...and an informative and interesting (but long) interview with DOJ ex-assistant attorney general Anne Bingaman concerning a proposal to split up the RBOCs into divisions that would focus on retail and suppliers of unbundled service elements. For those of you who will bear reading the entire article, notice what she says about the complexities of integrating OSS functions, and she doesn't even begin to suggest VoIP, yet.
VoIP is beginning to approach the home and SOHO markets from more perspectives than one, with increasingly good reasons to consider its use in the local markets as well as LD. Maybe this is a bit over the horizon... maybe not.
I recall discussions in the Spring of 97 when my colleagues (both in academia and in business) and I were debating VoIP possibilities for commercial LD, and the notion by some was that it was several years off, at least where the larger established carriers were concerned.
This proved to be a wrong prediction though, as evidenced by events which have transpired since then, and when you consider that virtually every large Interexchange player now has either set a date for deploying VoIP (such as DT, Qwest, etc., and AT&T in another month or so) or has it on the agenda to do so. This is only 10 months later, and not several years later, as some of my my esteemed colleagues suggested. [Gotcha, Guys and Gals, and you know who you are...]
Local monopoly control of facilities and the subscriber data base may just prove to be the in-your-face kind of impetus and challenge that is needed to bring about some real innovations by emerging ITSPs. Any thoughts along these lines would be welcome, either here or otherwise.
Regards, Frank Coluccio
================================
Bingaman Seeks Fast Track To Competition
April 17, 1998
Inter@ctive Week via NewsEdge Corporation : Anne K.
Bingaman knows her way around the
telecommunications regulatory arena, having served as
assistant attorney general and chief of the Antitrust
Division at the Department of Justice (www.usdoj.gov)
during the postdivestiture years. Since joining LCI
International Inc. (www.lci.com) as senior vice president,
and president of its Local Telecommunications Division,
she's proposing that state commissioners try to break up
the Bell companies into separate wholesale and retail
divisions. She spoke with Senior Writer Louis Trager by
phone.
Could you summarize the key points of your Fast Track
proposal?
The three critical issues that emerged after two years of
trying to implement this act are OSS [Operations and
Support System], the UNE [unbundled network element]
platform and pricing. It has been extremely difficult to get
regional Bell operating companies [RBOCs] to proceed in
the fashion that the act envisaged and that the FCC
[Federal Communications Commission] regulations and
court cases have envisaged.
What the Fast Track proposal does is acknowledge that
the problem is basically one of incentive. The RBOCs
have a very fundamental conflict of interest. They are
both suppliers to competitors, and competitors
themselves. And that keeps them from treating
customers in their supplier capacity as any other supplier
would. Instead, they view every customer as a potential
competitor -- which they are -- and as someone who will
take customers from them.
So what the Fast Track petition proposes is simply to
structurally separate the wholesale and retail lines, to
have as much public ownership as we understand the
federal law to allow, which is 40 percent, and to set up a
structure that will build in the kind of incentives that will
make the act much more workable, and most importantly,
provide for residential competition to the UNE platform
and OSS at fair prices.
And you are presenting this formally in what forum?
We filed it [with state regulators] in Illinois. We had a
roundtable in Oklahoma a couple of weeks ago, and I
have heard they filed favorable comments in the FCC last
week. Illinois has issued a Notice of Inquiry. We filed it
in New York, but they have not taken any action on it.
Oklahoma has expressed interest through questions and
a roundtable discussion and, I understand, a filing.
So, it is the state regulatory bodies that could actually
implement this proposal?
As we envisage it, it would have to be implemented
primarily at the state level with some regulations at the
federal level -- some rulings, rather, that simply allow
faster RBOC entry [into long-distance service] if the
structural changes are put into place. The states are the
ones that really are on the front lines for their consumers
and how the local monopoly is regulated.
The state commissions are regarded as being, in the
main, fairly friendly forums for the RBOC. Also, how far
is one state commission likely to go in dealing with a
company with a multistate jurisdiction that may be
incorporated or based elsewhere?
Any one state in a multistate RBOC region can go just as
far as they can today. Some of these states have fairly
different pricing and regulatory regimens. You have
exactly the same network, but state commissions today
operate independently of each other and have different
rules. So I don't think that's an issue.
But we're not talking about pricing or services, as I
understand it, we're talking about the very corporate
structure of the company.
Well, but we're talking about the corporate structure of
that state. Every one of these RBOCs has a state
subsidiary, a Bell operating company in the state, which
is what you'd be talking about changing. You wouldn't
change the parent. The parent would become a holding
company for two subsidiaries instead of just for one
subsidiary in a given state.
Then what about the political realities in these
commissions?
I think you are way overgeneralizing the degree of
similarity in commissions. They are very different. The
states for 80 years have been on the frontlines of
regulating the telephone companies, and they will stay
there. No one else is going to do that job. The key here is
that the federal rulings that would implement this petition
would set the parameters of what would meet the federal
Fast Track requirements. So, in other words, they would
set the minimums at the federal level and, unless the
state met those minimums, then the RBOC would not get
the benefits of the Fast Track rulings. So that is the
check on a state set of standards that falls below what
the federal standard is.
Do you expect the kind of division of these companies
that you are advocating, to actually come about?
Yes, I hope so. I don't know if 'expect' is the right word.
'Hope,' is certainly the right word. I wouldn't say I expect
it in the next six months, but telecom reform is a
long-range process. The RBOCs spent 12 years getting
into long-distance, and we now have two years trying to
make local competition work through their vast
ubiquitous network. And frankly, it hasn't worked yet.
No one can successfully implement local competition.
So, this is a long-haul struggle we're in. This is a way to
deal with the Act as it exists and get a lot of the benefits
of structural separation by changing the incentives [for
the RBOCs] in a major way, and improving dramatically, I
believe, the chances for meaningful local competition.
So yes, we are dead serious about it, but it doesn't mean
it is going to happen in the next two months. I have been
very encouraged by the level of interest, the debate and
sort of the recognition that this conflict of interest has
had in this vertical integrated structure as a problem.
Looking back to Feb. 8, 1996, I think several people
thought many Bell companies would be in long-distance
by now. They have not been, because they have not
been willing to open their markets because of the conflict
of interest. So, this is a way to get right to the heart of
what has caused the logjam.
Is it possible, in the meantime or as a side benefit, that
your proposal helps change the terms of the debate?
Absolutely, because I think the terms of the debate are
incorrect at this point. I think we are focusing on the
minutiae or focusing on the deck chairs as the Titanic
sinks, if you want to put it that way. I think the current
vertically integrated structure is a problem. So, yes it is
absolutely to get people thinking hard about where we
are going as a nation before we are sunk into one model,
which two years and a month has shown is not what
people thought it would be.
Can you comment on what MCI [Communications Corp.]
is proposing, which I guess is somewhat more radical?
I haven't read MCI's comments yet, so I shouldn't speak
on them. I can tell you what I told them at a meeting
about three weeks ago when they asked me why I didn't
propose full divestiture [of local network facilities from
the local service sales]. I said, I can't see under the
Telecom [Reform] Act [of 1996] as such, how we'd get
there. I would prefer divestiture. I make no bones about
that. But I am trying to work within the framework of the
law as I understand it.
What is the role of Congress, either formally or as a
source of influence in determining the direction of policy
on this particular issue?
The way we proposed it, researched it, conceived it and
understand it -- our proposal requires no action
whatsoever from the Congress.
To the extent that you are not calling for full divestiture,
what reason is there to think that the RBOCs wouldn't
sabotage the plan by circumventing the proposed
separation?
It is a concern. It is absolutely a concern. And I guess
my answer to that is 40 percent public ownership with a
public board of directors, and employees' compensation
tied purely to this retail affiliate, not to the parent stock
options in the retail affiliate and not in the parent
corporation, are much better to drive incentives in the
current 100 percent RBOC companies. But I don't claim
that it's perfect -- I don't believe it is. I think that full
divestiture is the better solution, but that is not the act
that was passed in '96.
Why has the prospect of getting into the long-distance
business not been enough of an incentive for the RBOCs
to open their networks?
As it turns out, these companies do spectacularly well as
companies -- the only places that are somewhat different
might be California and New York. Ameritech [Corp.]
does well in Illinois and in the whole Ameritech region.
These are powerful companies with monopoly bases that
they do very well selling to. I think when they really got
down to the reality, they hoped they could claim to be
opening markets, keep them mostly closed and also get
long-distance. The sad experience showed that SNET
[Southern New England Telephone Co.] got 40 percent
of the residential market right off the bat [in Connecticut]
and nobody could get local [service] market volume from
them. That would be my guess without having been
inside one of them. I have got to believe they concluded
that the price of actually opening that market at
forward-looking competitive prices was more than they
were willing to pay right now and they have resorted to
litigation instead. Judge it yourself.
Do you think that the impatience with the act has
increased the pressure, not so much to make the RBOCs
open their networks, as to start to allow them into
long-distance?
There is only pressure if you feel the pressure, you
know? I don't see the pressure. People believed this
would be fast and easy, but the reality is telephone
networks are incredibly complicated, and the regulatory
regimes at the state and federal level are complicated. As
it is turning out, to get free competition at local markets
is a tough thing. That's just the reality. I think everybody
is in good faith in trying to get there.
How would you characterize briefly what goes on in New
York?
I said the face of the New York [Public Service]
Commission's [PSC] March 17 order recited that New
York Commission had been in discussion with the DOJ,
the FCC staff, Bell Atlantic [Corp.] and other parties
about actions Bell Atlantic should take to get approval
to enter the long-distance market. I took from that from
later approval and also from what has been said -- that
there are ongoing discussions involving the DOJ and the
New York Commission about the terms under which a
Bell Atlantic commitment might be accepted.
How grave does that situation look from the standpoint
of your position?
Well, No. 1 -- first, nothing's happened. Second,
whatever happens -- assuming something happens
shortly -- there is a long way to go between now and a
long- distance filing by Bell Atlantic; and three, there is a
whole question of legality in the FCC of whatever
happens. So we are not talking about long- distance
entry in 90 days by Bell Atlantic -- not by a long shot.
We are talking months and months and months and
many proceedings down the road. In fact, part of what I
object to about this is that it is sort of like a preliminary
plan that the PSC is approving before any of it has
happened. There will be lots and lots more lawyers and
time expended on this. I can just guarantee you that.
How did you gravitate toward LCI?
I wanted to be in the business world. I very much wanted
to be in the Washington area. I had been a litigator,
lawyer for various firms -- and I have always loved
business. The happiest days of my life were my eight
years running my own law firm, as the principal. I feel
very lucky. Brian [Thompson, LCI chairman and chief
executive officer] was bold enough, I guess you'd say, to
look off into space and say: 'I got this idea. How about a
local service division? We'd been looking for somebody
to head that.' I said: 'Great!'
From the standpoint of your work in the organization --
what's been the biggest lesson to you?
I said the first week, it feels like breathing. It's a terrific
organization and I have an incredibly interesting,
challenging, hard job. We started with eight people in
our local division. We are over 100 at this point. We sell
in 41 markets by resale. We are certainly one of the
largest local service resellers in the country. We have
not given up on it because we understand we need to
sell bundled end-to-end products. That's why this
unbundled network element platform and operations and
support systems are so critical to us. Resale is proving
uneconomic -- we are still desperately trying to make it
work. MCI and AT&T have largely halted any efforts to
make it work. I think we may be the biggest company out
there making it work.
We have a local network planning department, which is
working through various ways to get to facilities-based. I
don't mean entirely, because there is no way we can
reach but a fraction of our customers with our own
facilities. It's not feasible in the next several decades for
any company. You have to be able to use the RBOC
network, at UNE prices and under the UNE-platform.
The RBOCs have claimed that the long-distance
companies aren't serious about offering residential local
service, and only want to cherry-pick the business
customers. Can you respond?
It's just not remotely true. Last year, before the merger
[with U.S. Long Distance Inc.], residential customers
were 35 percent of all LCI's gross revenues. So those
residential customers are very important to us. We spent
three months trying to figure out how to roll out [local
service] in one state, and after three months of hard
planning, I hired three people from MCI. We worked like
dogs on it and we concluded it would cost a fortune. The
operations and support systems [for service ordering,
etc.] didn't work. We'll take customers down. We'll turn
off our sales channel and with great regret, we shelved it,
and, frankly, that's when I turned to this Fast Track
petition. If the [Bell companies] get into long-distance
and we can't offer bundled packages to residential
consumers, you won't get the competition the Act
expected and that Congress wants to see for residential
customers. |
