[Congressional Record Volume 143, Number 102 (Thursday, July 17, 1997)]
[Senate]
[Pages S7669-S7688]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
NOMINATION OF JOEL I. KLEIN, OF THE DISTRICT OF COLUMBIA, TO BE AN
ASSISTANT ATTORNEY GENERAL
The bill clerk read the nomination of Joel I. Klein, of the District
of Columbia, to be an Assistant Attorney General.
Mr. ALLARD addressed the Chair.
The PRESIDING OFFICER. The Senator from Colorado is recognized.
Mr. ALLARD. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. HATCH. Madam President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HATCH. Madam President, I would like to comment just briefly here
on the nomination of Mr. Joel Klein, who has been nominated for the
position of Assistant Attorney General of the Antitrust Division of the
Department of Justice.
Last Friday, I spoke on this floor in support of Mr. Klein and urged
my colleagues to support his nomination. I certainly continue
wholeheartedly to support Mr. Joel Klein. And I continue to urge my
colleagues to join me.
I will not repeat today all that I had to say last week on Mr.
Klein's behalf, but I would like to reiterate that support and have my
statement from last Friday printed in the Record. I ask unanimous
consent to have that statement printed in the Record.
[[Page S7670]]
There being no objection, the material was ordered to be printed in
the Record, as follows:
Statement of Senator Orrin Hatch on the Nomination of Joel I. Klein To
Be Assistant Attorney General of the Antitrust Division of the
Department of Justice, July 11, 1997
Mr. President, I rise today on behalf of Mr. Joel Klein,
who has been nominated for the position of Assistant Attorney
General of the Antitrust Division of the Department of
Justice. Mr. Klein was reported out of the Judiciary
Committee unanimously on May 5. As his record and testimony
reflect, Mr. Klein is a fine nominee for this position, and I
am pleased that his nomination has finally been brought
before the full Senate today. He has my strong support.
I believe Mr. Klein is as fine a lawyer as any nominee who
has come before this committee. He graduated magna cum laude
from Harvard Law School before clerking for Chief Judge David
Brazelon of the D.C. Circuit and then Supreme Court Justice
Lewis Powell. Mr. Klein went on to practice public interest
law and later formed his own law firm, in which he developed
an outstanding reputation as an appellate lawyer arguing--and
winning--many important cases before the U.S. Supreme Court.
For the past two years, Mr. Klein has ably served as
Principal Deputy in the Justice Department's Antitrust
Division, and for the past several months he has been the
Acting Assistant Attorney General for the Antitrust Division.
It is clear, both from his speeches and his enforcement
decisions, that Mr. Klein is within the mainstream of
antitrust law and doctrine and will be a stabilizing
influence at the Antitrust Division. While no one doubts his
willingness to take vigorous enforcement actions when
appropriate, it is a credit to Mr. Klein that the U.S.
Chamber of Commerce, the National Association of
Manufacturers and other business associations have written in
strong support of his nomination to lead the Antitrust
Division. They believe he will be good for American business.
And I think they are right.
At the same time, Mr. Klein has demonstrated a sense of
direction and a vision for the Antitrust Division, which is
important in a leader. He is committed to enforcing our
Nation's antitrust laws in order to uphold our cherished free
enterprise system and protect consumers from cartels and
other anticompetitive conduct. So, I am certain that Mr.
Klein will also be good for consumers.
Antitrust doctrine has had its ups and downs over the
years--although we may not all agree on which times were
which. At this point, however, I am hopeful that antitrust is
entering a more mature and more stable period. Although
antitrust analysis is fact-intensive and will always contain
gray areas, I hope Mr. Klein will work to help make antitrust
doctrine as clear and predictable as possible so that
companies know what is permitted and what the Antitrust
Division will challenge. This will help businesses compete
vigorously without the worry and chilling effects that result
from uncertainty. I would suggest that the Division's goal
should be to avoid burdens on lawful business activities
while appropriately enforcing the law against those who
clearly violate it.
Finally, I would like to add that I personally have been
very impressed with Mr. Klein. He strikes me as a person of
strong integrity, as a highly competent and talented lawyer
who is well-suited to lead the Antitrust Division. While I
expect we may not always agree on every issue, I believe that
Mr. Klein's skills and expertise will be a service to the
Department of Justice, to antitrust policymakers, and the
health of competition in our economy and I look forward to
working with him in the coming years.
In what appears to be a last-ditch effort to scuttle Mr.
Klein's nomination, there are some who have now floated an
allegation that the nominee's participation in a particular
merger decision was somehow improper. Upon examination, let
me say that it appears to me that these reports are wholly
unfounded and provide no basis whatsoever for questioning the
nominees conduct. I understand that, with respect to the
matter at issue, Mr. Klein consulted with the proper ethics
officials and was assured that his participation raised no
conflict of interest or even the appearance thereof. Based on
what we know, this judgment appears sound, and I am confident
that the nominee has conducted himself appropriately. I
should hope that nobody in this body will use this
extraneous, ill-founded notion as an eleventh hour basis for
opposing Mr. Klein's nomination. I am confident that Mr.
Klein is a man of integrity, and urge my colleagues to cast
their votes in his favor.
Some have suggested that Mr. Klein is misapplying the
Telecommunications Act and has taken questionable positions
on particular mergers. I will refrain here from passing
judgment on any particular decision and from engaging in a
detailed debate on Telecommunications antitrust policy. I
fully recognize that there are some very, very important
issues at stake here, especially in light of a number of
ambiguities left in the wake of the Telecommunications Act. I
also recognize that there have been some controversial
mergers in this area, and yet other potentially landmark
mergers which have not come to pass.
In short, telecommunications competition and antitrust
policy is one of the most important, yet somewhat unsettled,
policy areas affecting our emerging, transforming economy.
The looming policy decisions to be made in this area cannot
be ignored and indeed I plan to have the Judiciary Committee
and/or our Antitrust Subcommittee fully explore these issues.
But I believe it is neither fair nor wise to hold a nominee
hostage because of such concerns. In my view, sound public
policy is best served by bringing this nominee up for a vote,
permitting the Justice Department to proceed with a confirmed
Chief of the Antitrust Division, and for us in Congress to
move forward and work with the Department and other involved
agencies in the formulation and implementation of
telecommunications policies.
I hope that all Senators, and especially those of the
President's own party, would permit the administration's
nominee to be voted on.
Mr. HATCH. I would also like to point out that numerous past and
present Government officials and attorneys have voiced strong support
for Mr. Klein, including James Rill and John Shenefield, who headed the
Antitrust Division during the Bush and Carter administrations
respectively.
I also ask unanimous consent that a letter to the New York Times
editor from Messrs. Rill and Shenefield be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Washington, DC,
July 11, 1997.
The New York Times,
New York, NY.
To the Editor: We write to state our disagreement with the
New York Times and with several Senators who have expressed
opposition to the nomination of Joel Klein to head the
Antitrust Division at the Justice Department. Mr. Klein
should be confirmed because he has all the qualities of
leadership and judgment to make an outstanding Assistant
Attorney General. In fact, the reasons why his detractors
have put his nomination on ``hold'' actually support the case
for his nomination. The objections to his nomination stem not
from concern about his qualifications, but from a difference
of opinion over the best way to ensure competitive markets in
telecommunications.
The Antitrust Division was created to function as a
specialist agency with the expertise and experience essential
to making sound antitrust enforcement decisions. Quick,
intuitive judgments based upon an incomplete understanding of
either the facts or the law can easily lead to incorrect
decisions. Critics of Mr. Klein's recent decisions are at a
disadvantage because they cannot possibly have his detailed
knowledge of the facts. That is why Congress wisely entrusted
such decisions to an expert agency. In the past that trust
has not been misplaced because the Division has been willing
to take an unpopular stand that it considered to be in the
public interest--as it did in settling the AT&T case.
Mr. Klein's willingness to reach a decision on the Bell
Atlantic merger indicates he has the courage to make a fine
Assistant Attorney General. He made a decision despite the
fact that whatever he decided to do was likely to offend
someone who was considering his nomination. No doubt Mr.
Klein could have found a way to delay a decision until after
he was confirmed. Instead, he made what he believed was the
correct decision from the perspective of the antitrust laws.
Mr. Klein is being criticized for doing his job. To
substitute the political process for the judgment of an
expert enforcement agency in an area where both the facts and
the law are remarkably complicated would be a dangerous
precedent that could only harm enforcement of the antitrust
laws in the future. We hope that those who have expressed
misgivings about Mr. Klein's nomination will soon allow it to
come to a vote, so that Mr. Klein can be confirmed--as he
should be.
James F. Rill.
John H. Shenefield.
Mr. Rill was Assistant Attorney General in charge of the
Antitrust Division during the Bush Administration; Mr.
Shenefield was Assistant Attorney General in charge of the
Antitrust Division during the Carter Administration.
Mr. HATCH. I am very pleased that cloture was invoked last week with
such overwhelming support. I must say, however, that I was quite
surprised, and disappointed even, to find us in the position of voting
on cloture for someone as good as Joel Klein. Even I, as chairman or
ranking member of the Judiciary Committee, have not filibustered a
single Clinton administration nominee for the Justice Department or the
Federal courts. I am not saying I will not in the future, but I will
say that I have not up until now.
Indeed, the last filibuster of a Justice Department nominee was over
the nomination of Walter Dellinger to head the Department's Office of
Legal Counsel back in October of 1993. Of all the nominees I have seen
in recent years, I must say that Joel Klein certainly ranks among the
very best of them.
Of course, I know my good colleague from South Carolina would not
take
[[Page S7671]]
this step lightly and without what is, in his view, adequate
justification, but in fairness I think we must now move quickly to
confirm this nominee who has been awaiting confirmation since May 5 of
this year.
As I explained last Friday, I believe it is critical for the
Department of Justice, and the business community generally, to have a
permanent, confirmed antitrust chief. Until we do, any antitrust matter
before the Department of Justice will invite political maneuvering and
gamesmanship by the affected parties, and any ultimate decision by the
Department, no matter how justified on the merits, will unfairly be
subject to criticism.
Mr. Klein has, to his credit, not permitted the likelihood of such
criticism to deter him from leading the Department to bring closure on
critical matters pending before the Antitrust Division. I believe it is
most unfortunate that, because of this body's, the U.S. Senate's,
delay, Mr. Klein has been unfairly criticized for such decisions. This
does a disservice to the Department as well as to those who come before
it.
By urging that we move to confirm Mr. Klein, and in expressing my
support for this fine nominee, I intend in no way to diminish the
important issues raised by my colleague from South Carolina, and
others, regarding competition and antitrust policy in the
telecommunications field. Quite the contrary, it is my belief that
telecommunications competition and antitrust policy is one of the most
important, yet somewhat unsettled, policy areas affecting our emerging
and transforming economy.
In fact, I announce today that I plan to work in coordination with
Senator DeWine, who chairs the Judiciary Committee's Antitrust
Subcommittee, to explore the looming policy decisions in this area and
the role of the Department of Justice in the telecommunications arena.
In my view, there are few competitive issues which are more worthy of
examination than this one.
Notwithstanding the tremendous import of the issues raised by some of
my colleagues, I believe it is neither fair nor wise to hold this
nominee and the Antitrust Division hostage because of concerns about
his potential positions in this very turbulent area of the law. In my
view, sound public policy is best served by bringing this nominee up
for a vote, permitting the Justice Department to proceed with a
confirmed Chief of the Antitrust Division, and for us in Congress to
move forward and work with the Department and other involved agencies
in the formulation and implementation of telecommunications policies.
So, I urge my colleagues on both sides of the aisle to vote to
confirm Joel Klein as Assistant Attorney General for the Antitrust
Division.
I have known Mr. Klein for quite a while, and I have to say I know
him well. I also know his abilities well. I can also say, as someone
who has had a little experience in the law, that Mr. Klein will stack
up with anybody. He is a fine nominee. I commend the President for
having made this choice, for having had the foresight to put somebody
like this into the Justice Department.
I commend Mr. Klein for the work that he has done up to date, for his
fearless work and not waiting until he is confirmed to act as the
acting person in that Department and for the work he did prior to this
nomination in that Department. I commend him for a lifetime of service
to this country and to his family and to the law firms that he has
worked with.
There is no question he has the academic and other credentials that
far exceed the academic and other credentials of many others who served
with distinction, who served in the Government of the United States,
and particularly in the Justice Department.
So I am very happy to support his nomination. I hope that today
everybody will support his nomination. I think it is the right thing to
do.
Again, I say, my colleague from South Carolina is sincere and
dedicated in his effort, but I hope he will see fit to support this
nomination as well, on the basis that he has made his case, he has made
his arguments, he has stood up for what he believes his principles are,
and now it is time to support the President's nominee for this
particular, important position in the Antitrust Division.
Mr. LEAHY. Madam President, it is my hope that Joel Klein will be a
strong and effective advocate for competition and the interests of
consumers when he is confirmed as Assistant Attorney General for the
Antitrust Division of the Department of Justice.
I had a close working relationship with his predecessor, Anne
Bingaman. I hope that we can develop that kind of relationship, as
well.
Mr. Klein has been buffeted a good bit since being nominated. He had
to answer some tough questions during his nomination hearing about
approving the Bell Atlantic-NYNEX merger without conditions. After the
Judiciary Committee reported his nomination to the Senate on May 8, he
responded to a letter from Senator Burns and succeeded in convincing
our colleague to remove his hold on this nomination. That letter and an
addendum filed by Mr. Klein as Acting Assistant Attorney in connection
with the application of SBC Communications before the FCC raised
serious concerns for a number of other Senators, however.
Last week the Senate proceeded by unanimous consent to consideration
of this nomination. Until that moment, I understood there to have been
Republican holds against this nominee. Why the Republican leadership
proceeded immediately upon calling up this nomination to file a cloture
petition, they will have to explain. In fact, we had worked out a time
agreement for the debate before the unnecessary cloture vote on Monday.
That agreement was confirmed by the majority and minority leaders and
pursuant thereto we are debating the nomination today.
In this regard, I note the consistent willingness of Senator Hollings
to debate and vote on this nomination from the outset, and the sincere
efforts of Senators Dorgan and Kerrey to obtain clarification of issues
that concern many of us.
I have given a good deal of thought to this nomination. I believe
that the Antitrust Division and the Assistant Attorney General who
heads it are extremely important to effective enforcement of our laws
and protection of American consumers. I have come to rely on them for
advice as we draft legislation and develop policies to foster
competition.
I hope to continue to do so. I believe that the President is to be
given significant deference on his selections for his Administration
team. The Attorney General has contacted us in support of Mr. Klein and
his interpretation of the law, and that means a good deal to me. As I
consider the legal interpretations and policies in question, I do not
find myself in total agreement with the Acting Assistant Attorney
General. Nonetheless, I will vote to confirm him.
Unlike some who have spoken in opposition to this nomination, I feel
that a good deal of the fault I find with Mr. Klein's positions stems
from the Telecommunications Act of 1996. I worked hard to correct and
improve that act's weak and deferential standards for ensuring
competition. In some measure we succeeded in strengthening the act, but
other significant provisions that I supported to foster competition and
protect consumers were rejected. That was a principal factor in my
decision to vote against that act--the bill was not strong enough.
Others predicted that passage of the Telecommunications Act would
launch an era of competition in which cable companies would compete
with the regional Bell operating companies for local phone service,
long distance companies would compete with the Bells in both local and
long distance services, and regional Bell operating companies would
compete against each other. The promise of competition was a sales
pitch but has not materialized to benefit American consumers. Instead
of competition, we see entrenchment, mega-mergers, consolidation, and
the divvying up of markets.
I, too, hoped that the Justice Department Antitrust Division would
act aggressively to protect consumers and foster competition. I have
noted my concerns during Mr. Klein's confirmation hearing in my
questioning of his unconditional approval of the Bell Atlantic-NYNEX
merger. If the current law only serves to protect against mergers that
tend to diminish competition where it already exists, it may be
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time to amend the law to foster competition where none has existed. I
hope that Joel Klein will help us do that.
I was taken aback by the language Mr. Klein used in his May 20 letter
to Senator Burns by which he ``specifically rejected the suggestion in
the conference report'' on the Telecommunications Act that the 8(c)
test be employed. But the more that I reviewed the matter, the more I
realized that much of the fault lies with the conference report itself
and the Telecommunications Act's failure to provide a definitive test.
I was not appointed to serve on that conference committee, although I
was serving as the ranking Democrat on the Antitrust Subcommittee on
the Judiciary Committee at the time. I would have wanted to help that
conference incorporate a stronger test into the law. That did not
happen.
It is my hope that working with the Department of Justice we can now
help ensure that the test the Attorney General has adopted--that the
local market be fully and irreversibly open to competition--is a
meaningful standard and strong enforcement tool. If not, Congress
should revisit it and strengthen it.
I do think that Senator Hollings is correct when he criticizes the
addendum to the Justice Department's submission in connection with the
SBC Communications application. Both Senator Hollings and Congressman
Bliley concur as principal drafters of the law regarding their intent
and its meaning. I trust that the Antitrust Division will review its
position on the proper meaning of section 271 of the Telecommunications
Act and its requirement for competing service providers to offer
facilities-based services.
In opening the debate on this nomination, Senator Hatch cited
``ambiguities left in the wake of the Telecommunications law'' and
``unsettled policy areas'' and said:
But I believe it is neither fair nor wise to hold a nominee
hostage because of such concerns, especially one as competent
and decent as Joel Klein. In my view, sound public policy is
best served by bringing this nominee up for a vote permitting
the Justice Department to proceed with a confirmed chief of
the Antitrust Division, and for us in Congress to move
forward and work with the Department and other involved
agencies in the formulation and implementation of
telecommunications policies.
I agree. I look forward to the Judiciary Committee and our Antitrust
Subcommittee exploring these important competition and antitrust policy
matters. I will likewise expect Senator Hatch to support other
Administration nominees for areas in which policies are in controversy.
Now that the majority leader has moved to implement his new hold
policy of proceeding on nominations, I trust he will not delay any
further the nomination of Eric Holder to be Deputy Attorney General and
that he will promptly move to consideration of the judicial nominations
reported by the Judiciary Committee over the last several weeks.
Some wrongly view confirmation as the end of the nominee's work with
the Senate. I hope that this is just the beginning of Assistant
Attorney General Joel Klein's work with us to protect consumers and
foster competition. This is an awesome responsibility.
Mr. HATCH. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. HATCH. I ask unanimous consent that the call of the quorum be
rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. KERREY addressed the Chair.
The PRESIDING OFFICER. The Senator from Nebraska is recognized.
Mr. KERREY. Madam President, I had a conversation with the
distinguished Senator from Utah who encouraged me to throw my entire
prepared remarks away and take a gentlemanly course and support the
nomination of Joel Klein. I have chosen not to do that. I have great
respect for the Senator from Utah, and I have chosen to continue to
offer to my colleagues reasons why I have chosen to vote against Joel
Klein, why I have chosen to oppose the nomination.
I like the man, I respect him, I believe he is a good individual, and
I don't like coming here opposing a nominee that President Clinton sent
to the Congress for confirmation. I would like very much to give him my
unqualified support, but I simply, Madam President, cannot.
About a year and a half ago, many of us in this Chamber who
participated in this debate over the Telecommunications Act--and I must
say, Madam President, one of the reasons I found myself in opposition
to Mr. Klein is I led him to get the Department a role in the
Telecommunications Act so that they would have some voice in
determining whether or not there could be competition prior to
approving the moving of entry from one sector to another. I fought for
that, and many opposed that. We ended the day and prevailed here on the
floor, prevailed in conference, and prevailed for final passage. It was
signed and made a part of the law.
Mr. Klein, in response to a question raised by a Member of this body
who actually opposed that, it seems to me in a letter gives away
Justice's role. Now the Attorney General, Janet Reno, has written in
response to our asking her if she thinks Justice has a role, has
written a letter saying, indeed, she believes Justice does have a role,
and she intends to exercise the authority the law gives her.
Indeed, Madam President, Mr. Klein, in meetings with me and with
others who were concerned about the remarks he made in this letter, has
given me assurance and pointed to several cases where his actions seem
to be very, very much procompetitor--my hope is that Mr. Klein is. As
the head of the Antitrust Division of Justice--I can read the tea
leaves earlier on the cloture vote and would expect he will receive a
fairly substantial vote, a resounding vote of support. My hope is I am
wrong.
This morning in the Omaha World Herald this article appeared. The
headline says, ``So Far, Consumers the Losers in Battle for Dial-Tone
Dollars.''
Madam President, this is what Members should be concerned about, not
just the Antitrust Division of Justice but they should also be
concerned about the nominees for the Federal Communications Commission
and what they intend to do, how they intend to vote, how they intend to
make certain that we have competition, because unless we get
competition at the local level, unless there is competition at that
local level for that local dial tone, indeed for all information and
services at the local level, it is not likely the consumers will
benefit in the same ways that consumers benefited after divestiture in
1982. Divestiture produced competition in long distance. That
competition resulted in a reduction of price to the consumer and an
improvement of quality, as competition almost always does.
Without precedent, this legislation proposes to move us from a
monopoly at the local level--which we still have for most residential
customers--from a monopoly to a competitive environment. We are not
there yet. We still have a monopoly. That monopoly can always, if there
is only one choice that the consumer has, can always basically charge
whatever they want to charge.
This new legislation preempts States authorities from being able to
do many of the things they had done in the past. There are 358,000
residential lines in the regional Bell company serving Omaha, NE. The
present rate for that local residential service is proposed to be
$16.35, from a current rate of $14.90, a 9.7-percent increase, almost a
10-percent increase from another local company that is also being
proposed. They have that authority, now Madam President, to be able to
come and raise these residential rates.
It is going to be a problem for all of us if we do not get, in as
expeditious a way as possible, competition down to the local level.
What will happen, all of us will have to be explaining why it was, in
1996 when we debated this bill, why it was that we all promised this
would be great for the consumers--reduction in price, improvement in
quality of service--why it is that they are not seeing this reduction
in price, why it is they are seeing an increase in price instead of a
promised reduction. The answer will be, we don't have competition yet.
My belief is that the Congress is going to have to think in a very
hard and clear fashion what it is we have to do in order to make
certain that we
[[Page S7673]]
have competition. I remember the distinguished Senator from Arizona,
Senator McCain, as he debated this bill, and I believe he ended up
voting against it for precisely the same reasons I am talking about
now. He actually talked about lots of regulatory requirements that
didn't necessarily mean that we would get competition. He favored, as I
heard him at the time, something that actually had great appeal to me,
which is forget all the regulatory requirements, let's have almost a Le
Mans racing start. Set a time certain when everybody can compete,
regardless of who they were, in everybody else's market--let's have
that.
As my colleagues will probably recall in 1996 when we were having our
debate, the prediction was that what we would have is the regional Bell
companies competing against one another in individual markets, that we
would have the cable companies then competing. Since that time, what we
have seen is a significant amount of mergers, and I don't believe the
kind of movement needed, with the single exception of a few companies.
We have seen Ameritech moving aggressively to open their market and try
to get approval, as well to get into long distance. That is the
transaction that the law provides for--open up your local market and
then you can go into long distance service. That is the idea of the
law. But it isn't happening very fast.
As a consequence, I don't think I will be the only Member who opens
up their hometown newspaper and looks at the headline and sees, ``So
far consumers the losers in battle for dial-tone dollars.'' The reason
the consumers will be the losers is that the consumers in Omaha, NE,
the residential consumers, when it comes to dial tone, they have two
choices--take it or leave it. If you don't like the increase you can
buy your local service from nobody else. You really only have one
choice.
I say, Madam President, I will not be supporting the nomination of
Mr. Klein. I will be voting against Mr. Klein. I hope that other
Members who are wondering what this debate is about will give it some
very serious thought. They will, as well, be hearing from consumers in
the not-too-distant future, if they haven't already, ``I remember,
Senator, when you were debating this. Didn't I recall you issued a
press release saying that this legislation was going to produce lots of
new competition and reduction in price, and improvement and quality of
service? Where is the competition? I still don't see it. Where is the
promised price reduction? Where is the promised benefits to the
consumers that were supposed to be coming our way at a theater near
you?'' Instead, what we have is price increases.
Mr. Klein, in his rather unfortunate, as he describes it, letter in
response to a question by a Member who opposed giving the Justice
Department authority over antitrust matters when it came to
telecommunications, Mr. Klein says today, ``Well, I didn't really mean
all those things. I intend to be a very forceful advocate for
competition.''
Madam President, I don't believe that is likely to happen. Mr. Klein
approved the Bell Atlantic NYNEX merger. There were a lot of people,
when this bill was being debated, that would not have stood up and
said, ``The reason I am supporting this is because I hope what we get
is the regional Bell operating companies merging with one another. I
hope that happens. I hope we get mergers because that is exactly what
we need in order to get more choice.'' I don't know how that produces
more choice for the residential consumers in this new expanded area
that now a single company will have. I see decreased choice.
I heard a lot of people coming down and saying in fact what we are
likely to see is the large local monopolies competing with one another
for service. Though we are seeing some of it, I don't believe we are
seeing anywhere near what we promised we were going to see, and unless
we get a vigorous advocate for competition in the Department of
Justice, unless we get, as well, on the Federal Communications
Commission, appointees who will do the same, as I said, Madam
President, there will be a lot of people in this Senate as well as in
the House of Representatives having to explain to their consumers, to
their residential consumers, just what exactly did you think was going
to happen back in 1996?
So I hope that my colleagues, when they come down here to make a
decision about whether or not they will vote yes or no for the man who
will have a very significant role in determining whether or not we were
right or wrong in 1996, I hope they give very serious consideration to
whether or not they believe that this individual is going to be able to
do what we all promised we were going to try to do when we voted for
and took credit for this very significant piece of legislation in 1996.
I yield the floor.
Mr. HOLLINGS. Madam President, let me first thank my colleague, the
distinguished Senator from Nebraska. He has been very, very
participatory over the years. It actually took us about 4 years to get
the Telecommunications Act of 1996 to a vote. On both sides of the
Capitol and both sides of the aisle we had a very, very deliberate
discussion and treatment of the particular issues involved. No one
understood better the thrust of trying to deregulate and bring about
competition than Senator Kerrey of Nebraska. I praise him publicly,
once again, for his leadership and the inclusions that he had contained
in the final act itself.
Referring to that final act, Senator Kerrey tells exactly what is at
stake here--this institution. The U.S. Senate seemingly has no
historical memory. What we really had on course during the 1960's,
1970's and early 1980's was a terrible monopolistic control of American
Telephone & Telegraph. The fact of the matter was that they had some 12
particular rulings by the Federal Communications Commission. But the
smart lawyers for the AT&T group would always put those on appeal, seek
further delay, further consideration. While there were 12 orders on
course at the Federal Communications Commission, mind you me, none of
them could get enforced. We were in an outrageous standoff in the
courts and at the Commission and, yes, an outrageous standoff in the
Congress itself. We could not get a bill passed. They have that much
political power. There isn't any question about it.
So, a very brilliant and dedicated jurist, Harold Greene of the
circuit court here in Washington, DC, took this matter over on a
petition from the Justice Department for the AT&T breakup. In 1984, the
modified final judgment was handed down and the Bell companies were
spun off on their own to begin competition, and AT&T itself was opened
up for competition. That wasn't easy. I wish my friend, Bill McGowan of
MCI was here because it was 30 years ago, practically, that he, with a
little two-floor apartment down in Georgetown, with a little aerial on
top and three assistants, started to try to get into long distance.
Very interestingly, the Farmer's Home finally gave him a loan. Can you
imagine that? Competition started with a Farmer's Home loan. With that
little bank, so to speak, he worked and brought some cases, he began
nibbling away at the magnificent monopoly of AT&T in long distance.
Since that time, of course, the long distance market has opened up.
You've got MCI, Sprint, GTE, and the Brits are coming in, and the
Germans, and all are participating--the Canadians, and otherwise. And
so you have a very dynamic long distance market.
However, the monopolies at the local level persisted, and those
monopolies were intended for the ``public convenience and necessity''--
that is a phrase hardly heard in the halls of our National Government--
in order for the advantages, the services, the opportunity, the
advancements to be brought onto the market and enjoyed by the public,
we instituted the Federal Communications Commission. We had the old
rulings coming out with respect to getting licenses to carry, and
otherwise, at the State level, at ``public convenience and necessity.''
And we intentionally gave these seven Bell operating companies a
monopoly. We said: You provide the services and we will protect you so
that you are not bothered with the competition. On the contrary, if you
get those services to the people, we will give you a profit that
averages around 12 percent. Sometimes, in hearings, it went above that.
You find them now to have made one heck of a lot of money. But my crowd
is down in Buenos Aires, and I just read
[[Page S7674]]
this past week that Bell South is investing in Brazil, which has some
20 million people. That is way more than the 3.6 million that we have
in my little State of South Carolina. So more power to them. They have
been well-operated. They have that monopoly. That was a big headache
that we had in trying to bring about deregulation, deregulation,
deregulation.
This crowd up here in the House and Senate have no idea of the
struggle that we had and the expertise that went into the drafting of
this particular Telecommunications Act of 1996, to make sure that that
monopolistic control, that checkpoint, that bottleneck, that choke-
point was broken up, so that competition really could ensue. And we had
what we call the ``checklist.'' And I can see that being worked on late
nights around the clock, over Thanksgiving holidays, working, of
course, with the Bell operating companies, we would meet--I forgot my
days now-- there was one on Friday and long distance on Monday. The
long distance may have been on Friday and the Bell operating companies
on Monday. But I set up a system, those years back, as the chairman of
the Committee of Commerce, Science, and Transportation, whereby
everything would be operated on top of the table. We would bring all
sides in. They would all be considered and they would be told where we
were and what we were negotiating and why.
I deemed that nothing was going to be done, because there were all
kinds of attempts during the 1970's and 1980's--and I had learned from
hard experience that you had to have a bipartisan bill and you had to
have all the parties in, and no last minute surprises, or anything of
that kind. So credit must be given to the various staffs on the
Republican and Democratic sides, working around the clock, to fathom
the particular provisions that are in issue in this particular
appointment.
I know that some don't want to hear, and others don't care and they
don't listen to this particular background. But it is a very
interesting thing because it was worked out and finally voted upon by
95 Republican and Democratic Senators when it passed. There was a
strong majority over on the House side.
It was a bill that, interestingly, when we finally agreed in December
of 1995, our distinguished friend, the Vice President of the United
States, heard that we in conference had gotten an agreement, and he
came on the NBC Evening News program right in the middle of the news
program. I happened to be listening when I had gotten back to the
office. What occurred was that Tom Brokaw said, ``Wait a minute, ladies
and gentlemen, we have a newsbreak from the Vice President of the
United States.'' I was worried that something may have occurred to the
President, but it was not that at all. He came on and said, ``We
finally got my information superhighway agreed upon and I got
everything I wanted. Well, this was December 1995, right after that
1994 election. Speaker Gingrich on the House side said, ``If he got
everything he wanted, that bill is deader than Elvis.'' The leader on
the Senate side, Senator Robert Dole, said, ``I am not going to call
it.''
Of course, I had the duty, during the ensuing weeks through into
Christmas and Christmas week, and all through the month of January, of
holding the line.
I describe that to my colleagues because I want them to know that
every little thing in that bill was worked out with everyone and to
their satisfaction and, finally, of course, to the Speaker and the
Majority Leader Dole, because the bills were called in February of last
year and passed both Houses and were signed by the President.
Now, in coming about the breakup of the monopolies, to make sure--
because you can't get competition going unless the Bell companies go
along. I can tell you here and now, if I ran a monopoly, I would
continue investing in Buenos Aires and all like that for my
stockholders, and what have you, and making money, and just hold on and
appeal and drag feet and everything else.
Let me emphasize that is just exactly what has happened, why this
particular nomination ought to really be rejected. It is a sort of sad
day when you work as hard as you do to get something done for the
administration, and the administration sends up an appointment of this
kind that upsets the entire apple cart.
Let me tell you, Madam President, here it is, just last weekend,
``MCI Widens Local Market; Loss Estimate,'' in the July 11 Wall Street
Journal. Some $800 million--saying its losses from entering that
business could total $800 million this year, more than double its
original estimate. Why? Because here is an analysis right here again in
the Wall Street Journal, over the weekend, when they announced that
their shares dropped 17 percent. I only quote Chris Mines, senior
analyst of Forester Research, Inc., in Cambridge, MA, who said, ``MCI's
complaints are totally justified. In general, I think local carriers
are dragging their feet, using every means at their disposal to protect
their monopolies.''
Now, Madam President, it is just not the news articles in the Wall
Street Journal. Take this week's Business Week magazine, on page 33,
``Why SBC Shouldn't be the First Bell in Long Distance.'' Rather than
reading the entire article, little squibs encapsulate those reasons.
``How SBC keeps rivals away: one, excess charges. AT&T needed
customized routing to provide directory assistance to its customers in
SBC's territory. SBC's initial quote is $300 million. AT&T says other
Bells charge $1 million to $2 million.'' That is rather than the $300
million.
So it is perfectly obvious that they sit there and make this
outrageous charge and that holds up everything. You get Senators
running around, ``I don't know what is the matter with our bill. We
want to open up the market. Let market forces operate.'' You have
monopolies determined. Here is another reason here how SBC keeps rivals
away. ``In Oklahoma, competitors must pay $19.13 per line for SBC's
unbundled network, but SBC's retail rates are $14.34 a month.''
So, if they are going to charge 20 percent again more than anybody
coming in the market, anybody coming in the market is going broke, and
there is a loss by another long distance carrier. AT&T is trying to get
in this market. MCI is trying to get in the other long distance market.
They are losing already $800 million trying to just break it.
Third, legal attacks. How SBC keeps rivals away. Legal attacks. SBC
has appealed even basic decisions by State regulators. For example, SBC
appealed a Texas decision to let Teleport Communications Group provide
competing local service. SBC contends Teleport had not met State
standards.
Madam President, I cite this from this particular article because
it's momentary, it's timely. What really happens is not just MCI and
AT&T, but others in these monopolies, with their lawyers, are bringing
cases to test the constitutionality of the Telecommunications Act of
1996. The one thing they said, ``Let's stop the bickering. Can't we
work in a bipartisan nature and get things done?'' The one thing done
this past Congress on a bipartisan basis was a 95 to 4 vote for the
Telecommunications Act of 1996--totally bipartisan. I think those
things ought to be understood and how they came about, and how long and
hard we worked over them.
Now, in getting about this particular task, I communicated with
President Clinton and the White House and asked him if he could note in
a letter just exactly what his concerns were. I want to make sure staff
gets copies of every one of these because they are not getting my file.
And every time I get ready to talk, I just need a few notes. I can't
even get a few notes. They are back there hidden away. So you get your
copies.
Remember this: I have a White House letter, Madam President, dated
October 26, 1995, from President Clinton. I ask unanimous consent that
this letter be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
The White House,
Washington, DC, October 26, 1995.
Hon. Ernest F. Hollings,
Ranking Member, Committee on Commerce, Science, and
Transportation, U.S. Senate, Washington, DC.
Dear Fritz: I enjoyed our telephone conversation today
regarding the upcoming conference on the telecommunications
reform bill and would like to follow-up on your request
regarding the specific issues of concern to me in the
proposed legislation.
As I said in our discussion, I am committed to promoting
competition in every aspect of
[[Page S7675]]
the telecommunications and information industries. I believe
that the legislation should protect and promote diversity of
ownership and opinions in the mass media, should protect
consumers from unjustified rate increases for cable and
telephone services, and, in particular, should include a test
specifically designed to ensure that the Bell companies
entering into long distance markets will not impede
competition.
Earlier this year, my Administration provided comments on
S. 652 and H.R. 1555 as passed. I remain concerned that
neither bill provides a meaningful role for the Department of
Justice in safeguarding competition before local telephone
companies enter new markets. I continue to be concerned that
the bills allow too much concentration within the mass media
and in individual markets, which could reduce the diversity
of news and information available to the public. I also
believe that the provisions allowing mergers of cable and
telephone companies are overly broad. In addition, I oppose
deregulating cable programming services and equipment rates
before cable operators face real competition. I remain
committed, as well, to the other concerns contained in those
earlier statements on the two bills.
I applaud the Senate and the House for including provisions
requiring all new televisions to contain technology that will
allow parents to block out programs with violent or
objectionable content. I strongly support retention in the
final bill of the Snowe-Rockefeller provision that will
ensure that schools, libraries and hospitals have access to
advanced telecommunications services.
I look forward to working with you and your colleagues
during the conference to produce legislation that effectively
addresses these concerns.
Sincerely,
Bill Clinton.
Mr. HOLLINGS. Madam President, I quote the second paragraph:
As I said in our discussion, I am committed to promoting
competition in every aspect of the telecommunications and
information industries. I believe that the legislation should
protect and promote diversity of ownership and opinions in
the mass media, should protect consumers from unjustified
rate increases for cable and telephone services and, in
particular, should include a test specifically designed to
ensure that the bell companies entering into long distance
markets will not impede competition.
I emphasize this because I had the charge from the President himself.
Now you have the President's nominee coming and refuting all of that,
because if you want to know where rates will increase, instead of
competition, we are going to get consolidation, and instead of a
competitive place in the market, you are going to get fixes all around.
This crowd has been operating monopolies for, lo, decades upon decades.
They know how to do it. They have a hard time learning.
AT&T in the 1980's pared down by a third the size of AT&T after the
modified final judgment in 1984. But they made twice the profit after
they finally learned how to compete. Our friends, the Bells, have yet
to come and learn that. In fact, I strongly advised from these
happenings that they have no idea of competing; they have every idea of
holding onto the monopoly as long as they can.
Madam President, ``If we can get an Assistant Attorney General or
Deputy Attorney General''--whatever you want to call Mr. Joel Klein--
``in our camp, rather we can hold on and continue making out like
gangbusters for years to come.''
Now, as a result of the President's letter, we finally have section
271(c)(1)(A) of the Telecommunications Act, and I ask that the
statement under ``presence of the facilities-based competitor,
including both residential and business subscribers, having a
facilities-based competitor for both business and residential''--which
was proscribed in this law, and there are no ifs, ands and buts how it
is written--I ask unanimous consent that it be printed in the Record,
just that section is necessary and not the entire act, of course.
There being no objection, the material was ordered to be printed in
the Record, as follows:
(A) Presence of a facilities-based competitor.--A Bell
operating company meets the requirements of this subparagraph
if it has entered into one or more binding agreements that
have been approved under section 252 specifying the terms and
conditions under which the Bell operating company is
providing access and interconnection to its network
facilities for the network facilities of one or more
unaffiliated competing providers of telephone exchange
service (as defined in section 3(47)(A), but excluding
exchange access) to residential and business subscribers. For
the purpose of this subparagraph, such telephone exchange
service may be offered by such competing providers either
exclusively over their own telephone exchange service
facilities or predominantly over their own telephone exchange
facilities in combination with the resale of the
telecommunications services of another carrier. For the
purpose of this subparagraph, services provided pursuant to
subpart K of part 22 of the Commission's regulations (47
C.F.R. 22.901 et seq.) shall not be considered to be
telephone exchange services.
Mr. HOLLINGS. Madam President, we had a glowing candidate for the
Acting Assistant Attorney General in Joel Klein on March 11, 1997. He
went down to a class, a legal work seminar, on March 11, and the title
of the seminar was ``Preparing for Competition in a Deregulated
Telecommunications Market.''
Joel Klein, on page 9, I read here, and I quote: ``Now let me add a
few words about how we will apply this standard to our BOC applications
under section 271 of the act. Our preference, though we recognize that
it may not always occur, is to see actual broad-based business and
residential entry into a local market.''
I ask unanimous consent that this particular speech be printed in the
Record in its entirety. So I am not quoting out of context.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Preparing for Competition in a Deregulated Telecommunications Market
(By Joel I. Klein, Acting Assistant Attorney General, Antitrust
Division, U.S. Department of Justice)
First, I want to say that I'm delighted to be here today
and I'm grateful to Joe Sims and Phil Verveer for having
invited me. I can tell from reading the program and looking
at the impressive array of speakers that this has been a
comprehensive and informative conference on some cutting-edge
issues in the communications industry. In fact, when I
realized that I was going to be the last person to speak I
was reminded of Adlai Stevenson's quip in a similar situation
when he said, ``We're at the point in the program where
everything that could be said has been said but,
unfortunately, not everyone has had a chance to say it.'' So,
I'm especially appreciative that so many of you have stayed
around to hear my closing remarks and I hope that, despite
the odds, I may be able to add something to the overall
discussion.
Let me start by stating the obvious: what we're going
through right now in the communications field is truly
extraordinary. Technology, globalization, and last year's
legislative, executive, and administrative actions have come
together to create an environment of rapid change, great
opportunity, and considerable risk. We all know that ten
years from now things will be very different in the
communications industry; we just don't know how they'll
differ. From our perspective at the Antitrust Division, we
have one, overarching goal--to maximize competition. To be
more concrete about that, as I see it, the ideal result would
be a variety of different conduits--be it wire, wireless,
cable, or what have you--that link people with all kinds of
content--be it voice, video, audio, computer, and so on. But
envisioning an ultimately desirable competitive market
structure is not the difficult part here: what's really hard
is how we get there in a market that's transitioning from
regulation to competition. And that is the journey that we in
the Antitrust Division have embarked upon--at a somewhat
dizzying pace. I might add, since the passage of the 1996
Telecom Act a little more than a year ago.
Before I focus in on some of the specifics, let me give you
a sense of the breadth of what we're dealing with. In the
first place, we've seen a flood of radio mergers now that the
1996 Act has authorized far more liberal ownership rules. I'm
advised that there have been over a thousand such mergers in
the past year and about 150 of them have been brought before
the Division, principally through the hart-Scott-Rodino
process, but also through independent inquiry in several non-
reportable transactions. We've conducted extensive
investigations in many of these cases and, to date, we've
sought divestitures in a handful of mergers. And while that's
important in terms of the economy the real story here is how
much concentration is occurring. In short, the concentration
envisioned by Congress is taking place, no doubt allowing the
industry to achieve some important efficiencies. And so long
as this consolidation doesn't erode competitive opportunities
in any market--and, with the application of sound antitrust
principles as a guide. I don't think it will--then these
mergers may ultimately strengthen the position of radio in
the overall communications industry. And, frankly, that's all
to the good.
Beyond radio, we're also experiencing consolidation in
other areas of the communications industry. The FCC is still
evaluating what limits to place on broadcast ownership but,
in other areas, we've already seen significant movement.
There's been a major Bell Company/cable merger--U.S. West/
Continental Cable--which the Division cleared with some
modification to the original deal. And we've also seen three
major telephone mergers--SBC/Pactel, which we cleared without
objection several months ago, and Bell Atlantic/NYNEX and
MCI/British Telecom,
[[Page S7676]]
which are both still pending before us. These cases raise
important questions about potential competition, and also
about international interconnection where market conditions
may differ significantly in different countries and we have
expended, and will continue to expend, considerable time and
energy analyzing them and other such mergers that may come
before us in the future.
Now, in the time that remains, I'd like to focus in on one
particularly challenging aspect of this journey through the
communications industry and that is the deregulation of
telephone services in this country. This was probably the
most significant part of the 1996 Act and it raises
enormously difficult questions, questions that we at the
Division have, to some degree, been dealing with under the
Modified Final Judgment, or the ``MFJ,'' that resulted in the
break-up of AT&T and the creation of seven Regional Bell
Operating Companies, or ``RBOCs,'' as they are called, with
severe restrictions on what they could do beyond providing
local telephony within their own service areas. As a result
of that lawsuit, there can be little doubt that the Nation
has seen significantly improved long distance competition,
accompanied by the innovation and downward pressure on prices
that results from such competition. That is not to say that
everything's perfect in long distance--even more competition
would certainly be welcome--but it's important to recognize
how far we have come when we have three well-established
competitors, hundreds of other resellers, and four fiber-
optic systems wiring the country, with a fifth in progress. I
can tell you from my personal dealings with officials from
other countries that, as a result of the AT&T case, the U.S.
is positioned for global competition in a way that is the
envy of our current trading partners--whose telephone
companies will be our future competitors, I might add.
But now we are charged with taking the next steps--in
particular, the Congress, together with the leadership
provided by the Clinton Administration, established a
statutory framework that is designed to open up local
telephone markets to competition and that would allow the
local companies to move into in-region, long distance service
for the first time. The goal of this process is to have full-
scale competition in telephony throughout the nation. In a
nutshell, consumers should have as many as possible, but at
least several local options, long distance options, and,
ultimately, combined local and long distance options (one-
stop shopping, if you will). Once again, knowing where we
want to get is the easy part: it's getting there that's hard.
And to accomplish that goal, the statute puts in place a
variety of interrelated steps and assigns responsibility to
three separate agencies--the FCC, the various state
regulatory commissions, and the Department of Justice. This
mix of players, I would suggest, sensibly reflects the fact
that telephone regulation has historically been a shared
function of the FCC and the state agencies and, quite
naturally, both of them are necessary to the deregulatory
process as well. And we also belong there, essentially
because the goal of the process is competition and we have
expertise in that area generally and with respect to
telephony, in particular, because of our extensive
involvement in the AT&T case.
The vision of the 1996 Act was premised on a simple
formula: if the regulatory environment were different, the
market for local telephone service--previously thought to be
a ``natural monopoly''--would be subject to the discipline of
competition, bringing down prices and increasing quality and
choices for consumers. On this point, there was widespread
agreement, supported by the experience of several states in
paving the way for competition in the market for local
telephone service. Building on that experience in 1995, the
Antitrust Division, along with Ameritech, AT&T, and many
other parties proposed, on a trial basis, a waiver of the
MFJ, allowing Ameritech to offer in-region, long distance
service in return for compliance with some measures designed
to open its local market to competition and a demonstration
that actual competitive opportunities were expanding. This
proposed waiver, like the 1996 Act, contemplated the creation
of new, facilities-based, local service as a way to bring
real competition to the local telephone market. The Act seeks
to do this on a much broader scale, and in so doing, calls
for a series of transitional steps. Getting these steps right
is no easy task, and although they may not immediately lead
to the type of comprehensive facilities-based service that
we hope to see over time, we all realize that we should
not let the perfect be the enemy of the good here.
As I see it then, implementing the deregulatory vision set
out in the 1996 Act involves four basic things: (1) a set of
rules that will allow new entrants into local markets--the
so-called interconnection rules adopted by the FCC last
August and which have now been stayed in significant part by
the Eighth Circuit: (2) another set of provisions that
establish the criteria necessary to facilitate local
competition and with which the RBOCs must comply before they
are allowed to provide long distance and one-stop shopping
services: (3) access reform, designed to reduce the price
paid to local carriers for originating and terminating long
distance calls so that this price will reflect the actual
cost of providing the service: and (4) a universal service
plan that will eventually replace the implicit subsidies
contained within the current regulated telephone service
system with explicit and competitively neutral subsidies. As
to this last point, I should quickly explain that the current
system requires some users to pay above-cost rates to
subsidize other users who are served at rates below cost: the
1996 Act calls for these implicit subsidies to be made
explicit and to be paid for through a competitively neutral
universal service fund. Until we fully implement this
mandate, some local exchange carriers (or LECs, as they are
called) may be required to bear the costs of serving these
customers at uneconomic rates and/or we will continue to see
inefficient pricing and entry signals which will tend to
distort competitive opportunities and thereby hurt consumers.
Now, as I see it, the paradox of this kind of deregulatory
effort is that it depends upon a series of regulatory steps--
all taken, to be sure, in the name of deregulation--and those
regulatory steps, in turn, can significantly affect the long-
term prospects for full-scale competition in telephony. There
is no formula or equation that one can look to in order to
get these things right. They involve the exercise of
discretion by government agencies, which in turn requires
careful, sound judgments. And, given that these predictive
judgments are necessarily based on incomplete information, we
should all be somewhat humble in second-guessing those who
have to make the calls. Interestingly, the Fifth Circuit,
quoting Justice Cardozo, made just this point about a quarter
of a century ago in a case evaluating an FCC regulation
prohibiting telephone companies from offering cable service
in their regions, explaining that: ``[i]n a complex and
dynamic industry such as the communications field, it cannot
be expected that the agency charged with its regulation will
have perfect clairvoyance. Indeed, Justice Cardozo once said,
`Hardship must at times result from postponement of the rule
of action till a time when action is complete. It is one of
the consequences of the limitations of the human intellect
and of the denial to legislators and judges of infinite
prevision.' '' \1\
---------------------------------------------------------------------------
\1\ General Telephone Co. of Southwest v. United States, 449
F.2d 846, 863 (5th Cir. 1971) (quoting Benjamin Cardozo. The
Nature of the Judicial Process 145 (1921)).
---------------------------------------------------------------------------
Against the backdrop of this call for humility, let me now
go on to highlight the problems in making the necessary
regulatory judgments by examining the four transitional steps
that I just mentioned. First, in order to get even some local
competition, at least for some period of time, competing
carriers will have to either purchase service from the LEC at
wholesale and attempt to compete with the same LEC by
reselling at retail or it will have to use the LEC's
facilities--switches, loops, and the like--in whole or in
part. In either case, someone has to set a price for the
product--be it wholesale service or the unbundled elements.
That price in turn can have important repercussions--set too
high, it can unfairly burden new entrants and make local
competition impossible; and set too low, it can give new
entrants a competitive advantage at the expense of the
incumbent LEC. What this all means is not just that one of
these companies may make a little (or even a lot) more than
the other but that long-term competitive conditions can be
seriously affected by these pricing decisions. This
particular concern has led to the Eighth Circuit litigation
in which the incumbent LECs are challenging the FCC's pricing
methodology (as well as the Commission's authority to impose
a certain pricing methodology to begin with). Fortunately, at
least from our point of view, most of the States have
followed the Commission's pricing methodology and so, while
the litigation goes forward, the actual prices for wholesale
and unbundled elements may not be materially different
regardless of who ultimately prevails in the Eighth Circuit.
I say that's fortunate from our point of view because we
supported the FCC's approach as a sound pricing methodology
for stimulating efficient local entry.
The second area where some difficult regulatory decisions
must be made in this deregulatory process has to do with the
issue of when a particular RBOC is permitted to enter the
long distance market. Under the statute, this is a state-by-
state determination, made by the FCC, with key inputs from
the state regulatory agencies and the Department of Justice.
Here, too, you can readily see the significance of the trade-
offs in the regulatory decision. If you let the RBOC into
long distance prematurely, two bad things can happen. First,
you may undermine the chance to ensure a competitive local
market since once in long distance, the RBOC's incentive to
cooperate with its competitors will diminish--if not
altogether, at least significantly. And second and
derivatively, a premature entry into in-region, long distance
service gives the RBOC an unfair advantage in the offering of
one-stop shopping since it can readily combine its local
service with one of several long distance services easily
available to it in the marketplace, while its potential
competitors may not have nearly so easy a time
combining their long distance service with local service
that has heretofore been unavailable to them. On the other
hand, if you keep the RBOC out of long distances for too
long a period, you risk giving the long distance carriers
an undue competitive benefit, since only they are able to
offer customers both local and long distance service for
the period of time that the RBOC is denied entry, thereby
giving them a first mover advantage. Not surprisingly in
this environment both kinds
[[Page S7677]]
of carriers--local and long distance--feel very strongly
about the timing of RBOC entry into long distance, even to
the point of purchasing significant advertising to make
their respective cases.
For our part at the Antirust Division the issue of RBOC
entry into long distance has been a special focus. Under the
statute, we are expressly charged with evaluating each of the
fifty state applications and our competitive assessment must
be given ``substantial weight'' by the FCC. What is probably
most notable about the process is that we are authorized to
make our assessment ``using any standard the Attorney General
considers appropriate.'' Now, given that broad swath the
first thing we needed to do is to establish a concrete
standard so that applicants would know in advance how we'd be
evaluating them. We also needed to relate our standard to the
other, specific provisions of the statute--such as the 14-
point checklist the Section 272 separate-subsidiary
requirements, and the Track A and Track B entry provisions,
as well as the public interest test that the FCC is charged
with applying. In order to meet this challenge, we engaged in
an extensive inquiry, soliciting comments from all interested
parties and meeting with virtually all the affected players.
We received almost seventy-five comments and have met with
countless industry officials.
The upshot of this process has been to reach the following
conclusion: Our basic standard is that before an RBOC should
be allowed to enter long distance, it must be able to
demonstrate that its market is truly open (which, I should
make clear, is different from saying its market is fully
competitive). Before I put meat on the bones of that standard
let me first say how we think it integrates with the
remainder of Section 271. We believe that the other
provisions--the checklist the facilities-based requirement
the separate-subsidiary requirement and the option of Track
B--are all necessary, though not sufficient, to support
entry. These requirements, almost as their names imply,
involves fixed points but, by themselves are not sufficiently
dynamic to ensure that real competition can take place.
That's where we think our approach comes into play; we view
it as the dynamic part of the equation looking to ensure that
the wholesale support systems for opening up local markets
are not simply claimed to be in place, but that they will
actually work in fact are scalable, and have been
beachmarked, so that competition will be real and not marely
theortical. We think this approach is the best way to ensure
competitive effectiveness which we take to be our express
charge under the statute and we think it dovetails nicely
with the ``public interest'' standard that the FCC is charged
with applying in making the ultimate decision under 271
whether to approve a particular application. More broadly, we
believe that our approach fits well within the overall
statutory scheme adopted by Congress, nicely blending the
fixed and dynamic requirements to reach an effective result.
Now, let me add a few words about how we will apply this
standard to RBOC applications under Section 271 of the Act
Our preference, though we recognize that it may not always
occur, is to see actual broad-based--ie, business and
residential--entry into a local market. This kind of entry
requires not only appropriate agreements between the RBOCs
and their potential competitors, but also the wholesale
support systems necessary to ensure that when a current
customer is switched from the RBOC to the new competitor,
the switching process occurs quickly and effectively, so
that the customer is satisfied and its new phone company
is not blamed for messing up the transfer--or that, after
a customer has been switched and she needs any services,
such as repair of her phone line, she gets it from the
RBOC in a timely and effective manner. The truth is that,
no matter how effectively systems are designed and even
assuming complete good faith on the part of the RBOC, this
kind of transition can have a lot of bugs in it. Once we
see successful full-scale entry, however, then we will
have reason to believe that the local market is open to
competition. This approach doesn't require the shift of
any particular amount of market share; nor should it take
very long once there is true broad-based entry into the
RBOC's market. Rather, using a metaphor that I've become
quite fond of, we just want to make sure that gas actually
can flow through the pipeline; and the best way to do that
is to see it happen.
This approach--i.e., looking for tangible entry--also has
two additional virtues: first, once there is such entry, the
new entrant certainly should have an incentive to make the
process work, since any new customers that are ill-served
will blame the new entrant. This will mean that the new
entrant is not likely to be gaming the system and, if there
are problems, the reason will be that the local market, for
some real-world reason--malign or benign--just isn't ready
for competition yet. And second, if broad-based competition
appears to be working smoothly, as we certainly hope it does,
it will establish a benchmark against which future, post-RBOC
entry into long distance, performance can be measured. In
other words, if competitors can obtain what they need, and
what they are legally entitled to get from the RBOC prior to
its entry into long distance, but not after it then we will
have reason to suspect that something is wrong and we will be
able to pursue appropriate remedial action.
Now, an even harder problem arises when the RBOC claims
that it's done everything it can to make entry opportunities
fully available but, for some reasons, no new entrant has
decided to go forward in a significant way. In these
circumstances, we will attempt to determine what the problem
is. And, purely at the level of speculation, one could
imagine a variety of explanations. For example, the prices
being charged by the RBOC could be too high to allow
effective competition any time soon or its systems may be too
uncertain for the new entrant to take the risk of large-scale
entry, or the RBOC may not be cooperating with its
competitors by providing the necessary wholesale support
systems. One the other hand, it may be that, despite
reasonable interconnection terms, fully available support
systems, and so on, it simply may not make economic sense for
a new entrant to come into any given market on a large-scale
basis. Or, a more elaborate version of this problem may be
that, if the long distance carriers think they are better off
preventing the new competition by the RBOC in their market
and also think that the best way to achieve this result is to
stay out of the local markets, they may simply choose not to
enter. On the third hand, if you will, it may be that some
other factor--such as a state statute or local regulation--is
making large-scale entry infeasible or, at least, very
unattractive. These are some possibilities, and I'm sure
there are others as well.
In any event, we will carefully examine the facts in any
case where there isn't full-scale entry to determine what's
actually going on. In such circumstances, of course, we will
ultimately have to make a fact-based determination on a case-
by-case basis. But I want to be very clear about one thing:
we will pay careful attention to see whether any party is
trying to game the system for its own parochial reasons. And,
if we think that's what's going on, be assured that we'll
take appropriate action. We don't have any dog in this
fight--just a desire to ensure full-scale competition in
telephony in an enduring fashion. Once that occurs, the
market can pick the winners and losers.
Let me now quickly turn to the last couple pieces of this
deregulatory puzzle--access reform and universal service.
These areas, which are related, also raise long-term
competitive concerns. Lowering access charges to cost is
desirable in a competitive market but, in the process, there
are at least a couple of things you need to be alert to--
first, you want to ensure that no one gets an undue
competitive advantage during the transition process: and
second, you need to make sure that the incumbent LEC is
fairly compensation for any implicit subsidies in the system
that it has to bear and which have previously been supported
by above-cost access charges. That is where the universal
service funding system kicks in. It is designed to pick up
these kinds of subsidies so that, as I said earlier,
competition can go forward without unfairly burdening those
players that have to bear the costs of such subsidies.
These kinds of issues can be enormously complex--first, how
do you sort out implicit subsidies as well as any historic
costs that a LEC is entitled to recover in a way that is fair
and, second, how do you then collect the money necessary to
pay these costs through a competitively neutral system. If
you've seen the FCC's Notice of Proposed Rulemaking on Access
Charges--a rulemaking that is ongoing as we speak--you
probably have some idea of how complicated this whole process
is. The Commission has raised important questions about rate
structure, about rate levels--including possible market-based
as well as prescriptive methods for dealing with these
levels--and about rate de-averaging, which means allowing
different access charges for different customers. Anyway, the
trick is to do this in a way that hastens competitive
opportunities but that is fair to all parties. I am confident
that the Commission will do just that.
One final point to remember as we move into a deregulated
environment is that the Telecom Act explicitly keeps the
antitrust laws in force. This serves not only to guard
against any anticompetitive consolidation, but also against
any other practices that violate the antitrust laws. Once
regulation begins moving off center stage, we are prepared
for the possibility that antitrust enforcement may be
necessary to ensure full and fair competition in these
markets. Especially in network industries, questions of
exclusive dealing, control over essential facilities and the
use of market power can raise significant antitrust concerns.
As a result I intend to make sure that the Division keeps
fully abreast of the developments in the marketplace and is
ready to take any action necessary to prevent abuses of
market power or other anticompetitive practices.
Let me close my emphasizing that while I've tried to
accurately portray at least some of the difficulties set in
motion by last year's Telcom Act I'm very optimistic about
the endeavor we have embarked upon. I've seen some recent
stories in the press complaining that consumers haven't yet
received the benefits of the 1996 Act but frankly, I think
such expectations are unrealistic. We've had a regulated
system of telephony in this country for over a century; it
won't be deregulated in a year and even after it is
deregulated, it'll take time for competition to wring all the
fat out of the system so that consumers truly get the best
service at the lowest prices. But, if we stay the course, I'm
confident that we will ultimately realize how wise this
legislation was and how much it will benefit our people. I
say that because
[[Page S7678]]
history has taught us, time and time again, that deregulation
is difficult and transitions can be costly, but if our
Nation's economy is to be as strong as it can be--indeed, as
strong as it must be in an increasingly globalized market--
deregulation is not only desirable, it's essential. In short,
history is on our side. A little patience is all that's
needed.
Mr. HOLLINGS. I thank the distinguished Chair.
Madam President, it is very interesting. I want to refer back to this
because that is in regular type. ``Though we may recognize that it may
not always occur''--``though we recognize that it may not always
occur.'' We are going to refer back to that in just a few minutes
because our distinguished chairman of the Communications Subcommittee,
Senator Conrad Burns, of Montana, wrote Mr. Joel Klein on May 15, 1997.
I ask unanimous consent that a copy of this letter be printed in the
Record in its entirety.
There being no objection, the material was ordered to be printed in
the Record, as follows:
U.S. Senate,
Washington, DC, May 15, 1997.
Mr. Joel I. Klein,
Acting Assistant Attorney General,
Antitrust Division,
Department of Justice,
Washington, DC.
Dear Mr. Klein: I have written to the Senate Majority
Leader requesting that a hold be placed on your nomination to
be Assistant Attorney General of the Justice Department's
Antitrust Division. I have concerns as to whether your views
of the implementation of the Telecommunications Act of 1996
are in accordance with Congressional intent.
Section 271(d)(2)(A) of the Telecommunications Act of 1996
gives the Department of Justice a consultative role when the
Federal Communications Commission considers petitions filed
by the Bell Operating Companies (BOCs) for authorization to
provide in-region interLATA service. This summer the FCC will
begin ruling on these applications and I have several
concerns about how both the Department and the FCC will
implement Section 271 of the Act. As you know, both the House
and the Senate, in establishing a test for BOC entry into the
interLATA business, rejected the imposition of any
requirement that a BOC must face ``actual and demonstrable
competition'' in the local exchange market before obtaining
relief. While the statute allows the Department to apply
``any standard the Attorney General considers appropriate'',
a speech you gave in March raises fears the Department and
the FCC may attempt to resurrect this test that was rejected
in Congress.
My concern arises particularly from your March 11 speech
announcing the Antitrust Division's position regarding
implementation of Section 271 of the Telecommunications Act
of 1996 (47 U.S.C. Section 271). You stated that the Division
would take the position that the BOCs should be forbidden to
enter long distance under Section 271 until there is
``successful full-scale entry'' into the local market. As you
put it, the point of this requirement is to be sure that with
respect to local telephone services, ``gas naturally can flow
through the pipeline.'' I also read your speech as suggesting
that where there has not been full-scale entry, you would
oppose BOC entry unless the BOC could show that its
competitors are ``gaming the system.''
You have suggested that Section 271 gives you ``broad
swath'' to urge whatever position the Antitrust Division
likes. Congress, however, gave the Attorney General a role in
advising the FCC with respect to public interest issues
because of the Department's antitrust expertise. See, for
example, Sen. Conf. Rep. 104-230 for a list of some antitrust
standards that might be used. A ``gas in the pipeline''
standard is plainly unrelated to the antitrust laws and, even
worse, violates congressional intent that the checklist
should be the only measure of when local markets are open.
Simply stated, the Attorney General's consultation on
antitrust issues must be framed by the specific statutory
standards for BOC entry, which preclude anything approaching
a ``metric test'' like the one Congress rejected.
More fundamentally, the basic point of the
Telecommunications Act is that regulators should stand aside
and let market forces work once fair competition is possible.
Holding up competition in one market because there is not
enough competition in another market makes no sense. It is
particularly harmful in this context, for local telephone
competition may be slow in coming to rural states for reasons
that have nothing to do with BOCs' steps to satisfy the
checklist. If so, your approach would prevent rural consumers
from realizing the benefits of long distance competition that
will be available to residents of urban states, just because
potential local competitors want to enter profitable urban
markets first.
As you prepare to discharge your responsibilities under the
Act, I would appreciate your answers to the following
questions. This will enable the Subcommittee on
Communications to carefully monitor implementation of this
portion of the Telecommunications Act.
1. In your speech you used the following terms--``real''
and ``broad-based competitions'', ``actual, broad-based
entry'', ``true broad-based-entry'', ``tangible entry'',
``large-scale entry'', and entry on a ``large-scale basis''.
What do these terms mean to the Department?
2. How many residential customers have to be served by a
competitor to meet the Department's entry test?
3. How many business customers have to be served by a
competitor to meet the Department's entry test?
4. Does there have to be more than one competitor in the
local exchange market to meet the Department's entry test?
5. Does a BOC have to face competition from AT&T, MCI or,
Sprint to meet the Department's entry test?
6. How do you reconcile Congress' rejection of a metric
test for BOC entry into the long distance market with our
statement that ``successful full-scale entry'' is necessary
in order for the Department to ``believe the local market is
open to competition?''
7. You have used the metaphor that the Department ``want(s)
to make sure that gas actually can flow through the
pipeline'' before allowing interLATA entry. How many orders
for resold services must be processed by a BOC in order to
satisfy this standard?
8. How many orders for unbundled network elements must be
processed by a BOC to satisfy this standard?
9. How much market share must a BOC lose to its competitors
to demonstrate that ``gas can flow through the pipeline?''
10. FCC Chairman Reed Hundt testified on March 12, 1997,
before the Senate Commerce Committee that a BOC that
satisfied the checklist but did not have an actual competitor
in its market would meet the entry standard. Do you agree
with Chairman Hundt?
11. If the Department opposes a BOC interLATA application,
do you believe the FCC should reject that application? If so,
wouldn't that give the Department's recommendation
``preclusive effect,'' something that the Act specifically
prohibited?
12. You have also stated that the checklist, the
facilities-based requirement, the separate subsidiary
requirement and the option of ``Track B'' (the statement of
terms and conditions) are all ``necessary, though not
sufficient, to support entry. What more must a BOC
demonstrate to obtain the Department's support?
13. Do you believe that Track B can be used only if no one
has requested interconnection under Track A?
14. Can a BOC rely on Track B if it has received
interconnection requests from potential competitors but faces
no ``competing provider'' which is actually providing
telephone exchange service to residential and business
customers predominantly over its own facilities?
15. What if requesting interconnectors under Track A do not
ask for, or wish to pay for, all of the items in the
checklist? Can the BOC satisfy the entry test by
supplementing their interconnection agreements with a filing
under Track B to cover at least all remaining items in the
checklist?
Your prompt attention to these questions would be helpful
to the Subcommittee.
Sincerely,
Conrad Burns,
Chairman,
Senate Subcommittee on Communications.
Mr. HOLLINGS. Madam President, you can read the entire letter. But I
can see the thrust of the letter by this language here, and I quote on
page 2.
Congress, however, gave the Attorney General a role in
advising the FCC with respect to public interest issues
because of the Department's antitrust expertise. See, for
example, House conference report 104-458 for a list of some
antitrust standards that might be used. A gas-in-the-pipeline
standard is plainly unrelated to antitrust laws, and, even
worse, violates Congressional intent that the checklist
should be the only measure of when local markets are open.
We in the majority who wrote this particular bill would demur very,
very strongly from that wording by our distinguished friend, the
Senator from Montana, in this particular letter.
What occurred is that the nominee, Joel Klein, in the talk, he talked
about you can see when competition is present, when you get to see the
gas coming through the pipeline. He alludes to the anecdotal situation
of gas pipeline cases.
But Senator Burns differs with that. He says you are supposed to
handle this antitrust, and don't give us anything about when
competition starts. You can tell his displeasure because, along with
the letter, he put a hold on the Joel Klein nomination. You have a hold
on the nomination by the chairman of the Communications Subcommittee,
and you got a strong letter with a questionnaire that is included,
because I have included it in its entirety in the Record.
So 5 days later, on May 20, the Department of Justice, Acting
Assistant Attorney General Joel Klein sends a letter to Senator Burns.
Madam President, I quote:
To begin with, I wholeheartedly agree with your statement
that the basic point of the
[[Page S7679]]
Telecommunications Act is that regulators should stand aside
and let market forces work once fair competition is possible.
I want to assure you that the Department of Justice shares
that view.
Well, both distinguished gentlemen are writing and speaking
colloquially. One wants to tell you that competition is present when
you can see the gas coming through the pipeline, or smell the gas if
you can't see it. Otherwise, the Acting Assistant Attorney General
said, ``Oh, yes, I want to let'' --in the Conrad letter, all these
expressions about ``let market forces.'' What we are trying to do is
``let market forces.'' He said, ``I agree with you. We have to stand
aside and let market forces work.''
That, Madam President, is not the duty of the Acting Attorney General
of the United States. He is supposed to stand there by that market and
watch it day in and day out. Because there is one thing that will occur
if you let market forces work freely, and that is, monopolies will
develop. Consolidations and mergers you see afoot right now are
occurring every day, and money is talking. People are not suffering
yet, but when they get into that monopolistic position, they will,
because there won't be any of the rules and regulations, and they will
be in their own private businesses.
This group up here that continues to talk about ``let market forces''
operate, this tells me, one, I have a questionable candidate for the
Antitrust Department of the Office of the Attorney General of the
United States when he starts chanting about monopolies.
Reading on page 2, again, from the Joel Klein letter, I read on page
2, one sentence:
In order to accomplish these goals, almost immediately
after I became Acting Assistant Attorney last October, I
asked all of the BOCs [the Bell Operating Companies] as well
as any other interested party, to give me their views of the
appropriate competition standards under section 271.
We set it out. We set out our report. We didn't need an Assistant
Attorney General running around rewriting the law. He is talking about,
``Oh, I got them all in. I am going to start developing policy.'' The
Congress developed the policy. It took us 4 years to do it.
Here, he says gratuitously in the next sentence on the bottom of page
2--this is Joel Klein, the nominee:
In formulating this standard, I specifically rejected using
the suggestion in the conference report that the Department
analyze Bell Operating Company applications employing the
standard used in the AT&T consent decree objecting to the
Bell Operating Company in regional long distance entry
``unless there is no substantial possibility that the Bell
Operating Company or its affiliates could use its monopoly
power to impede competition in the market such company seeks
to enter.''
Bear with me a minute. I know this thing sounds complicated. And
those who want to watch a good, loud show they put on around the world,
or whatever the dickens they put on in the afternoon, go ahead and turn
to it. But this is very, very important.
Judge Greene had what we call in the trade ``the VIII(c) test''--that
they couldn't enter these markets until--this is the one rejected by
Joel Klein--``there is no substantial possibility that the Bell
Operating Company or its affiliates could use its monopoly power to
impede competition in the market such company seeks to do enter.''
Madam President, with that particular VIII(c) test, that is how
competition starts in long distance that we have today. We don't have
any in the local. Ninety-eight percent of the local calls are still
controlled by the local Bell Operating Company. They have the monopoly.
But this really genius test, the VIII(c) test, became the standard of
the discipline, the standard of the industry.
In one hearing, as chairman of the Communications Subcommittee--the
Commerce, Science, and Transportation hearing--I had the seven Bells
attest. And we will put that in the Record, if necessary. They agreed
with this particular test. You have the Bell Operating Companies
agreeing to that particular test, and that is why we kept it in there.
We didn't write it into the formal statute because one former colleague
on the House side had held up. He had tremendous influence, Jack Fields
of Texas. So we put it in the language. But you follow the course or
talk to any of the conferees, you talk to any of the House and Senate
Members, they will tell you the VIII(c) test was the test, and we
couldn't think of a better one.
Here comes nominee Joel Klein, stating categorically here in May,
``In formulating this standard, I specifically rejected using the
suggestion in the conference report that the Department analyze BOC
applications employing the standard used''--the VIII(c) standard.
Madam President, when you work this long and you know the industry,
you know the monopolies, you know how Judge Greene held control and
operated as well as he did, and communications prospered, expanded, and
competition burst out all over in the long distance field with this
particular standard, and then have a gentleman come in totally green
and just write back, just as he got a letter from the chairman who put
a hold on his nomination, and said ``I threw that out.'' The Bell
Operating Companies tried to throw it out, and they couldn't. They know
it because they had already testified in behalf of it.
He goes on to say that ``the VIII(c) standard which has barred Bell
Operating Company entry into long distance since their divestiture from
AT&T, struck me as insufficiently sensitive to the market conditions,
and I was concerned that it would bar Bell Operating Company entry even
where it would be competitively warranted.''
I want him to describe that. My understanding is that another
Senator, my distinguished colleague from North Dakota--and also I was
talking to the Senator from Nebraska. And they have talked with the
gentleman, Mr. Klein, and have asked him. And he has yet to come and
elaborate about what is more ``sensitive.'' He says this is
``insufficiently sensitive.'' We have yet to find another.
I have met twice with Joel Klein. And he said I was right. He was
there with the Attorney General. He understood, and he would get some
ensuing opinion, or letter, or some note that he understood, and he
could read the language, and it was going to be corrected.
Madam President, let's turn the page and go to Senator Conrad Burns'
questions and answers, and go to that question. Here is what Senator
Burns questioned, and I quote.
In your speech, you use the following terms: ``Real and
broad-based competition,'' ``actual broad-based entry,''
``true broad-based entry,'' ``tangible entry,'' ``large-scale
entry,'' and ``entry on a large-scale basis.''
What do those terms mean to the department?
And I could read it all. The entire letter has been included. But let
me read this last sentence.
Thus, in my March 11th speech--
The Acting Attorney General, he knows what we are talking about. He
refers to that speech.
In my March 11th speech to which you referred, I stated
that ``our preference, though we recognize that it may not
always occur, is to see actual broad based, that is, business
and residential, entry into a local market.''
Now, Madam President, for all of those unstudied in trying cases with
lawyers, watch this particular language because it has the regular
language and regular print but he highlights with italic the phrase:
``Our preference, though we recognize that it may not always occur.''
Now, that is in italic, not the rest of it. So the distinguished
chairman of the communications subcommittee is given a signal. Watch
the play. And then comes the play.
Madam President, on May 21, the next day, he doesn't delay. Oh, that
Acting Attorney General for antitrust that held up for weeks the answer
to the Dorgan letter and the Kerrey letter, he was prompt; he answered
that letter of Senator Burns in 5 days, gave the signal with the
italics.
(Mr. BENNETT assumed the Chair.)
Mr. HOLLINGS. Mr. President, I ask unanimous consent that this docket
No. 97-121, in the matter of the application of SBC Communications, be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[Before the Federal Communications Commission, Washington, DC, CC
Docket No. 97-121]
In the Matter of Application of SBC Communications Inc. et
al. Pursuant to Section 271 of the Telecommunications Act of
1996 to Provide In-Region, InterLATA Services in the State of
Oklahoma.
addendum to the evaluation of the united states department of justice
Several parties have informally asked the Department to
clarify its views concerning
[[Page S7680]]
two issues that have arisen in connection with this
proceeding: (1) whether we agree with the argument made by
some commentors that under Section 271(c)(1)(A) (``Track
A''), each separate class of subscribers that must be served
to satisfy that entry track, i.e., residential and business,
must be served ``exclusively . . . or predominantly'' over
the telephone exchange facilities of an unaffiliated
provider; \1\ and (2) the importance (and meaning) of
``performance benchmarks'' in assessing whether BOC in-region
interLATA entry would be in the public interest. To address
any confusion on these points, the Department now files this
addendum.
---------------------------------------------------------------------------
Footnotes at end of article.
---------------------------------------------------------------------------
I. Section 271(c)(1)(A) does not require that both
residential and business customers be served over the
facilities-based competitors' own facilities
Section 271(c)(1) requires that a BOC's application to
provide in-region interLATA services proceed under one of two
distinct tracks. As our evaluation explained, SBC's
application is governed by the standards of Track A. 47
U.S.C. Sec. 271(c)(1)(A). See SBC Evaluation at 9-20. Under
Track A, a BOC must be providing ``access and interconnection
to its network facilities for the network facilities of one
or more unaffiliated competing providers of telephone
exchange service . . . to residential and business
subscribers.'' The statute further specifies that ``such
telephone exchange service may be offered by such competing
providers either exclusively over their own telephone
exchange service facilities or predominantly over their own
telephone exchange service facilities in combination with the
resale of the telecommunications services of another
carrier.'' 47 U.S.C. Sec. 271(c)(1)(A). As we explained in
our evaluation, SBC does not meet the standards of Track A
because there is no facilities-based competitor offering
service to residential subscribers. See SBC Evaluation at 20-
21. Brooks Fiber, to which SBC points as a residential
service provider, is merely testing its ability to offer
residential service by providing uncompensated service to
four employees; thus, it does not compete with SBC to serve
any residential ``subscribers.'' See id.
Some parties have pressed for rejection of SBC's
application on the additional ground that Brooks does not
provide residential service to anyone, including its four
employees, over its own facilities. In their view, Track A
requires, among other things, that residential service is
being provided completely or predominantly over a
competitor's own facilities. We disagree.
The statute requires that both business and residential
subscribers be served by a competing provider, and that such
provider must be exclusively or predominantly facilities-
based. It does not, however, require that each class of
customers (i.e., business and residential) must be served
over a facilities-based competitor's own facilities. To the
contrary, Congress expressly provided that the competitor may
be providing services ``predominantly'' over its own
facilities ``in combination with the resale of'' BOC
services. 47 U.S.C. Sec. 271(c)(1)(A). Thus, it does not
matter whether the competitor reaches one class of
customers--e.g., residential--only through resale, provided
that the competitor's local exchange services as a whole are
provided ``predominantly''over its own facilities.
This reading is not only consistent with the language of
the statute, but also serves Congress' twin purposes of
maximizing competition in local exchange and interexchange
telecommunications markets. To ensure that the BOCs truly
opened up their local networks to competitors, Congress
required that any BOC qualifying for Track A consideration
wait until a facilities-based competitor became operational--
provided that there is at least one potential competitor
proceeding toward that goal in a timely fashion--before that
BOC could satisfy the statute's in-region interLATA entry
requirements. In mandating that such a facilities-based
competitor offer both residential and business service,
Congress ensured both that (1) facilities-based entry path is
being used wherever requested; and (2) at least one
facilities-based competitor is offering service to
residential, as well as business, subscribers. See SBC
Evaluation at 14-17. Once those two basic conditions have
been satisfied, however, there is no reason to delay BOC
entry into interLATA markets simply because competitors that
have a demonstrated ability to operate as facilities-based
competitors, and that are in fact providing service
predominantly over their own facilities, find it most
advantageous to serve one class of customers on a resale
basis. Imposing this requirement would tip unnecessarily the
statute's balance between facilitating local entry and
providing for additional competition in interLATA services by
adding an unnecessary prerequisite to Track A that might
foreclose entry in certain cases for no beneficial
competitive purpose. Cf. id. at 22.
II. The Importance of performance benchmarks
In articulating the Department's approach to assessing BOC
applications for in-region, interLATA authority, we stated
that the existence of ``performance benchmarks'' serves an
important purpose in demonstrating that the market has been
``irreversibly opened to competition.'' To better explain the
role of ``performance benchmarks,'' ``performance
standards,'' and ``performance measures'' in our analysis, we
have outlined further the definition and importance of these
concepts below.\2\
At bottom, a ``performance benchmark'' is a level of
performance to which regulators and competitors will be able
to hold a BOC after it receives in-region interLATA
authority. The most effective benchmarks are those based on a
``track record'' of reliable service established by the BOC.
Such benchmarks may reflect either the BOC's performance of a
wholesale support function for a competitor, or, in areas
where the BOC performs the same function for its competitors
as it does for its own retail operations, a benchmark may
also be established by the BOC's service to its own retail
operations. In instances where neither type of benchmark is
available, the Department will consider other alternatives
that would ensure a consistent level of performance, such as,
for example, a commitment to adhere to certain industry
performance standards and/or an audit of the BOC's systems by
a neutral third party. Such benchmarks are significant
because they demonstrate the ability of the BOC to perform a
critical function--for example, the provisioning of an
unbundled loop within a measurable period of time. Thus,
benchmarks serve, as explained in our evaluation, the
important purpose of foreclosing post-entry BOC claims that
the delay or withholding of services needed by its
competitors should be excused on the ground that the services
or performance levels demanded by competitors are technically
infeasible. See SBC Evaluation at 45-48.
To make ``performance benchmarks'' a useful tool for post-
entry oversight, we also expect the BOC to adopt the specific
means and mechanisms necessary to measure its performance--
i.e., ``performance measures.'' That is, if there are no such
systems in place, it will be considerably more difficult to
ensure that the BOC continues to meet its established
performance benchmarks. Finally, we acknowledge that there
may be areas in which the present industry standards will be
updated, requiring new levels of performance. Accordingly,
the Department will also focus on the importance of
commitments by BOCs to adhere to ``performance
standards,'' even when they will be imposed upon it post-
entry.
footnotes
\1\ See, e.g., Opposition of Brooks Fiber Properties, Inc. to
Application of SBC Communications, Inc., CC Docket No. 97-
121, at 8-9 (May 1, 1997).
\2\ To reflect this typology, our evaluation should be
modified as follows:
Page 45 line 2 of heading ``b.'' (and Table of Contents),
``standards'' to ``benchmarks'';
Page 47 line 3, ``measures'' to ``benchmarks'';
Page 47 line 5, ``measures'' to ``benchmarks'';
Page 48 line 9, ``measures'' to ``benchmarks'' and add ``as
well as its commitment to adhere to certain performance
standards'' to the end of the sentence;
Page 60 line 9, ``measures'' to ``benchmarks''; and
Page 60 line 11, 15, 18 ``measures'' to ``benchmarks''
Respectfully submitted,
Donald Russell, Chief; Joel I. Klein, Acting Assistant
Attorney General, Antitrust Division; Andrew S. Joskow,
Deputy Assistant Attorney General, Antitrust Division;
Lawrence J. Fullerton, Deputy Assistant Attorney
General, Antitrust Division; Philip J. Weiser, Senior
Counsel, Antitrust Division; Carl Willner, Jonathan D.
Lee, Stuart H. Kupinsky: Attorneys, Telecommunications
Task Force; Gerald B. Lumer, Economist, Competition
Policy Section; Antitrust Division, U.S. Department of
Justice, 555 4th Street, N.W., Room 8104, Washington,
D.C. 20001.
Certificate of Service
I hereby certify that I am an Attorney for the United
States in this proceeding, and have caused a true and
accurate copy of the foregoing Addendum to the Evaluation of
the United States Department of Justice to be served on all
petitioners in this proceeding and other interested parties
as indicated on the attached service list, by first class
mail, on May 21, 1997.
Jonathan D. Lee,
Attorney, Telecommunications Task Force, Antitrust
Division, U.S. Department of Justice.
Service List
Richard Metzger, General Counsel, Association for Local
Telecommunications Services, 1200 19th Street, NW.,
Washington, DC 20036.
John Lenahan, Ameritech Corporation, 30 South Wacker Drive,
Chicago, IL 60606.
Mark Rosenblum, AT&T Corporation, 295 North Maple Ave.,
Basking Ridge, NJ 07920.
Susan Miller, Esq., ATIS, 1200 G Street, NW., Suite 500,
Washington, DC 20005.
James R. Young, Bell Atlantic, 1320 N. Courthouse Road, 8th
Floor, Arlington, VA 22201.
Walter Alford, BellSouth, 1155 Peachtree Street, NE.,
Atlanta, GA 30367.
Edward J. Cadieux, Director, Regulatory Affairs--Central
Region, Brooks Fiber Properties, Inc., 425 Woods Mill Road
South, Town and Country, MO 63017.
John Windhausen, Jr., General Counsel, Competition Policy
Institute, 1156 15th Street, NW., Suite 310, Washington, DC
20005.
Genevieve Morelli, Executive Vice President and General
Counsel, The Competitive Telecommunications Association, 1900
M Street, NW., Suite 800, Washington, DC 20036.
Laura Phillips, Dow, Lohnes, and Albertson, PLLC, 1200 New
Hampshire Ave., NW., Suite 800, Washington, DC 20036, Counsel
for Cox Communications.
[[Page S7681]]
Russell M. Blau, Swidler & Berlin, chartered, 3000 K
Street, NW., Suite 300, Washington, DC 20007-5116, Counsel
for Dobson Wireless.
Gregory M. Casey, LCI International Telecom Corp., 8180
Greensboro Drive, Suite 800, McLean, VA 22102.
Rocky Unruh, Morgenstein & Jubelirer, One Market, Spear
Street Tower, 32d Floor, San Francisco, CA 94105, Counsel for
LCI Telecom Group.
Anthony Epstein, Jenner & Block, 601 13th Street, NW.,
Washington, DC 20005, Counsel for MCI.
Susan Jin Davis, MCI Telecommunications Corporation, 1801
Pennsylvania Ave., NW., Washington, DC 20006.
Daniel Brenner, National Cable Television Association, 1724
Massachusetts Ave., NW., Washington, DC 20036.
NYNEX Telephone Companies, Saul Fisher, 1095 Ave. of the
Americas, New York, NY 10036.
Cody L. Graves, Chairman, Oklahoma Corporation Commission,
Jim Thorpe Building, Post Office Box 52000-2000, Oklahoma
City, OK 73152-2000.
Mickey S. Moon, Assistant Attorney General, Oklahoma
Attorney General's Office, 2300 North Lincoln Boulevard, Room
112, State Capitol, Oklahoma City, OK 73105-4894.
Robert Hoggarth, Senior Vice President, Paging and
Narrowband PCS Alliance, 500 Montgomery Street, Suite 700,
Alexandria, VA 22314-1561.
James D. Ellis, Paul K. Mancini, SBC Communications, Inc.,
175 E. Houston, Room 1260, San Antonio, TX 78205.
Philip L. Verveer, Wilkie, Farr & Gallagher, 1155 21st
Street, NW., Washington, DC 20036, Counsel for Sprint.
Richard Karre, U S West, 1020 19th Street, NW., Suite 700,
Washington, DC 20036.
Charles D. Land, P.E., Executive Director, Texas
Association of Long Distance Telephone Companies, 503 W. 17th
Street, Suite 200, Austin, TX 78701-1236.
David Poe, LeBoeuf, Lamb, Greene & MacRae, LLP, 1875
Connecticut Ave., NW., Suite 1200, Washington, DC 20009,
Counsel for Time Warner.
Janis Stahlhut, Time Warner Communications Holdings, Inc.,
300 First Stamford Place, Stamford, CT 06902-6732.
Danny Adams, Kelley, Drye & Warren LLP, 1200 19th Street,
NW., Suite 500, Washington, DC 20036, Counsel for USLD.
Catherine Sloan, WorldCom, Inc., 1120 Connecticut Ave.,
NW., Washington, DC 20036-3902.
Charles Hunter, Hunter Communications Law Group, 1620 I
Street, NW., Suite 701, Washington, DC 20006, Counsel for
Telecommunications Resellers Association.
Mr. HOLLINGS. I thank the distinguished Chair. And again now on page
3 here the fellow has gotten the signal, and I read on page 3--the
entire matter is in the Record.
It does not, however, require that each class of customers,
business and residential, must be served over a facilities
based competitor's own facilities. To the contrary, Congress
expressly provided that the competitor may be providing
services predominantly over its own facilities in combination
with the resale of Bell Operating Company services (47 USC
271 (c)(1)(A)). Thus, it does not matter whether the
competitor reaches one class of customers, namely
residential, only through resale provided that the
competitor's local exchange services as a whole are provided
predominantly over its own facilities.
Well, Mr. President, there it was. Bell Operating Companies through
the distinguished Senator from Montana got what they wanted in black
and white. They just totally refuted 4 years of work, the most
important part of the checklist, the most important part that provided
for competition in the long distance market, the most important part
that we included. We talked about it. We discussed it. We debated it. I
was in these conferences. They were in the conferences, like I tried to
emphasize. The Bell Companies met all one day with our staffs on both
sides and the long distance companies met all one day, and it was
worked out. But do not take the word of the Senator from South
Carolina.
Mr. President, I ask unanimous consent that a letter to the Honorable
Reed Hunt, Chairman of the Federal Communications Commission, from
Chairman Tom Bliley, Congressman from Virginia, and chairman of the
Commerce Committee over on the House side, be printed in the Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
U.S. House of Representatives,
Committee on Commerce,
Washington, DC, June 20, 1997.
Hon. Reed Hundt,
Chairman, Federal Communications Commission, Washington, DC.
Dear Chairman Hundt: I recently read with interest and
dismay the Department of Justice's additional comments
regarding SBC Communications Inc.'s (SBC's) application to
provide in-region, interLATA services in the State of
Oklahoma. The Department therein clarified its views on
section 271(c)(1)(A) of the Communications Act, as amended.
As the primary author of this provision. I feel compelled to
inform you that the Department misread the statute's plain
language. As you rule on SBC's application and future BOC
applications, you should not overlook the clear meaning of
section 271 or its legislative history.
The Department argued that a BOC should be allowed to enter
the in-region, interLATA market under ``Track A'' (i.e.,
section 271(1)(A)) if a competing service provider offers
facilities-based services to business customers and resale
services to residential customers, so long as the combined
provision of both services is predominantly over the
competing service provider's facilities. In other words, the
Department wrongly takes the view that section 271(c)(1)(A)
is satisfied if a competitor is serving either residential or
business customers over its own facilities.
Section 271(c)(1)(A), however, clearly requires a different
interpretation. To quote the statute, a competing service
provider must offer telephone exchange service to
``residential and business subscribers . . . either
exclusively over their own telephone exchange service
facilities or predominantly over their own telephone exchange
service facilities.'' Track A is thus satisfied if--and only
if--a BOC faces facilities-based competition in both
residential and business markets. Neither the statute nor its
legislative history permits any other interpretation; I know
this because I drafted both texts.
In the end, the Department's recent misinterpretation of
section 271 reinforces a point I frequently made during
Congressional debate over the Telecommunications Act of 1996:
the Department of Justice does not have the expertise to make
important telecommunications policy decisions. The FCC, by
contrast, does have the necessary expertise, which explains
why Congress gave you and your colleagues--and no one else--
the ultimate authority to make important decisions, such as
the decision to interpret section 271. I remind you that the
Department's role in this matter is a consultative one, and
should be treated as such.
Let me conclude by noting that, while this letter focuses
exclusively on Department's interpretation of section
271(c)(1)(A), it should not be construed to mean that the
balance of the Department's comments were either consistent
or inconsistent with Congressional intent.
Sincerely,
Tom Bliley,
Chairman.
Mr. HOLLINGS. This is dated June 20, 1997.
Dear Chairman Hunt:
I recently read with interest and dismay the Department of
Justice's additional comments regarding SBC Communications'
application to provide in-region interLATA services in the
State of Oklahoma. The department therein clarified its views
on section 271(c)(1)(A) of the Communications Act, as
amended. As a primary author--
Let me emphasize that. This is Chairman Bliley--
As a primary author of this provision, I feel compelled to
inform you that the department misread the statute's plain
language. As you rule on SBC's application and future Bell
Operating Company applications, you should not overlook the
clear meaning of section 271 or its legislative history. The
Department argued that a Bell Operating Company should be
allowed to enter the in-region interLATA market under track
A, that is, section 271(c)(1)(A) if a competing service
provides office facilities based services to business
customers and resale services to residential customers, so
long as the combined provision of both services is
predominantly over the competing service provider's
facilities.
In other words, the Department wrongly takes the view that
section 271(c)(1)(A) is satisfied if a competitor is serving
either residential or business customers over its own
facilities. Section 271(c)(1)(a), however, clearly requires a
different interpretation. To quote the statute, ``A competing
service provider must offer telephone exchange service to
residential and business subscribers either exclusively over
their own telephone exchange service facilities or
predominantly over their own telephone exchange service
facilities. Track A is thus satisfied if and only if a Bell
Operating Company faces facilities based competition in both
residential and business markets. Neither the statute nor its
legislative history permits any other interpretation. I know
this because I drafted both texts.
Mr. President, that is Chairman Bliley. I do not know how you can
make it more clear. He talks of the history. He talks of the conference
report. He talks of the actual language. And anybody reading it can see
exactly that. In essence, Mr. Klein sort of quietly acknowledged it. I
was waiting because I met with him individually and then I met with him
with the Attorney General, I can tell you here and now for those who
watch this and follow it. And I ask unanimous consent the recent
editorial in the New York Times entitled ``A Weak Antitrust Nominee''
be printed in the Record.
There being no objection, the article was ordered to be printed in
the Record, as follows:
[[Page S7682]]
[From the New York Times, July 11, 1997]
A Weak Antitrust Nominee
The next head of the Justice Department's antitrust
division will have a lot to say about whether the 1996
Telecommunications Act breaks the monopoly chokehold that
Bell companies exert over local phone customers. He will rule
on mergers among telecommunications companies and advise the
Federal Communications Commission on applications by Bell
companies to enter long-distance markets. Thus it is
disheartening and disqualifying that President Clinton's
nominee, Joel Klein, is scheduled to come up for confirmation
today in the Senate with a record that suggests he might
knuckle under to the powerful Bell companies and the
politicians who do their bidding.
Senators Bob Kerrey, Ernest Hollings and Byron Dorgan have
threatened to block the vote today and put off until next
week a final determination of Mr. Klein's fate. But the
Administration would do its own telecommunications policy a
favor by withdrawing the nomination and finding a stronger,
more aggressive successor.
Mr. Klein, who has been serving as the Government's acting
Assistant Attorney General for Antitrust, demonstrated his
inclinations when he overrode objections of some of his staff
and approved unconditionally the merger of Bell Atlantic and
Nynex. That merger will remove Bell Atlantic as a potential
competitor for Nynex's many dissatisfied customers. Mr. Klein
refused even to impose conditions that would have made it
easier for state and Federal regulators to pry open Nynex's
markets to rivals such as AT&T.
Worse, Mr. Klein sent a letter to Chairman Conrad Burns of
the Senate communications subcommittee, who runs political
interference for the Bell companies, that committed the
antitrust division to pro-Bell positions in defiance of the
1996 act.
That act invites the Bell companies to provide long-
distance service, but only if the Bells first open their
systems to rivals that want to compete for local customers.
Yet in the letter to Mr. Burns, Mr. Klein explicitly rejected
Congress's interpretation of requirements to be imposed on
the Bells in favor of his own, weaker standard.
In a subsequent submission to the Federal Communications
Commission, Mr. Klein further weakened a requirement that
before the Bells enter long-distance service they face a
competitor that is serious enough to build its own switches
and wires. Mr. Klein has also upset some senators by seeming
to minimize the importance, provided in the 1996
Telecommunications Act, of Justice's advice to the F.C.C. on
applications by Bell companies to enter long-distance.
True, Mr. Klein has blocked applications by two Bell
companies, SBC and Ameritech, to offer long-distance service
before they had opened their local markets to competition.
But by pandering to Mr. Burns, he has created strong doubts
that he can provide aggressive antitrust leadership.
Mr. HOLLINGS. I ask unanimous consent that the Consumer Federation of
America letter of July 14, 1997, on this score be printed in the
Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
Consumer Federation of America,
July 14, 1997.
Dear Senator: With cable rates rising almost three times
faster than inflation and massive consolidation in cable,
radio and telecommunications markets, your efforts to promote
competition through the 1996 Telecommunications Act are
backfiring.
Acting Assistant Attorney General for Antitrust Joel Klein
bears significant responsibility for these unintended,
monopolistic results. Unless you demand that the Justice
Department's Antitrust Division reverse course and engage in
strict antitrust enforcement (see attached New York Times
editorial: ``A Weak Antitrust Nominee''), consumers will face
vastly inflated telephone and cable rates from increasingly
entrenched monopolies.
After antitrust officials allowed the seven local Bell
telephone monopolies to consolidate into four bigger
monopolies; permitted Time Warner and TeleCommunications Inc.
(TCI) to unite companies service almost one-half of all cable
customers through a combination with Turner Broadcasting; and
approved hundreds of radio mergers, consumers are seeing no
appreciable increase in either competition or pocketbook
savings from the Telecommunications Act.
While Acting Assistant Attorney General Joel Klein
described some of this activity as ``the concentration
envisioned by Congress'' (remarks to Glasser Legalworks
Seminar, March 11, 1997), we believe you were hoping
antitrust enforcement would foster increased competition
rather than concentration.
Contrary to promises they made to Congress in return for
more market freedom, large cable, telephone and other
telecommunications companies are not vigorously entering each
other's markets:
AT&T appears to be throwing in the towel on the notion of
competing with the local Bell monopolies, as it pursues
mergers with the Bell companies.
MCI is losing money hand-over-fist in its failed efforts to
jump-start local phone competition.
After failing to start a competitive satellite alternative
to cable monopolies, Rupert Murdoch decided to join forces
with the cable giants through deals with TCI's John Malone,
Primestar and Cablevision.
Finally, local phone companies have pulled the plug on most
of their grandiose efforts to enter the cable business, and
cable companies have retreated just as quickly from entering
the phone business.
And while all this market entrenchment goes on, cable rates
are skyrocketing and many local phone companies seek a
doubling of local phone rates in anticipation of
``competition.''
It is more obvious than ever before that the
Telecommunications Act will be an abject failure unless
Congress makes sure that the Antitrust Division reverses
course and reinvigorates its enforcement practices.
Sincerely,
Howard M. Metzenbaum, Chairman, Consumer Federation of
America, former chairman, Senate Subcommittee on Antitrust,
Business Rights and Competition.
Gene Kimmelman,
Co-Director, Consumers Union.
Dr. Mark Cooper,
Research Director, Consumer Federation of America.
Mr. HOLLINGS. Consumer Federation and others who have followed this
thing have been on the phone and otherwise just fighting to make sure
that this was really held up and defeated. And in all fairness, I am
sorry, after we see the exchange of letters here recently, that I did
not fight this nomination. I put a hold on it. I thought that Members
would listen, that they would want to learn and they would want to
understand. But evidently the jury has been fixed.
Mr. President, I ask unanimous consent that two letters, one by
Senator Kerrey to the Attorney General dated June 23, and the letter
back from the Office of the Attorney General dated July 14 to Senator
Dorgan be printed in the Record.
There being no objection, the letters were ordered to be printed in
the Record, as follows:
U.S. Senate,
Washington, DC, June 23, 1997.
Hon. Janet Reno,
U.S. Department of Justice,
Washington, DC.
Dear Madam Attorney General: Not too long ago, I met Joel
Klein and found him to be an intelligent, talented attorney
and a dedicated public servant. I would like very much to
support his nomination for Assistant Attorney General for
Antitrust but have some very serious concerns about the
Administration's telecommunications policies and Mr. Klein's
interpretation of the Telecommunications Act of 1996. I am
hopeful you can clarify the Department's official views for
me.
I am particularly concerned about recent comments made by
Acting Assistant Attorney General Klein regarding the
Department of Justice's (DOJ) role in facilitating
competition in the wake of the Telecommunications Act of
1996. As you know, my support of the Telecommunications Act
was contingent upon a strong role for DOJ in shaping a
competitive telecommunications market. I did not stop the
work of the United States Senate with a filibuster in order
for the Department of Justice to take its responsibilities
lightly. In the contrary, I expected DOJ to use every ounce
of its authority, including those powers granted outside of
the Telecommunications Act, to ensure the competitive
integrity of the new telecommunications market.
In response to questions by the Chairman of the Senate
Communications Subcommittee, Mr. Klein said that he
``specifically rejected using the suggestion in the
Conference Report that the Department analyze Bell Operating
Company (BOC) applications employing the standard used in the
AT&T consent decree''. This standard would reject BOC entry
into in-region long distance unless ``there is a substantial
possibility that the BOC or its affiliates could use its
monopoly power to impede competition in the market such
company seeks to enter.'' The Telecommunications Act gave you
the authority to choose any standard you see fit to evaluate
BOC entry into in-region service. Winning that discretion was
a hard fought battle. Is the Department using its discretion
to chose a weak standard? Does Mr. Klein's statement mean
that a Bell Operating Company should be allowed to enter the
in-region long distance market even if there is a
``substantial possibility that he BOC or its affiliates could
use monopoly power to impede competition?''
Mr. Klein's comment to the Chairman that ``we think that
the openness of a local market can be best assessed by the
discretionary authority of the FCC, relying in part on the
Department of Justice's competitive assessment, and based on
the evaluation of the particular circumstances in an
individual state.'' I fought hard to include DOJ in this
process because of the legal and economic expertise of the
Antitrust Division. Is the Department abdicating its role in
this area? The Federal Communications Commission (FCC) is not
the only agency equipped to
[[Page S7683]]
make decisions about the openness of markets. Can a market be
competitive if it is not open? The Department's
responsibility under the act and the nation's antitrust laws
is most serious and should be aggressively pursued by the
Antitrust Division. Although the ultimate decision lies with
the FCC, the Department should accept its important role as
the expert in competition and market power and adopt a
meaningful entry standard based on pro-competitive
principles. I am not convinced that the Department has done
that.
On a separate but equally important competition issue, I
remain very concerned about recent mergers between large
telecommunications providers. The decision by Justice to
approve the Bell Atlantic/NYNEX merger without any conditions
is troubling. I am also concerned about rumors circulating
about a possible reconstruction of the old Bell system.
Reports of AT&T efforts to bring two BOC's back into its fold
should give everyone pause. Such a merger will likely lead to
a new round of large telecommunications mergers which could
greatly reduce any chance for the swift adoption of a
vibrant, competitive telecommunications market. Competitive
entry could be frozen while real and potential competitors
court, woo and marry each other.
Finally, I am pleased with Mr. Klein's emphasis on ensuring
that the BOC's take the necessary steps to allow competition
in their markets. The Department of Justice should use its
authority to ensure that no one creates or uses artificial
impediments to block competitive entry. Interconnection
agreements are pending in all fifty states, but at this time
no significant competition has developed. The era of
telecommunications monopolies should be over, not recreated.
Market forces, not market power should motivate all
telecommunications carriers to work night and day to win and
keep customers. Interconnection should be made as simple and
efficient as possible. It should be very easy for a
telecommunications entrepreneur to gather a group of
customers and easily, efficiently and expeditiously begin
providing them service through interconnection or resale.
The telecommunications industry is at a critical point in
its history. The Department's commitment to using its full
authority to promote competition is important to achieving an
environment where consumers come first and entrepreneurs are
encouraged to challenge the status quo. Thank you for your
careful consideration of my concerns and would appreciate
your views on these matters. I look forward to your response.
Sincerely,
J. Robert Kerrey.
____
Office of the Attorney General,
Washington, DC, July 14, 1997.
Hon. Byron L. Dorgan,
U.S. Senate,
Washington, DC.
Dear Senator Dorgan: The President has requested that I
respond to your recent letter to him regarding the nomination
of Joel Klein to be Assistant Attorney General for Antitrust
and the Administration's telecommunications policies.
At the outset, I want to emphasize my appreciation and that
of the Department as a whole for your strong and unwavering
support for the important role provided for the Department in
the implementation of the Telecommunications Act of 1996. I
remember how hard we fought together to secure the DOJ role.
As a consequence, I share with you a keen interest in
ensuring that the Department carries out its role under the
Telecommunications Act effectively.
Let me begin by assuring you that the Department of Justice
takes its role under the Telecommunications Act of 1996
extremely seriously. We have devoted substantial resources to
preliminary investigations all across the nation on a state-
by-state basis to understand the competitive conditions in
each state. We have devoted even more resources to our review
and evaluation of specific Section 271 applications. We
prepared extensive, even exhaustive, analyses of SBC's
Section 271 application for in-region long distance authority
in Oklahoma and Ameritech's Section 271 application for in-
region long distance authority in Michigan.
Our actions in these matters make absolutely clear that the
Department is firmly committed to ensuring that local markets
are fully and irreversibly open, so that competition can take
hold there and flourish, and that long distance markets are
as competitive as possible. We share your view that this is
crucial for consumers in this country. To this end, we have
adopted a procompetitive standard for evaluating Section 271
applications, and we are providing the FCC with meaningful
guidance on competition policy in specific cases. The FCC
relied heavily on our analysis in its only decision to date,
its recent decision denying SBC's application.
You have specific questions regarding the standard used by
the Department in evaluating Bell Operating Company (BOC) FCC
applications to provide in-region long distance service.
After a careful evaluation of public input, the Department
adopted a standard that the local market had to be ``fully
and irreversibly open to competition.'' I assure you that
this is not a weak standard. It is a meaningful standard
based on strong procompetitive principles and is designed to
ensure and protect competition in both local and long-
distance markets. It ensures that no one can create
artificial impediments to entry, and it ensures that BOCs are
not able to provide in-region long distance service
prematurely, when they might have unfair competitive
advantages over competitors. Otherwise, the promise of fully
competitive local and long distance markets would be delayed.
As demonstrated by our evaluations of SBC's Section 271
Oklahoma application in May, and of Ameritech's Section 271
Michigan application in late June, we will not support long
distance entry until local markets are fully and irreversibly
open to competition. Our position (and our standard) is one
that is tough but fair and designed to promote the maximum
amount of competition in all markets. The Department is fully
committed to ensuring that all telecommunications markets
become as competitive as possible.
In closing, let me say Joel Klein is an extremely
intelligent and talented attorney and a dedicated public
servant. The President and I hope he is rapidly confirmed by
the United States Senate to be the Assistant Attorney General
for Antitrust.
Sincerely,
Janet Reno.
Mr. HOLLINGS. Now, you see every effort has been made to try to clear
that record, and you can read the Attorney General's letter, and for
the purposes at hand it is not worth the paper it is written on. You
can throw it away. It says nothing--that she believes in competition.
Now, she is a lawyer. She knows how to read emphasized italics
language. She saw the pitch. I told her about the pitch and how it
occurred. I showed her the talk that Klein made. We went down the whole
thing. So Senator Kerrey, and I understand, of course, Senator Dorgan
wrote a letter, and we were waiting for a letter back and we had to
wait several weeks. Not the Senator from Montana. His letter and
addendum and opinion were all put out immediately. But when Senators
who worked on the bill as diligently as we did tried to meet with him
and then put down in black and white our misgivings, write the Attorney
General's department and ask, please, now, let's see your position here
on the plain, clear language, they write back--``I believe in
competition.'' Just two pages of nothing. I have that in the Record.
Mr. President, I should have, like I say, politicked this nomination
for its defeat.
Let me ask unanimous consent that the ``Dear Colleague'' letter of
July 10 by Senator Dorgan of North Dakota and myself be printed in the
Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
U.S. Senate, Committee on Commerce, Science, and
Transportation,
Washington, DC, July 10, 1997.
Dear Colleague: The Senate may soon move to consider the
nomination of Joel Klein to be the Assistant Attorney General
in charge of the Antitrust Division. Because of statements
and actions by Mr. Klein in his acting capacity at the
Department of Justice we are very concerned with the
direction of the Administration's policies with respect to
its interpretation of certain provisions of the
Telecommunications Act of 1996. We believe that these issues
need clarification before Mr. Klein's nomination should be
brought to a vote in the Senate. We urge you to support us in
our desire to resolve the issues surrounding Mr. Klein's
actions before his nomination is brought to the Senate floor
for debate.
Whether or not robust competition develops in the local
telephone service market depends upon the Administration's
commitment to vigorously enforce these critical provisions of
the Telecommunications Act. Unfortunately, while serving as
acting chief of the Antitrust Division, Mr. Klein has
explicitly contradicted specific statutory mandates and
conference report directions that we, working with the White
House, fought again all odds to have added to the
Telecommunications Act of 1996. We have asked Mr. Klein,
Attorney General Reno, and the White House to review our
concerns and demonstrate that the Antitrust Division will
follow the explicit meaning of the Telecommunications Act. So
far, we have not received a satisfactory response to our
concerns.
Our misgivings about Mr. Klein go to the very heart of
whether the Telecommunications Act achieves its goal of
promoting more competition and lower prices for consumers. In
response to White House requests (and a very specific veto
threat) we made sure that nothing in the Telecommunications
act in any way undermined the antitrust laws. In fact, to
address these concerns, we gave the Justice Department new
authority to rule on mergers of telecommunications common
carriers (power previously reserved for the Federal
Communications Commission), and we gave the Justice
Department a substantial role in determining when a local
Bell telephone monopoly could enter the long distance market
because it had sufficiently opened its market to competition.
However, under the leadership of Mr. Klein, the Justice
Department has abdicated its responsibility and failed to use
[[Page S7684]]
these tools to promote the level of competition that we and
the Clinton Administration believed should be developing in
telecommunications markets.
By interpreting the Telecommunications Act in a manner that
fails to ensure that both consumers and businesses receive
competitive choices from separate local phone companies; by
abandoning the Department of Justice's traditional standard
for measuring competition to make it easier for the Bell
companies to enter long distance; and by approving the
largest merger in telecommunications history without even a
policing mechanism to ensure that competition would be
enhanced, Mr. Klein has sent the wrong signal to the
marketplace and undermined the core principles that are the
foundation upon which the Telecommunications Act was
constructed.
In a letter describing his final concerns about our bill
and the bill passed by our colleagues in the House, President
Clinton wrote that the final bill ``should include a test
specifically designed to ensure that the Bell companies
entering into long distance markets will not impede
competition.'' This test described by President Clinton is
actually a stronger test than the VIII(c) test contained
within the Modified Final Judgment. Yet, Mr. Klein rejected
both these tests recently and decided to develop his own
lesser standard of ``irreversibly open to competition.''
In another more compelling matter, Mr. Klein has turned the
statute on its head in his interpretation of the facilities-
based entry test for long distance. The statute requires that
a facilities-based provider serve both business and
residential customers before the Bell company can enter long
distance. Mr. Klein, however, believes the statute can be
interpreted to mean that a facilities-based carrier need only
provide service to business or residential customers. Yet
again, another instance where Mr. Klein has weakened the
protections that the Congress fought hard to enact into law
to protect consumers from premature entry into long distance.
We will insist that any Administration nominee support the
consumer protection we fought hard to put into place. Mr.
Klein's interpretation of the law will result in more
consolidation, less choice and higher costs to consumers. We
therefore want to ensure that this or any Administration
nominee implement the letter of the law and follow the steps
that we and the Administration outlined in achieving a
consensus during deliberations on the Telecommunications
Act's conference report.
Sincerely,
Byron L. Dorgan.
Ernest F. Hollings.
Mr. HOLLINGS. It is not my intent to take further time. I can tell
that this was called. I had checked after the last rollcall. They said
it wasn't going to be called until after 6 o'clock. When they filed it,
they filed cloture immediately before there was any kind of debate
whatever. They have not only lost their senses with respect to reality,
calling deficits listed in the document as $179.3 billion as balanced,
but they have lost their manners and their courtesy. Usually you have
the Senator who had the hold and caused the particular confusion put on
notice, but I had a staffer watching the TV and saw our friend from
Utah, Senator Hatch, was talking. So there we are, just right in the
middle.
You did not need cloture. At the time we put on a hold and were
asked: Do you want to be identified as the one having the hold, I said
absolutely. I am not playing games, tricks or anything of that kind. I
would be glad if you called it this afternoon. That was weeks ago where
I would have a chance to explain exactly what occurred. But, of course,
you can see what has occurred. They have politically worked it, got the
votes, got cloture. Don't waste time. Let us get on with this.
And then when the rates go up, when you get consolidation instead of
competition and those rates go up, and you don't get competition in the
local market and you don't get what we intended in the
Telecommunications Act, don't come around like in Gramm-Rudman-Hollings
and say it didn't work. Gramm-Rudman-Hollings worked up until 1990 when
they went out to Andrews Air Base and they put in the categories and
so-called ceilings--we haven't reached those ceilings yet--and repealed
the across-the-board cuts, the sequester language. On October 21 at
1:40 a.m. I made the point of order that you are now repealing the
thrust of Gramm-Rudman-Hollings. Today, this afternoon, I am making the
same point. You are repealing the competitive feature of the
Telecommuncations Act of 1996.
I hope the nomination is defeated and we get somebody here who can
read.
I yield the floor.
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. Mr. President, I yield 4 minutes to the distinguished
Senator from South Carolina.
The PRESIDING OFFICER. The Senator from South Carolina.
Mr. THURMOND. Mr. President, I rise today in support of the
nomination of Joel I. Klein to serve as Assistant Attorney General for
the Antitrust Division of the Department of Justice. Mr. Klein is a
fine man and is an outstanding nominee for this important position. I
am pleased to support him.
Mr. Klein achieved an excellent academic record at both Columbia
College in New York and Harvard Law School. He then served as a law
clerk for the Chief Judge of the D.C. Circuit Court of Appeals and
later for U.S. Supreme Court Justice Lewis Powell. Afterward, he
developed a distinguished reputation in private practice, where he
argued important cases before the U.S. Supreme Court.
For the past several months, he has served as the Acting Assistant
Attorney General for the Antitrust Division. During that time, he has
shown that he is firmly committed to enforcing our nation's antitrust
laws. For example, under his leadership, the Antitrust Division has
greatly increased its collection of criminal fines. Thus far this
fiscal year, which almost coincides with Joel Klein's tenure, the
Antitrust Division has collected over $192 million dollars in criminal
fines, compared to only about $27 million for all of fiscal year 1996.
Mr. President, I am confident that Mr. Klein is within the mainstream
of antitrust law and doctrine, and will exercise his responsibilities
fairly and within the dictates of the law. He is committed to upholding
our free enterprise system and to protecting consumers from anti-
competitive conduct.
Under Chairman Hatch's distinguished leadership, the Judiciary
Committee held a hearing on Mr. Klein's nomination in April, and his
nomination was reported out of the Committee unanimously in May.
In short, I strongly believe that Mr. Klein is a man of unquestioned
integrity and great ability. I urge my colleagues to vote in favor of
this nomination.
Mr. President, in closing I want to commend Senator Hatch, the able
chairman of the Judiciary Committee for the position he has taken on
this particular nomination.
Mr. President, I yield the floor.
Mr. KOHL. Mr. President, let me make a few brief points. First, it is
kind of ironic that Joel Klein's nomination has nearly universal
Republican support, but has divided many Democrats. After all, he is
the President's choice for the job and any Presidential nominee for an
executive branch appointment--Democrat or Republican--deserves the
benefit of the doubt. More than that, Mr. Klein has the support of many
prominent Democrats, among them Judge Abner Mikva, Former Deputy
Attorney General Jamie Gorelick, Lloyd Cutler, and others. I ask
unanimous consent that a letter from them--and from prominent
Republicans--in support of Joel Klein be printed in the Record.
There being no objection, the letters were ordered to be printed in
the Record, as follows:
July 14, 1997.
Hon. Trent Lott,
Senate Majority Leader, Washington, DC.
Hon. Tom Daschle,
Senate Minority Leader, Washington, DC.
Dear Senator Lott and Senator Daschle: We are lawyers,
academics, and former government officials with differing
views on various legal and public policy issues. We are
united, however, in our belief that Joel I. Klein is a
superbly and uniquely qualified nominee to be the Assistant
Attorney General for Antitrust at the Department of Justice.
We are confident that as Assistant Attorney General Joel
Klein would vigorously enforce the nation's antitrust laws
and effectively serve the public interest. We urge the Senate
to act upon this nomination promptly and confirm Mr. Klein to
this important post.
Sincerely,
Donald B. Ayer, Former Deputy Attorney General, Former
Deputy Solicitor General; Warren Christopher, Former
Secretary of State, Former Deputy Attorney General;
Lloyd N. Cutler, Former Counsel to the President; Alan
Dershowitz, Professor of Law, Harvard Law School; Peter
Edelman, Professor of Law, Georgetown Law Center;
Eleanor Fox, Professor of Law, NYU Law School; Jamie
Gorelick, Former Deputy Attorney General; Carla A.
Hills, Former United States Trade Representative,
Former Secretary of Housing and Urban Development;
Charles James, Former Assistant Attorney General,
Antitrust Division.
[[Page S7685]]
Harry McPherson, Former Counsel to the President; Abner
J. Mikva, Former Counsel to the President, Former Chief
Judge, United States Court of Appeals for the District
of Columbia, Former Member of Congress; Newton N.
Minow, Former Chairman, Federal Communications
Commission; Leon E. Panetta, Former White House Chief
of Staff, Former Member of Congress; Deval Patrick,
Former Assistant Attorney General, Civil Rights
Division; Robert B. Reich, Former Secretary of Labor;
James Rill, Former Assistant Attorney General,
Antitrust Division; Richard E. Wiley, Former Chairman,
Federal Communications Commission.
____
Senator Orrin Hatch,
U.S. Senate.
We are writing to express our support for the nomination of
Joel Klein as Assistant Attorney General for Antitrust.
We are a group of economists who are working actively to
help break down entry barriers and bring competition in the
telecommunications sector, as Congress intended in passing
the Telecommunications Act of 1996. Collectively, we have
served as economic experts for interexchange carriers,
wireless companies, and Bell operating companies. The
signatories below include four recent Economics Deputies from
the Antitrust Division and the two most recent Chief
Economists at the Federal Communications Commission.
Although we have our differences in the interpretation of
various economic evidence, and in our recommendations for
telecommunications policies, we all believe that Joel Klein
will make an excellent Assistant Attorney General. He is fair
and thoughtful, he understands and uses economic arguments
and analysis effectively, and he is dedicated to enforcing
our antitrust laws and promoting competition in our economy.
Sincerely yours,
Joseph Farrell,
Prof. of Economics, U. of California at Berkeley.
Michael Katz,
Prof. of Business Administration, U. of California at
Berkeley.
Carl Shapiro,
Prof. of Business Strategy, U. of California at Berkeley.
Richard Gilbert,
Prof. of Economics, U. of California at Berkeley.
Janusz Ordover,
Prof. of Economics, New York U.
Robert Willig,
Prof. of Economics and Public Affairs, Princeton U.
Mr. KOHL. Second, while it is unfortunate that Eric Holder is being
held ``hostage'' to Joel Klein's nomination, the truth is that the
sooner we confirm Mr. Klein, the sooner we can move forward and confirm
Eric Holder. The Department of Justice, and the American people, will
be better off with a confirmed Deputy Attorney General.
Third, I respect the efforts of my colleagues, Senator Hollings,
Senator Dorgan and Senator Kerrey, who have fought long and hard for
consumers on telecommunications matters. Like me, they clearly want
someone in charge of the Antitrust Division who will bring about the
kind of competition promised in--but not yet delivered by--the
Telecommunications Act. They have sent a strong message to Joel Klein
on how to interpret Section 271 of the Act, and I believe he
understands that message and will work hard to promote vigorous
competition in the telephone industry--and all other industries.
My hope is that Joel Klein, as a confirmed appointee, will surprise
his critics and please his supporters in his enforcement of the
antitrust laws. I urge my colleagues to support him.
Mr. KENNEDY. Mr. President, I give my strong support to Joel Klein's
nomination to serve as Assistant Attorney General of the Antitrust
Division at the Department of Justice. Mr. Klein's background and
experience have prepared him well to serve the country in this
capacity.
After graduating magna cum laude from Columbia University and Harvard
Law School, Mr. Klein served as a law clerk for both D.C. Circuit Judge
David Bazelon and Supreme Court Justice Lewis Powell. He later served
with great distinction as a public interest lawyer, Deputy White House
Counsel, and Principal Deputy of the Antitrust Division where he is now
the Acting Assistant Attorney General.
Mr. Klein's work in the Antitrust Division has earned wide praise.
Leading economists, including two former Chief Economists of the
Federal Communications Commission, believe that he will be an excellent
Assistant Attorney General who is ``dedicated to enforcing our
antitrust laws and promoting competition in our economy.'' Mr. Klein
wins similar high praise from State and Federal officials and many
members of the American Bar Association active in the Section of
Antitrust Law.
This praise is well deserved. Mr. Klein has won substantial criminal
fines against large companies guilty of price-fixing. He has challenged
anticompetitive practices and anticompetitive mergers that harm
consumers. He has given new emphasis to antitrust enforcement overseas
to help open more markets for U.S. businesses.
I have had the opportunity to work closely with Mr. Klein on several
issues, including a recent ``East-West Initiative,'' which brought
together business leaders, government officials, and Republican and
Democratic Senators from Massachusetts, North Carolina, Washington,
Utah, and California to discuss cooperative efforts by government and
business to help consumers. Mr. Klein's participation in this effort
was key to its success, and I have the greatest respect for his ability
and his commitment to public service.
I urge the Senate to approve his nomination. His outstanding record
makes him an excellent nominee for this position. I hope that the
strong bipartisan support already expressed by many Senators on both
sides of the aisle will lead to further cooperation in expediting
action on other nominees for the Department of Justice, and for long
overdue bipartisan action on judicial nominations as well.
Mr. WYDEN. Mr. President, the position of Assistant Attorney General
for Anti-Trust is one of the most critical to assuring American
consumers enjoy the benefits of competition. The decisions made by the
individual who holds this title affect billions of dollars and the
ability of our companies to compete in the global economy. They affect
corporate profit and loss sheets and the course of the stock market.
But most importantly, they affect the prices consumers pay for basic
services, from telephone calls to transportation and television.
No area holds more promise for competition than communications, and
that was the major impetus for the 1996 Telecommunications Act. The Act
was intended to eliminate monopolies, spur new entrants and bring down
prices. Eighteen months later, we have seen pitifully little progress.
The Administration has not moved aggressively to promote competition.
The vote I will cast today is meant to send a signal to the
Administration that those of us in Congress who supported the 1996
Telecommunications Act want to see competition rather than
concentration.
As a member of the Commerce Communications Subcommittee, I had hoped
the 1996 Telecommunications Act would unleash a torrent of competition.
Instead, we have seen prices outpace inflation in many areas. Each day
the paper seems to carry yet another announcement of one giant
company's plans to merge with another. Companies are spending millions
of dollars on litigation and negative advertising. The situation
reminds me of the African proverb: when elephants fight, the grass gets
trampled. The grass here is the American consumer.
Perhaps the overwhelming array of choices has lulled the consumer
into a sense of complacency. We hear about 500 channel broadcast
satellite and video-on-demand. We see pages and pages of advertisements
for cellular phones and CD ROM's, interactive computers and digital
cameras. The pace of progress is incredible.
But if one peeks behind the smorgasboard, there is a very disturbing
trend. The trend is toward concentration and media mega-mergers.
Today's competitors are becoming tomorrow's partners.
Mr. President, this is why the position of Assistant Attorney General
for Anti-Trust is so crucial. The individual who sits in that office
plays a pivotal role in assuring our anti-trust laws produce robust
competition rather than rogue concentration. Consumers need a champion
for choice in communications.
I like Mr. Klein personally and believe him to be a skilled lawyer.
It is the Administration's failure to move aggressively to promote
competition that disturbs me. I hope my vote today
[[Page S7686]]
sends a clear message to the Administration that the trend toward
increased communications concentration needs to be thorougly examined
and challenged. For this reason, Mr. President, I will not be able to
support the Administration on this vote.
Mr. TORRICELLI. Mr. President, I rise in support of the nomination of
Joel Klein because of my confidence in his ability to be the kind of
antitrust law enforcer the Justice Department and the country need to
protect consumers and ensure vigorous competition.
My confidence comes from Mr. Klein's record of great success during
the past nine months during which he has headed the Antitrust Division.
He has proven to be a strong advocate in promotion of competition. His
accomplishments include suing Rochster Gas and Electric for impeding
competition for electric power, suing to block a hospital merger that
would have raised prices for patients on Long Island, NY, obtaining
indictments of an insulation company executive for price fixing,
blocking an acquisition that would have created a dominant provider of
asphalt concrete in New Hampshire and Vermont, and blocking an
acquisition by Gulfstar Communications that would have created
unacceptable media concentration.
His record also includes numerous guilty pleas and fines and
settlements from antitrust violators, including a record $5.6 million
penalty from German and Brazilian companies for violating pre-merger
notification rules.
With an already strong record in an acting capacity, we can look
forward to great things from Mr. Klein should he be confirmed by the
Senate.
Mr. HATCH. Mr. President, I must say I find some irony in the
criticisms I am hearing today regarding Mr. Klein's efforts to
implement the Telecommunications Act. In essence, it is being suggested
that Mr. Klein's interpretation of the Act would permit local Bell
companies to enter the long distance market prematurely, or too easily.
In fact, however, Mr. Klein has weighed in against Bell entry into
long distance in the 2 applications that have, to date, come before
him--that is, the SBC and Ameritech applications. So it is curious to
me that, while Mr. Klein's only actions in this regard have been
contrary to the Bells, his confirmation is being opposed on the ground
that he is being too lax on the Bells. This puzzles me.
But the broader point here is that Mr. Klein has demonstrated a
studied, fair approach to interpreting the law, as a general matter.
I may well disagree with particular decisions Mr. Klein makes, but I
am persuaded he will make a top-flight antitrust chief. So I urge my
colleagues to join me in supporting this nomination.
Mr. BURNS. Mr. President, I rise this evening to offer may support
for nomination of Joel Klein to assume the position of Assistant
Attorney General of the Antitrust Division of the U.S. Department of
Justice.
There has been much debate here this evening over my letter to Mr.
Klein dated May 15, 1997, and his subsequent letter in response dated
May 20, 1997. I'd like to take this opportunity to offer my two cents.
When Mr. Klein's nomination was first reported out of the Judiciary
Committee, I was concerned for three primary reasons. First, I had
recently read Mr. Klein's paper entitled ``Preparing for Competition in
a Deregulated Telecommunications Market,'' which he presented at the
Willard Inter-Continental Hotel in Washington, DC, on March 11, 1997,
and his interpretation in that paper of Section 271 of the
Telecommunications Act of 1996 troubled me. Because I chair the
Subcommittee on Communications, I felt that I could not, in good
conscience, allow his nomination to move forward; consequently, I
placed a hold upon his nomination and sent a letter to him asking him
to explain his statements concerning 271 applications. He promptly
responded with a comprehensive explanation of his statements, and,
while I did not at that time nor do I now, necessarily agree with his
assessment of the DoJ's role in the 271 application process, I
understood the basis of his convictions.
Second, in addition to the questions raised in my letter, I also
telephoned him and expressed concern over what had been reported to
me--both by press accounts and by a wide range of industry
representatives--as a total failure on the part of the Antitrust
Division to investigate allegations that Microsoft Corporation was in
violation of the Consent Decree entered into with the Department of
Justice on August 21, 1995. I have here one of several newspaper
articles detailing these allegations and seek unanimous consent for its
introduction into the Record. Subsequently, I met with Mr. Klein and he
assured me that he would investigate these allegations.
Finally, I had been contacted by a number of radio broadcasters who
had complained that the Antitrust Division was misinterpreting the
radio ownership provisions of the Telecommunications Act, but, after
meeting with Mr. Klein, and discussing the issue at length, I was
satisfied with his approach in this matter.
Consequently, based upon both his written and verbal responses to my
concerns. I am satisfied that he will be a fine Assistant Attorney
General for the Antitrust Division, and I support his nomination.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. DORGAN. Mr. President, if there is a cure for insomnia, as I said
the other day, this kind of debate surely must be it. This is so arcane
and technical, to be talking about antitrust issues and VIII(C) and
section 271, and all of these issues that almost no one understands.
They seem not very important to many, I am sure. I suppose most who
would listen to this would think it incredibly boring. But, in fact, it
is very, very important. We have a market system in this country that
works only when there is competition. When you don't have competition,
the market system doesn't work.
We have something called a referee several places in this Government:
One at Justice, in the Antitrust Division; we have a referee function
in the Federal Trade Commission. In fact, we have 1,000 attorneys,
roughly, I understand, whose job it is to deal with antitrust issues
and the issues of monopoly and so on. The purpose is to make sure that
we don't have enterprises, where people come in and grab markets and
develop trusts or monopolies and extract from the consumers a price
that is unfair, a price that is not set in an open market or an open
competition. That is what this antitrust enforcement is about.
Mr. Joel Klein is, by all accounts, capable, smart, and a fellow with
a distinguished career. I have met him. I think he is a nice fellow. We
should not be voting on this nomination at this point. We should not
have been voting on a cloture motion on this nomination either, as we
did a week ago. Why? Because there are substantial questions that a
number of us have raised about the nomination of Mr. Klein that have
not been answered. I feel I must vote against this nomination. I don't
like that position, but I don't intend to vote for a nomination with
the kind of questions that remain about a number of positions that have
been taken, a number of things that have been written and said by this
potential nominee on antitrust issues, that give me great concern.
I intend to speak only briefly because I think my colleagues have
covered this subject. After I complete my presentation I will yield
back the remainder of our time. But I want to make a couple of
important points.
The fight on the Telecommunications Act, which was the first major
reform of the telecommunications laws in this country in five or six
decades, was a substantial battle between behemoths in our country--
organizations that provided local service that are collecting tens and
tens of billions of dollars of revenue, and organizations that are
involved in long distance telephone service that are just as big. These
titans then clashed as we wrote a Telecommunications Act. One of my
concerns as we wrote this act was that we would end up, not with more
competition, but, instead, with more concentration. If you have less
competition and more concentration you will have higher prices.
My colleague from Nebraska held up something that was in the paper
this morning in Nebraska, ``So Far, Consumers Losers in Battle for
Dial-Tone Dollars; basic rates for telephone service are up for 93
percent of Nebraska
[[Page S7687]]
residential customers the past year.'' I don't know much about
Nebraska, but I fear what will happen if we don't have aggressive
antitrust enforcement at the Justice Department, something I fought
very hard for, as did the Senator from South Carolina, as did the
Senator from Nebraska, when we passed the Telecommunications Act. We
were the ones standing out here on the floor talking about the VIII(C)
test. We are the ones who fought for a role for the Justice Department
in all of these issues. Were it not for us, it would not have been
there.
Now, the Justice Department role is critical, as is the role of the
Federal Communications Commission. If we have a Federal Communications
Commission that does the wrong thing, or we have a Justice Department
that doesn't do the right thing in antitrust enforcement, I guarantee
the result of the Telecommunications Act last year will not be more
competition and lower prices, it will be more concentration, fewer
companies, and higher prices. I guarantee it.
This is important. This is about billions and billions and billions
of dollars of additional charges that consumers may or may not have to
pay in the future, depending on antitrust enforcement in the Justice
Department and on thoughtful, responsible decisions in the Federal
Communications Commission that properly implement the
Telecommunications Act. There will be more discussion about that
because we also have some disagreements about nominations to the
Federal Communications Commission.
Mr. President, I ask unanimous consent to have printed in the Record
at this point a letter that I have written to Mr. Joel Klein dated July
15, asking some questions about the interpretations that have been made
on the VIII(C) test--the VIII(C) standards, rather, relative to the new
standard called ``irreversibly open to competition.''
There being no objection, the letter was ordered to be printed in the
Record, as follows:
U.S. Senate,
Washington, DC, July 15, 1997.
Mr. Joel Klein,
Acting Assistant Attorney General, U.S. Department of
Justice, Washington, DC.
Dear Mr. Klein: Last night, I received a letter from
Attorney General Janet Reno responding to a letter I sent to
President Clinton relating to issues that I have with respect
to your nomination. While I appreciate the fact that the
Administration has acted to respond to my inquiry, the
response was very general and lacks sufficient specificity to
alleviate my concerns.
I expect that you will be confirmed by the Senate on
Thursday. However, before I can vote in your favor, I still
need to resolve some concerns with respect to the role of the
Justice Department in the antitrust aspects of
telecommunications policy. In particular, your assurance to
other Senators that you reject the VIII(C) standard with
respect to the Justice Department's evaluation of a Section
271 application by a Regional Bell Operating Company (RBOC)
needs further explanation. I would like a more detailed and
specific analysis from you on how the ``irreversibly open to
competition'' standard relates to the VIII(C) standard, which
was recommended in the Conference Report on the
Telecommunications Act of 1996. How does the ``irreversibly
open to competition'' standard differ from the VIII(C)
standard with respect to assessing adequate local competition
and the impact of RBOC entry into long distance services on
long distance competition.
In our meeting last week, you said that the standard that
you and the Antitrust Division have developed is stronger
than the VIII(C) standard, and more appropriate in your
judgement. I would like your analysis why this is the case. I
want to assure you that I have an open mind on this subject.
My position is not absolutely wedded to the VIII(C) standard
as the only test for evaluation of a Section 271 application
by an RBOC. Rather, I become concerned when an Administration
official adopts a position that differs from previous
Administration policy--which I fought for in the debate over
the Telecommunications Act--and I would like to better
understand the new position.
As I said on the Senate floor last Friday, I do not doubt
your abilities nor your integrity. I simply would like some
clarification on some issues that I fought hard to secure in
the Telecommunications Act at the request of the
Administration before the Senate votes on your nomination to
be Assistant Attorney General for the Antitrust Division.
Thank you for your assistance and cooperation.
Sincerely,
Byron L. Dorgan,
U.S. Senate.
Mr. DORGAN. I have sent Mr. Klein this letter.
Let me say this. It may well be that the irreversibly open to
competition standard is a tougher standard, as they allege. I don't
have the foggiest idea. I don't know. Nobody knows. And I am not
prepared to have someone say, ``I reject the standard that Congress
determined to be the standard when it passed the Telecommunications
Act, and I create my own standard,'' and none of us know what that
means here--I am not prepared to say, ``Yes, let me sign up for that.
Let me be a partner in that process.'' I am not willing to do it.
It may be, at the end stage of this process, maybe it is proven to us
that Mr. Klein was right. I hope so. I hope that is the case. But if he
is not right, if we are right, what is going to happen is everybody in
this country who uses a telephone, everybody in this country who is a
consumer of telecommunications services, is going to end up paying
higher prices. That's the test.
Mr. President, one final point and then I will conclude. During the
debate on the Telecommunications Act, something happened to me that was
a real learning experience. All of us in the Senate have learning
experiences, despite the fact that some say we never seem to be able to
learn.
I offered an amendment on the floor of this Senate on the issue of
concentration, because the bill that came to the Senate said, ``Let's
take the limits off. Let's let these companies marry up. The more
weddings the better. Let three companies become one. Let two companies
become--let's have mergers, let them go off and get married--it is just
terrific.'' That is what the bill was. So I offered an amendment on the
floor of the Senate and said, ``Let's put these limits back on at this
point.'' I don't support taking the limits off how many television
stations you can own, how many radio stations you can own.
We had a vote and guess what? Guess who won? I won. My amendment
prevailed. I was so surprised I could hardly stand, and it was about 4
o'clock in the afternoon. The then-majority leader did not support my
position. He was on the opposite side. He changed his vote--had another
Member change his vote, and asked for reconsideration after dinner, 3
hours later. And do you know what happened? There were four, five, or
six Members of the Senate that went out to have dinner--Lord only knows
what they ate--they came back and 3 hours later they had some sort of
epiphany that allowed them to vote against my amendment, so I lost.
I learned that winning around here sometimes means you only win for 3
hours. It felt good from 4 to 7, but the fact is I lost. Then the bill
went to conference and the bill had enough in it to make me feel that
maybe we will move in the right direction. But I would rue the day of
supporting any portion of this telecommunications act if we don't have
the most aggressive antitrust enforcement and the best decisions, the
most thoughtful decisions comporting with what we decide is in this act
from the Federal Communications Commission.
I have a lot more to say but I know there are other times when
Members will be anxious to hear it, and I will save it for those times.
Let me compliment the Senator from South Carolina and the Senator
from Nebraska.
Let me say a word, finally to the nominee. I expect the Senate will
cast a favorable vote for this nominee. I hope this nominee succeeds. I
hope this nominee proves that the standard that he has developed is a
tough, no-nonsense standard. If he does, I will come to the floor at
some point in the future and say, ``Hurrah for you. I support what you
have done.'' I think we should not be voting on this nominee today. I
wish we had more time. If we had more time, maybe some of these votes
would have been different.
Mr. President, I yield the floor and yield the remainder of our time.
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. Mr. President, do I understand the other side is willing
to yield back the remainder of their time and we are prepared to yield
back the remainder of our time?
Mr. HOLLINGS. Mr. President, we yield the remainder of our time.
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. Mr. President, I yield back the remainder of our time. I
ask unanimous consent that upon the completion of debate or the
yielding back
[[Page S7688]]
of time on the Klein nomination, we proceed to a rollcall vote on the
nomination and then, after that vote we proceed to vote on Executive
Calendar No. 139, the nomination of Eric Holder to be Deputy Attorney
General of the United States.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
Mr. LEAHY. May I ask for the yeas and nays on both.
Mr. HATCH. On both nominees.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Mr. LEAHY. I ask unanimous consent the yeas and nays be ordered on
both.
The PRESIDING OFFICER. Is there objection to the ordering of the yeas
and nays on the second nomination?
Without objection, it is so ordered. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Mr. HATCH. I yield the remainder of my time.
The PRESIDING OFFICER. The question is, Will the Senate advise and
consent to the nomination of Joel L. Klein, of the District of
Columbia, to be an Assistant Attorney General. On this question the
yeas and nays have been ordered. The clerk will call the roll.
The yeas and nays have been ordered.
The clerk will call the roll.
The legislative clerk called the roll.
The result was announced, yeas 88, nays 12, as follows:
[Rollcall Vote No. 187 Ex.]
YEAS--88
Abraham
Akaka
Allard
Ashcroft
Baucus
Bennett
Biden
Bingaman
Bond
Boxer
Breaux
Brownback
Bryan
Burns
Campbell
Chafee
Coats
Cochran
Collins
Coverdell
Craig
D'Amato
Daschle
DeWine
Dodd
Domenici
Durbin
Enzi
Faircloth
Feinstein
Frist
Glenn
Gorton
Graham
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Jeffords
Johnson
Kempthorne
Kennedy
Kerry
Kohl
Kyl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lott
Lugar
Mack
McCain
McConnell
Mikulski
Moseley-Braun
Moynihan
Murkowski
Murray
Nickles
Reed
Reid
Robb
Roberts
Rockefeller
Roth
Santorum
Sarbanes
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Torricelli
Warner
Wellstone
NAYS--12
Bumpers
Byrd
Cleland
Conrad
Dorgan
Feingold
Ford
Harkin
Hollings
Inouye
Kerrey
Wyden
The nomination was confirmed.
____________________