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Users Should Be Steering Policymakers toward a More-Cautious Dereg Approach.

With the development of various voice and data-based systems and applications, large users in the United States have become dependent on efficient, reliable, readily available and reasonably priced telecommunications equipment, facilities and services. As a result of this dependency, users have in recent years become an active force in many US and international telecommunications policy deliberations.

The superior telecommunications system presently in use within the United States has evolved over many years, and this evolution has been funded rpimarily by the ratepaying users of telecommunications services and facilities. Although there have been some advancements in the transmission of signals by use of satellites and fiber optics and the introduction of digital signals, these advancements have resulted in the faster and more-reliable transmission of signals, not in innovative uses of the signals transmitted. The transmission system, however, forms the most-fundamental building block on which all advancements in new and innovative telecommunications uses and services must rest.

Potential uses for telecommunications services are infinite and limited only by a user's ability to develop new requirements or needs and an innovator's ability to develop technologies to meet these needs. The basic transmission system is a finite resource, dependent on other finite resources such as radio spectrum and rights of way, both in the public domain. Users only ask that government policy-makers ensure the continued viability and availability of this precious resource to all who require it at reasonable cost. If government policymakers should fail to do so, innovative uses will also fail.

Beginning a little over a decade ago, advancements in electronics stimulated users of telecommunications serices to develop new and innovative methods of using these services. Since the traditional providers of telecommunications had little incentive to provide the equipment and services necessary to fulfill these new user needs, users were forced to work outside the traditional providers of telecommunications service to obtain the means and technologies to meet their requirements. This caused a new industry to develop equipment and systems to meet these needs, and there is now a healthy competitive environment in equipment for enhanced uses of telecommunications services. This in turn caused a rethinking of the regulatory environment necessary for the provision of all types of telecommunications services. While the United States has been the world leader in this re-thinking, some other countries, notably Japan and the United Kingdom, have begun similar efforts to re-think their telecommunications policies.

Were Changes Worth It?

As a consequence of divestiture, every US communication manager during the last two years has been required to deal with at least one, and probably all, of the following problems: (1) Increased "rate churn" caused by rapidly changing prices for intrastate and interstate common carrier services and facilities; (2) supplier turnover; (3) wider variations in the quality of services and equipment; (4) complicated procedures for ordering, maintenance and other support services; (5) service provisioning delays; and (6) more-rapid obsolescence of user investment in older technologies as new innovations appear.

In the face of such turmoil, it is not surprising that some users currently doubt whether all the changes brought about by the combined effects of divestiture, deregulation and pro-competitive policies will, on balance, benefit them. However, I personally believe that in the long run the vast majority of users will come to appreciate the greater service diversity and cost savings that are likely to result from emerging competition. Regardless of how communications managers may currently feel about whether divestiture has been worth it, so far, there is one fundamental principle that should guide all users in attempting to deal with this complicated, new environment: They must encourage government policymakers to act prudently and cautiously during the ongoing transition to a more-competitive environment.

I cannot stress this too strongly. Many users believe, for example, that had the policymakers folowed this advice, they would have required AT&T and the Bell operating companies (BOCs) from the outset of the divestiture transition to devote more resources and trained manpower to the preservation of rpe-divestiture service levels. Users can only hope this type of practical mistake will not be repeated again as several major policy issues affecting user rates and services are addressed by federal and state policymakers in the next few years.

In the case of the FCC, the single-most-important issue before it is how to regulate AT&T and the exchange carriers for the foreseeable future. Multiple proceedings are already in motion that will substantially affect both the rate levels for services and the number of service and equipment providers. Despite overwhleming evidence that users do not yet have reasonable alternatives to AT&T and the exchange carriers in many cases, there is good reason to fear that the FCC may move too quickly to remove regulatory safeguards and protections for users, both large and small.

Specifically, the FCC is considering the degree of regulation it should exercise over AT&T in the near future. Users have already demonstrated in their filings that the time is not ripe to discontinue rate and service regulation of AT&T or to relieve ti entirely from the requirements of the Computer Inquiry II rules. The user position is grounded in the conclusion, based on considerable market analysis, that a workably competitive market does not now exist or seem likely to emerge in the foreseeable future. Moreover, users believe full deregulation is simply unthinkable until all service problems are resolved and equal access is fully and fairly implemented.

As a practical matter, there are already signs that equal access may prove to be the death knell for many resellers and other woudl-be competitors of AT&T Communications.

Also before the FCC are issues involving possible changes in the Computer II structural separation requirements that now require AT&T and the BOCs to conduct unregulated competitive activities through separate subsidiaries. Users are participating in the FCC's deliberations on this important issue. Users approach this proceeding with a broader perspective than the competitors of AT&T and the BOCs; that is, users will closely examine the workability, fairness and effect on users of the FCC proposals.

In particular, users will closely look at proposals to ascertain whether they might unduly favor AT&T or the BOCs over other providers of equipment and services. Users would be opposed to any proposal that requires basic service ratepayers to subsidize AT&T and BOC competitive unregulated offerings. Such a state of affairs could harm competition in the vital enhanced service and equipment markets, not to mention result in keeping users' basic service rates artificially high. Similarly, users will closely examine the FCC proposals to determine their impact on integrated services digital networks (ISDNs). Many users are already concerned about the cost of ISDN and would not favor policies that lead to them bearing evne more costs.

The BOCs and AT&T have gotten a good jump on selling their positons for removal of the Computer II structural separation requiremetns. And, indeed, some users would agree with the carriers that the FCC's Computer II rules have not always struck an appropriate balance between ensuring availability of new services (such as Custom Calling II) and accomplishment of other regulatory goals. But when the issues are examined in a fair and product manner--as they must be--telecommunications users believe it will become clear that the FCC must be very careful not to thwart, through abrupt regulatory action, the very competitive forces it professes to be encouraging. My personal view is that should the FCC decide to remove the Computer II structural separation requirements altogether, or otherwise relax its regulation of AT&T and/or the BOCs, it must at the same time put in place sufficient safeguards to prevent or minimize potential anticompetitive and other public interest detriments.

I also believe the FCC's determinations on Computer II and the regulatory treatment of AT&T and BOCs could have important legislative implications. For example, should the FCC proceed hastily or overzealously to deregulate AT&T and/or the BOCs to a point where the industry believes it is confronted with the prospect of a return to the days of more-limited service options and economic choices, I would not be very surrised to see blcoking legislation considered in Congress.

Unfortunately, whenever any telecommunication legislation is introduced, it spurs each industry favors at the expense of other industry segments. For example, if legislation has to be considered, I would expect the BOCs to petition the Congress for changes in the restrictions on the lines of businesses that they may enter as a result of the Modified Final Judgment. AT&T, the OCCs and even the states could likewise be expected to petition Congress for special relief. Many of these and other parties may attempt to have large users bear the brunt of the increased costs that could result from the enactment into law of the special favors. Accordingly, users may face legislative initiatives in the near future that could have a far-reaching effect on the costs and availability of services and equipment.

Increasing State-Level Concern

There is another era that is becoming of increasing concern to telecommunications users--developments at the state level. I see a need for users to become more informed about and involved in the vitally important issues being addressed by state policymakers. Unfortunately, user groups and individual users all too often overlook the importance of state regulatory or legislative matters. Yet issues such as deregulation and access charges, are being or will be considered by state regulatory commissions.

As a specific example, I see little evidence that the exchange carriers will cease their efforts to take advantage of post-divestiture confusion and related changes in order to exact unprecedented rate increases at the expense of business users.

At the same time, it appears that many exchange carriers are committed to blocking intraLATA competition and making life difficult for privately owned and operated user systems, which they disparagingly label as "bypass." Interestingly, each state has shown a tendency to resolve the issues differently, depending on their particular circumtances. For this reason, users can, in fact make a difference, but only if they make the effort to participate actively in state regulatory and legislative matters.

In sum, divestiture and other deregulatory actions have confronted users with many problems and fundamental changes in their ways of doing business. Although emerging competition brought about by divestiture and other pro-competitive policies is a welcome change to users, I believe we have not yet reached a point where total deregulation of AT&T and the exchange carriers is justified or even politic. Federal and state government policymakers must therefore be encouraged to be prudent and cautious during the transition to a more-competitive industry. And, it is up to users to ensure that the policymakers steer that course. After all, it is users who will pay m ost dearly in an environment characterized by limited choice and limited government protections.
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Author:Moir, Brian
Publication:Communications News
Article Type:transcript
Date:Jan 1, 1986
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