USTA head outlines legislative plans

(Telephony) Ridding phone companies of outdated payments, taxes and regulatory burdens are on the U.S. Telecom Association’s wish list for the current session of Congress, said Gary Lytle, the organization’s interim president and CEO.

Heading the list of issues is reciprocal compensation, the system by which carriers pay each other for terminating each other’s calls. USTA’s membership is weary of making payments to competitive local exchange carriers (CLECs) with businesses based on ISPs--customers that make very few outgoing calls but terminate many lengthy Web-surfing sessions daily, Lytle said.

“Our large members… are spending in excess of $2 billion on these payments, and it is going up 33% per year,” he said. “So it is just hemorrhaging cash, and it is an issue that we feel is wrong, that a call to the Internet is not a local call.”

A bill to abolish reciprocal compensation introduced late in the fall congressional session failed to reach a vote. Former FCC Chairman William Kennard stated his hope to have the regulatory agency address the issue before the end of 2000, but no action was taken before he resigned.

Kennard reportedly wanted a three-year phaseout of reciprocal compensation, which accounts for more than 20% of the revenues garnered by some CLECs last year. Congress is expected to end the practice more abruptly if a law can be passed.

The USTA also hopes Congress will halt the assessment of the 3% excise tax on telecommunications services--a law with roots that can be traced to the funding of the Spanish-American War more than 100 years ago. In the last session, a bill abolishing the excise tax passed the House and Senate but was vetoed by President Clinton.

The excise tax is just one of several that burden telecom providers, which issue bills to customers that are 15% to 20% comprised of taxes, Lytle said. “The excise piece of it is maybe the most egregious [tax example] but certainly not the only one,” he said. “Our members and the customers they serve are among the most taxed items in this country.”

“Tobacco, booze and telephones are all taxed at the highest rates in the country… Does it make sense that [phone customers] pay the taxes they do on a service that is not a so-called ‘sin’ tax?” he asked.

USTA also will oppose the practice of governments using their rights-of-way for free to offer others networks services at prices that undercut private service providers, Lytle said.

“It is increasingly happening that cities and states are using their rights-of-way to build systems or lay fiber to select customers--universities, state institutions,” he said. “We think it’s incredibly unfair that the government is in the business of competing with private industry, and we intend to make that a high priority this year.”

In addition, the telecom organization will ask lawmakers to regulate the industry based on services provided, not their medium. For example, it is unfair that traditional telephony is heavily regulated while cable telephony and IP telephony are not, Lytle said.

“We think it is incredible to regulate the same service differently because it is provided by different providers in different ways,” Lytle said. “We are not advocating more regulations for anyone, including those people we compete with. We are pointing out, however, the basic unfairness.”