WASHINGTON, DC-- The dispute engendered
by the court's decision must be viewed in a larger context, namely its
implications for the introduction of meaningful competition into the market
for local telephone service. The Administration is committed to doing anything
possible to increase competition in all telecommunications markets. The
reason is that competition benefits consumers by producing lower prices,
an expanded range of available services, and improved service quality.
A fundamental objective of the 1996 Act
was to introduce competition into the local telephone services market,
which is currently dominated by the incumbent local telephone companies.
The interconnection, unbundling, and resale provisions of section 251 were
the tools that Congress chose to open up the local market.
Section 271 -- one of the provisions struck
down by Judge Kendall -- was designed to create incentives for the BOCs,
which now control about 75-80% of the local market, to cooperate in advancing
local competition. In essence, Congress held out long distance entry as
a reward for the BOCs' acceptance of and expeditious compliance with the
market-opening provisions of section 251.
By invalidating section 271, and thereby
reducing the BOCs incentives to facilitate competitive entry in their monopoly
markets, the court's decision has disrupted the incentive structure that
Congress carefully constructed. The effect will be to slow dramatically
the growth of a competitive local telephone market.
Some may argue that allowing the BOCs into
long distance now will benefit consumers by increasing competition in that
market. While that may be true to some extent, we must bear in mind that
the long distance market currently has more than 400 competitors, and the
competition for many customer groups is quite intense.
On the other hand, as one Senator pointed
out during the debates on the 1996 Act, most people have no choice in their
local telephone company. If they are dissatisfied with rates or service
quality, their choices are to be dissatisfied customers or to disconnect.
The Justice Department has properly concluded that creating choice in a
market where there is now none will benefit consumers more than would rapid
BOC entry into a long distance market that is at least workably competitive.
So the court's decision is bad as a matter
of telecommunications policy. It is also bad as a matter of law. The decision
rests on a doctrine -- bill of attainder -- that is invoked about as often
as Northwestern goes to the Rose Bowl. News reports indicated that the
judge acted without taking oral argument. Indeed, it seems that the issue
did not even arise until rather late in the game.
The court's legal argument also does not
withstand even cursory analysis. While one could readily dispute several
aspects of his decision, the heart of the matter is the court's conclusion
that Congress intended section 271 "to punish the BOCs for their parent
AT&T's transgressions over two decades ago for crimes yet to be committed
by the BOCs." In the court's view, Congress' decision to penalize the BOCs
without a prior judicial finding of guilt constituted an unconstitutional
bill of attainder.
That decision misunderstands the nature
of section 271 and ignores more than two decades of history. Section 271
did not impose any new penalty on the BOCs. It simply continued a restriction
-- a ban on long distance entry -- that had been included in 1982 Consent
Decree negotiated by AT&T and the Department of Justice, and approved
by a federal district court.
Further, AT&T's decision to negotiate
a decree was precipitated by the court's finding -- after some eight years
of trial -- that AT&T had impeded competition in several telecommunications
markets. More importantly, the court found that it was AT&T's control
of local operating subsidiaries like SBC that enabled the parent to transgress
the antitrust laws. To prevent the recurrence of such anticompetitive conduct
in the future, the court approved a consent decree that both divested AT&T
of its local BOCs and barred the BOCs from providing long distance services
until they could show that there was "no substantial possibility" that
they could use their local monopolies to impede competition in the long
In enacting section 271, Congress accepted
the need for a long distance restriction and the district court's rationale
for imposing it. Congress objected, however, to the standard that the court
had established for judging requests to eliminate that restriction (no
substantial possibility of competitive harm) and bridled at the fact that
so important an issue was being decided by the Department of Justice and
the courts, rather than by Congress and the FCC. Accordingly, Congress
structured section 271 so that decisions about BOC long distance entry
would be made by the Commission in accordance with congressionally-mandated
criteria, and after consulting with the Department of Justice and the relevant
State regulatory commissions.
Properly viewed, section 271 does not punish
the BOCs, but rather establishes a new way to escape a restriction that
had been imposed by a court after exhaustive judicial proceedings. The
nonpunitive nature of section 271 is confirmed by the fact that Congress
reduced the existing long distance restriction in several important respects
-- such as by allowing the BOCs immediately to offer wireless long distance
services and wireline services outside of their monopoly service areas.
To sum up, the Administration believes
that the Texas court's decision is bad as matter
of telecommunications policy, it's bad as matter of antitrust policy, and
it's bad as matter of law.We are confident
that, after being stayed pending appeal, the decision will be reversed.
Larry Irving is the Assistant Secretary for Communications and Information and Administrator of the
National Telecommunications and Information Administration (NTIA). The
Commerce Department's NTIA serves as the principal adviser to the President,
Vice President and Secretary of Commerce on domestic and international
communications and information issues and represents the Executive Branch
before the Congress, other Federal agencies, foreign governments and international
organizations. For more information, visit NTIA's homepage at http://www.ntia.doc.gov.