Room TW-C305
Federal Communications
Commission
445 12th Street, S.W.
Washington, D.C. 20554

Friday,
November 30, 2001

BEFORE: Andrea Williams, Committee Chair Pro Tem

PARTICIPANTS:

JEFFREY KRAMER
AARP

MATT BENNETT
Alliance for Public Technology

DAVID POEHLMAN
American Council of the Blind

MICHAEL F. DelCASINO
AT&T

KATHLEEN O'REILLY
Attorney at Law

ANDREA WILLIAMS
Cellular Telecommunications & Internet
Association (CTIA)

SUSAN PALMER
Cingular Wireless LLC
PARTICIPANTS CONT.:

SHELLEY NIXON
College Student

JOSEPH C. GASKINS
ConnectBid LLC

CLAUDE STOUT (By Interpreter)
Consumer Action Network

KEN McELDOWNEY
Consumer Action

SCOTT MARSHALL
FCC

JUDITH HARKINS
Gallaudet University

DENISE GANT
Hewlett-Packard

JIM TOBIAS
Inclusive Technologies

RAYNA AYLWARD
Mitsubishi Electric America Foundation

KAREN FULLUM KIRSCH
National Association of Broadcasters

GIL BECKER
National Association of State Relay
Administration

LORETTA POLK
National Cable and Telecommunications

SUSAN GRANT
National Consumers League

LEO FITZSIMON
Nokia

MELISSA NEWMAN
Qwest Communications International, Inc.
PARTICIPANTS CONT.:

MARIE LONG
Rainbow/PUSH Coalition and Citizenship Education Fund

VERNON JAMES
San Carlos Apache Tribe

BOB SEGALMAN, PH.D.(By Interpreter)
Speech to Speech

BRENDA BATTAT
Self Help for Hard of Hearing People

PAUL LUDWICK
Sprint Corporation

KAREN WALLS
Telecommunications Research & Action Center (TRAC)

ROBERTA BRADEN
TIA

RICHARD T. ELLIS
Verizon Communications

LARRY GOLDBERG
WGBH National Center for Accessible Media

NANCY BLOCH

STEVE COSTON

STEVE JACOBS

    MS. WILLIAMS: Good morning and welcome to the Advisory Committee. I want to thank all of you for coming this morning and welcome all of you.

    My name is Andrea Williams, and I'm going to be chairing today for Shirley Rooker, who unfortunately -- our leader has been taken down with the flu. I hope that Shirley is going to be better and back on her feet soon. And I'm sure all of you would join me in sharing out heartfelt sympathies with her right now as she tries to battle the flu.

    At this point, I would like to do introductions around the table, and then I'm going to turn it over to Dane Snowden. We have a distinguished speaker with us this morning, Commissioner Copps. Thank you so much for joining us.

    I'm Andrea Williams. I'm also the Assistant General Counsel with Cellular Telecommunications and Internet Association.

    MS. HARKINS: Judy Harkins, Gallaudet University.

    MS. O'REILLY: Kathleen O'Reilly. I'm an attorney, and I represent various consumer groups on telco issues at the federal and state level.

    MR. POEHLMAN: David Poehlman, the American Council of the Blind. Private consultant in disability access technology.

    MR. BENNETT: I'm Matt Bennett from the Alliance for Public Technology.

    MS. WALLS: I'm Karen Walls from TRAC, Telecommunications Research and Action Center.

    MR. KRAMER: I'm Jeff Kramer with AARP.

    MR. GOLDBERG: Larry Goldberg from the WGBH Media Access Group and the National Center for Accessible Media.

    MS. NIXON: Shelley Nixon, Cabrini College student, majoring in human services.

    MR. GASKINS: Joe Gaskins with ConnectBid.

    MR. LUDWICK: Good morning. I'm Paul Ludwick with Sprint.

    MR. McELDOWNEY: Ken McELDOWNEY with Consumer Action.

    MS. AYLWARD: Rayna Aylward with the Mitsubishi Electric American Foundation.

    MR. FITZSIMON: Leo Fitzsimon with Nokia

    MS. GRANT: Susan Grant, National Consumers League.

    MS. BRADEN: Roberta Braden, TIA.

    MR. ELLIS: Rich Ellis from Verizon.

    COMMISSIONER COPPS: Mike Copps, FCC.

    MS. PALMER: Susan Palmer, Cingular Wireless.

    MR. JAMES: Good morning. Vernon James, San Carlos Apache Telecommunications.

    MR. DelCASINO: Mike DelCASINO, AT&T.

    MS. KIRSCH: Good morning. I'm Karen Kirsch from the National Association of Broadcasters.

    MR. TOBIAS: Jim Tobias, Inclusive Technologies.

    DR. SEGALMAN: Bob Segalman, Speech to Speech.

    MS. BATTAT: Brenda Battat, Self Help for Hard of Hearing People.

    MR. BECKER: Gil Becker, National Association for State Relay Administration and the Maryland Relay.

    MS. POLK: Loretta Polk, National Cable and Telecommunications.

    MR. MARSHALL: I'm Scott Marshall, FCC staff.

    MS. WILLIAMS: Thank you. Before we have Bureau Chief Dane Snowden, Scott has a few housekeeping matters he wants to share with us.

    MR. MARSHALL: Just briefly, welcome. And I wanted you to know that the rest rooms are right behind me out this door to my left, across the hall and around the corner. And we also have telephones including TTY-equipped phones in the corridor available for your use. Thanks for coming.

    MS. WILLIAMS: Dane, we turn it over to you right now.

    MR. SNOWDEN: Good morning everyone. Thank you very much for coming and joining us today. We are excited about, obviously, having you with us today. You've picked a good day to come to Washington D.C. in November. It's not too cold; it's not too hot. It's muggy just like we like it.

(Laughter.)

    I want to just give -- more or less , my remarks today are more housekeeping things than anything else. First, this committee recommended to Chairman Powell that we not -- or you not -- excuse me -- accept -- that he not accept the recommendation to three people who -- three organizations who wanted to join the Commission -- excuse me -- the Committee. He has agreed with that, and so you're committee will stay as it is now.

    In addition, you all have received or are in the process of receiving the Chairman's priorities. That is one of the things you asked from the meeting last week -- last time from Marsha MacBride. And you all have received that. And we're excited about the direction that this advisory committee is going.

    Chairman Powell is not available to be here. He is actually giving a speech at the same time right now and could not be here. Commissioner Martin is out of the country right now. Commissioner Copps will be speaking and addressing you in a moment. And Commissioner Abernathy will be down around lunchtime.

    I wanted to also share with you some of the exciting things -- and I say exciting -- it's been very tiring as well -- that are going on in the Commission right now in terms of the Chairman's priorities of reorganizing the agency. Many of you, I'm sure, have read and heard a lot about it from the September meeting that we had where Mary Beth Richards announced the reorganization of the agency. And one of the key parts of that is how it's going to affect the bureau that I happen to be Chief of.

    We have proposed -- and I say proposed because the process that we're going through right now needs union approval, Commission approval and Congressional approval. But I can share you where we're going. We have proposed that our bureau be renamed, for one, to the Consumer and Governmental Affairs Bureau to more -- to better reflect that direction that the bureau is going in. Of course, some of the questions that I typically get, well, what will happen to the Disability Rights Office.

    One of the things that we have done -- and we recognize the great work that the staff is doing in the Disabilities Rights Office -- we will continue. As a matter of fact, I've elevated it to a different -- to a higher level, and we do plan to increase the staff as we move forward. In addition, this bureau, the new bureau going forward, will have a policy arm within the bureau, which is new for this bureau. And so it's moving in a positive direction.

    We will continue to focus and be aggressive in outreach on all issues for consumers. And my goal is to be beyond the Beltway working with consumers. One of the challenges that I see is that we often bring people and meet in this room, and there are certain limitations to that. In addition to the limitations, I think we're only hitting a small cross-section of consumers that we need to hear from. So, as we move forward, hopefully, as they joke with me in the Chairman's office, I'll take my show on the road.

    Recently, we released information on complaints and inquiries that we have received in the Commission. And we released the top five complaints categories across the Commission in the various bureau's from the Wireless Bureau to the Common Carrier Bureau, et cetera. And if you need information or would like information on that, we can provide it to you. One of our goals is to make sure we can educate as many consumers as possible and also make policy changes as we need.

    I would like to also add and encourage your support in a broadband forum that we're going to have on January 24th? I'm looking at Martha Contee. January 24th. What we want to do is take the idea of broadband and hear different voices, and we're calling it Broadband 101. And the goal behind it is to engage consumers in this process of what is working with broadband, what is not working with broadband. And so we encourage you all to participate with us. This is joint project with the FCC and the Local/State Government Advisory Committee as well. So it is my intention to have representation and support from this advisory committee as well.

    I would like to end just by thanking the DRO staff for putting this meeting on. It is a tremendous undertaking, as you might imagine, to have the technological systems all working together at one time. And I want to specifically call out Arlene Alexander, who has been doing a great job. I'm not sure where Arlene is, but she's probably back in the back. She went upstairs to do more work who did a good job. Of course, your fearless leader, Scott Marshall, represents you very, very well here within the Commission.

    So, if there are any questions for me, I'll be happy to take any before I introduce Commissioner Copps.

(No response.)

    You guys are letting me off easy today.

(Laughter.)

    I'm not going to be an idiot. I'm going to take advantage of it. Yes? Oh!

(Laughter.)

    MS. WILLIAMS: You knew it was too good to be true.

    MR. SNOWDEN: Jim.

    MR. TOBIAS: Thank you. I guess the question that I have is do we need to go about some formal process to get a presentation by the Disability Rights Office either to the committee as a whole or to the Disability Subcommittee?

    MR. SNOWDEN: What I would recommend -- actually, let me back up for a second. We take a hands-off -- we the Commission take a hands-off approach to setting your agenda. And so, if you would like that, I encourage you to speak to Shirley or Andrea right now or at a break about doing that. We are definitely -- I would support that idea wholeheartedly for that to happen, but we do not meddle in --

    MR. TOBIAS: Okay.

    MR. SNOWDEN: -- setting your agenda.

    MR. TOBIAS: Thank you.

    MR. SNOWDEN: Just one? Thanks, Jim, for letting me off the hook.

(Laughter.)

    I would like to introduce Commissioner Michael Copps. Commissioner Michael Copps joined the Commission this past spring. He has been an avid supporter of many of the issues that are before this advisory committee, and he plans to stay with us for a good portion of the morning. And, without any further adieu, Commissioner Copps.

(Applause.)

    COMMISSIONER COPPS: Thank you and good morning to everybody. On behalf of Chairman Powell and my fellow Commissioner colleagues and all of us here at the FCC, I want to welcome you all to Washington. I am not here today to give a speech. I'm here to listen, so I am not going to delay the proceedings unduly. But I did want to come and thank you all for coming. And I know it's always a challenge to get here. And, in these times, it's even a bit more of a challenge, but.

    We had a chance last time I was here to get into some of the specific issues that your committee is addressing. And I want to tell you again how much we appreciate the work that you do. Your commitment of time and resources to provide us your expertise is an effort for all of you. It's a real sacrifice for some of you to come here; I realize that. But you should know that your work on behalf of American consumers helps us to make better decisions in the public interest.

    And with your further help, we can advance the goal of bringing the best and most accessible communications system to all of our citizens. And whenever I say that, I always underline the word "all" in all of our citizens and particularly pertaining to those with disabilities.

    Today's meeting gives us a little different opportunity to discuss your work in a broader context, and that context is the 1996 Act. And I think going into this discussion today, we all ought to realize -- and I think most of here do -- that at its heart the Telecom Act of 1996 is a pro-consumer act.

    Now, right to the point, Congress declared that the preeminent goal of the Telecommunications Act was -- and this is a quote right from the legislation -- to secure lower prices and higher quality services for American consumers, end quote. So, as public servants, our job -- and it's more than a job, it's our mandate -- our mandate, if you will, is to put the interest of American consumers front and center in everything that we do.

    In writing the Telecom Act, Congress didn't seek to establish competition merely for the sake of competition. It recognized the power of competition to help consumers, to bring services and options and choices to consumers, choices of services, choices of providers, choices of technology and choices in sources of content. And that sprang from the Congressional realization that where you have these choices, consumers get better services, greater innovation, higher technology, and they also get a more robust public discourse.

    So I look forward to today's meeting, to hearing your views. I hope these discussions will not be just a one-day event because I think you ought to look at what you do against the broad context of that act regularly as we go along and keep the dialogue going.

    Finally, I just want to say I welcome Dane's comments with regard to the future of the Disability Rights Office in the reorganization that is taking place here at the FCC. And I am pleased to learn of his commitment and the Chairman's commitment to maintain that office and even to enhance that office by increasing the staff, by giving it, as Dane said, a further and a wider involvement in the policy dialogue.

    And I like the idea of going beyond the Beltway and making sure we do that outreach, although I also like the idea of you guys coming inside the Beltway and doing whatever you can up on Capitol Hill and elsewhere to advance the causes that you believe in. But, anyhow, that I think can be a good development, and I'm looking forward to working with the Office and with its enhanced resources to make our work more effective.

    And with that, I'm going to sit down and listen. But thank you again all for being here today.

(Applause.)

    MS. WILLIAMS: Thank you Commissioner Copps. First of all, I want to check the phone line. Do you we have any members on the phone?

(No response.)

    I believe Steve Jacobs is supposed to be joining us?

(No response.)

    MS. PALMER: Andrea.

    MS. WILLIAMS: Okay.

    MS. PALMER: Laura Ruby -- I'm not on the mic, am I?

    MS. WILLIAMS: I'm sorry, I can't hear you.

    MS. PALMER: Laura Ruby.

    MS. WILLIAMS: Okay. Laura?

    MS. PALMER: Laura Ruby, unfortunately, can't make it today from Microsoft. She sends her regards. She has an illness in her family. So this is kind of off the record, but if you want to send her note and cheer her up that would be great for anyone here.

    MS. WILLIAMS: Thank you, Susan.

    Also I wanted to acknowledge some new representatives to the CDTAC. We have Melissa Newman from Qwest and Marie Long from Rainbow/PUSH, Denise Gant from Hewlett-Packard Corporation, and I also I understand that Claude Stout, my dear friend Claude, is joining us as representing Consumer Action Network.

    I'd also like to acknowledge and thank Verizon for breakfast and lunch today. Rich, we appreciate your baking all last night.

(Laughter.)

    MR. ELLIS: I personally checked to make sure everything is fresh over there, so it --

(Laughter.)

    MR. ELLIS: -- possibility if I'm up to it. Thank you.

    MS. WILLIAMS: Also to Paul Ludwick -- I don't if Paul is here, I haven't seen him this morning -- from Sprint -- oh, there you are, Paul -- I'm sorry -- for teleconferencing services. And also for Ideal at NCR for funding travel expenses for some of our CDTAC members.

    Steve? Steve, are you on the phone?

(No response.)

    Well, let the record note that we appreciate Ideal's at NCR, their efforts on this.

    As we move along in terms of the agenda for today first of all, I would like to thank Shirley and my other colleagues of the subcommittee's chairs, Micaela Tucker and Leo Fitzsimon, who has been sitting in for Micaela who did have her baby in October, a little girl. And also Ken McEldowney and myself in terms of putting together, developing today's agenda.

    One of the things we came back from the last advisory committee meeting in terms of where we talked -- had a day-long discussion really about universal service issues. One of the things that became very clear at that meeting was that we had different representatives at different levels of understanding of what universal service and it made, as we found out, the discussion very difficult and challenging.

    So one of the things that Shirley and the subcommittee chairs discussed that perhaps it would be best that before we try to tackle these issues that we educate ourselves. And that is the purpose of today's meeting. What we are going to be looking at is competition in the local exchange and long-distance markets, and has it really benefited consumers. We have an illustrious panel today that's going to be moderated by Edie Herman this morning.

    What we anticipate on a going forward -- that the future -- at some of the future CDTAC meetings, we will look at various issues within the Telecom Act and various services -- telecommunication services, whether it's wireless, broadcasting, cable, also looking at Section 255 so we can better educate ourselves so that we can have a dialogue, a constructive dialogue, where everyone is talking with one another rather than at each other and on different levels of understanding.

    With that said, I am going to ask Edie Herman to come forward and our panelists. And while they're coming forward, because I know these are very, very busy people, and I'm -- one thing Shirley has taught me is to stay on-task and on-time.

    We have with us today Edie Herman, who -- Edie? She's associate managing editor for Warren Publishing, which, as many of you know, the publisher of Communications Daily, which, for those of us in the industry and even for some of the -- and for many of the consumers is the must-read. She has been at Warren Publishing since November of 1993. She is associate managing editor at Communications Daily and also reports on telecommunications regulation. This is her second tour of duty at Warren Publishing. She worked there for three years in the early 1980's covering Capitol Hill and was on the founding staff of Communications Daily.

    And, Edie, at this point, I'm going to turn it over to you to introduce our panelists. Again, I want to welcome our panelists and thank you very much for taking time out of your busy schedules.

    I want many of you to know that these folks that we see on this panel, we are very, very fortunate. Many of them were involved in helping to write the Telecommunications Act of 1996. They were there on the ground level as we would say. They were on the battlefield, the front fields. And, hopefully, with their insight, they can give us and tell us a little bit about what Congress had intended for industry, consumers. And, Edie, take it away.

    MS. HERMAN: Thank you very much for hoping that we can be helpful as you make your recommendations to the Commission on various telecom issues. We've been asked to discuss the consumer benefits that were promised in the Telecom Act and whether those benefits have actually occurred.

    Panelists will talk about things like whether there is actually choice, whether the business, especially the local telephone business for residential users, is as competitive, whether prices have come down. Some of these panelists will probably tell you that it's too early to decide whether the Telecom Act was successful. Some may say that it would more successful if there was more enforcement of some of the competitive requirements. Some may say it was too ambitious. And, of course, the recent economic downturn also has to be taken into consideration when judging how many competitors there are.

    I will introduce everyone in the -- I guess in the order they're sitting, or maybe I'll introduce them in the order they're going to speak because that's how my papers are organized.

    The first person who will speak is Debra Berlyn. She co-founded the Competition Policy Institute in 1996, and she serves as the executive director of this non-profit organization. Before creating CPI, she served as executive director of the National Association of State Utility Consumer Advocates, NASUCA, for six years. And before that, she worked for several public interest organizations.

    I'll go ahead and introduce them all, and then I won't be interrupting them as they speak. They'll each speak for a few minutes, and then we can have questions. I can ask some. I'm hoping you all will have questions.

    Howard Symons, right here, has nearly 25 years' experience in telecommunications law. A partner in Mintz, Levin, Cohn, Ferns, he represents cable, wireless and telecommunications companies and their trade associations. Before joining the firm, he served as senior counsel to the Subcommittee on Telecommunications in the U.S. House of Representatives.

    Lauren Belvin, who we all know as Pete and many of you may also know her by that name, is Vice President of Federal Relations for Qwest Communications. She is responsible for Qwest's business here in Washington with the FCC and Congress. She worked for three years as Senior Majority Counsel in the Senate Commerce Committee's Subcommittee on Communications and was the principal advisor on telecommunications to the Commerce Committee's Chairman, Senator John McCain. And, before, that she worked in many senior executive positions at the FCC for 20 years.

    Brad Ramsay, who is next to Howard there, is general counsel of the National Association of Regulatory Utility Commissioners, which represents the interests of state utility commissions. And he brings to us today the state perspective. He's been there for 11 years. Before that, he was, for three years, at the Federal Energy Regulatory Commission and also was an associate with a Washington law firm before that.

    And finally, Gene Kimmelman. He is co-director of the Washington office of Consumer's Union which publishes Consumer Reports magazine. He's an expert on deregulation, consumer protection issues, especially for telecommunications. Before joining Consumer's Union he served for two years as the chief counsel and staff director for the Antitrust Subcommittee of the Senate Judiciary Committee. And, before that, he was legislative director for the Consumer Federation of America.

    As I said, each one will give a short talk. And the first person will be Debbie Berlyn from CPI who will give us a historic perspective and make other comments she thinks is appropriate.

    MS. BERLYN: Well, thank you, Edie, and thank you all for inviting me to come and speak before you today. As I look around the room, I realize that in addition to the five of us sitting up here, many of you around the room also worked on the Telecommunications Act of 1996. So I will try and keep my remarks brief so we can engage in a discussion.

    The Telecommunications Act of 1996 was the result of probably more than decade of debate and haggling. And it came out of drafts and discussions and legislation that went through chambers for votes. But we didn't get to the point until 1995 when we actually had legislation where all parties were ready to sign on the line.

    One of the fun things about thinking about the Telecommunications Act and its development and its passage was looking through some of the articles that came out in January and February of 1996. And in reading through that, there was a tremendous feel of optimism, lots of promises, lot of predictions. And I pulled a couple of those out to share today.

    First, AT&T's, CEO Bob Allen, predicted that AT&T would capture at least a third of the 90-billion dollar local telephone market within five to 10 years beginning as early as the summer of 1996.

    Vice Chairman of Bell Atlantic Corp., James Cullen, said he hoped to win such approval, and here is was referring to section 271, which would allow the regional Bell operating companies into long distance. He said he hoped to receive such approval so Washington area telephone customers could choose Bell Atlantic long distance service as soon as a year. We want to get started immediately he said.

    Deloitte & Touche consulting group predicted that we're going to see major industry groups with enormous resources begin to penetrate each other's markets.

    And, finally, on February 16th, right after the Act was passed, a Washington Post article stated that the ink wasn't dry on the bill deregulating it before free-for-all competition broke out in the telecommunications industry. Bell Atlantic Corp. said it would test the waters by offering local service in five states outside its home territory.

    Well, for most of you around the room, you know that many of these optimistic promises and predictions didn't come true and have not come true yet. So what's happened?

    Well, in the five-and-a-half years following the -- almost six now -- passage of the Act we have a slightly different landscape. And several thorns have happened in the side of competition over the past five years. What are some of those barriers?

    Well, first, you remember the predictions about competitors, strong competitors entering each other's markets? Well, one of the great hopes was that strongest competitors of all in the local market, the regional Bell operating companies, would compete in each other's markets. Well, what happened? And if you could show my overhead please.

    This is a cartoon. For those of you who may not be able to see it, I'll tell you what it is. There are four babies in a playpen each holding a knife and fork, and on the diaper it says Baby Bell. And there's a gentlemen looking kind of like Uncle Sam there saying, honey, didn't we used to have seven.

(Laughter.)

    Well, that refers to the fact that there were seven regional Bell operating companies in 1996, and lo and behold, they were quickly reduced to four through mergers and acquisitions. So rather than compete with one another, the Bell companies consolidating into stronger, larger monopoly companies.

    Second thing that happened is that every decision that was made to implement the telecommunication, just about every decision, was taken to the courts. So, the mantra of the day became appeal, appeal, appeal, creating uncertainty and slowing down the advent of competition.

    The third thing that has happened, and this is something that has happened more recently, is that the number of competitors out there to the local Bell operating companies has started to lessen. Whether it's shrinking capital or faulty business plans or perhaps rules in the marketplace that have been more advantageous to incumbents, there are fewer competitors out there. And some of these competitors have had to scale back very ambitious plans to enter greater number of local markets.

    With all that said, in spite of these obstacles, competition is developing. And the Competition Policy Institute believes that consumers are starting to see the benefits of competition. The FCC local competition report, which was released in May 2001 based on figures from the year 2000, provides some show of how competition has developed. At the end of the year 2000, 8.5 percent of local access lines were served by competitors. And that 8.5 percent at the end of year 2000 has obviously grown since that point. But one thing to note is that the number of lines served by CLECs actually doubled from 1999 to 2000.

    Sixty percent of these lines, according to the FCC report, are large and medium-sized businesses. So the balance of 40 percent is residential and small business. And the other thing to note is that the mode of entry utilized by competition local exchange companies, by CLECs is spread fairly equally between use of owned facilities which is 35 percent, resale, which was about 40 percent and 25 utilizing unbundled network elements.

    Finally, I want to conclude by just saying that we believe that if the Act is adhered to, if we continue to enforce section 271 and keep the markets that have already been opened open, we do believe that consumers will start to reap the benefits of competition which should be prices, innovative services and higher quality of services. So, thank you.

    MS. HERMAN: Thank you, Debbie.

(Applause.)

    I have to tell you it's really neat for us to be sitting up here. We're sitting where the Commissioners usually sit. That's a very interesting view. I notice like there's little TV screens, so that's how come they don't have to turn around and look at the big screen behind us. But, anyway, it's just cool to be sitting here.

(Laughter.)

    Next is Howard Symons.

    MR. SYMONS: Thank you, Edie, and thanks for the opportunity to address this task force and also for the opportunity to sit up here.

(Laughter.)

    Commissioner Copps, it is a nice view. There's no doubt about that.

(Laughter.)

    COMMISSIONER COPPS: It's fine if it's not all that close.

(Laughter.)

    MR. SYMONS: Well, Edie didn't tell you, we're not actually watching the meeting on these little TVs.

(Laughter.)

    There's some entertainment for us up here.

    I think in trying to evaluate whether the 1996 Act succeeded for consumers you've got to look at the question through a couple of different prisms. I think let's get something out of the way right away, and that is all the rosy predictions from February of 1996 suffer just the sort of fate rosy predictions always suffer. Debbie pulled out a couple of quotes that look a little bit silly in hindsight. Many of us could pull out many more quotes. Some of probably are guilty of having uttered some of them at the time and even thereafter.

(Laughter.)

    So I think it's indisputable that the extent of competition that was predicted at the cutting edge in 1996 has not come to pass. Most of us don't have a choice of local phone company. The telephone companies did not get into the video business. In fact, they pulled back from that.

    The overall market downturn of the past year and certainly the past couple of months has taken a disproportionate toll on the telecommunications industry and its economic prospects. Each day there's another dismal story about a once vibrant competitor now limping along. There's no doubt that that trend is not going to be reversed in the next couple of months.

    But I think that you also have to step back and look at what has happened and what continues to happen despite the economic downturn. Five-and-a-half or six years ago, there really was not a CLEC industry at all. To the extent that there was local competition, it was available only to the largest businesses who use dedicated lines to avoid or, as we say, bypass the local phone company for their long distance service. Now there are competitive local exchange carriers, and they do in fact offer service to residential customers.

    Cable companies alone, for instance, offer local telephone service to over a million residential customers. Wireless companies offer multiple choices and face vibrant competition in the marketplace. Broadband capable plant passes upwards of 70 percent of all homes. The take rate is very low for a variety of reasons, but the plant is there.

    So there are some successes in the marketplace. There is growth and development along the lines contemplated in 1996.

    I think one way to think about whether the Act succeeded or failed, and my own view is it's too early to tell. I think Edie jumped -- you know, stole all my thunder of my modest point. One way to look at it is to ask four questions about the Act. One, did it embody sound policy? Two, has it been effectively implemented? Third, has it been obeyed? And, finally, has it been enforced? Let me take each of those one at a time briefly.

    Is it sound policy? The underlying theory of the 1996 Act was that competition would serve consumers better than regulated monopoly. My own view, speaking only for myself and not for my clients of course, is that competition is the soundest policy, the best way to encourage people to provide the widest variety of services at the best price. It doesn't always work, and it's a lumpy process, so at any given point in time it may not be delivering optimally the range of services and the price of services that we want. But it is better and much more efficient than intensive government regulation and supervision.

    Competition was the hallmark of the policy in the 1996 Act applied to the local exchange marketplace, to the video marketplace and to the wireless marketplace. It remains, I think, the best policy. It has a ways to go before it reaches full fruition, but I think the underlying framework of the 1996 Act, the choices Congress make remain sound.

    Second, has it been effectively implemented? There's continuing controversy over this question. It manifests itself in various bills pending before Congress now over whether the unbundling requirements and the interconnection obligations imposed on incumbent local exchange carriers are appropriate. The FCC was handed a very difficult task in 1996. It was required to implement the market-opening obligations in the '96 Act within six months. The FCC responded with a 1,000 page order, which has been the subject of much litigation, many reconsiderations in the years since.

    But by and large again, I think the implementation decisions that the FCC made were sound. They recognized that to get to the kind of competitive marketplace Congress envisioned, the incumbent local exchange carriers had to be required to open up their markets and share their networks. The controversy surrounding those decisions and the ongoing implementation of those decisions has generated endless controversy. And I think any decision the FCC would have made with respect to the extent of unbundling, the degree of regulation or the degree of forbearance from regulation will generate that controversy. But by and large I think the implementation was true to the spirit of the '96 Act and pushed the industry in the direction of openness.

    Has there been compliance with the 1996 Act? Here again controversy is probably the only thing that everybody would agree on. There has been controversy over whether there has been compliance with the Act. Pete probably has a different view of this than Debbie does, for instance. Brad probably has a different view of it from a jurisdictional standpoint at least than some of the rest of us up here.

    I think, from my own perspective, compliance, there has been compliance, but it has been grudging compliance. And I suppose we shouldn't be surprised by that because so many of the requirements of the '96 Act were not consonant with the economic interests of the people who were required to comply with it. It's awfully hard to get excited when the primary requirement you face in a statute is to open up your network to your competitor, and yet that was the requirement of the Act. And, surprisingly perhaps, there has been as much compliance as there's been.

    There's been a lot of fines. There's been a lot of foot-dragging. There's been a lot of litigation, and there will continue to be such. But there has been at least enough compliance to produce the kind of market entry in the competitive local exchange carrier business that Debbie outlined in her remarks, and I think that's progress.

    Has there been enforcement? There's been as much enforcement as there can be under the 1996 Act and the 1934 Communications Act. Could there be more? I think in view of the foot-dragging, yes. I think that requires some statutory changes. And the Chairman of the FCC has noted that and requested that of Congress. We'll see if Congress can turn around that request. But I think there's at least been an awareness here of the people who really sit here, not us make-believers, that there needs to be an ongoing vigorous enforcement of the Act if it's to really take root and flourish.

    Overall, I think the Act will be a success. I think that's an appropriate sentiment. I think it is too early to say whether it has been a success or failure. And I think it's possible in hindsight in a few years we make look back and say it was overly ambitious or that it ignored market realities and economic realities. But I think -- I'm an optimist. I think it will be a success. I think that it will begin to accomplish -- it has begun to accomplish some of its goals. It will accomplish more of them going forward.

    I would close just with this. Just when you think you're working in an obscure corner of the world like telecommunications policy, along comes someone like Oliver Stone, noted director and paranoid.

(Laughter.)

    I don't know how many of how you read, or, as my aunt used to say, take the New Yorker, but there was a little clip a couple of weeks ago where Oliver Stone was appearing at a conference and he whispered conspiratorially you know, he said, the 1996 Telecommunications Act was written and passed in the dead of night, in the dead of night he emphasized.

(Laughter.)

    Well, you can say a lot of things about the 1996 Act, but I'm here to say, and Pete can vouch for me, I think everybody else can, that there wasn't a single person with the most tendentious claim to being a telecommunications policy person who wasn't involved at some or many points of the ten or twelve-year process it took to produce the 1996 Act.

    In fact, if there's a criticism of the Act, it's that it is the product of compromise and, therefore, largely unenforceable. I think, you know, we're all the better for the large participation in the Act. I think, you know, producing statutes of this complexity always takes compromise. But I would take issue with the fact that the problem with the statute was that it was passed under the cover of darkness.

(Laughter.)

    MS. HERMAN: Thank you, Howard.

(Applause.)

    The Act did -- the effort to write the Act did go on and on and on. Next is Pete Belvin from Qwest.

    MS. BELVIN: Thank you, Edie. And still goes on and on and on and on in other contexts. I find myself in the uncomfortable and unfamiliar position of agreeing with a lot of what's been said already, but let me try and just put a slightly different tilt on it.

    Perhaps we shouldn't spend so much time in retrospect and foresight looking at what's happened already. I would agree with both Debbie and Howard in their characterization of how successful the Act has been, you know, to borrow a phrase that I've found very useful from the Carter administration used in describing the disastrous and totally failed attempt to rescue our hostages in Iran from the Ayatollah Khomeini. I will never forget the day a State Department representative came before the cameras and declared that disaster an incomplete success.

(Laughter.)

    And I think what we're dealing with here, and certainly not a disaster, but very definitely an incomplete success.

    Let's take a look at the format that Howard gave us for a minute because I find that a useful form of analysis. Is the policy on which the Telecom Act was based sound? You bet. Competition is a good thing. Anybody needs any evidence, let's take a look at where competition has actually broken out. Let's take a look at New York and Texas.

    In New York and Texas, long distance rates have dropped between 10 and 20 percent to the average consumer. And even local telephone rates have come down four percent. What's wrong with that? Absolutely nothing except for the fact that competition hasn't broken out in more places than it already has. Now again, looking back for just a minute, why can we say that even though the policy is great it has been, as I said, an incomplete success.

    That's because, you know, Howard and Gene, you know, who have worked on the Hill will agree with me that, you know, one of the principles of statutory drafting and enactment is where the facts are inconvenient, ignore them. And one of the uncomfortable facts about local telephone service -- and, after all, bringing competition into the local telephone market was the warp and woof of this act when you come right down to it -- local telephone service is not a profit center. It is subsidized very heavily as you all know by a very intricate system of subsidies, internal and external. So let's see what framework this statute sets up to bring about competition.

    One the one hand, the incumbent phone companies who run that local market are supposed to, as Howard said, open their markets, which is not, you know, a natural thing for them to do. Shareholders tend to not like competition. But they do have a quid pro quo, and that is that they have a chance to get into the long distance market. Now I can tell you from the perspective of Qwest that's something we very much want to do. And, obviously, our cousins in the RBOC industry would like to do that too. The hang-up you have is the folks in the long-distance industry, okay.

    In 1996, when this Act was passed, they actually had a profitable market. Yeah, it had a margin of about, you know, 10, 12 percent or more profit unlike the local market. Now, ask yourself, what incentive did those folks in the long distance market have to let us come in and compete with them just so that they can get into our market where the profit margin was about two percent. The answer is they had less than no incentive.

    And we can sit here and we can talk about whether there's been enough compliance and whether we need enough enforcement. But unless and until we recognize the fact that long distance companies were given a big incentive of getting into a two percent profit local market in return for opening up their 12 percent profit long distance market to competition, until we recognize that didn't make any sense we're not going to understand why there's been a lot of litigation and not a lot of competition.

    I can tell you though that there have been -- and I'm sure Brad is going to echo this, at least I hope he will -- there have been very earnest efforts at least on the part of our company to come into compliance with the terms of the Act and get into long distance competition. We know that that's the key, not just for voice because the one thing about telecommunications is it never sits still long enough for you to take a photograph of it. We're now way beyond worrying about the voice market. We're obviously worrying about the advanced data market, the benefits that can provide to consumers.

    And the uncomfortable fact that Howard avoided alluding to is that the cable monopolies control 70 percent of that market. Thanks to 271 of the Act and other requirements, local telephone companies, which are ready, willing and able, at least I can speak for my own company, to roll out DSL service pretty widely tomorrow are largely restricted from doing that because of the requirements in the Act adopted to take care of the local voice telephone monopoly. This doesn't make a lot of sense.

    But we are working hard to comply. We have 3300 collocation agreements in-place in our region. This gives CLEC access to about 90 percent of all the residential and business telephone lines in our region. Now that having been said, residential and small business subscribership by CLECs is something under two percent.

    So the issue, I would submit to you, when we're judging the failure or success of the Act is not whether, at least judging from Qwest's experience, our market is open, whether competitors can come in and compete, the issue is whether they have the economic ability to come in and compete. And that, in turn, as Debbie has said, is a function of a lot of things. Some of them are themselves built on the fact that they don't have economic business plans. Some of them who have marginal business plans have been disastrously affected by the economic downturn. All of these things affect competition currently.

    But we can talk about this endlessly, and that's not nearly as productive as the last point I want to leave you with, which is whatever our experience in the past, in our judgment of all points, we have to avoid porting that over to this new market for advanced telecommunications services. Our companies can begin rolling out a mixture of multi-channel video, voice and data services tomorrow. Keep in mind, Qwest is already a CLEC outside our region, unlike the other regional Bell operating companies. We serve 25 cities outside our in-home region. We're ready to build on that but for the fact that legacy of the '96 Act raises huge practical business questions to whether we can in fact provide those facilities and provide them on an economic bases. Unless and until the regulation that impedes that roll-out is modified, you're going to have a perpetuation of the situation where incumbent cable monopolies build on their existing 70 percent of the market for advanced data services.

    So I would urge us at some point in this program and beyond to really focus not so much on the local market. I would say from the perspective of Qwest these requirements are not easy but we understand them. We're not as interested in trying to change the law for the local voice market, in fact not at all since we're almost there in compliance with it, as we are in terms of looking at the lessons we can learn, plus and minus, from our experience in local voice monopoly and breaking it down, repeating the successes and avoiding the failures when it comes to advanced network deployment.

    Thanks alot.

(Applause.)

    MS. HERMAN: Gene Kimmelman will be our last speaker. And oh my gosh, I'm sorry, but Brad even has some Power Point things to show you. I'm sorry. Brad is next from the state regulatory association, NARUC. Sorry.

    MR. RAMSAY: You know, I was going to say I was really excited because I wasn't last on the panel. They usually put the state regulators last, but she's forgetting me.

(Laughter.)

    MR. HERMAN: It's not easy.

(Laughter.)

    MR. RAMSAY: Anyway, are my -- can you -- yeah, there we go. I did this real fast. I know realize I'm never going to do a PowerPoint presentation again. When you come fourth or last or not at all on a panel --

(Laughter.)

    -- frequently everybody's said pretty much what you wanted to say. We got a list of questions from Ms. Rooker that we were supposed to try to answer, and I did try to do that. And I thought a little bit of graphics would help. The other concern I had when I walked in here though was I actually did not know who was on this panel. And I assume from the questions that it would be a much less knowledgeable group of people. I recognize all the people around this table so forgive me for bouncing through these slides extremely quickly, most of them covering information that previously people have probably already said or addressed. And I want to get back to the tail end of my -- my last two slides are the things that I'm the most interested.

    Anyway, the first question we were asked were what was Congress' guiding principle. I've got three there: eliminate entry regulations, substitute market forces for regulation, protect and expand universal service. A lot of the problems come in with the tension between two and three, the tension between allowing full market forces and continue to protect universal service.

    There was a missed opportunity in the Act to fix the universal service system, I think. And this again is not NARUC's but my view that there should have been a more targeted effort toward life-line linkup, individually targeted type programs and less emphasis on the traditional modes of high-cost funding of companies. But that opportunity was missed, and we're stuck with the Act like it is. And I'm one of the many in the room that don't want to see Congress meddle in this again any time in the near future.

    What were the mechanisms that Congress was relying on to get this jumpstarted? As mentioned by two of the other speakers, earlier speakers, ILECs are supposed to be charging into video. They had a slightly abortive attempts with some satellite ownership. It didn't really happen. Cable's supposed to be getting into voice. And about every two years they tell me we're going to have voiceover IP two years from now. And I asked Rick Zimmerman I think at the least meeting, when are you going to have voiceover IP, when am I going to see, you know, substantial roll-out here so I've got another facilities-based carrier for voice and maybe a potential for some little competitive pressure there. And he said two years. So I suppose when we ask him a year from now, it will be two years. If and when that does happen, that's a good potential for entry.

    Voice, obviously, also mentioned ILEC into ILEC. We ended up with mergers, and Debbie's cartoon is much better than my little printout here.

    How fast? As is usual, Congress -- one of the questions that she asked was, you know, how fast did Congress expect all this to take place. As is very typical with our men on the Hill -- men and women on the hill, they had a completely unrealistic expectation of how fast this would roll-out.

    If you compare this to the roll-out of competition in long distance telephony, you can say that that started in 1978 with Execunet or a little bit earlier, or you can say that it started in 1982/83 with the breakup of the Bell system. But if you use either one of those dates, it took twenty years almost before AT&T go to where they had right about 50 percent of the market and got non-dominant status.

    Now the long distance market doesn't have the infrastructure barriers that the local market does. Putting up two microwave towers to connect two cities gets me into the long distance market at least for those two cities, and I've got scope because I can link into the distribution network and pick up a lot of customers and make some money. To get into the local market, you've got to rebuild a line to everybody's house or find an alternate way in. That's a much bigger barrier.

    So to think that we're going -- the quotes that Debbie mentioned earlier, I am happy to say that I was not one of the ones that thought it was going to happen quickly. I am happy to say I can pull out speeches that were using this very analogy the year after the Act because on every anniversary people say why is it not here yet. And if you look at the market penetration, it's actually a little ahead of where I'd expect it to be.

    Did the consumers -- the next question we were asked: did the consumers have unrealistic expectations? Well, yeah, but you were keying off of Congress. And anybody that listened to the press and the hype anticipated that things would happen a lot more quickly than they have.

    What is the state of local competition? Debbie mentioned this. The only thing that I add is my guesstimate for what the FCC will be saying in December. These are the 4.4 from 1999 which increased 93 percent to 8.5 penetration in year-end December 2000. We're not anticipating because of the economic downturn that started in October of 2000, or at least I'm not anticipating it's going to be much over 10.2 percent penetration now. My guesstimate, and it's always dangerous to guess, but if things stay stable, which means my guesstimate is worthless because we know that's not going to happen, I'm figuring within a five-year timeframe we could be anywhere between 25 to 40 percent of market penetration. I don't see more rapid. I did see another very optimistic group put out a suggestion that they think there will be 65 percent market penetration last month, and they were saying more like a three or four-year timeframe.

    This is a typical split. This is kind of a average of what you'd see in terms of the different methods of entry. There's resale, the leasing of the network and facilities-based entry, and this is the general split that I would expect you'd see.

    I'm going to bounce through these. Consumer benefits. As Pete alluded to, there have been some toll and some local benefits in the first states to get 271 approval. I do believe that the '96 Act and the tech boom generally that the '96 Act contributed to the economic expansion and kind of prolonged it a bit, so there was a benefit there. Wireless prices obviously have come down significantly. That probably would have happened without the '96 Act. Most of these benefits though have focused -- you know, if you were doing a balancing act the business users have gotten significant benefits out of this. I don't think there's a whole lot of doubt about that. The local residential service, it's premature to see if it's going to work, and it's premature to say that there are tremendous benefits for the residential market.

    These were a couple just for comparison purposes. I want to put them up here so you can see the people that litigate one side of the issue versus the people that litigate the other. On one side I have all of the Bell operating companies and their relative market capitalizations, and on the other side I have, as of year-end 1995 just before the 1996 Act, the market capitalizations for AT&T, MCI-Worldcom and Sprint who are the -- had a lot of the money and spent a lot of money on the litigation here on implementation and at stateside.

    AT&T's market capitalization was, what, 100 -- that's million or billion. I can't even -- billion, yeah. And then, here we are -- in fact, I actually think this one's a little high. AT&T's too high. This one we've got AT&T up at 39 or 38-billion. And, of course, the Bell company market caps if anything have gone up.

    The last question that was asked in the letter I received was do we really need more federal legislation. And those of you that can see this, I have no with three exclamation points, and that's probably not enough. The only possible exception for that -- I advocate at the state and at the federal level. I do believe that the FCC needs higher fining authority. Right now, their fining authority is -- is it at 1.2 million, something like that? It's fairly low. I know Chairman Powell's asked for more. When you consider that for most of the Bell operating companies their quarterly revenues are somewhere between 10 to 15 billion, a million dollar fine is next to nothing. And most state fines, which are -- and those that have them are in the 10 to 30,000 dollar range are next to nothing either.

    One state that's done something fairly good recently, Illinois a couple of months ago gave their state the ability to fine a carrier a quarter of a million dollars basically every day for a potential violation, which I think would make the local/state guy in charge of operations wake up and notice if he's losing a million dollars every four days.

    The focus has to be on enforcement. I think that what is most important and what can be done without new legislation is stabilizing the regulatory environment so that the market entrants have some reasonable idea of the rules they're going to be playing by instead of bouncing back and forth because they keep having to change their market entry strategy. And it should come as no surprise to you that the way that that can be done in my view is even closer cooperation between the state regulators who are on the front lines in terms of implementation and the FCC who provides an extraordinary amount of sometimes welcome and sometimes unwelcome guidance to the state commissions in getting their job done.

    Examples. Perfect examples of where this is possible. We spent and other people have alluded to the fact that there was enormous amount of litigation. A lot of that litigation was over whether or not the FCC had authority to impose a particular standard. TELRIC. I've got two missed opportunities here where we've already had -- there was an opportunity for the FCC to do what I consider to be the right and the proper policy thing, and they didn't.

    One was imposing -- they mandated a pricing methodology on us right after the Act was passed, and we're still litigating whether that should be -- you know, this is I think the second time we've been to the Supreme Court. And after this decision, no matter what the Supreme Court does, there's going to be a host of additional action at the state level as a result of that litigation and more fallout, and, from my view, more waste of taxpayer dollars. Your state commission has to spend a lot of money to do it. The FCC's got to spend a lot of money to do it. And the companies that are involved have to spend a lot of money to do it. And guess who pays for it? You and I do.

    Now, what could they have done? They could have given a non-binding guideline. They could have come out with TELRIC and said this is the guideline, we think that this is a good idea. A lot of the states would have followed that guideline or come close to it. A lot of states would have appreciated that and come close to it. In fact, the FCC has now said in several public statements most of the states did pretty much what we wanted to do. And my question is so why have we been litigating this all this time.

    Immediately after the Act, the first arbitration items that went to court where the states had done pricing methodologies, almost all of the pricing methodologies were more or less in large part upheld. That part of the argument would be over. Reciprocal compensation is another place; we're in court now. There are a few states that have already gone to a bill and keep regime. We have the opportunity to see if that's working.

    The FCC has imposed effectively kind of a binding, overlying guideline when they could have simply given non-binding guidelines, and we would not be in court now litigating this. And whatever happens from this litigation, all of the state commissions wouldn't be in another rulemaking or litigation cycle as a result of it. My view is if the bill and keep approach works or if the approach that the FCC has suggested here works, which some states will follow, the ultimately, even without it being binding, the other states, for their own economic benefit, will fall in-line.

    Future opportunities. And this is critical and a place that should be of interest to all of you sitting at the table. The FCC is anticipated at the upcoming meeting to be looking at the UNE-P platform list, the list of items that are required to be unbundled.

    Now, they can do two things here. They can come up with a minimum list and they can say it's binding on the states and the states can't put anything more to it and the states really can't take anything away. In my view, that would be a mistake. Already, in a previous enactment in a previous FCC order, they said, guys, we're going to give you a minimum list but you can add to it. And I think that was the one right thing to do. I would hate to see them now take something away from the list without giving the state the first shot at it.

    In this circumstance, if they're going to make a decision that the federal minimum list goes down, there should be something in that order that says if -- you know, you've got to go to the state commission first and make sure that in the market conditions that exist in that state and the roll-out of competition in that state that it's appropriate for that to be removed from the minimum list in that state. It's a very, I think, factually-sensitive inquiry and important that the state have a shot at that.

    Performance measures is the same thing. And I actually am optimistic that this is the way the FCC is intending to go on both of these. But the Chairman had approached NARUC and the NARUC leadership quite some time ago to discuss the performance measures NPRM. And, again, there, guidelines for the states rather than instigating any litigation over any performance measures that the state commissions have already put in-place.

    Final comments. So far -- we've got a brand-new FCC. I've been extremely fortunate so far working with two offices in particular, Commissioner Copps' and Jordan Goldstein on numbering issues a number of times have been extraordinarily helpful. And Commissioner Martin and Sam Feder have been extraordinarily helpful on numbering issues. And the joint board procedures that the federal and the states are involved in on universal service and separations issues, the new commissioners that have joined those boards have made extreme and welcome advances in bringing the state commissioners more into the process, and that looks very good too.

    The only area that I have a little bit of concern is accounting reform, and because I know I've talked longer than I'm supposed to already, I'll save that for another day.

(Applause.)

    MS. HERMAN: Well, I'm the first to admit that we would have missed out on a good presentation if I really had skipped Brad.

(Laughter.)

    And, in a minute, we'll hear from Gene Kimmelman. This is Gene Kimmelman.

    DR. KIMMELMAN: One of the benefits of going last is I can try to borrow Brad's PowerPoint. If we could put back -- he's got the relative market cap in 2001 that he had before. That's great. Now, see, if I really could do split-screen, I'd take Debbie's cartoon --

(Laughter.)

    -- and put it next to that.

    Wow, I really don't know where to begin at this point.

(Laughter.)

    Just look at that market cap. Please look at it and think about the consolidation.

    Howard, how is it too soon for -- the only thing it's too soon for is a burial when the reg guys go underneath.

(Laughter.)

    I mean, I guess they still pay their lawyer's bill, but my goodness.

    Howard, talked about 10 or 12 years of deliberation, and it was very public in a lot of ways. A lot of the media couldn't seem to figure out how to cover it because it involved a lot of deregulation of media companies. It's funny how all that open debate didn't get on nightly news a lot. And Pete mentioned the ease at which we disregard convenient facts in the legislative process. Promises, predictions.

    You know, I think we really ought to get away from expecting our policymakers to be treating major laws like 11 year olds on the playground fighting over who is winning the ballgame. It seems to me that the predictions -- I mean, just imagine if we'd had every witness come in and basically sign a bond for the amount of benefits, savings, earnings that they were promising. Imagine that. I mean, it sounds silly, but you know what? This is what the American people deserve from people who are the experts in the fields, who understand markets.

    Did the courts get created on February 14th, 1996? I believe they were there before. Was someone going to litigate? Everyone knew it. Was this an infrastructure shared by all these services where there were always ongoing fights about costing proceedings whether you call them UNE's or reciprocal comp? Certainly, ever since I started doing this work there were fights. It's never changed. All of this was known.

    When you deregulate, opening the door to consolidation, did anyone predict consolidation? I believe they did, maybe not exactly in the form that the little cartoon shows it but it was all there. These are not just unfortunate results. Very seriously, this is a fraud on the American people. This is intentional misrepresentation of known facts about the markets, about their structures, about what was going on.

    All I can say is if someone as stupid as me could put out a press release in February 1996 predicting consolidation, higher cable rates, higher phone rates, less long distance competition and no meaningful local phone competition in a foreseeable future. And God knows, no one should be thinking about 20 years when you pass legislation. Our antitrust officials won't even block a merger if they can't delineate within three to five years what it will and the courts won't uphold anything beyond that.

    Surely we can't be passing laws saying the manana 20 years hence, so no one's accountable. There has to be some accountability. I won't repeat all the facts. You've seen it, consolidation, and just look at the market cap. But here are the facts that come home for consumers.

    Local phone rates are up, not because of what state regulators have done but all because of what federal regulators have done in deregulating and passing through costs to consumers. Long distance rates are up, up in every measurement you can imagine. Compared to the 10 years before deregulation, compared to the five years before. Any way you want to do it, those long distance rate reductions people had hoped for aren't there, and these are the companies. Look at the market caps.

    In the mid-80's -- well, we can go through it. Are cable rates up? Yes. DSL, cable modem service, anything new? Is it getting cheaper? No, no, no. Anyone noticed inflation in our society lately? It's down below these lines. It is deflation. Costs are not going up for many services. Your gasoline prices gone up lately?

    I agree with Howard's principle of competition. And in the mid-1980's there was a Senator who introduced a bill basically just handing over markets to the Bell companies, and I was vigorously against it following the principles that Howard articulated about competition and choice. Pete probably thinks I'm thinking of Senator Dole. I'm not. Senator Gore introduced a bill that basically just said the Bells have to turn that subscriber line charge, then called access charge, into a big goose egg, zero, and they'll be allowed into all these other markets.

    Now, let's just take that as a counterfactual of what the world would like today. Instead of five or six dollar subscriber line charge on your first line and even higher one on your second one, it would be zero. The Bells would be a local phone monopoly. They might be almost a long distance monopoly because it's hard to say whether long distance companies could have survived in that. Go back and look at the market cap, how are they doing today.

    Would we be better off or worse off? I can even show you where for a majority of consumers -- long distance companies would say but our costs wouldn't have come down, your long distance rates wouldn't be as low. I can show you for a majority of consumers, the consumers who do less than a hour worth of long distance calling today, those rates probably would be almost the same as if they hadn't gotten any of the old pass-throughs when the subscriber line charge went up. These are people still on-average if they use any rate plan out there from basic on up with its three, four, five, six dollars a month fee who are paying 15 to 30 cents a minute for long distance calling. Great competition, huh?

    I think I can show you how, despite my principles of believing in competition and choice, that almost every consumer and disability benefit I have seen in the last 20 years comes from regulation or a specific mandate on a company not from deregulation. Those long distance rate reductions that we saw from the mid-80's on all were pass-throughs from the rising subscriber line charge. A little bit on the margin from competition, very little.

    The local competition we're seeing in New York and Texas is from all government-mandated network sharing. As the slides before indicate, fewer than one percent of people have a facilities-based competitor for local phone service. When you don't have that, it means everyone's sharing the Bell's monopoly network. It is at a regulated price.

    The internet explosion that all of us have experienced, that great consumer benefit comes from the fact that anyone can pick any Internet provider on our public switched telephone network. Those providers have just exploded. The choices have exploded for consumers, and that great market benefit is called common carriage, non-discrimination requirements, everyone gets on, everyone can use what he or she wants. That's regulation.

    I forgot one thing. There have been enormous benefits to cable customers. Cable modem service didn't exist before a lot of new programming. Unfortunately, the comes from a deregulation with enormous price-gouging for basic and expanded basic cable services, prices that are up 35 percent from where they were when we passed the Act in '96. I'm not sure that's the kind of trade-off we want from deregulation.

    So the Gore bill may not have been so bad, everybody saving six to twelve bucks a month on their local phone bill, the Bells would have dominated local phone services, they would have dominated long distance. Would long distance prices be down? As far as I can tell, the driving force in pushing long distance prices down any more in our market come from wireless plans, big buckets of minutes. Now, again, this isn't that bottom half of the consumer market I was worried about. But the high end would still be getting enormous market pressures to bring down long distance rates. So anybody here who's worried about being on the phone for more than an hour or two for long distance, there would still be competition. That Gore bill may not have been so bad.

    I think at this point what's clear is whether or not you want Congress to do anything, there's really only two ways to get clear consumer benefits and benefits to disadvantaged groups out there. They're not from the marketplace. Some would call the first one, to use a more positive term than I'm going to use -- I just don't like it -- and I'd call it greenmailing. You can bribe the companies and say, we'll support this legislation or we'll support that deregulation, or we'll support whatever you want if you just give us x or y or z. And it works.

    Often for a company that could see enormous benefits of less public oversight in other markets, it's a good quid pro quo. You give something to consumers or those with special needs and you make more money elsewhere I don't think it's very good public policy.

    The other choice I think we have is simple, old-fashioned regulation. If you want prices to be lower, you're going to need regulation. If you want prices to be about where they are, you're going to need regulation. If you want greater access to remote areas, to people of lower income, to people of lesser means, to people to do not have enormous market demand, you need government intervention, you need regulation. There's just no way around it. I think that's the reality we face.

    While I don't entertain the possibility of new legislation being any more fun that the last go-round, at a certain point you do have to bury those companies that just really are not able to deliver any more for consumers. And nothing against those companies; they all tried. I'm not trying to demean them. It was a law that was doomed to failure because it never got the market economics right, it never got the understand of the market accurate, it never was willing to impose the right constraints to deal with the obvious disputes that were going to arise, and, therefore, I don't think it is in any way the solution for serving consumers needs or the needs of the disabled community in the future. Thank you.

(Applause.)

    MS. HERMAN: I was wondering if anyone on the Committee had any questions. Some of the comments were somewhat provocative, especially Gene's at the end about regulation being the -- I don't know where to start. I think, Kathleen, I saw your hand first.

    MS. O'REILLY: As we heard from Commissioner Copps, the preamble promised consumers that we'd get lower prices and higher service quality. And I know that in the time that you were allowed there was not time to touch on everything. But one of the things that strikes me is how service quality has declined very, very dramatically. And not only is that a broken promise, I think it's an indicator of lack of competition and lack of a sort of a perception on the part of the ILECs that they will have competition. And I wonder if you could comment on where you see service quality decline in the whole mix.

    And also for you, Pete, when you talk about local rates you seem to assume they're -- a general assumption that local rates are subsidized. And every state commission that has looked at this using ILECs own sworn-to as truthful data has concluded that it's just the opposite whether you look at Washington, Indiana, Georgia. And it reminds me of the old myth at the time of divestiture when we were told that local rates were subsidized by long distance, and those of us who fought that finally won that battle a few years later. But I think that's a complete myth that local rates are subsidized. If anything, residential rates are the biggest, biggest subsidizing rate across the board and that an awful lot of bad public policy and implementation come from that, you know, misunderstanding of reality. And it touches on Gene's point that local rates -- and for most American families before and after the bill the biggest check they write out every month is for their local service, not long distance. And local rates have certainly not gone down.

    And there's been such a distraction with the state and federal proceedings mandated by the various providers, the 271 proceedings and so forth, that the core issue of residential ratepayers, lower rates, better quality of service, has not made it to the priority list. And I just wonder if the panel might address those two consumer aspects of the bill.

    MS. BELVIN: Yeah. Let me start. And perhaps I should have been more specific when talking about subsidies. I'll, you know, talk with Gene and I'll talk with Brad and Howard and everybody else, but it does seem to me that it has been and it continues to be the case, although less so given the advent of competition, that local residential rates, at least in our company, have typically been below cost. They have been subsidized by business small and particularly large.

    You have a two or three part problem it seems to me. With the advent of the '96 Act and the coming of the CLEC industry, for the economic reasons that Gene and I talked about, it was perfectly rational to expect that whatever competition occurred would go after the fat margins in the local market first if not exclusively, and that has been primarily big business. Small business to my knowledge is not faring nearly as well as big businesses. Once you take away some of the profits from some of the customers that we get from big business, that exerts more pressure on the residential rates that traditionally we have subsidized with big business.

    Our company faces a specific problem out in, you know, those big, square states where there's lots of space and not too much people. And that comes from another problem that's been touched on by Gene, and that is the failure of the FCC, I would say, to handle the issue of universal service as the Act directed. As soon as you introduce competition, whether it expectably hits big business and not residential consumers first or whatever, you absolutely attack that subsidy system. And it becomes necessary to get to the subsidy system and rebalance it.

    I think what Gene would say is precisely the reason that low-volume, residential consumers, okay, in long distance are paying higher rates today is sort of the same reason that residential consumers locally their rates have not gone down. It's because the competition has bled away the local profit that was subsidizing them and the universal service subsidy hasn't basically been rebalanced.

    We've, you know, created funds for wiring schools. We've done some other things. But we haven't gotten to the fact that an extensive subsidy system is incompatible with the notion of competition. That has to be fixed in some way. That for all of the things that we're talking about, all of the problems in the '96 Act this is by far the most difficult to do because -- and this is my opinion only -- when you come down to it it seems to me the only system of subsidies that exists in a perfectly competitive market, which is what we would like to get to I think, is one where the subsidies are targeted to the user that needs them, not to companies, not to geographic areas or neighborhoods. And that, you know, I'll defer to Brad to talk about is how difficult that would be to achieve.

    So, let me just be more precise on the subsidies, at least as how I understand them and how they work out where we are.

    MS. O'REILLY: I agree with that last piece. And there's no time to debate, but I think that consumer advocates in Qwest states would take issue with your conclusion on subsidies for those states.

    MS. BELVIN: They do about many things.

(Laughter.)

    MS. HERMAN: Does anyone up here want to talk on that issue? Brad or --

    MR. RAMSAY: Well, the only thing I'll say is I'm actually shocked that I do agree. God, I can't even say this.

(Laughter.)

    I agree with a lot of what she just said in terms --

    MS. O'REILLY: The last piece, yeah.

    MR. RAMSAY: -- of the disparity between the business and the --

    MS. O'REILLY: Targeted subsidies.

    MR. RAMSAY: -- residential rates because they're priced differently, and there is kind of a death spiral inherent with the target competition going after the business users. And I do agree with the last piece.

    The other issue that's raised by your question that you're not -- that I want to briefly speak to that's here is the reporting requirements and the service quality reporting requirements that apparently are being considered. There seems to be some concern here at the FCC -- and this is a proceeding that NARUC cares about -- that the RMS service quality reporting requirements may or may not be needed for now. And I've always kind of wondered about that. Because if you're a company and you're in a truly competitive environment, you're going to be monitoring your service quality and you're going to have some troubleshooter out there to save yourself money by saying, okay, we're having this type of problem 15 times, there's a problem, let's see if we can fix it so it doesn't reoccur.

    So, if you're in a competitive environment, you're going to be keeping those statistics anyway. And if you're not in a competitive environment, we need the statistics to make sure that service quality doesn't fall below an acceptable level. I agree with your preamble statement that since 1992, which is the last time we had a big outrage in Congress about service quality, if you look at the general trends of the data that the Bell companies have filed, generically its service quality across the board according to those measures has been more or less trending downward.

    MS. HERMAN: I thought I saw a hand.

    MR. LUDWICK: Paul Ludwick with Sprint for Brad.

(Laughter.)

    Brad, one of your slide showed a percent right around 8.1 percent I believe today with access lines in competitive hands --

    MS. HERMAN: Paul, can you speak into the mic.

    MR. LUDWICK: Sure.

    MR. RAMSAY: Actually, it's 8.5, and that's the FCC's figure.

    MR. LUDWICK: Okay. My question is on your prediction earlier or forecast for an increase to 25 to 40 percent in the next five years. That's an increase of about 300 to 500 percent over what we're at today. What's going to change in the landscape in your opinion that's going to generate that kind of slope.

    MR. RAMSAY: Well, actually, the -- am I on? Yes, I'm on. The stuff that I'm reading now suggests that possibly at the latter end -- we'll be out of the recession by the end of 2002, and there are people that are predicting that next year might be a good market for the telecommunications industry.

    This is just kind of a -- what I did -- and that's kind of an old prediction from me. But when I did it I was just kind of looking at the span how long it took get roll-out in long distance and kind of looking at how fast we got a little bit more roll-out. We actually got faster roll-out it looked like to me -- I did this about five months ago -- faster roll-out in the local market relatively speaking than we did in the long distance. And so, that's why my guesstimate was what it was. I mean, I'm just guessing based on what happened in long distance.

    As with most predictions, usually whenever I'm asked to do predictions it's always a dangerous thing. Anything that's more than a year out is probably going to be wrong. I've been doing this for 12 years and one thing that I've figured out early on is almost all of our predictions, if you're doing more than a year or a year or two out, you're usually wrong.

    But I do believe that if we keep creeping along at this pace that we should in five years be up to 25 percent. Yeah, I think that's a reasonable figure, and it's a guess.

    DR. KIMMELMAN: I'd just like to -- could I raise two things about that? Number one, the pace at which the roll-out has occurred was during the dot com boom.

    MR. RAMSAY: Right.

    DR. KIMMELMAN: That was certainly not predictable in the '96 Act. I don't think anyone predicted that. So, I'd say that was an accelerated pace that you are very unlikely to see continue in the future. And if you do the comparison to long distance, you did -- it was fifty years, right? If you do the comparison --

    MR. RAMSAY: It was 20 years, but that's okay.

    DR. KIMMELMAN: Was it 20?

    MR. RAMSAY: Okay. It doesn't matter because what I'm going to say is the first ten of those were full, absolute regulation, NFEA rates. And you're not going to get a full ten years of regulation that way for local access pricing unless Pete's worst nightmare comes true. And so, I don't think you can anticipate that kind of public intervention that brought us that very stable growth pattern in long distance that we saw.

    MR. RAMSAY: Let me hedge again. I also recall now that the reason the -- I was also relying on some predictions in part by a CLEC in the last couple of months. I'm trying to think who it was who had testified and suggested --

    DR. KIMMELMAN: Does it --

    MR. RAMSAY: Pardon.

    DR. KIMMELMAN: Does it exist?

    MR. RAMSAY: Probably not. No. But I mean I was looking at one -- the other thing that I did at the time when I was trying to figure out how things would go was I did a literature search to see what other people had said. So it was a combination of those two things. But we were already in the economic downturn. I mean, things were already sliding down.

    MS. HERMAN: I should probably look over there, a gentleman in the gray shirt.

    MR. TOBIAS: Thanks. We've heard, I think -- I had to step out of the room for a minute, so if this was touched on I apologize in advance. I was conducting my own experiment on the decline in customer quality in the telephone networks --

(Laughter.)

    -- finding it almost impossible to make an international call no matter who I chose and what form of payment I was willing to use.

(Laughter.)

    But, at any rate, we've been focusing on sort of side-by-side competition of equivalent products over equivalent networks, in other words company A offering POT service and company B offering POT service. And I think that's less and less relevant to the real issues that consumers -- and I'm not only talking about consumers with disabilities, but that is my principal area -- what consumers are experiencing and want to experience.

    You touched on it a little bit with references to wireless service and it having an effect on usage and prices and what have you and somewhat of an expansion of the range that consumers have with some accessibility issues and what have you as well. You talked about it also with respect to voice over IP, which maybe I'm reading the wrong kind of magazines, too many technical journals, but it's my impression that voice-over IP is tremendously successful in organizational settings in businesses and large organizations that can afford the investment. They save, you know, tremendous amounts in international calls and what have you, but, at any rate, we haven't seen it yet in the residential market.

    My main concern is competition between media that are not at all the same, that we are using -- as end-users we're substituting one form of communication for another: I am choosing not to make a phone but sending e-mail; I'm choosing not to send e-mail but to page someone. And that takes us perilously close to the issue of what is the Commission's jurisdiction or what could be Congressional action. But I think it needs to be in your thoughts when you're talking about competition not just to focus on existing traditional view of it but, you know, looking at consumers.

    For example, you know, the fax. I don't know what your fax machine is like, but mine's real dusty. Fax peaked at some point a couple of years ago, and I think the fax volume is declining. Will we see the same kind of decline at some point in POT service as people abandon it for, you know, whatever else they're using. If we are not continually focused on users and a statistical and economic model of what people are doing and want to do when we talk about competition, our conclusion will be more and more irrelevant to the needs of the consuming public.

    So, I'd be interested in hearing what the panelists think about that and especially how we can direct the activities of the Commission to address that issue.

    MS. BELVIN: That's an excellent statement. I couldn't agree with you more. One of the more amusing events that I had recently was at the recent Aspen Institute Annual Teleconference event, which Dr. Kimmelman was also at. We had one breakout session where we were talking about precisely what you're discussing now. And one very learned former state commission person and academic who shall remain nameless for obvious reasons was inveighing about how consumers really didn't have an alternative for local phone service, just didn't have it.

    And my point was, well, you know, ever pick up a cell phone, you know. And this gentlemen just, you know, wouldn't acknowledge that the cell phone was competition until Dr. Robert Pepper's 14 year-old son who was keeping notes was invited by Dr. Pepper to make a comment, and he said, sure, none of us kids ever use a landline phone, we all use cell phones.

(Laughter.)

    And I want to take that one step further and relate back to Gene's recommendation. First of all, this is just amazing, and this is why Gene always had a seat at every Senate Commerce Committee hearing that John McCain chaired. And that's because, I think, we can agree -- we agree on our diagnosis of the problems. We couldn't agree less on our solutions. Gene loves more regulation. I think competition, unless and until it can be shown to fail, is the way to go.

    And why is that the case? Because of what you just said. The former silos of regulation where wireless is over here and cable's over there and, you know, oh, a hundred hears ago U.S. West was a local phone company. So now, if it wants to offer cable service, ooh, we've got all this stuff we've got to borrow from the '96 Act and graft onto that maybe. It doesn't make any sense any more.

    In point of fact, all of these companies, thanks to the blessings of digital, you know, technology and conversion are capable of offering all of these services. So not only from the consumer perspective, where you're using different services provided by different people, but also from the public policy perspective, you've got to break down the balkanization of regulation we've had where we're tasked more than cable is because of our telephone company heritage even though our networks do precisely the same things fundamentally. And that, in turn, is going to bring about a heck of a lot more benefits in terms of service assortments and pricing for consumers than all of the regulation that good Dr. Kimmelman, with all of his best intentions, is going to dream up.

    DR. KIMMELMAN: Can I say, I hate regulation. But the one thing --

    MS. BELVIN: You wouldn't have known it from you said.

    DR. KIMMELMAN: -- the one thing I hate more is fraudulent misuse of good concepts like competition. Competition is wonderful, absolutely fabulous, much better than regulation where it works. If people keep trying to pretend it will work places it won't, it will undermine the viability of that very concept. I would have said the telecommunications industry was very high up in achieving that goal, but the electricity industry beat them out. I mean, there are tremendous opportunities in our marketplace to use competitive forces. This one is wrought with all kinds of inherent problems based upon the economics of telecommunications infrastructure.

    I totally agree that we should be looking into what consumers do and don't do, what they want, what they don't want. That should be a driving force, and the Commission should focus on it.

    But I think it's also important that you have to make clear decisions in policy as to whether cultural heritage -- not the heritage of the phone company, but cultural heritage like ubiquity of a wire line system is in the public's interest, in the national interest or not. Does it matter? Does it matter to the culture? Does it matter to the society that we live in? If it doesn't, you can throw it out and experiment with all kinds of marketplace activities.

    But if people had been honest when they passed the '96 Act, they would have probably said in doing so, we are leading to the process of a doubling or tripling of your local phone bill, your cable bill, world rates will go up, we'll need an enormous universal service fund, it is unclear whether long distance competition will survive, but welcome to the brave new world, you'll have e-mail. If they had said that, I would have loved to see the American people vote. And if that's what they want, that's perfectly fine. I think a lot of people in conjunction with their desire to have marketplace solutions also care an awful lot about the heritage of our society, the culture we've built on talking a lot over the telephone.

    Just one final point. Cellular I hope -- I hope wireless will really become a local competitor. Do you know how many minutes the average American family spends on the telephone for local phone service each month. I'll let you buy the biggest bucket of minutes at the lowest possible price, and given the average 1400 minutes of local airtime on wire you are not going to save money; you're going to spend three times as much as that lovely local phone bill. So you've got to take everything into account, and please look at the numbers.

    MS. HERMAN: Howard and both Debbie would also like to comment I think.

    MR. SYMONS: You know, so much of the dialogue here suggests, implicitly at least, that the issues here present an all or nothing proposition, and they don't. I think Kathleen's point about service quality and Mr. Tobias' point about intermodal competition that you might not even think of actually come together if you believe that the alternatives are not simply, you know, deregulation read-in tooth and claw or regulation where there is no -- or deregulation on one hand without any kind of constraints or regulation on the other hand without any chance for the development of competition.

    In fact, in a market like the telecommunications marketplace you often need regulation to engender competition. I think you can't just take all the brakes off -- and here I would disagree with Pete -- I think you just can't say, well, let's deregulate now and hope that that's going to promote competition. There's still even now too much of a legacy of incumbency to permit that to occur responsibly.

    On the other hand, I guess I disagree with Gene that regulation needs to be a persistent state extensively throughout the telecommunications industry. There will always be a role for regulation. Sometimes the regulation will be necessary to promote competition, to break open monopolies. Sometimes regulation will be necessary because there is simply market failure or an unwillingness or inability of market participants to meet the social goals Gene suggests without a government-imposed requirement. Sometimes there are going to be issues like service quality or truth in billing that simply do require persistent regulation.

    I think the important thing for the policymakers is to be able to open up their toolbox and pick the right tools to achieve these goals and knowing that sometimes the tools are going to regulatory tools but sometimes they're going to be deregulatory tools or just the willingness to step back and let the market take hold. It is unlikely, in a fully regulated environment, that you would get the kind of innovation, for instance, in services and technology that you get in a market with multiple players who will all have different ideas or some of whom will have different ideas, different technologies to marshall, different service packages to offer. You want to encourage that.

    And a regulated environment -- and it's sort of an admission of utter failure. And a reliance on regulation, I don't think produces that outcome as well as a mixed bag.

    MS. HERMAN: Debbie.

    MS. BERLYN: Thanks. I knew one of the challenges of being on this panel would be getting a word in with my colleagues here.

(Laughter.)

    And I want to just -- I'm glad Howard went first actually because you said exactly what I was going to say which is that this is not an absolute regulation or competition. And one of the questions we had was also kind of what the pace of deregulation should be. And, most certainly, it should track the pace of competition, that as competition develops that's when we should start to roll-back some regulations and not before that point.

    But also to comment on Jim's point before about other technologies, wireless, satellite services, internet telephony, whatever we look at, I think that there is a willingness I have heard on this commission to take a look at what other technologies can offer in terms of services for consumers. And I know that my organization -- I'll put a little -- I'm sorry -- a little advertisement in here right now. Our organization is holding a conference next week, and one of the panel sessions that we are having is entitled, Will New Technologies Come to the Rescue of Competition. And I'm inviting everyone here to attend, and fortunately I can say that without too much guilt because for consumers it's free. You can see me afterwards. But that is one of the questions that we're taking a look at because I do think that that is an important point.

    MS. HERMAN: Andrea, we're running behind.

    MS. WILLIAMS: Yeah. We're going to take one more question down here -- David -- and then we'll let you wrap-up.

    MR. POEHLMAN: Good morning. It's David Poehlman with the American Council of the Blind. And, first, I'd like to say this has been a stimulating, informative and instructive time period.

    One thing that's been touched on slightly -- and I do have a question, but I want to preface it. One thing that's been slightly alluded to here in a couple of respects such as, for example, the dot com taking hold and pushing things up and the depressed economy and that short of thing is the attitude or, shall we say, the, you know, reluctance at this point of lots of people to take up and buy services in certain areas. You know, we're talking about little people like me, for example. And I think there's an overall climate of sort of a little doom in that area right now. And it's exemplified by the fact that last spring I was notified that if I wanted to continue paying my old-fashioned telephone bill in the old-fashioned way I've been paying it for more years than I care to count, I've got to pay a $1.50. And I guess my question is, given my lack of prowess with the high degree of mathematical capability to figure this out, why is it that if we have an act that is pro-consumer and is promoting competition that I now have to pay an extra $1.50 to pay my phone bill? Thank you very much.

    MS. HERMAN: Who would like to --

(Laughter.)

    -- David, everyone's sort of passing this on to someone else. Gene. Gene.

    DR. KIMMELMAN: You're lucky it's not higher.

(Laughter.)

    That's a bargain, come on.

    MR. POEHLMAN: If you have a question about the question, I'll be happy to ask --

(Laughter.)

    MS. HERMAN: Well, one of you I guess should -- well, how about the regulator in the audience -- that are on the panel I mean.

    MR. RAMSAY: In my view that's a question for the FCC to answer.

(Laughter.)

    MS. HERMAN: I don't think you're going to get too much more out of this panel on that.

    DR. KIMMELMAN: I'd just like to say one thing. That's reflection of straight economics. Any economist would stand up very honestly and say this is market segmentation where you deregulate markets, you have people looking for the customers they really want, the high-margin customers. I guarantee you -- I could almost guarantee you if your bill were big enough they would waive that $1.50 like they waive a lot of other things. So, it is a way without directly charging people differently based on what they look like, what they seem like. It's a way of discriminating based on economics.

    And that -- by the way, I don't mean that pejoratively. That's what markets do. That is exactly what markets do.

    MS. WILLIAMS: Edie, we have one more question. I understand Bob Seagalman is on the phone. Oh. I'm sorry. Bob, you're here. Bob had a question.

    MR. JACOBS: Steve Jacobs is on the phone.

    MR. MARSHALL: Steve Jacobs is on the phone.

    MS. WILLIAMS: Steve, are you on the line?

    MR. JACOBS: Yeah, I have been since 9:00, but we've been having a few technical difficulties that have been worked out. And everything is fine, thank you.

    MS. WILLIAMS: Thank you, Steve. Bob.

    DR. SEGALMAN: You've all been talking about competition, and a lot of people around the table are interested in relay. California has been experimenting with competition in multi-vendor environments with the relay for a couple of years. And I was wondering if you could comment on that kind of competition.

    MS. HERMAN: I don't know. What you've got here, I'm afraid, is an inside-the-beltway crowd.

    MR. RAMSAY: Well, actually, I'll --

    MS. HERMAN: Maybe Brad, yeah.

    MR. RAMSAY: -- about it. I have not seen or am not aware of there maybe other states that are doing experimentation in that area, but I'm not aware of any others that are. It's unusual. I don't know what to say about it other than California's experimenting with it. I guess California's one of the bellwether states. So, if it results ultimately, I guess, after a few years in better service to the disabled community, then it probably will spread because I -- you know, I believe the way it's structured, and you can correct me if I'm wrong, is -- and I'm sorry. I don't know. Did --

    MS. WILLIAMS: Brad, let me help you out.

    MR. RAMSAY: Help me out on this one, yes. Thank you.

    MS. WILLIAMS: With the multivendoring basically you have more than one telecommunication relay service provider, and a consumer gets to choose which service provider rather than having their local telephone company.

    MR. RAMSAY: But how's it funded? Do you remember how they split the money up?

    MS. WILLIAMS: I know that is an area that they're looking at in terms of the TRS fund here at FCC. I'm not sure how that is --

    MR. RAMSAY: Done stateside.

    MS. WILLIAMS: -- on the stateside how that is working. I know that there has been some billing issues and problems with the multi-vendoring, and that's why I think it's still in a trial period. And that's pretty much where it is right now. I don't see other states -- I haven't seen other states yet taking on -- maybe Brenda or --

    MS. BATTAT: Some of the states are looking at it, but California's has a lot of problems. It's very unsatisfactory, and they have just come out with a new request for proposals and trying to put in an infrastructure. One of the big problems they're looking at is the 7-1-1.

    MR. RAMSAY: All right.

    MS. BATTAT: You call in with 7-1-1. You know, how does that all --

    MR. RAMSAY: How do you split that all -- divide it?

    MS. BATTAT: -- get sorted into how gets paid. The other problem was that while they were using it they had a primary provider which means they had access to the state 800 number, which means what incentive is there for anybody to compete because they can't publish the number. They have to really go out to make themselves known that, hey, we're here also. Multiple problems in California. So, they're trying to work through those, and other states and kind of watching on the sideline.

    You know, a lot of -- there's a split right now in the community, the same as what's going on here is a lot of people who are deaf and hard of hearing say competition is what we want, it has to be better. And there are other groups saying that has never proven true for any disability group. We can go back years and years and years and show you what any access that we ever got in any area of telecommunications has come about as a result of regulation. So there are definitely two camps in the disability community regarding multi-vendoring,

    And right here in Maryland now we're looking at that and trying to over the next two years to research it. We just don't want to jump into it because we're not convinced that it's the answer to get better service. It certainly has not proved better service in California. The whole service really went down the tubes.

    MR. RAMSAY: Which is why I'm glad I'm a states rights advocate --

(Laughter.)

    -- because I believe that the theory the laboratory of the states is actually one that works. And so, when you have -- you know, the California regulators you can call them a lot of things, but they're not stupid people. And yet, if you look at their -- I don't know how many of you are familiar with the electric dereg plan that they put into place.

(Laughter.)

    Some of us that read it had some questions about the sanity of the people involved, but that's why you don't want one regulator establishing a uniform plan for the entire country.

    One thing -- if you watched the evolution of regulation over the years, we almost always get it wrong the first time and have to go back and adjust it. And it's better if it happens in one state than in 50 at the same time.

    MR. SYMONS: Unless you're living in that state.

    MR. RAMSAY: Unless you're living in that state.

(Laughter.)

    MS. WILLIAMS: Edie, Howard, Brad, Gene --

    MR. RAMSAY: But if you have the FCC, you can't get away from it.

    MS. WILLIAMS: -- Pete and Debra, I just want to thank you on behalf of the Advisory Committee for sharing your morning with us, which I think was -- has enlightened all of us particularly in terms of where the Telecommunications Act came from, where we're going and really gave us some basic understanding, as we have our deliberations here, in terms of advising the FCC with respect to consumers and disability issues in terms of telecommunications access. Please join me in thanking them.

(Applause.)

    Before everyone jumps up to use the ladies' room and the men's room, due to time restrictions we're going to have a little change in the agenda. Why don't we take first a ten-minute break, come back here, and we're going to take care of some committee business that we weren't able to take care of earlier. That will probably take us to 12:00, so that means the subcommittee breakout session we will defer that until the afternoon, and we will have lunch at 12:00. So if everyone can take a ten-minute break and come back here, and we will resume and discuss some committee business.

(Whereupon, a recess was taken.)

    MS. WILLIAMS: Okay. We're going to get started. I know we ran a little over this morning, but I hope everyone on the Committee found the discussion enlightening and useful. As I said earlier, our goal is to have these type of discussions and panelists to provide us with some understanding of some of the subject areas that we will be dealing with as a committee so that we can make our recommendations to the Commission and have a more constructive dialogue when we're all, as one person said, singing from the same hymnal with respect to our knowledge of the subject area.

    We're going to have a little change in plans. What we're going to do now is there's some Committee business that we need to take care of. If we get through this, I don't think that's going to leave us much time for the subcommittee breakout session I. So what we're going to do is move that to this afternoon and sort of combine at 3:30 not only to continue your work on the statements of your priority issues but also look at those priority issues in terms of the impact of local competition issues that were discussed this morning and will be discussed this afternoon.

    Scott, I think you had --

    MR. MARSHALL: I did. Two brief items if I may. I would like to introduce Yanic Hardie who recently joined cgb and is our lawyer. She is assigned to this committee. Yanic, are you still here.

(No response.)

    She must have stepped out. At any rate, it's great to have her on the team. And this is the first time I've ever had a lawyer on retained and also the first time I never had to pay for one.

(Laughter.)

    And, secondly, I wanted to mention also that in your packets today you'll find an article that I just discovered like a day-and-a-half ago from the Kiplinger personal finance magazine. In fact, Karen Walls from TRAC sent me an e-mail about it. It profiles four consumer advocates. And one of those consumer advocates is our own Shirley Rooker. And she really was -- protested a lot when I came up with the idea of distributing a copy of it to you all, so I said I would take the blame. But it's a really, really nice article about her organization and her effectiveness as an advocate. Thanks.

    MS. WILLIAMS: The first matter of business is the minutes from the August 6th meeting in terms of approval. Are there are edits? Judy.

    MS. HARKINS: A very small one, but I was here.

    MS. WILLIAMS: Ah.

    MR. MARSHALL; That's very significant. Sorry about that, Judy.

    MR. HARKINS: That's okay.

    MS. WILLIAMS: Jim.

    MR. TOBIAS: Just as small, not only was I here but I'm not even listed as absent.

(Laughter.)

    MR. MARSHALL: Okay.

    UNIDENTIFIED SPEAKER: I want to say something.

(Laughter.)

    MS. AYLWARD: Actually, I don't have a change to the minutes, but I just wanted to make sure that there was something --

    MS. WILLIAMS: Rayna, talk into the mic, please.

    MR. AYLWARD: Are mics considered telecommunications issues?

(Laughter.)

    There we go. One point of the minutes that I hope we will carry over into our subsequent discussions was Commissioner Copps' recommendations that we stick to three or four issues each year in terms of our recommendations rather than a whole span of different kinds of topics.

    MS. WILLIAMS: Thank you. Are there any other changes, comments? Rich?

    MR. ELLIS: I was here as well.

    MS. WILLIAMS: Boy. Is there anyone else we missed?

(No response.)

    Okay. Could I get a motion to accept the minutes with the modifications?

    MR. TOBIAS: So moved.

    MS. WILLIAMS: Jim. All those in favor of approval of the minutes.

    ALL: Aye.

    MS. WILLIAMS: Any opposed?

(No response.)

    Abstaining?

(No response.)

    MS. AYLWARD: Second.

    MR. MARSHALL: That was Rayna seconding.

    So moved.

    One of the business matters that Shirley wanted to take care of today was to solicit volunteers to examine or recommend changes to the Advisory Committee's structure and operating guidelines. You may recall this was raised at the last Advisory Committee meeting. Shirley would like, rather than taking the time of the entire Advisory Committee to address this issue, she would like to have a small committee where they would review the guidelines and bring a proposal to the Advisory Committee for the next meeting.

    Do we have any volunteers? Rich. Kathleen.

    MR. MARSHALL: I'm sorry. Who was --

    MS. WILLIAMS: Rich Ellis, Kathleen O'Reilly.

    MR. MARSHALL: Okay. Susan Palmer.

    MS. WILLIAMS: Susan. Okay. Bob Seagalman. Okay. So I have Rich Ellis, Kathleen O'Reilly, Susan Palmer and Bob Seagalman and Jeff Kramer. Great. Okay.

    Is that David?

    MR. POEHLMAN: Yes.

    MS. WILLIAMS: That's David Poehlman. Okay. Thank you very much. I'm sure Shirley will be back in touch with you in terms of scheduling a meeting time and date.

    At this point -- I didn't think we were going to get through the committee business so quickly. If we want to -- if you want to break out into the subcommittee we at least have about 20 minutes -- 20 or 40 minutes. Let me ask Leo -- what happened to Ken? Susan? Excuse me. Susan Grant, I understand that you're going to be heading up the subcommittee in David's -- I mean, in Ken's place?

    MS. GRANT: Actually, I have to leave at 12:30, so I could do it if we do it now. If we do it later, I can't.

    MR. MARSHALL: Ken should be back.

    MS. WILLIAMS: Well, he should be back. Well, Leo, do you think your subcommittee could get work done in 20 minutes?

    MR. FITZSIMON: Yeah, I think we could in --

    MS. WILLIAMS: Okay.

    MR. FITZSIMON: -- and then --

  &n