive
regulation over everything, but Congress gave us the authority
of certain programming issues, certain ownership issues, and
then in the 1996 Act Congress deregulated our rate authority.
Mr. Shimkus. So very little.
Mr. Solomon. Well, there is authority on certain discreet
issues.
Mr. Shimkus. Is there authority over high-speed internet
services over cable?
Mr. Solomon. I think these are issues the Commission is
looking at.
Mr. Shimkus. That is fair.
Mr. Sarjeant, this question is for Mr. Sarjeant, and,
again, back to Mr. Solomon. Mr. Holland stated in his testimony
that one way to curb the motivation to engage in anti-
competitive behavior is to structurally separate RBOCs and
retail and wholesale operations.
What is your view of this idea? And do you think it would
work?
Mr. Sarjeant. It is an idea that I think is not going to,
in the end, help the people who we really must be focusing on,
and that is the consumers, because what it does is deprive
companies who are currently integrated of the efficiencies of
integration, if you wind up separating them out. And the remedy
certainly does not do anything to cure the problems that the
CLECs are having with the capital markets. It is not going to
help them with their capitalization.
So, in effect, what it does is perhaps inflict some
inefficiency pain on large companies or integrated companies
today, but for no gain for consumers and with little benefit,
if any, for CLECs. So it hardly seems worth it.
Mr. Shimkus. Mr. Holland, since I used your name, do you
want to respond?
Mr. Holland. Yes, sir. I had suggested structural
separation or functional separation, one or the other, as
something that would be--that I would favor if greatly
increased enforcement and a much bigger stick--much bigger
penalties didn't get the job done. I am not advocating that it
be done today.
I think ultimately----
Mr. Shimkus. If I could interrupt, and we will just keep
the dialog, when you say ``much greater penalties,'' much
greater penalties as close to what is occurring in this
legislation or even greater?
Mr. Holland. As I mentioned before, $10 million would be
nothing to a company that has $15 billion in quarterly revenue.
It has to be significant enough to impact their quarterly
financials, because that is what gets senior management's
attention. I know that from my own experience.
And, certainly, something like 1 percent of revenue will
get you there. That is--in fact, having it based--pegged to
percent of revenue is very consistent with the USF funding, but
I think that that is worth a try, doing that.
I think ultimately, though, if you are going to get to
where every citizen in America has a competitive choice, you
are going to ultimately wind up with structural separation,
because, as an example, you never would have had the market
share shifts of the magnitude you did in long distance if the
Bell operating companies had had an incentive to discriminate
in favor of AT&T vis-a-vis MCI.
The reason for that was to open that market. I think
ultimately that will happen in the local market, but I would
say this. I think it will happen voluntarily at some point in
time. I think the operating companies will come to the
conclusion that if they really do--say, Verizon and SBC, if
they want to be major global players, they really need to move
toward true deregulation, which is to give up the bottleneck
facilities, either to a tracking stock or a spinoff to
shareholders.
And those bottleneck facilities, when you get right down
and cut to the chase, are the local loop and the collocation
space. And then everyone is dealing with it separately.
A great model for that is Empire City Subway in New York,
which is a wholly owned subsidiary of Verizon that owns all of
the communications conduit that everybody uses at the same
rate, which is a tariff rate. So I think that is ultimately
going to happen. We are not proposing it today, but if greater
enforcement doesn't get the job done, we would propose it in
the future.
Mr. Shimkus. Mr. Chairman, if I may, I would like to get
the FCC's response to the initial question. Do I need to
restate it or----
Mr. Solomon. This may sound overly bureaucratic, but as
Chief of the Enforcement Bureau, I sort of view my role on
these issues as Congress did not include that in the 1996 Act,
so our job is to enforce what is there.
Mr. Shimkus. You guys are speaking truth. I am glad to hear
that. We may have--you know, it is a legislative prerogative,
and you would have to enforce the legislative prerogative. And
I appreciate that.
Thank you, Mr. Chairman.
Mr. Upton. Thank you, Mr. Shimkus.
We have another vote, so I am going to ask maybe one or two
questions, and maybe, Bart, do you have an additional question
you want to ask as well?
Actually, Mr. Engel is here. I should--Mr. Engel, do you
have any questions? I should ask, have you voted yet or not?
Mr. Engel. I have not.
Mr. Upton. Okay.
Mr. Engel. I have learned in 13 years to make the 3-minute
dash over to the Capitol.
Mr. Solomon, are cable operators providing telephone
service classified as common carriers, and would they be
subject to these fines?
Mr. Solomon. The issue of how cable should be classified
for various services is in the process of litigation and
consideration in a number of contexts, so I don't want to
answer it too generally other than to say that, to the extent
they are acting as a common carrier, then they are subject to
the rules governing common carriers. There is a lot of
litigation over the issue of whether, in fact, or in what
context they are acting as a common carrier.
Mr. Engel. Okay. Thank you. In your testimony, you said
that you strongly support extending the statute of limitations.
How often does this interfere with the FCC's oversight
abilities? Is 2 years enough? Should it be three?
Mr. Solomon. I think 2 years will be of great help. We have
had a lot of situations where because of the nature of our
investigations we end up running against the 1-year statute of
limitations, because we are still getting information from the
carrier and evaluating it.
But my sense is that it will make a big difference. We are
usually sort of almost there, so giving us another year will
really make a big difference.
Mr. Engel. Okay. Thank you.
Mr. Sarjeant, in your testimony, you say that the FCC could
use Sections 207, 207, and 209 of the Communications Act to
enforce its provisions. Why, in your opinion, is the FCC not
doing so now?
Mr. Sarjeant. Well, I think the FCC is doing so when a
private party brings a dispute to it. As Mr. Solomon mentioned
when he testified earlier, Section 208 is the adjudication of
private party disputes. So while the FCC does have its own
authority to initiate a complaint under 208, generally
speaking, it awaits the parties to bring--a party to bring a
dispute with another party to it.
So I believe there have been 208 complaints that go to the
question of interconnection and the application of Section
251(c) and the rights and responsibilities under it.
Mr. Engel. Mr. Solomon, would you agree to that or--with
that, or would you----
Mr. Solomon. Certainly, it is a process that is available
and we get many complaints. I think in the local competition
area the complaints we have acted on have been more in the 271
area about whether the BOCS have in certain ways entered into
the long distance market too soon. We do have some recently
filed complaints that address other local competition issues as
well.
The other thing I would add is that, as I mentioned,
compensatory damages are available, although it is often the
case that what we will do is issue a ruling on liability and
set the structure for damages, and then the parties will settle
on damages. So it is not as often that we actually decide what
the damages are.
Mr. Engel. Thank you.
Mr. Halprin, when the FCC Chair, Mr. Powell, was before our
subcommittee, he stated his desire to have less upfront
regulation, but then on the other end he said if he found
someone was not playing by the rules he wanted the authority,
and I am quoting him, ``to hit them hard and hit them fast.''
In your opinion, does H.R. 1765 succeed in this goal? Does it
hit them where it hurts?
Mr. Halprin. Mr. Engel, I think it is a good start. As I
indicated, I think there are a number of other tools that can
be added. I could not agree more with Chairman Powell, a) that
it is important to move toward deregulating services and
markets which are competitive, and, second, that adequate
deterrence is necessary.
Right now, the local phone companies are--I don't know if
it is 3 million regulations, but are, as the Chairman said,
pervasively regulated. The FCC has 8, 10 different ways to
impact it, and one of the excellent things that Chairman Powell
has done is said that he is going to use the statutory and
regulatory mechanisms and not go into this ``let us make a
deal'' attitude that we have had for too long, where almost
every enforcement mechanism has been the result of private,
off-the-record discussions.
So I am extremely hopeful that Chairman Powell will, in
fact, use those enforcement mechanisms, both for deterrence and
for punishment where necessary, and the approach that he has
taken is exactly right. I do think that it can be enhanced,
particularly in the area where there are not regulations--that
is, small businesses and residential consumers.
Mr. Engel. Thank you very much.
Thank you, Mr. Chairman.
Mr. Upton. We are down to the 3-minute dash time. I
appreciate your testimony. I want to announce again that those
members who were not here to answer questions will submit some
for the record. If you could answer them quickly, that would be
appreciated.
This hearing is now adjourned. Thank you.
[Whereupon, at 12:20 p.m., the subcommittee was adjourned.]