COMMUNICATIONS LAW REFORM
Y 4. C 73/8: 104-34
Connunications Lau Reforn, Serial H. .
'n
HEARINGS
BEFORE THE
SUBCOMMITTEE ON
TELECOMMUNICATIONS AND FINANCE
OF THE
COMMITTEE ON COMMERCE
HOUSE OP REPRESENTATIVES
ONE HUNDRED FOURTH CONGRESS
FIRST SESSION
MAY 10, 11, AND 12, 1995
Serial No. 104-^4
Printed for the use of the Committee on Commerce
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COMMUNICATIONS LAW REFORM
HEARINGS
BEFORE THE
SUBCOMMITTEE ON
TELECOMMUNICATIONS AND FINANCE
OF THE
COMMITTEE ON COMMERCE
HOUSE OP REPRESENTATIVES
ONE HUNDRED FOURTH CONGRESS
FIRST SESSION
MAY 10, 11, AND 12, 1995
Serial No. 104-34
Printed for the use of the Committee on Commerce
U.S. GOVERNMENT PRINTING OFFICE
92-967CC WASHINGTON : 1995
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-052079-7
COMMITTEE ON COMMERCE
THOMAS J. BLILEY,
CARLOS J. MOORHEAD, California,
Vice Chairman
JACK FIELDS, Texas
MICHAEL G. OXLEY, Ohio
MICHAEL BILIRAKIS, Florida
DAN SCHAEFER, Colorado
JOE BARTON, Texas
J. DENNIS HASTERT, IlUnois
FRED UPTON, Michigan
CLIFF STEARNS, Florida
BILL PAXON, New York
PAUL E. GILLMOR, Ohio
SCOTT L. KLUG, Wisconsin
GARY A. FRANKS, Connecticut
JAMES C. GREENWOOD, Pennsylvania
MICHAEL D. CRAPO, Idaho
CHRISTOPHER COX, Cahfomia
RICHARD BURR, North CaroUna
BRIAN P. BILBRAY, California
ED WHITFIELD, Kentucky
GREG GANSKE, Iowa
DAN ERISA, New York
CHARLIE NORWOOD, Georgia
RICK WHITE, Washington
TOM COBURN, Oklahoma
Jr, \rirginia. Chairman
JOHN D. DINGELL, Michigan
HENRY A. WAXMAN, CaUfomia
EDWARD J. MARKEY, Massachusetts
W.J. "BILLY" TAUZIN, Louisiana
RON WYDEN, Oregon
RALPH M. HALL, Texas
JOHN BRYANT, Texas
RICK BOUCHER, Virginia
THOMAS J. MANTON, New York
EDOLPHUS TOWNS, New York
GERRY E. STUDDS, Massachusetts
FRANK PALLONE, Jr., New Jersey
SHERROD BROWN, Ohio
BLANCHE LAMBERT LINCOLN, Arkansas
BART GORDON, Tennessee
ELIZABETH FURSE, Oregon
PETER DEUTSCH, Florida
BOBBY L. RUSH, IlUnois
ANNA G. ESHOO, California
RON KLINK, Pennsylvania
BART STUPAK, Michigan
James E. Derderian, Chief of Staff
Charles L. Ingebretson, General Counsel
Alan J. Roth, Minority Staff Director and Chief Counsel
SUBCOMMITTEB ON TELECOMMUNICATIONS AND FINANCE
JACK FIELDS, Texas, Chairman
MICHAEL G. OXLEY, Ohio,
Vice Chairman
CARLOS J. MOORHEAD, California
DAN SCHAEFER, Colorado
JOE BARTON, Texas
J. DENNIS HASTERT, Illinois
CLIFF STEARNS, Florida
BILL PAXON, New York
PAUL E. GILLMOR, Ohio
SCOTT L. KLUG, Wisconsin
CHRISTOPHER COX, California
DAN ERISA, New York
RICK WHITE, Washington
TOM COBURN, Oklahoma
THOMAS J. BLILEY, Jr., Virginia,
(Ex Officio)
EDWARD J. MARKEY, Massachusetts
RALPH M. HALL, Texas
JOHN BRYANT, Texas
RICK BOUCHER, Virginia
THOMAS J. MANTON, New York
EDOLPHUS TOWNS, New York
GERRY E. STUDDS, Massachusetts
BART GORDON, Tennessee
BOBBY L. RUSH, IlUnois
ANNA G. ESHOO, CaUfomia
RON KLINK, Pennsylvania
JOHN D. DINGELL, Michigan
(Ex Officio)
(H)
CONTENTS
Page
Hearings held:
May 10, 1995 1
May 11, 1995 219
May 12, 1995 369
Testimony of:
Allen, Robert E., Chairman and CEO, AT&T Corporation 21
Anderson, John, Executive Director, The Electricity Consumer's Resource
Council 107
Annunziata, Robert, Chairman, President, CEO, Teleport Communica-
tions Group ., 36
Bingaman, Hon. Anne K., Assistant Attorney General, Antitrust Division,
Department of Commerce 219
Binz, Ronald J., National Association of State Utility Consumer Advo-
cates 301
Boaldin, Robert, President, Elkhart Telephone Company 180
Brown, Richard, Vice Chairman, Ameritech Corporation 135
Carroll, Julie H., Director of Governmental Affairs, The American Council
of the Blind 328
Chapman, Gary, President, LIN Television Corporation 387
Colbert, Terry, President and CEO, Communication Central Inc 465
Cullen, James, Vice Chairman, Bell Atlantic Corporation 84
Decherd, Robert, Chairman, President and CEO, A.H. Belo Corporation ... 453
Deutsch, Don, Director, Strategic Standards, Sybase, Inc 478
Devlin, Richard, Executive Vice President, General Counsel, Sprint Cor-
poration 88
EasterUng, Barbara J., Secretary-Treasurer, Communications Workers
of America 333
Eigner, Michael, Executive Vice President, WPK-TV 392
Ferguson, Dick, President and CEO, NewCity Communications 410
Ford, Joseph T., Chairman, President, CEO, ALLTEL Corporation 44
Galvin, Chris, President and Chief Operating Officer, Motorola, Inc 456
Gooch, Tom, Executive Vice President, Storage Technology Corporation ... 483
Goodman, Dean, President, Paxon Communications Corporation 374
Grossman, Sherwin, President, Sherjan Broadcasting Company 413
Harris, Laurence, Senior Vice President, MCI 142
Harrold, Robert E., Manager, Strategic Programs, ARI Network Services,
Inc 346
Hendricks, John, Chairman and CEO, Discovery Communication, Inc 475
Holland, Royce J., President, CEO, MFS Communications Co., Inc 92
Hooks, Bennett W., Jr., Buford Television, Inc 192
Houser, Charles, CEO, Corporate Telemanagement Group, Inc 195
Hundt, Hon. Reed E., Chairman, Federal Communications Commission ... 266
Irving, Hon. Larry, Assistant Secretary for Communications and Informa-
tion, Department of Commerce 228
Katz, Stephen, Chairman and CEO, Nationwide Cellular Service, Inc 472
Levin, Gerald, Chairman, CEO, Time Warner, Inc 74
Lund, Peter, President, CBS Broadcast Group 369
Patterson, Gail Thoma, President and CEO, rroxy Message Centers 461
Perry, Wayne, Vice President, McCaw Cellular Communication, Inc 188
Reilly, Edward, President, McGraw-Hill Broadcasting 381
Roberts, Brian L., President, Comcast Corporation 33
Rosenblum, Lisa, Deputy Chairman, New York Public Service Commis-
sion 296
IV
Page
Testimony of— Continued
Schwartzman, Andrew Jay, Executive Director, Media Access Project 416
Scullv, Jane, City Council Member, Falls Church City, VA 308
Shockley, Thomas V., Ill, Executive Vice President, Central and South
West Corporation 99
Siegel, John, Senior Vice President, Chris Craft Industries 378
Sonnenstrahl, Alfred, Executive Director, Telecommunications for the
Deaf, Inc 352
Specter, Rochelle, CouncUwoman, City of Baltimore and Member, Board
of Directors, National Association of Counties 312
Stillman, Bradley, Telecommunications Policy Director, Consumer Fed-
eration of America 336
Synk, Jim, Executive Director, National Burglar and Fire Alarm Associa-
tion 450
Thompson, H. Brian, Chairman, CEO, LCI International, Inc 39
Weyrich, Paul, President and CEO, NET— The Political News Talk Net-
work 447
Whitacre, Edward, Chairman and CEO, SBC Communications, Inc 30
Material submitted for the record by:
American Public Power Association, prepared statement of 536
Ameritech, letter dated May 17, 1995, to Hon. Jack Fields 538
Barton, Hon. Joe, a Representative in Congress from the State of Texas,
prepared statement of May 11, 1995 359
Communications Workers of America, letter dated September 28, 1995,
to Hon. Jack Fields, enclosing response for the record 367
Entertainment Made Convenient, prepared statement of 540
Hundt, Hon. Reed E., Chairman, Federal Communications Commission:
Letter dated May 12, 1995, to Hon. Jack Fields, responding to ques-
tions for the record 360
Letter dated May 16, 1995, clarifying letter of May 12, 1995 363
Irving, Hon. Larry, Assistant Secretary for Communications and Informa-
tion, Department of Commerce, letter dated October 5, 1995, to Hon.
Thomas J. BlUey, Jr., enclosing response for the record 366
Minority Media and Telecommunications Council, prepared statement
of..... 530
National Association of Broadcasters, prepsired statement of 5 19
National Center for Law and Deafness, letter dated September 22, 1995,
to Hon. Jack Fields, enclosing response for the record 365
National School Boards Association, prepared statement of 526
New Orleans City Council, prepared statement of 364
Oshman, M. Kenneth, Chairman, President and CEO, Echelon Corpora-
tion, prepared statement of 469
Reilly, Edward T., letter dated May 18, 1995, to Hon. Jack Fields, re-
sponding to subcommittee questions 539
Rural Telephone Coalition, prepared statement of 528
COMMUNICATIONS LAW REFORM
WEDNESDAY, MAY 10, 1995
House of Representatives,
Committee on Commerce,
Subcommittee on Telecommunications and Finance,
Washington, DC.
The subcommittee met, pursuant to call, at 10:06 a.m., in Room
2123, Raybum House Office Building, Hon. Jack Fields (chairman)
presiding.
Members present: Representatives Fields, Oxley, Moorhead,
Schaefer, Barton, Hastert, Steams, Paxon, Gillmor, Klug, Cox,
Frisa, White, Cobum, Bliley [ex officio], Markey, Hall, Bryant, Bou-
cher, Manton, Towns, Gordon, Rush, Eshoo, Klink, and Dingell [ex
officio].
Also present: Representatives Lincoln and Deal.
Staff present: Michael Regan, majority counsel; Catherine Reid,
majority counsel; and David Leach, minority professional staff
member.
Mr. Fields. First of all, I would like to welcome everyone to the
first day of 3 days of hearings. Members of Congress can rarely say
that a piece of legislation is truly historic, that it truly evidences
a watershed moment, that one piece of legislation can truly
unleash the investment of capital to build the infrastructure and
technology that gives enormous benefits to the consumer and pro-
pels this country into the 21st century, but it is fair to say that the
Communications Act of 1995 is just such a piece of legislation.
Building on the 14 months of negotiation between Ed Markey
and myself, during the last session of the 103d Congress, the Com-
munications Act of 1995 gives definition and certainty as we move
into this time of convergence and technological innovation. It recog-
nizes that the 1934 act is outdated and that the consumer could
be denied the benefits of modem technology and advanced applica-
tions; it creates an atmosphere of legislative parity so that the
rules are fair to all competitors as new lines of business are en-
tered; it fashions a legislative model that is djoiamic so that it can
evolve with new technologies and their applications; and, finally, it
is predicated on the model of competition and opportunity rather
than government control and management.
I will be the first to say that this legislation is not perfect. I am
very proud of this legislation but am not so enamored with pride
of authorship to think that it cannot be improved. I welcome the
expert testimony of our witnesses over the next 3 days and the
comments of any interested party, be it government, industry, or
consumer group.
(1)
With the 26 members of the Commerce Committee now cospon-
soring this bill, it is safe to say that this legislation will pass this
subcommittee and this full committee. This legislation will then
pass the House. It will come out of a conference committee with the
Senate and be presented to the President for his signature. I am
going to advance this legislation as fast as humanly possible, and
it is my hope to be in the Rose Garden this summer when the roses
are still in bloom.
I would be remiss, however, if I did not give special recognition
to my friend, Ed Markey, the ranking minority member. We would
not be at this historic juncture were it not for the many years that
Ed has dedicated to telecommunication policy and its development,
and while Congressman Markey and I nave not always agreed on
every issue, he has always been the consummate gentleman. I had
the distinct pleasure and honor of serving with him and calling Ed
my friend.
I also must acknowledge the hard work of our Chairman, Tom
Bliley, who has encouraged, cajoled, and counseled me during these
important times, and I can say the same thing for John Dingell,
who has provide stellar leadership and inspiration through our
years of service together. And Tom, John, Eddie, and myself are al-
ways the ones up front who get the credit when things go well, and
it is Christy Strawman on my personal staff and Cathy Reid and
Mike Regan, majority staffers, and David Leach and Colin Crowell,
minority staffers, who only get the credit when things go bad. As
all of us on this panel would acknowledge, they are really the ones
who deserve much of the credit for the countless hours of consulta-
tion and drafting that produced this historic legislative product. On
behalf of this subcommittee to them I offer our sincere thanks.
My time has expired. The Chair would now like to recognize the
ranking minority member, the distinguished member from Michi-
gan.
Mr, Markey. I thank the gentleman from Texas very much, and
I very much appreciate the extremely kind words which he used to
describe my participation in this area over the years and in the last
several months with you and with the other members of this com-
mittee, and I can't allow for your comments to go unanswered be-
cause it would open too large of a graciousness gap between us,
and I have to close it now by praising you for your tremendous ef-
fort on behalf of the important concepts which are advanced in the
legislation which we have before us here today and for the spirit
of cooperation that you have dealt with these tough issues.
Many of the concepts that are in this bill are agreed upon by the
consensus of this committee, there is no question about that, and
so it is to your everlasting credit that that is the case. So it is with
a mixture of anticipation and disappointment that I come here
today, because I share with you the conviction that our country
needs to reform the Communications Act to reflect the revolution-
ary changes we have seen in the telecommunications marketplace
as the language of digital bits has emerged as a new worldwide
technological Esperanto.
Our mutual anticipation of accomplishing this urgent task and
our mutual respect for a process that could bring this about not
just on a bipartisan basis but on a consensus basis has helped this
subcommittee craft a bill which is, in many respects, a thoughtful,
a thorough, and a balanced product.
At the same time, I am deeply disappointed that our attention
to detail and to balance, our commitment to the competitive model,
and our rejection of the mjnriad pleas to preserve and to protect mo-
nopolies broke down as we reached the final stages of the drafting
process in a couple of issue areas. This unfortunate and ominous
development has required me to withhold cosponsorship while we
attempt to put those portions of the bill back on track.
It is my hope that once the members have a better understand-
ing of what is at stake we can resolve our differences and move
ahead expeditiously. But if the bill is not amended to remove pro-
tections for unregulated cable monopolies and to restore the con-
cept of open, transparent, and interoperable communications net-
works so that entrepreneurs everjrwhere can reach every consumer
at any time without paying tribute to a monopolist, we will regret
this undertaking.
Cable consumers should be on red alert. The bill would lift all
rate regulation on cable programming either immediately if your
cable company is not one of the largest national companies or 15
months after the bill becomes law if your cable companies happens
to be one of the few largest companies. DBS will not hold them
back as long as it is a $700 alternative. The telephone companies
won't hold them back until they show up and start delivering the
goods.
The cold reality is that no telephone company is currently offer-
ing cable service on a commercial basis in competition with a cable
company. To pretend that 15 months from now this world will have
suddenly changed to one of widespread delivery of commercially
competitive cable service from a telephone company is sheer folly.
At best, the telephone companies will cherry pick a few promising
towns and test whether they know what they have been doing.
So let's not fool ourselves. The cable industry wants to be deregu-
lated before effective competition arrives, and if it is, the bad actors
in the industry will see their unrelated monopoly opportunities and
they will take them; that's human nature. Just prior to the passage
of the Cable Act in 1992 the average cable company was raising
prices more than three times the rate of inflation and gouging peo-
ple on equipment. This bill says to the industry go ahead, do it
again, to the consumers of this country.
It is my hope that is spirit of consensus can prevail in our delib-
erations on these issues. I'm committed to working with Chairman
Fields and my colleagues on the committee to achieve a completely
procompetitive, a completely pro-consumer bill this year. We expect
long-distance rates to continue to go down. We expect local rates
to go down. We want cable rates to go down as well. This bill, as
it is presently constructed, does two-thirds of that job; one thirds
remains to be completed.
I congratulate the chairman, and I hope to work cooperatively
over the next 3 weeks towards the goal of resolving these final is-
sues, and I yield back the balance of my time.
Mr. Fields. The gentleman's time has expired.
The Chair will now recognize the chairman of the full committee,
the gentleman from Virginia, Mr. Bliley.
Mr. Bliley. I thank the chairman of the subcommittee.
Today we begin hearings on the Communications Act of 1995,
one of the most sweeping reforms of communications law in his-
tory. I want to commend Chairman Fields, my good friend Ed Mar-
key, and John Dingell for their leadership in producing this biparti-
san bill which recognizes the need for fundamental changes in our
communications law.
But the significance of the bill extends beyond the telecommuni-
cations industry that it will so significantly invigorate. Indeed, the
Communications Act of 1995 will do more to dissolve monopoly
power and do more to promote competition than perhaps any other
single piece of legislation that Congress has ever undertaken.
In no other instance have mandated monopolies been so com-
pletely open to competition. When the history is written of the
failed experiment of excessive government regulation of industry,
the Communications Act of 1995 may well be the central story.
Current law, based on the Communications Act of 1934, is pre-
mised on the misguided idea that government, through regulation
and the construction of artificial monopolies, can best serve the in-
terests of consumers. The Communications Act of 1995 is the tri-
umph of common sense over this disproved notion.
Where current law prohibits competition, this bill promotes com-
petition. Where current law generates regulation, this bill ends reg-
ulation. Where current law retards innovation, this bill accelerates
innovation. Where current law works to the detriment of consumer
interest, this bill elevates consumer interest.
Most Americans cannot choose a local telephone service. The
problem is not that the local telephone companies are run by evil
people intent on destroying competition or by unusually clever peo-
ple who provide a service that no one else can match. The problem
is that antiquated laws have created the monopoly situation. Lots
of companies would like to have the opportunity to compete for
local telephone service, but the laws and regulations of this country
effectively prohibit them from competing for business and offering
innovative services, higher quality services, and lower price serv-
ices. American consumers want the choices that competition pro-
vides. The Communications Act of 1995 will give them those
choices. The Communications Act of 1995 will promote competition
in practically all telecommunications markets.
But the mere presence of many firms competing in the current
American telecommunications would not be enough to make con-
sumers as well off as they could be. American telecommunications
markets today are burdened with excessive regulations. Firms that
offer telecommunications services in the United States have artifi-
cially high costs because of, one, the high cost of complying with
regulation; two, the length of licensing procedures; and, three, the
uncertainty of the outcome of licensing procedures.
Who pays for the high cost of regulations? As always, it is the
poor American consumer who pays the price. These costs of regula-
tion are passed along to telecommunications consumers in the form
of high prices for services, a lack of responsiveness to new market
conditions, and a slow rate of innovation.
The Communications Act of 1995 would harness and substan-
tially reduce Federal regulations of telecommunications. The act
streamlines licensing procedures for broadcasters. The act creates
temporary rules that promote a transition to competition. After the
transition, most of the act sunsets. The act requires the Federal
Communications Commission to forebear from, or to stop, regula-
tion. Much of the act would be largely administered locally rather
than Federally. The act would prevent States or the Federal Gov-
ernment from requiring costly rate of return regulation. Once tele-
communications markets are competitive, price regulation would be
banned altogether.
Telecommunications, perhaps more than any other segment of
the economy, holds the key to our future. If America is at the fore-
front of telecommunications, revolution prospects for our country
are bright, all Americans will win. If instead we do not lead this
revolution, our prospects are dimmer. The telecommunications rev-
olution in America is threatened not by foreign powers but by our
own antiquated communication laws. They were originally written
in 1934. Telecommunications technology has changed dramatically
since then. Our laws have not kept pace.
The key to the telecommunications revolution, like any other
technological advancement, is competition. Competition breeds in-
novation. Competition leads to lower prices. Competition is what
has made America great. American telecommunications consumers
will be the beneficiary of the Telecommunications Act of 1995. Less
regulation will lead to lower cost. More competition will lead to
greater innovation, greater choice of services, and lower prices, and
all of these are ultimately what consumers want.
Obviously, no introduced bill is perfect. I look forward to the
comments and suggestions of this week's witnesses. Again, I want
to commend Chairman Fields, John Dingell, Ed Markey, and all
the members of the subcommittee who worked long and hard to
produce this bill. We are off to a good start.
I thank the gentleman for yielding me the time.
Mr. Fields. I appreciate the chairman's statement.
The Chair would now recognize the gentleman from Michigan,
Mr, Dingell.
Mr. Dingell. Mr. Chairman, I want to commend you and our
good friend, Mr. Bliley, for the fine cooperation and the fine work
that was done in drafting what is a landmark piece of legislation.
I believe the process that we have undergone in the construction
of this legislation is a fair one, it has been open, and I believe for
that fact alone you deserve the congratulations of the members of
the committee.
It is my hope that the legislation, which closely tracks the legis-
lation overwhelmingly passed by the House last year, will continue
to have the same level of support when it passes this committee
and goes through the House.
This is a good bill, but like any other piece of legislation, it has
possibilities for improvement. I am troubled by some of the provi-
sions that end regulation of cable rates on the day that the Federal
Communications Commission issues its rules governing the offering
of cable service by telephone companies. My concerns are shared by
many of the members of this committee, and they are shared by
the administration, and I think that it is likely that we will see
amendments which will ensure that consumers are not gouged by
unregulated monopolies before real competition and proper alter-
natives are available. I'm also concerned that certain amendments
to a fine underlying text may have the practical effect of compelling
me or other members to reconsider support of the bill if those
amendments are adopted.
These are reservations, but despite them I want to work with my
colleagues on both sides of the aisle to develop H.R. 1555 and to
see to it that it represents the real concerns of everybody in this
room.
I would like to commend again Chairman Bliley and Chairman
Fields for the fine manner in which they have conducted the draft-