ALTS'S LEGISLATIVE AGENDA INCLUDES TOUGHER RULES FOR BELLS

“ALTS is going on the offensive,” Pres. John Windhausen announced at Thurs. news conference, as he and others in CLEC industry began campaign for tougher enforcement of rules on local phone competition. ALTS members said they would ask Congress to consider strict penalties for Bell companies that failed to comply with Telecom Act’s market-opening provisions, or even splitting Bells into separate wholesale and retail units.

With lawmakers increasingly feeling pressure to do something to speed broadband deployment, “we can’t just say no any more” to Bell-backed bills, Windhausen told us later. He said Bell companies had found strong argument for deregulation -- that they need regulatory parity with cable -- and “we need something in response” to show lawmakers that encouraging local loop competition “is still the right public policy.” CLECs still have friends on Hill, especially in Senate, Windhausen said, and “we expect our bills to get introduced.” He said ALTS would work with its members on concerted PR campaign to get phone customers to weigh in in Washington. ALTS is part of new group called Voices for Choices (also including such familiar names as AT&T, WorldCom and CompTel) that began running ads in Washington media this week.

As Bush Administration and Congress focus on faltering economy, Windhausen told us, CLECs need to show that threat of pro-Bell legislation is contributing factor. He said CLEC industry stocks started 73% drop when it became clear last year that House Commerce Committee Chmn. Tauzin (R-La.) and others would push hard for reciprocal compensation reform and relaxation of Sec. 271 requirements. ALTS also is asking Congress for building access legislation and requirement that cities make their licensing processes for new entrants easier. It said it supported broadband tax credit legislation in hope of encouraging investors’ confidence in industry to return.

“The conventional wisdom in the Beltway is that the FCC is ready to close up shop” on local phone competition experiment, said Allegiance Telecom CEO Royce Holland, who’s member of Bush FCC transition team. But “I don’t think that’s going to happen.” He said Bush’s record in Tex. was of requiring tough enforcement, and expected FCC under new Chmn. Powell to move in same direction. Holland said FCC needed to streamline its handling of CLEC complaints, acting swiftly and “making penalties hurt.” Sec. 271 process isn’t providing enough of carrot for Bell compliance, he said, and FCC and Justice Dept. “need much more use of the stick.” Windhausen said he had made his case to Powell, who he said showed signs “that he’s serious about beefing up enforcement.”

“This is sort of a remedy in search of a problem,” Verizon Senior Vp Edward Young said. “Structural separation doesn’t work,” he said, noting that FCC had looked at it in past and concluded it didn’t provide “additional assurance the objectives that the regulatory agency is trying to achieve will be attained.” Young said he questioned premise of arguments for structural separation: “Our markets are open. Competition in the local marketplace has doubled in the past year.” He said that in markets where Verizon had entered long distance, companies such as AT&T entered as local competitors but only after Bell company had received Sec. 271 approval. “I think that they [ALTS] will have a very skeptical reception on the Hill,” Young said. “Consumers don’t want yet another breakup, which is what ALTS is proposing. They want to be able to order bundles of packages from a single provider.”

USTA also balked at call for mandatory structural separation, saying it “imposes unnecessary expenses on companies and distorts the competitive retail market.” Splitting carriers’ wholesale and retail operations would “create inefficient new companies with no economic justification” and harm facilities-based competition by making all companies dependent on ILEC networks. USTA also contended that structural split would impose “unnecessary expenses” on companies, leading to higher prices for consumers.