deregulation. The committee is also continuing to gather more information and plan to proceed
cautiously. He explained a memorandum he distributed, "General Principles for Legislative
Action." He emphasized the EDT wants to make sure there is a free market if the state becomes
deregulated, and that all customers are beneficiaries.
Rep. Evans explained the revised schedule for the legislative site visit planned for September
17-18, 1997 . She made registration forms available for anyone interested in attending.
2. Telecommunication Deregulation: competitive Market Issues
Ted Smith, US West, said some competitors are claiming US West is impeding competition,
and went on record as saying that is not true. US West is dealing with a very complicated federal
statute as Utah moves toward a competitive market, he said. He noted disagreements will occur,
but there is a vast difference between a disagreement and impeding competition. US West is
moving ahead with the process of deregulation. Mr. Smith also reviewed three ways competitors
interconnect or are allowed to use US West's network:
1.
Facilities based - a competitor that builds their own network;
2. Resale - a competitor purchases facilities or service from U S West and then resells it;
3.
Unbundled network elements - a competitor will buy parts of a network to combine with their own facilities for providing services.
He noted most competitive companies would be using a combination of all three ways to
interconnect. The 1995 Utah Telecommunication Act established competition as a policy and,
requires U S West to resell services and to provide unbundled network elements. In 1996, the
Federal Communication Commission (FCC) imposed criteria that was not required in the state
statute. He reviewed the issues and decisions being studied by the Public Service Commission
(PSC). He also reviewed how Utah compares to other states, and noted that Utah is progressive.
He emphasized that competition is present and developing in the state. In fact, seventeen
companies have now been certificated and some are providing service. Key issues Mr. Smith
raised included:
.
US West is in the middle of a rate proceeding. They are taking a strong position regarding fundamental changes that will have to be made to their rate structure;
.
US West intends to fully comply with the intent of Utah's Legislature as well as the federal act;
.
US West intends to be a vigorous competitors;
.
US West contends that if competitors are going to utilize the network that was funded by US West's shareholders, the competitors should not pay more than is reasonable, but they also
should not pay less than what is reasonable;
.
US West intends to seek redress in the instance of inequities; and
.
US West will keep the Legislature informed as they continue to play a key role in the industry.
Greg Killpack, President, Rocky Mountain Telecommunications, stated his comments will be from a rural perspective. He acknowledged they have a rural monopoly, but wanted to clear up a
misconception that rural phone companies are slow to change. He reviewed the impacts that
competition will likely have on rural incumbent local exchange carriers (ILEC) and on urban
areas. He agreed that competition currently exists; and that ILEC's will have to begin marketing,
something they have not done much of in the past. He reviewed digital switching and other
technologies that are available in some rural areas. ILEC's will continue to fight for the
protections that are part of the federal act. He surmised that competition will not be clamoring to
the rural areas of Utah when there are more lucrative customers in the urban areas. He also noted
they would fight to make sure their companies are not placed in a competitive disadvantage for
the sake of artificially inducing competition into rural areas, and to make sure they can recover
the millions of dollars invested in the infrastructure. He indicated that there are many other
issues that rural ILEC'S believe will have to be considered and addressed at the implementation
of this change. He also encouraged the committee to not forget, as the changes proceed there are
differences between Salt Lake City and rural Utah.
Lyle Williamsen, MCI, his company was one of the first to address the possibility of
competition in long distance service. He said it has been claimed that MCI was not interested in
rural market. However, he noted they will be focusing on all markets. He also addressed
universal service, which he said, cannot be separated from competitive service. He distributed a
handout titled "Fair Play" displaying MCI's play for local service. He said MCI will be
contracting local services and partnering with other companies to provide services.
Jerry Oldroyd, Suitter Axland & Hanson, representing Electric Lightwave, Inc. (ELI)
explained he also is involved with a group of companies, who will compete with US West. He
indicated there are no residential customers who have a choice, that US West maintains a
monopoly, and he does not agree with Mr. Smith's opinion that true competition now exists. It is
difficult for companies to get successful interconnection with US West, he explained. He also
reviewed ELI's experience in facilities-based competition in Utah. He encouraged the
Legislature to make a decision either way, so that the various companies can make some
decisions as to their future direction. It was his opinion that the PSC will have to take a very
active position.
Claire Geddes, United We Stand, noted that competition currently means having no choice
and experiencing high prices. She emphasized this is a national issue and deregulation means
experiencing an unregulated monopoly. She requested the Legislature stop and reevaluate the
existing process. The current rate case is to consider an increase in service charges, but no new
services are being offered.
Steve Mecham, Chairman of the PSC, responded to earlier comments and noted it would
probably not be a smooth transition. Where margins are higher, competition will exist, he said.
He noted cost studies for a competitive market are not reliable and will not even be available for
months. He also explained most states gave up trying to figure out costs, so proxy rates were
adopted. He indicated that Utah has conducted cost-modeling and projects there, therefore, feels
there will be duplication.
Mr. Smith responded to comments regarding a "capacity problem," and indicated there is no
capacity problem in the backbone. Athough, they occasionally see network blocking problems,
they are working hard to deal with those issues.
3. Federal Communication Commission Rulings; State Options _ Access and Universal Service Funds (USF)
Ted Smith, reviewed the Universal Service and Access Reform Orders in the Federal Communications Act, and demonstrated why it is more costly to provide services to rural areas.
He noted the issue is; "subsidies have long maintained affordability throughout Utah," but, the
future danger is in losing that revenue because of the FCC. He then reviewed the funding of
universal service in Utah and noted it is in the best interests of all to establish a national
Universal Service Fund.
Jim Woody, Exchange Carriers of Utah, Union Telephone, reviewed the legislative intent of
Congress for the 1996 Telecommunication Act. He indicated the order from the FCC did not
reflect the intentions of Congress. He also noted that Utah's funding has come from the federal
funds in the past but is now being reduced. He reviewed the subscriber line charge which is part
of the access charge reform, and how much that will cost both businesses residents. He noted the
rural problems have not been eliminated by the federal act and, they have many problems to face
in the future.
MOTION: Rep. Haymond made a motion to send a letter from this committee to the Joint Board of the FCC lending support for the National Universal Service Fund rather
than the 75-25 universal split that is being considered. The motion passed by
unanimous vote with Sen. Myrin and Representatives Goodfellow, Harward, D.
Jones, and Tuttle absent for the vote.
Steve Mecham noted the PSC is in the process of reviewing the State Universal Service
Fund. He spoke in favor of the letter going to the FCC.
MOTION: Rep. Cox made a motion to request legislative leadership to also send a letter to the FCC indicating support for the Universal Service Fund. The motion passed
by unanimous vote with Senators Holmgren and Myrin and Representatives
Goodfellow, Harward, D. Jones, and Tuttle absent for the vote.
Lyle Williamsen, MCI, commented there will be a shifting of large amounts of money and he
posed the question: Where is the funding going to come from to support the universal service
fund?
Mr. Mecham commented that markets don't provide for a universal service fund, that they go
where the density and money exists.
Statewide Partnership For Telecommunication Services Update
Sen. Jones explained this issue has been postponed until the next meeting.
Rep. Harward commented competition does not work in every geographical area of Utah.
Where competition exists, it should be free market and unregulated; where it does not, it should
be regulated, or otherwise it is a monopoly.
Rep. Evans asked for a status report on the Statewide partnership For Telecommunication
Services Request for Proposal (RFP) from Gordon Peterson.
Gordon Peterson responded negotiations are proceeding, but there is not a particular time
frame. They hope to have a resolution by the October interim meeting.
Rep. Evans expressed the following concerns regarding the RFP:
.
There are a number of volatile issues;
.
Duplication is not bad, but business decisions have been made based on existing criteria and now it is being changed on them. No one should be put at a disadvantage;
.
She is not comfortable when US West says there is enough capacity backbone, but an RFP has been let;
.
A ten-year commitment is a long time; and
.
The PUT needs to have good dialogue, oversight, and more public input.
Gordon Peterson responded this second RFP was issued with the idea of reducing costs, but
they are still in the process of negotiation. He noted ten years may be too long.
Adjournment -
MOTION: Rep. Seitz moved to adjourn the meeting. The motion passed by unanimous vote.
The meeting adjourned at 11:55 a.m.