[Congressional Record Volume 143, Number 128 (Tuesday, September 23, 1997)]
[Senate]
[Pages S9777-S9778]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            FCC REGULATIONS AFFECTING RURAL TELEPHONE RATES

  Mr. LEAHY. Mr. President, I would like to express my dismay, actually 
my increasing dismay, at the direction the Federal Communications 
Commission is taking, the misguided deregulation of local telephone 
markets.
  When the Telecommunications Act was debated, and then when it was 
signed into law, many supporters hailed the legislation first and 
foremost as a boon to consumers.
  We were told that because of the magical hand of competition, 
telephone rates for consumers would decrease; the free market system 
would take over.
  Now, competition, if it is correctly injected into the telephone 
market, can lead to lower prices for consumers. But the FCC's ham-
handed attempts to implement poor legislation--and it was poor 
legislation, which is why I voted against it--has made the problem even 
worse.
  During the debate of the telecommunications bill, I took the Senate 
floor and expressed real strong concerns that skyrocketing telephone 
rates for rural areas, like my own State of Vermont, seemed likely. I 
wish I had been wrong, but unfortunately my concerns seem justified.
  Even a bad telecommunications bill--and this was--could have been 
partially mitigated by careful and proper implementation. But the FCC 
seems bent on wanting to take what was a poorly done bill and make it 
worse. They want to exacerbate the conditions I expressed concern about 
during debate on the bill.
  Here is what has happened.
  Instead of increasing telephone service competition, there are three 
alarming FCC decisions that will in fact reduce telephone competition 
in rural areas and will likely result in much larger monthly telephone 
bills in States such as Vermont.
  The result may be that many rural customers will not be able to 
afford a

[[Page S9778]]

telephone at home. The dream of linking America together on the 
information superhighway, a dream of linking all parts of America, 
urban and rural, together will remain just that, a dream, not a 
reality, because rural America will be cut off.
  The Telecommunications Act directed the FCC to ensure that rates for 
phone service in rural areas remain reasonably comparable to rates in 
urban areas. Now, I understand there are details being worked out, but 
many of the decisions already rendered by the FCC do not bode well for 
rural States like Vermont.
  For instance, the FCC decided the Federal universal service support 
would be raised only from the interstate revenues of interstate 
carriers. So what does that do? The FCC places off limits more than 
half of the retail revenue available from the telephone industry.
  Second, the FCC has ruled they would support only 25 percent of the 
need even in a high-cost rural State like Vermont. This leaves 75 
percent of the need to be raised by the States themselves, presumably 
from the intrastate revenues generated in those States, in other words, 
to raise the largest amount from the small rural States.
  And third, they seem to repeal the high-cost support as we know it.
  Let me show you on this chart, Mr. President. This shows a likely 
result of the FCC's three decisions.
  This assumes the States are going to have to make up the support that 
the FCC now says it will not provide. Let us see what this means. The 
blue vertical bars show the anticipated State surcharges on intrastate 
revenues; that is, if they want to make up the difference. The red bars 
show an alternative approach, which the FCC did not adopt, where all 
needed support would come from a uniform Federal surcharge on all 
telephone revenues.
  Let me tell you what this means. If they had done what they should 
have done, almost all States would have paid about a 2-percent 
surcharge to make up the difference. That is the red line on the chart. 
Whether you are in the District of Columbia or North Dakota, whether 
you are in New Jersey or Wyoming, you will be paying roughly the same.
  However, instead of doing that, what the FCC has said, to heck with 
rural States. Instead of keeping a surcharge about the same for 
everybody, they tell North Dakota they will have to come up with about 
33 percent, South Dakota about the same, Wyoming, just under 30 
percent, Montana similar to that, New Mexico and Kansas up over about 
12 percent. If you are a small rural State, what they are saying is 
forget about being part of the telecommunication revolution. If you are 
a small rural State, forget about being told the U.S. Congress has 
given you a good deal in the Telecommunications Act. You have just got 
a disconnect signal. In fact, you probably have to pay for that.
  Of the top 15 States, almost all rural States, they can buy with only 
a rate surcharge of 9 percent. That is money out of pocket. The act 
requires States to have reasonably comparable rates. Boy, this sounds 
great. You are from a rural State or from an urban State, roughly 
comparable rates. Who could disagree? Except what happens, if you are 
paying a 1- or 2-percent surcharge in one State and in another State a 
30- or 35-percent surcharge, you are not roughly comparable, and there 
is no way these States can compete.
  Would it not have made more sense to say every State pays about 2.6, 
2.5 percent surcharge? Then everybody would be on an even playing 
field, whether you are a company in North Dakota or in Vermont, or you 
are a company in Michigan or Pennsylvania, at least basic costs would 
remain the same. If you were a homeowner, if you were a renter, if you 
were in those States, your costs would be roughly comparable.
  Under the FCC's proposal, which make no sense at all, many experts 
predict an increase in the 100 percent to 200 percent range for phone 
rates in these very rural States. Now, I am one Vermonter who would not 
stand for that, and I cannot imagine any other Vermonter standing for 
that.
  I think the time will prove these unfortunate predictions correct, as 
rural phone companies go out of business, the bigger competitors cherry 
pick the best customers, and the rural areas, you might as well go back 
to smoke signals, Pony Express, or shouting across the valleys because 
you will not be able to do it by picking up the phone.
  I think the FCC is letting a golden opportunity slip by. I think, Mr. 
President, we may have given them the opportunity by casting rural 
areas over the side in that Telecommunications Act. Even tossing them 
over side, you would have thought the FCC would have put out a net or a 
helping hand. Instead, it looks like they tied the anchor around their 
neck as they went by and dropped them into the ocean.

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