Small Telecom Firms Step Up Fight Against Bill
By Yuki Noguchi,
WASHINGTON, D.C., U.S.A.,
27 Nov 2001
Local telecommunications firms in Washington are helping wage a last-minute public-relations campaign against proposed legislation that they say favors their rivals – the large, regional Bell companies – and will put most of the smaller telecom firms out of business.
The bill, popularly referred to as the Tauzin-Dingell bill after its co-sponsors – Reps. W.J. “Billy” Tauzin (R-La.) and John D. Dingell (D-Mich.) – may be up for a full House vote as early as the first week of December. It isn’t expected to become law this year, but it is expected to advance further than in previous congressional sessions. And that has its opponents fighting tooth-and-nail, trying to prevent the bill from gaining political ground, because they say it could be life-threatening to their
business in the future.
The legislation would roll back some key regulatory requirements on the Bell companies, which, as a condition of the Telecommunications Act of 1996, must lease parts of their local networks to their upstart competitors at wholesale rates. George Schmitt, chairman and chief executive of Herndon-based E.spire Communications Inc., has spent $10,000 of his own money lobbying against it. He’s also divvied up the country with his counterparts at other companies in the same boat and is spending hours with the press and on Capitol Hill
trying to fight the bill.
Bells such as SBC Communications Inc. don’t have an incentive to invest in network upgrades for high-speed Internet services under the existing system, because they would have to share those facilities with their competitors, said Tim McKone, vice president of congressional affairs with SBC. The Bells
are regulated more than the cable companies, and the proposed legislation would level the playing field between those two technologies, he said. “We at SBC believe Tauzin-Dingell would give a shot in the arm to the high-tech community” and bring broadband, the high-speed data lines that make the Internet faster, to more consumers, McKone said.
Already, the companies on both sides of the issue have spent millions-an estimated $3 million or more on each side-on a media blitz that peaked early
Pundits on both sides predict the bill will pass in the House by a sizable margin, but it may not even get beyond the Senate Commerce, Science and Transportation Committee, which means Tauzin-Dingell is unlikely to become law this session. However, the consequences are daunting enough to mobilize
the weakened forces into action. The competitive local phone industry is already near collapse because it’s getting frozen out by tight capital markets. Numerous local phone companies
such as WinStar Communications Inc., Teligent Inc., Net2000 and E.spire have filed for Chapter 11 bankruptcy protection while dozens of others nationwide are waiting in the wings to meet a similar fate.
While the bill isn’t expected to pass both houses of Congress, if it did, it would push 150 more U.S. companies into some form of bankruptcy, according to the Association for Local Telecommunications Services, a Washington trade association that has seen its membership roster go from robust to anemic
within the past year and a half. The bill “sends the wrong message to investors, and it sends the wrong message to regulators,” said Jonathan Askin, general counsel for ALTS. “In
every other business-to-business interaction, you have business rules, clauses and guarantees that services get delivered,” and so far the Bells haven’t delivered those services in a timely and fair fashion, he said.
Thus far, the regional Bells have been playing a carrot-and-stick routine. By proving that they have successfully sold network access to their competitors at a deep discount, they have won piecemeal rights to expand
outside of their region by getting permission from state and federal regulators to sell long-distance voice and Internet services. Since the Bells have the only comprehensive local network that runs a wire into every building, accessing the Bell network has been the only way most competitors could reach their customers.
Competitors argue that the Bells haven’t held up their end of the bargain, having stymied access to their the networks by delaying the provisioning of networks and failing to meet performance standards for delivering wholesale network services over to its competitors. “If they had their way, (the Bells) would push us out of business,” Schmitt
said. E.spire has been operating out of Chapter 11 bankruptcy since March and has been trying for the past year to raise $100 million to $150 million to restructure its debt and emerge from court-supervised reorganization. E.spire’s potential investors are waiting to see what happens with the Tauzin-Dingell bill before closing on new financing, Schmitt said, because
if it passes, it casts more uncertainty on his company’s future.
On the other side, the Bell companies argue that the burden of having to foster their own competition by selling access to all their equipment is hurting business evolution. After all, why buy new equipment if you have to then lease it to your competitor, who can undercut you because they can purchase the service at your wholesale rates, they say. “You can’t give it away at discount prices and still get it built,” said Tom Tauke, senior vice president for public policy at Verizon Communications
Inc., the largest Bell company. The economics of the business won’t work if some companies remain dependent on the facilities of others to provide service, he said.