Deregulation: windfall for lawyers.

Constant litigation has been the most notable result of the Telecommunications Act of 1996, but what else can we expect?

As network providers and their end users move into the second year since the U.S. Congress passed the Telecommunications Act of 1996, it appears that lawyers are the

The Federal Communications Commission is running several months late in drafting the complex rules needed to implement the competitive market required by the Act.

Regulations that have to do with "unbundling" the local loop by the RBOCs were shot down by a decision of the 8th Circuit Court, causing further delays in implementing competition guidelines.

Detractors say that only a naive soul without a staff of lawyers behind him could believe that the Telecommunications Act of 1996 actually would set policy for competition in the U.S. market.

The reality is what Brian Moir, legal counsel for the International Communications Association (ICA), calls "Balkanized deployment" of competition in the local phone market. ICA represents 500 large end-user firms that generally spend more than $1 million a year in (aggregated usage) telecommunications bills.

However, the little guys are upset, too: "The driving force behind the new Telecommunications Act was the perception that one judge (Harold Greene) was writing communications policy for the whole country," says Rep. W.J. "Billy" Tauzin, chairman of the House Subcommittee on Telecommunications. "That idea was so offensive to those of us in the legislature who believe in representative democracy. But look what we did--we gave the power to 100 judges instead!"

The result has been that the FCC's guidelines for domestic competition are in limbo, and any implementation before late this year is highly unlikely.

Many people feel the entire issue will end up before the Supreme Court. One reason is that individual states may no longer have a baseline for setting competitive policies and pricing. States may feel this infringes on their constitutional rights under federal-state separation rules.

Telecomm offerings and rate structures are a maze. Local regulators approve services offered wholly within state boundaries and regulate the associated rates. .The FCC regulates interstate services and their supporting rate structures. These distinctions are relatively clear when dealing with the PSTN. With new wireless services, the clarity between state and federal jurisdiction disappears. Imagine if the FCC and the states tried to carve up jurisdiction of the Internet.

State regulatory bodies, including public utility commissions, public service commissions and legislatures, bristle at federal infringement into "local" offerings. Some states have taken a proactive stance to adopt rules consistent with the Act. Many have not. Moir says until all regulators get on the same sheet of music, consumers can expect a bewildering mix of local communications offerings.

Moir calls for state regulators to "order the local telephone monopolies to set fair interconnection prices" and federal regulators to eliminate "$10 to $15 billion of excessive charges for accessing local phone networks."

Until that time, he adds, Americans will be denied the promise of a nationwide competitive local telephone market full of choices, lower prices, technological innovation, and improved reliability.

"Without these changes, too many of this nation's telephone customers may soon be faced with litigious local telephone markets characterized by stonewalling, industry consolidation, price increases, and service complaints," Moir says.

ICA and other groups estimate there is anywhere from $10 to $16 billion in excess fat in LEC (local exchange carrier) rates, including exorbitant charges in the access rates long distance carriers pay.

In fact, Moir says, LEC access rates went up for the year ending July 1, 1996--the first time ever, and hardly what one would expect as the result of a new, competitive market.

Moir, of course, wants wide-open competition and the lower rates which should result. Early returns, however, have been disappointing for those on his side.

Gene Kimmelman, co-director of the Consumers Union, Washington, D.C., says that the RBOCs' getting into long distance has caused rates to go up, and deregulation of payphones has resulted in a broad 40% increase (from 25 cents to 35 cents for a local call). He projects a 50% to 100% increase in local rates as a result of the Act.

Not everyone would agree that there has been no progress on the issue. As of mid-February, there were 470 interconnection agreements signed and another 218 in arbitration, says Roy Neel, president the United States Telephone Association. USTA represents companies that range from tiny Ma & Pa rural telcos to giant large local exchange carriers.

Major LECs are preoccupied with mergers and the overseas marketplace as well as getting into long distance.

"If you look at the regional Bells' financial makeup today, they cannot afford to put in billion-dollar access networks," says Jim Carpenter, who heads NEC America's Corporate Networks Group (CNG). "So they're going to have to create partnerships and other relationships. And they're going to have to do this in a way that doesn't clutter up their balance sheets and enables them to still pay their dividends."

GTE has taken more decisions to court than anyone else, Moir says. He believes that running to the judicial system every time a regulatory decision goes against a company's short-term profits is sculpting a perilous future for American business.

Moir fears a "have-not local telephone market" and predicts that individual state economies will suffer as the nation becomes a patchwork quilt of states with thriving competition and states with telecomm infrastructures dominated by a few large carriers.

The American Association of Retired Persons (AARP), arguably the most powerful lobby for telephone subscribers in Washington, has two specific requirements of the FCC: to lower the subscriber line charge from $3.50 to $1.80 per month, and require long distance companies to pass through directly to consumers any access charge reductions in their basic rates.

Harry Pliskin, senior policy analyst for AARP, says the Telecommunications Act was passed with the implied promise that consumers would get lower prices, have more choices, and receive better service. "But," he says, "the FCC must help turn this promise into reality."

Universal access is another sticking point. As the FCC rules on interconnection, access reform and universal service, business and consumer groups get the uneasy feeling that the courts will end up throwing the baby out with the bath water.

"Telecommunications reform offers the promise of expanded investment, affordable access to advanced services, and the creation of thousands of good jobs in the industry. We want to be certain that this promise is fulfilled," says Barbara Esterling, secretary-treasurer of the Communications Workers of America (CWA), the union that represents many telecommunications trade workers.

There is even ambiguity among legislators who helped pass the Act. On the one hand, Rep. Tauzin defends the legislation. "It's only just over a year old and you don't expect a year-old child to speak Latin. Give it time to grow."

On the other hand, he has questions about what's actually going on. For example, he wonders about the continued necessity of having the FCC oversee telecommunications law as it does today.

"Do we need a politically appointed FCC?" Tauzin muses. "Maybe it is time to think about whether we should make a transition to another kind of FCC."

There are those who would like to see the FCC out of the regulatory game for other reasons. A group of 22 organizations called the "Keep America Connected Campaign" (KACC) says it believes the FCC's rules are destined to raise rates and threaten service quality.

"The FCC's proposals pose a dangerous threat to the accessibility of modern telecommunications for all consumers," says David Newburger, executive director.

Members of KACC range from the Communications Workers of America, the phone industry trade union, to USTA. "If the FCC continues down the path it laid with its interconnection order, the 1996 Telecommunications Act will never realize the promises Congress made to American consumers," says USTA's president, Roy Neel.

Other hot political topics facing the subcommittee include the ongoing battle between LECs and long distance carriers over unbundling and equal access, and how to handle interception of cellular phone messages. The latter became a front-burner item when the intercept of a very personal conversation and its later publication in the New York Times embarrassed Speaker of the House Newt Gingrich.

Tauzin says he places higher priority on spectrum allocation--especially in the area of bandwidth allocation for public safety interests like fire and ambulance services--than on FCC reform.

He also says that he would entertain hearings on the role of public television vs. commercial television, noting that there are many people without the interest or the means to buy into expensive satellite-based TV systems.

Implementation of all of these issues would go through the halls and offices of the FCC.

FCC officials have grumbled about the large number of issues on its plate in a wide variety of areas, including wireless, cable, universal service, long distance, and local loop competition.

The feeling at FCC is that Congress dumped a broad directive on its plate and now expects it to color in all the missing details in no time at all. There are complaints about lack of personnel, the sheer volume of work, the constant constraint of time.

"The FCC ought to be doing what the rest of us are doing: paring down, making do, not expanding," Tauzin says.