Letter from the Consumers Union (CU) and Consumer Federation of America (CFA) to the Senate Commerce Committee.
Re: FCC proceedings pertaining to local competition, unbundled network elements, and broadband deployment.
Date: January 13, 2003.
Source: CFA.

January 13, 2003

The Honorable John McCain, Chairman
U.S. Senate Committee on Commerce, Science, and Transportation Washington, DC 20510

The Honorable Ernest "Fritz" Hollings, Ranking Member
U.S. Senate Committee on Commerce, Science, and Transportation Washington, DC 20510

Dear Senators McCain and Hollings,

On behalf of Consumer Federation of America and Consumers Union, we write to express our concern for the direction that the Federal Communications Commission appears to be taking with respect to competition in local telephone and advanced Internet service markets. As reported in the Wall Street Journal last week, Chairman Powell appears to favor a proposal that would undo important provisions of the 1996 Telecommunications Act (the "Act") and seriously undermine the competitive benefits that consumers have only recently begun to enjoy.

Today, Congress finds itself at a crossroads with respect to regulation of the telecommunications marketplace. Unfortunately, the monopoly attributes of telephone network facilities have been much more difficult to chip away at than many policymakers anticipated, as evidenced by the extremely slow deployment of competitive facilities since passage of the Act. In that time the Bell telephone companies have resisted competition through litigation, lobbying efforts, and anticompetitive practices, including failing to meet performance standards and making false promises about where and how they would compete. Even more telling is the fact that the Bell companies refuse to compete in each other's territories.

Congress has a simple choice to make: either regulate the Bell's wires to promote competition by preserving unbundled network element ("UNE") pricing and availability, or deregulate at the wholesale level, allowing the Bells to expand their local market dominance into long distance. If you choose the latter course, it is virtually certain that the vast majority of consumers will never see meaningful competition for their local and long distance needs, and therefore the states and FCC will need to regulate to prevent inflated prices and discriminatory practices.

The only thing that Congress must not permit is the path that appears to be favored by Chairman Powell-deregulation of the Bell monopolies-a path that short-circuits local competition in violation of the Act without any protection for consumers. That would be the worst of both worlds-no regulation to protect consumers and no competition to keep prices and service quality in check.

Chairman Powell's "draft" proposal unlawfully rewrites important provisions of the Act. In section 271, Congress clearly and specifically required that the Bell companies provide competitors unbundled access to the UNE-Platform of loops, transport and switching if they want to provide long distance services. Now that the FCC has largely granted the Bells entry into the long distance market, the agency must not exempt them from their legal obligation to provide reasonably priced wholesale access to competitors.

What's more, state regulators have relied on the 271 checklist requirements to grant approval to the Bells to offer long distance services. Taking away UNE requirements now would force regulators in nearly every state to re-examine Bell compliance with state requirements.

Local telecom competition has been thriving lately, providing consumers lower rates and better service. For example, SBC recently cut consumer rates by more than 30 percent in Michigan, and lowered and simplified rates in Illinois, Ohio and California to meet new competition. In New York, Verizon has made similar rate cuts.

These consumer benefits have come about largely due to the diligence of state utility regulators who in recent years have concluded that Bell rates are too high and have lowered the prices competitors pay for UNEs. As a result competition is finally starting to take hold at the state level.

The FCC should not restrict the ability of state regulators to fulfill their Congressionally assigned role of keeping local markets open and wholesale prices fair and reasonable. In the alternative, Congress and the FCC must be prepared to regulate local and long distance prices for consumers who have no meaningful choice of providers, if elimination of wholesale pricing rules leads to the expansion of Bell monopoly power.

We look forward to working with you in the months ahead on these important consumer issues.


Mark Cooper
Director of Research
Consumer Federation of America

Gene Kimmelman
Senior Director of Public Policy and Advocacy
Consumers Union

Cc: Senate Commerce Committee