[Congressional Record (Bound Edition), Volume 147 (2001), Part 8]
[Senate]
[Pages 11147-11148]
[From the U.S. Government Publishing Office, www.gpo.gov]



                     TELECOMMUNICATIONS ACT OF 1996

  Mr. FRIST. Mr. President, I am increasingly concerned about the 
stalled promise of the Telecommunications Act of 1996. There are many 
indications that the pro-competitive course we charted in 1996 when we 
enacted the Telecommunications Act is not moving as quickly as we 
intended. In response to that landmark law, hundreds of

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companies invested billions of dollars in an effort to bring a choice 
of service provider to local consumers. Yet the competitive 
telecommunications industry has virtually collapsed in the past year. 
Every day brings reports of competitors declaring bankruptcy, shutting 
down operations, or scaling back plans to offer service. Even in my 
home State, five competitive local exchange carriers with major 
operations in Tennessee have gone bankrupt.
  We have all read recent reports of the difficulties that competitive 
telecommunications firms are facing in the current economic downturn. 
For those that continue to struggle in operation, stock prices have 
plunged, and the capital market has virtually dried up. While 
telecommunications companies captured an average of two billion dollars 
per month in initial public offerings over the last two years, they 
raised only $76 million in IPOs in March, leading numerous companies to 
withdraw their IPO plans.
  The difficulty in entering local markets has also caused nearly all 
competitors to scale back their plans to offer service. Covad had 
established offices in Chattanooga, Knoxville, Memphis and Nashville, 
but is now closing down over 250 central offices, and will suspend 
applications for 500 more facilities. Rhythms has cancelled plans to 
expand nationwide. Net2000 has put its plans for expansion on hold. 
Numerous other competitors, such as DSL.net, have resolved to focus on 
a few core markets. Each of these decisions has been accompanied by 
hundreds of eliminated jobs. In all, competitive local carriers 
dismissed over 6500 employees nationwide in the last year while 
attempting to remain in business. Tennessee is among the hardest hit 
States.
  The repercussions of these events on consumers is significant. 
Competitors reinvested most of their 2000 revenues in local network 
facilities. Competitors that declared bankruptcy in 2000 had planned to 
spend over $600 million on capital expenditures in 2001. Those 
competitive networks will not be available to consumers.
  In this uncertain financial climate, it is imperative that we 
maintain a stable regulatory framework. The 1996 Telecom Act 
established three pathways to a more competitive local 
telecommunications marketplace: a new entrant could purchase local 
telephone services at wholesale rates from the incumbent and resell 
them to local customers; a competitor could lease specific pieces of 
the incumbent's network on an unbundled basis, using what the industry 
calls unbundled network elements; or a competitor could build its own 
facilities and interconnect them with the incumbent's network. Each of 
these alternatives must remain available to new entrants. Making 
fundamental changes to the structure of the 1996 Act will destabilize 
the already shaky competitive local exchange industry, depriving 
consumers of even the prospects for meaningful choice.
  Recent press reports indicate that investors will not sink more money 
into local competitors when there is a ``growing view that regulators 
are working against the new entrants.'' We need to ensure that the 
market-opening requirements of the 1996 Act are vigorously implemented. 
Without a supportive regulatory environment, there will be no more 
capital flowing to new entrants in the local telecommunications market 
spurring competition and lower consumer prices. This was not the 
promise of the Telecommunications Act I voted for in 1996.

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