Congressional oversight: McCain decries 'regulation without competition

Competition in the telecommunications industry has failed to develop quickly because of federal micromanagement and Congress' unrealistic expectations, Sen. John McCain, R-Ariz., said on Capitol Hill.

"Regulation is just not in sync with reality," McCain said in explaining why the 1996 Telecommunications Act's promises-competition and lower prices in all sectors of the industry-have not yet come to pass.

"The worst of all worlds is a deregulated monopoly," said McCain, chairman of the Senate Commerce Committee and one of the few lawmakers who voted against the telecom act. Regulation without competition allows prices to rise, not fall-witness cable television rates, he told an industry audience at a luncheon sponsored by the United States Telephone Association.

McCain said that his colleagues were partly at fault because they didn't fully understand the industry's complexities when they passed the landmark law last year. But he also pointed a finger at the Federal Communications Commission, the five-member panel that regulates the telephone, cable TV and broadcasting industries.

"We must stop federal micromanagement" and turn instead to a "minimalist, federal/state blueprint" for competition in the marketplace, McCain declared.

For example, "the FCC has turned the act's Section 271 process into a bureaucratic garden" rife with paperwork, the senator said. That section of the telecom law is one that Bell regional holding companies must follow to sell long-distance service in their territories. It requires the RHCs to prove they've opened their local markets to competition and to satisfy a 14-point checklist of technical mandates.

The FCC has rejected the highly publicized Section 271 applications of two carriers-Ameritech for Michigan and SBC Communications for Oklahoma.

McCain favors SBC's view-that it should be enough for an RHC to show it's willing and able to meet new rivals' demands, even if no local competition actually exists. He also questioned the meaning of another requirement-that RHCs must show their long-distance entry is in the public interest.

"What is the definition of public interest? It's clearly in the eye of the beholder," McCain said.

The senator also criticized the FCC's attempt to use its method for pricing interconnection services. The method, known as Telric, was thrown out by a federal appeals court, but the FCC is trying to revive it through the Section 271 process, McCain said.

The USTA, several RHCs and an association of state regulators have filed lawsuits asking the Eighth Circuit Court of Appeals in St. Louis to enforce its July order that gave pricing authority to the states, not the FCC.

"Telric should not be and need not be the basis of pricing for universal service support in rural areas," McCain said. Perhaps the senator foreshadowed the next battleground between the FCC and Congress: how to set prices for contributions to and distributions from the new universal service fund.

The FCC will have a different makeup soon, and McCain also headed hearings last week in which senators pressed for details on the nominees' regulatory approaches and warned of challenges ahead.

The Senate Commerce Committee kicked off the hearings in a packed room by questioning Michael K. Powell, chief of staff of the antitrust division of the U.S. Department of Justice; Harold W. Furchtgott-Roth, chief economist for the House Commerce Committee; and Gloria Tristani, a member of the New Mexico State Corporation Commission.

A hearing for the next likely chairman, FCC General Counsel William Kennard, followed the next day.

McCain expected a vote on all nominees sometime after Oct. 7. If approved, the four new commissioners would bring the FCC up to its full, five-member strength for the first time since spring 1996, but with only one holdover member.

GRANTS TARGET UNDERSERVED AREAS The U.S. Department of Commerce last week awarded $21 million in federal matching grants to provide on-line training and information about jobs to people in economically depressed areas. The grants will also pay for telecom technology that will help detect child abuse and develop a telemedicine system for accident victims in rural areas.

MANHATTAN MAY GET OVERLAY The New York Public Service Commission last week said it preferred an area code overlay plan that would require anyone ordering a new telephone line in Manhattan to get a 646 area code after the existing 212 code runs out of numbers. But the commission postponed final action until later this month when a task force unveils a plan to implement number pooling.