Congress to focus on telecom reform in 2005

As the U.S. Congress gears up for its 2005 work following the presidential inauguration, reform of the rules governing telecommunications competition promises to be a top priority.

Other technology-related issues, particularly digital copyright, are likely to come up during the year. But tech-savvy lawmakers and tech-focused committees will spend much of their time working on changes to a 9-year-old law that regulates wireline-based telephone services, predict lawmakers and congressional observers.

Critics of the Telecommunications Act of 1996, including several lawmakers and some telecom trade groups, say growing Internet-based services like voice over Internet Protocol (VOIP) have rendered the law largely obsolete. Backers of telecom reform say it's time to update the law, which focused on promoting competition among wireline carriers, to factor in Internet-based services.

"We need to have the first legislative enactment for the new era of telecommunications," said Representative Rick Boucher, a Virginia Democrat. "The Internet has been treated in an ad hoc way for the past 10 years."

In a November ruling, the U.S. Federal Communications Commission (FCC) exempted Vonage Holdings Corp.'s residential-focused VOIP service from state regulations. But some lawmakers pushing bills to deregulate VOIP and other Internet applications say a more comprehensive approach is needed.

Congressional deregulation of VOIP could create a "boon for consumers" and a new era of competition, said Senator John Sununu, a New Hampshire Republican who introduced his own IP services deregulation bill in 2004. "If we get this right, if we create a clear framework for IP services, then we'll create a very good incentive for investment and innovation," Sununu said in an interview. "We owe it to industry participants and consumers to provide clear rules of the road."

Boucher, cosponsor of a 2004 bill that would have exempted VOIP and other Internet-based communication services from most federal regulation, argues that such a bill would achieve most of the telecom reform that's necessary. "The '96 Act needs to be repaired on the edges," he said in an interview. "Let's get the old rules out of the way when they don't apply."

Others, including major telecom trade groups, have called for a major overhaul. The '96 Act established a set of rules in which the incumbent owners of much of the nation's telephone network infrastructure -- four companies often called the regional Bells -- were required to share parts of their networks with competing carriers. After a series of rulings by the FCC, neither side is happy with the results.

The United States Telecom Association (USTA), representing facilities-based carriers including the incumbent Bells, argues that rules requiring the incumbents to share their networks aren't needed anymore, because consumers have a variety of choices, including VOIP and competing carriers that purchase access from wireline wholesalers.

"We advocate that where there's competition, there's no need for economic regulation," said Allison Remsen, spokeswoman for USTA. "There's plenty of competition out there."

CompTel/Ascent, which represents Bell competitors such as AT&T Corp. and Sprint Corp., also wants extensive changes to the '96 Act, but for different reasons than USTA. In December, the FCC, prompted by court rulings, relaxed some of its network-sharing rules. The FCC backtracked on an earlier decision requiring incumbents to share local switching facilities in the residential market. Bell competitors, collectively called competitive local exchange carriers or CLECs, decried the December ruling as bad for competition and for customers' pocketbooks.

With recent court and FCC decisions going against competitive carriers, the coming telecom debates will be a "tense time for us," said Robert McDowell, senior vice president at CompTel/Ascent.

CompTel/Ascent members generally support a light regulatory touch for VOIP, McDowell said. Some CLECs have begun offering VOIP services, and most believe VOIP should be treated with the same relaxed regulatory approach as other IP-based services, he said.

But without some protections for CLECs, the providers of broadband connections could shut CLECs out of the VOIP market, McDowell said.

The regional Bells control most DSL (digital subscriber line) connections, and cable companies control cable modem broadband service. VOIP needs a broadband connection to work, and without some regulation, CLECs fear that an incumbent carrier could lock out competing VOIP or other services.

Sununu's 2004 bill, which prohibited the FCC from imposing rules on VOIP unless approved by Congress, appeared to assign incumbent network owners no responsibility to share their lines, McDowell said. "We're concerned that the bill would give monopolies control over the content that rides over the network," McDowell added. "The big fear is we're on the precipice of an era where he who controls the network controls the content that rides over the network."

In addition to the competing interests of the Bells and the CLECs, groups such as the Consumers Union and the National Association of Regulatory Utility Commissioners (NARUC) are likely to press Congress to keep some telecom regulations intact. Consumers Union has advocated that the FCC address issues such as 911 emergency service requirements for VOIP providers.

NARUC has argued that state regulators should play a role in ensuring that VOIP providers offer services for the hearing disabled and 911 services. The regulators also seek to fine-tune the incumbent network-sharing rules in their own states. NARUC officials argue that state regulators are closest to the disputes among phone carriers and between carriers and customers can best deal with those issues.

States should also have a role in requiring carriers to provide affordable access to customers in poor and rural areas, NARUC argues.

NARUC is currently working on an official policy on telecom reform, said James Ramsay, NARUC's general counsel. But he also predicted that other voices, including more consumer groups, will join the telecom reform debate and question wholesale deregulation this year. "This year, I anticipate we won't be lonely any more," Ramsay said of NARUC's positions.

Beyond the basic questions of network sharing and VOIP regulation, some telecom carriers may ask Congress to address a variety of other issues. Likely to be on the table are carrier payments to the Universal Service Fund, which helps fund telephone service to rural and poor areas, and the highly technical rules governing access fees, which carriers pay to each other when a phone call starts on one carrier's network and ends on another's.

Because of the competing visions for telecom reform, quick fixes aren't likely. Some observers predict a drawn-out fight, although USTA's Remsen hopes Congress can pass telecom reform legislation by late 2006. "By the end of this Congress, I think we will have a law," she said. "But there's a lot to address."

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