Tauzin-Dingell: Helping to Disable
The 1996 Telecommunications Act

By Judi Clark
NetAction Advisory Board Member

Introduction

Previous Section


End Notes

[1] Sheldon Hochheiser, AT&T Corporate Historian, A Brief History, Origins, (Dec. 2002) (last visited Mar. 4, 2003).

[2] Sheldon Hochheiser, AT&T Corporate Historian, A Brief History, The Bell System, (Dec. 2002) (last visited Mar. 4, 2003).

[3] Variously called Regional Bell Operating Companies (RBOCs) or Bell operating companies (BOCs). The term Incumbent Local Exchange Carriers (ILECs), a term invented in the 1996 Act, applies to any and all then-existing LECs who were part of the monopoly industry. That included the RBOCs, but also GTE (always a separate company, until Verizon was formed) as well as ~1500 small "independent" telephone companies, serving mainly rural areas. Here, ILEC refers primarily to the incumbent Bell Operating Companies.

[4] These four entities together provided more than 91% of all lines in service as of June 30, 2001. FCC Releases Study on Telephone Trends, FCC (May 22, 2002). (This is the most recent data as of July 11, 2003.)

[5]"In 1969, the FCC approved MCI's application to provide private microwave service between Chicago and St. Louis, marking the beginning of the end of AT&T's 70 year monopoly." Taken from Milestones, MCI WorldCom (last visited Mar. 26, 2003).

[6] FCC Study on Long Distance Telecommunications.

[7] Eli M. Noam, Media Concentration in the United States: Industry Trends and Regulatory Responses (last visited July 12, 2003).

[8] The famous "consent decree" describing AT&T's divestiture is found at U.S. v. American Tel. and Tel. Co., 552 F.Supp. 131 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983).

[9] Telecommunications Act of 1996, Pub. LA. No. 104-104, 110 Stat. 56 (1996), codified at scattered section of 47 U.S.C. (last visited Mar. 1, 2003). References in this paper to "Section __" refer to sections of 47 U.S.C.

[10] The Congressional Record and Committee Hearings are full of this discussion. See, for example, "...bringing competition to the wireline telephone network, one of the key goals of the Telecommunications Act." in Congressional Record, 142 Cong Rec s2000 (March 13, 1996).

[11] See 47 U.S.C. § 251(h) (1996).

[12] 47 U.S.C. § 251(b)(5) (1996).

[13] The text of the Telecommunications Act of 1996 (last visited on Mar. 1, 2003).

[14] Id.

[15] Bill and Keep is discussed in the FCC's First Report and Order, In the Matter of Implementation of Local Competition Provisions in the Telecommunications Act of 1996, Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers, FCC 96-325 (Aug 8, 1996), especially ¶ 1096-1118.

[16] Id, FCC 96-325, ¶ 1034 (Aug. 1996). Note that the term "local" is not defined in the Act, although it is widely used in the industry. The ambiguity of the term came back to haunt the FCC in its efforts to deal with reciprocal compensation for calls to ISPs. See infra. While it is beyond the scope of this paper to cover this topic in detail, note that a simple phone call to anywhere in the world can be merely a local connection from a home telephone, through a service provider (who may be an ILEC or a cable, wireless, or satellite company), to the Internet. This means that, in a sense, all calls are local. Increasingly, the telephone companies are an expensive specialty, and no longer required as monopoly telephone service providers. Indeed, they can be replaced today by software and one of many kinds of Internet-connected devices. This is referred to as Voice over IP, defined below.

[17] The ILECs don't unilaterally set these rates. They negotiate them with the CLECs (see 47 U.S.C. § 251(c)(1)), and if they can't come to an agreement the issue is arbitrated by state commissions (see 47 U.S.C. § 252(b)).

[18] This situation was favorable for the CLECs because as dial-up service became increasingly popular with a mass residential customer base, people used their local phone lines to call their ISPs. This effectively meant the ILECs owed termination charges to CLECs for the imbalance of those calls.

[19] Before the House Telecom Subcommittee Hearing on HR 4445 IH, House Commerce Committee (June 22, 2000) (Statement by Larry Strickling, FCC Common Carrier Bureau) (last visited March 3, 2003).

[20] Before the House Commerce Committee (Sept. 25, 2000) (Letter from John Windhausen, Jr., President, Association for Local Telecommunications Services (ALTS)) (last visited Mar. 5, 2003).

[21] Id.

[22]In The Matter of Implementation of the Local Competition Provisions in the Telecommunications Act of 1996 Inter-Carrier Compensation for ISP-Bound Traffic, 1999 WL 98037, 14 F.C.C.R. 3689, 14 FCC Rcd. 3689, 17 Communications Reg. (P&F) 201, FCC (Feb 26, 1999).

[23] Supra, letter from John Windhausen. More specifically, 47 U.S.C.§§ 252(a)(1) and (e) indicate that interconnection agreements are to be "binding" (in the words of subsection (a)(1)). Additionally, the FCC said in 1999, and again in 2001, that interconnection agreements on this topic are binding.

[24] Bell Atlantic Telephone Companies v FCC, 206 F.3d 1 (C.A.D.C., 2000) (On Petitions for Review of a Declaratory Ruling of the Federal Communications Commission) (last visited Mar. 4, 2003).

[25] Some of the more notable bills sponsored by Tauzin in favor of the Bells, since the passage of the Telecommunications Act of 1996, include: 105th Congress: HR 1872, HR 4324, HR 4801; 106th Congress: HR 1746, HR 2420, HR 4445; 107th Congress: HR 1542, HR 1697, HR 1698, HR 3268, HR 3484, HR 4560.

[26] Tauzin's PACs received contributions from Telephone Utilities amounting to: $45,000, of which $26,500 (58.9%) was from Bell Atlantic, SBC, and Verizon (3 of the 4 Bells) (1999-2000 cycle), and $35,500, of which $26,000 (73.2%) was from the same group (2001-2002 cycle). Verizon and SBC Communications were Tauzin's #1 and #4 (respectively) contributors for 1999-2000, having donated $24,000 between them. Taking turns, Bell South was Tauzin's #1 contributor in 2001-2002, having donated $34,800. From the Center for Responsive Politics.

[27] Dingell's #3 and #4 contributors in 1999-2000 were Verizon and SBC, having a combined donation of $31,800. Bell South stepped up in 2001-2002 to the #2 position with $55,325, ahead of Verizon's $18,000 and SBC's $16,024.

[28] Reciprocal Compensation Adjustment Act of 2000, HR 4445 (May 15, 2000).

[29] "...no local exchange carrier shall be required to make any payment for the transport or termination of telecommunications to the Internet or any provider of Internet access service." See supra HR 4445 § 2(3)(A).

[30] Before a legislative hearing on HR4445, the Subcommittee on Telecommunications Trade & Consumer Protection (June 22, 2000) (prepared statement of the Honorable Joan Smith) (last visited Mar. 5, 2003).

[31] Id.

[32] Internet Freedom and Broadband Deployment Act of 2001, HR 1542.

[33] The "parts" are referred to in the 1996 Act as unbundled network elements (UNE). From the revised 1934 Act, 47 U.S.C. 153 § 3:

Definitions. (29) NETWORK ELEMENT.--The term ''network element'' means a facility or equipment used in the provision of a telecommunications service. Such term also includes features, functions, and capabilities that are provided by means of such facility or equipment, including subscriber numbers, databases, signaling systems, and information sufficient for billing and collection or used in the transmission, routing, or other provision of a telecommunications service.

[34] Supra, HR 1542 § 232(j)(1)(E).

[35] USTA Carrier Members list.

[36] Four Reasons to Support Tauzin-Dingell, United States Telecom Association (last visited Mar. 5, 2003).

[37] Tim McDonald, Analysts: Broadband Competition a 'Firestorm', E-Commerce Times (June 27, 2002).

[38]James Gattuso, The Tauzin-Dingell Telecom Bill: Untangling the Confusion, Thomas A. Roe Institute for Economic Policy Studies, The Heritage Foundation (February 25, 2002) (last visited Mar. 5, 2003).

[39] One example of this is an accounting methodology called Total Element Long-range Incremental Cost, or TELRIC, which sets prices that ILECs charge for interconnecting to their network. ILECs charge that it doesn't allow the incumbent to recover their actual network costs. In Verizon Comm., Inc. v FCC, No. 00-511, slip op. at 54-55 (8th Cir. May 13, 2002), the court stated,

This challenge must be assessed against the background of utilities' customary preference for extended depreciation schedules in ratemaking (so as to preserve high rate bases), see n. 8, supra; we have already noted the consequence of the utilities' approach, that the 'book' value or embedded costs of capital presented to traditional rate-making bodies often bore little resemblance to the economic value of the capital. See FCC Releases Audit Reports on RBOCs' Property Records, Report No. CC 99-3, 1999 WL 95044 (FCC, Feb. 25, 1999) ("[B]ook costs may be overstated by approximately $5 billion"); Huber et al. 116 (We now know that "[b]y the early 1980s, the Bell System had accumulated a vast library of accounting books that belonged alongside dime-store novels and other works of fiction. . . . By 1987, it was widely estimated that the book value of telephone company investments exceeded market value by $25 billion dollars"). TELRIC seeks to avoid this problem by basing its valuation on the market price for most efficient elements; when rates are figured by reference to a hypothetical element instead of an incumbent's actual element, the incumbent gets no unfair advantage from favorable depreciation rates in the traditional sense.

[40] Chris Savage, from Cole, Raywid & Braverman, in personal email, June 20, 2003.

[41] Money Talks in the Tauzin-Dingell Bill Contributions Correlate Strongly with Final Vote (Feb. 28, 2002) (last visited Mar. 3, 2003). Also see: Issue Profile: Telecommunications, The Center for Responsive Politics (Feb. 27, 2002) (last visited Mar. 2, 2003).

[42]Senator Fritz Hollings' biography (last visited Mar. 5, 2003).

[43] FCC Adopts New Rules for Network Unbundling Obligations of Incumbent Local Phone Carriers (FCC Press Release, Feb. 20, 2003) (last visited Feb. 20, 2003).

[44] The plan's details have not been released as of this writing. The FCC normally announces its major decisions at a formal public meeting, with the actual written ruling implementing a decision coming later - sometimes much later.

[45] Ray Le Maistre, Editor, and Jo Maitland, Senior Editor, Covad Bends Commissioner Martin's Ear, Boardwatch (Apr. 16, 2003) explained the situation this way:

To recap, on Feb 20, the FCC announced a decision that four regional Bell operators in the U.S. ... should no longer be obliged to provide competitors with cheap line-sharing access to their broadband networks. That decision, regarded by many in the U.S. telecom industry as a death knell for ISPs that rely on cheap access to the RBOCs' networks, was made on a three-to-two vote by the five FCC commissioners... .

[46] "The immediate response of all the RBOCs [to the FCC's Feb. 2003 announcement] was that they're not going to spend until they win on UNE-P." Quoted from Eugenie Larson, Will RBOCs Spend More on Broadband?, Light Reading (Feb. 26, 2003) (last visited May 17, 2003). This is supported by the Bells' own statements, e.g., " ...today's switching decision will mean that regulation continues to stifle capital investment and research and development in the telecom industry." (Duane Ackerman, Chairman & CEO, BellSouth Corporation (Feb. 20, 2003).) "This 'worst of both worlds' situation is forcing SBC and others to carefully consider how they will invest, where they will invest, how many people to employ and even what kind of consumer services to deliver." (William Daley, President, SBC Communications (Feb. 25, 2003).)

[47] Implementation of the Local Competition Provisions of the Telecommunications Act of 1996 , Third Report and Order and Fourth Further Notice of Proposed Rulemaking, 15 FCC Rcd 3696 (1999).

[48] USTA v FCC, supra, p. 9.

[49] Id.

[50] Id, at p. 17.

[51] USTA v FCC, supra, p 14-15, notes the frequencies as typically between 300 hz and 3.4 khz for the voiceband, 20 khz and above for the high-frequency part. For comparison, the range for human hearing is typically between 20 hz -20 khz, cited in Clinton Colmenares, Research explores how we hear, how to hear better, The Reporter, Vanderbilt University Medical Center (May 21, 2003) (last visited May 21, 2003).

[52] In Telecom Investment Bonanza, author Bruce Fein cites the Phoenix Center Policy Bulletin No. 4 as associating the 1996 Act with a boost of $267 billion in investment over a 5 year period. As to UNE prices, Fein points out that "the marketplace behavior of the Baby Bells convincingly discredits the theory of below-cost pricing of UNEs." He concludes, "to jettison the winning UNE formula would smack of regulatory irresponsibility." The article is from TechCentral (last visited July 14, 2003).

[53] Attachment to Triennial Review Press Release (Feb. 20, 2003) (last visited Feb. 20, 2003).

[54] Supra, 47 USC § 251(d)(2)(B)

[55] From the Attachment to Triennial Review Press Release, FCC (Feb. 20, 2003) (last visited Feb. 20, 2003). Loops are defined as "a telephone line that runs from the customer's premises to the ILEC 'end office,' which houses switches used to route calls to their destination." In Competitive Telecoms. Ass'n. v FCC, 309 F.3d 8 (Oct. 2002).

[56] Broadband Internet Grows to 19 Million in the U.S., Leichtman Research Group (May 16, 2003).

[57] 47 USCS § 151 (1997), from Purposes of Chapter section.

[58] Defined in FCC Court Brief Underscores Consumer Benefits from National Internet Policy of Unregulation; Urges Narrow Judicial Resolution, Aug. 16, 1999.

[59] Janine Jackson, Their Man in Washington: Big media have an ally in new FCC chair Michael Powell, FAIR, Sept-Oct. 2001.

[60] Neil Hickey, Unshackling Big Media, Columbia Journalism Review, July-Aug. 2001,

[61] Id.

[62] Cited from Consumer Federation of America's press release, Consumers Assail FCC Broadband Proposal, Cite Threat to Net, Consumers: FCC Proposal Violates the Law, May 2, 2002. The groups filing comments include Consumer Federation of America, the Texas Office of Public Utility Counsel, Consumers Union, Media Access Project, the Center for Digital Democracy and other state and local groups.

[63] Commissioner Kevin J. Martin's Press Statement on the Triennial Review (FCC Press Release, Feb. 20, 2003).

[64] Id.

[65] Separate Statement of Chairman Michael K. Powell (Dissenting in Part, Feb. 20, 2003).

[66] Headlines are filled with stories about states' budgets in crisis.

[67] Supra, 47 USCS § 151, at §§ I(2): Purpose.

[68]In a move particularly reminiscent of Chicago's corrupt political past, the Illinois State Senate, in May 2003, overrode the FCC and the state PUC, by allowing SBC to double UNE-P cost to competitors, ostensibly to "protect jobs." Of particular note: Chicago mayor Richard Daley's brother is William Daley, recently hired SBC president. William is well paid in his new position: $612k salary, $809k in bonuses, plus a $1M signing bonus (from SEC filings last March). The new law was passed within hours of its proposal by state legislators including one whose wife is an SBC lobbyist. For more on this, see local coverage. A motion for a preliminary injunction was granted one month after the bill passed. Voices for Choices v. Ill. Bell Tel. Co., 2003 U.S. Dist. LEXIS 9548 (May 9, 2003), based on a finding that the IL Legislature did not have the expertise to pass this bill, and that the rates allowed by the bill were in conflict with the earlier TELRIC decision in Verizon, supra.

[69] See H3344 (Rat # 0011, Act # 0006): An Act To Amend Section 58-9-10, As Amended, Code Of Laws Of South Carolina, 1976, Relating To Definitions Pertinent To The Regulation Of Telephone Companies, So As To Provide A Definition For "Broadband Service"; And To Amend Section 58-9-280, As Amended, Relating To The Circumstances Requiring A Telephone Company To Obtain A Certificate Of Public Convenience And Necessity, So As To Exempt Broadband Service From Regulation By The Public Service Commission And To Provide An Exception For Facilities Used By Rural Telephone Companies For The Provision Of Broadband Service, To Clarify That This Act Does Not Affect The Commission's Authority With Respect To Services Other Than Broadband Service And Does Not Relieve An Incumbent Local Exchange Carrier Of Its Obligations Under Federal Law To Provide New Local Exchange Carriers With Unbundled Access To Network Elements Or Interconnection, To Specify Information That The Commission Must Compile In Order To Monitor The Status Of Local Telephone Competition In The State, And To Provide That This Act Does Not Preclude The Commission From Assessing Broadband Service Revenues For Purposes Of Contributions To The USF. (Ratified title, exempting broadband service from regulation by the public service commission, signed by Governor Mar. 12, 2003). South Carolina legislature and BellSouth cite myriad benefits of their newly passed legislation in Marcia Purday's article, BellSouth announces major investment in broadband technology in South Carolina; Passage of State Broadband Bill makes new technology offer possible, Swamp Fox (Apr. 9, 2003).

[70] Supra, Separate Statement of Chairman Michael K. Powell.

[71] Jonathan Krim, Bell Firms Pledge to Fight New FCC Rules: Voice-Network Sharing To Be Fought in Court, The Washington Post, p E01 (Feb. 25, 2003) (last visited Mar. 5, 2003).

[72]See e.g., The Tell-The-Truth Broadband Challenge to Verizon vs "The Verizon 100 Megabit Challenge," NewNetworks (Mar. 28, 2003). This report cites Bell Atlantic, now Verizon, considered DSL a temporary technology, and that "in Bell Atlantic's 1993 Annual Report, the company stated it would spend $11 billion and have 9 million households wired [with fiber optic lines] by 2000." Additionally, Bruce Kushnick published a report, How The Bells Stole America's Digital Future, holding that "Consumers have already paid over $45 billion in extra telephone charges, and continue to pay over $8 billion annually." (June 2000).

[73] Supra, FCC Adopts New Rules.

[74] Letter from SBA's Office of Advocacy to Chairman Michael K. Powell, Ex Parte Presentation in a Non-Restricted Proceeding, Initial Regulatory Flexibility Analysis for Triennial Review of Unbundled Network Elements, CC Dkt. No. 01-338; CC Dkt. No 96-98, CC Dkt. No. 98-147 (Feb. 5, 2003) (last visited Mar. 4, 2003).

[75] Judi Clark, The Future of the Regional Bells, NetAction (May 2002) (last visited Mar. 6, 2003).

[76] Bruce Kushnick, How Much Money Did the Bell Companies Collect From Customers for Broadband Networks They Will Never Receive? : Teletruth Finds that the FCC's Broadband Analyses Are Seriously Flawed and Calls for a "Broadband True-Up", Not a "Customer Takings", Complaint to the FCC, TeleTruth (Feb. 19, 2003)(last visited 4 March 2003).

[77] Marc Ferranti, Stall Tactics: A telecom case study: SBC illustrates how RBOCs are thwarting competition, Network World (Dec. 8, 1997) (last visited Feb. 21, 2003).

[78] Kim Sunderland, Competitive Covenants: Are BOCs Promising Too Much Too Soon? Phone Plus Magazine (Nov. 2000) (last visited Mar. 4, 2003).

[79] One of many stories exploring how telephony is transforming from a hardware-based industry to a software application that works over the Internet. Rachel Konrad, Yahoo: Net will rattle phone industry, Cnet News.com (May 10, 2000). Also see Voice over IP, defined below.

[80] For perspective, see "A Nation Online: How Americans Are Expanding Their Use of the Internet" (February 2001), showing, for example, that over 50% of households with incomes averaging $35,000/year or more, and 85% of households with incomes averaging over $75,000/year, have computers with Internet access (last visited Apr. 16, 2003).

[81] The 1996 Telecommunications Act was the first major update to the 1932 Telecommunications Act.

[82]This non-scientific graph merely illustrates one view of changing trends over time.

[83] Roy Mark, FCC Frees Bells of Broadband Restrictions, InternetNews (Feb. 20, 2003).

[84] Patrick Ross, Remaking the Telecommunications Act, CNet News (Feb. 5, 2003).

[85] Voice over IP, mentioned supra, is "the transmission of telephone calls over a data network like one of the many networks that make up the Internet. While you probably have heard of VoIP, what you may not know is that many traditional telephone companies are already using it in the connections between their regional offices." Explained by Jeff Tyson, How IP Telephony Works,HowStuffWorks.

[86] James K. Glassman, Multi-Billion Dollar Fib, Tech Central Station (Mar. 11, 2003).

[87] Id.

[88] Id.

[89] In a 1999 News Release, an FCC audit found that "[t]he audit reports found that the RBOCs' book costs may be overstated by approximately $5 billion." FCC Releases Audit Reports On RBOCs' Property Records, Report No. CC 99-3 (Feb. 25, 1999). (This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).) More information can be found on the FCC audits at http://www.fcc.gov/wcb/asd/audits/. The audits were not pursued by the FCC, as Chairman Powell dissolved the audit teams and the entire Accounting Safeguards Division as one of his first acts. Perhaps the letter from Tauzin and Dingell to the FCC had an effect, but it's beyond the scope of this paper to look more closely at this issue.