107TH CONGRESS REPT. 107–83 " ! HOUSE OF REPRESENTATIVES 1st Session Part 2

INTERNET FREEDOM AND BROADBAND DEPLOYMENT ACT

OF 2001

JUNE 18, 2001.—Ordered to be printed

Mr. SENSENBRENNER, from the Committee on the Judiciary,

submitted the following

ADVERSE REPORT

together with

ADDITIONAL AND DISSENTING VIEWS

[To accompany H.R. 1542]

[Including cost estimate of the Congressional Budget Office]

The Committee on the Judiciary, to whom was referred the bill

(H.R. 1542) to deregulate the Internet and high speed data services, and for other purposes, having considered the same, reports

unfavorably thereon with amendments and recommends that the

amendments be agreed to and that the bill do not pass.

CONTENTS

Page

The Amendment ...................................................................................................... 2

Purpose and Summary ............................................................................................ 3

Background and Need for the Legislation ............................................................. 3

A. History of the Judiciary Committee Role in Telecommunications Legislation ........................................................................................................... 3

B. The Telecommunications Act of 1996 ........................................................... 7

C. Telecommunications Since the 1996 Act ...................................................... 8

D. The Provisions of H.R. 1542 .......................................................................... 9

E. The Goldwasser Case ..................................................................................... 11

F. The Referral ................................................................................................... 12

G. Chairman Sensenbrenner’s Amendment ..................................................... 12

H. Parliamentary Issues Relating to Chairman Sensenbrenner’s Amendment ............................................................................................................ 13

Hearings ................................................................................................................... 14

Committee Consideration ........................................................................................ 15

Vote of the Committee ............................................................................................. 15

Committee Oversight Findings ............................................................................... 15

Performance Goals and Objectives ......................................................................... 15

New Budget Authority and Tax Expenditures ...................................................... 15

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Congressional Budget Office Cost Estimate .......................................................... 15

Constitutional Authority Statement ...................................................................... 20

Section-by-Section Analysis .................................................................................... 20

Changes in Existing Law Made by the Bill, as Reported ..................................... 22

Markup Transcript .................................................................................................. 24

Additional Views ...................................................................................................... 69

Dissenting Views ..................................................................................................... 77

The amendments (stated in terms of the page and line numbers to the committee print document containing the text of the

amendment as reported by the Commmittee on Energy and Commerce) are as follows:

Page 15, line 6, insert ‘‘, subject to subsection (l)’’ after ‘‘service’’.

Page 15, after 21, and insert the following:

(c) APPLICATION PREREQUISITE TO PROVIDING HIGH

SPEED DATA SERVICE OR INTERNET BACKBONE SERVICE.— Section 271 of the Communications Act of 1934 (47 U.S.C.

271), as amended by subsection (b), is amended by adding

at the end the following: ‘‘(l) APPLICATION PREREQUISITE TO PROVIDING HIGH

SPEED DATA SERVICE OR INTERNET BACKBONE SERVICE.—

‘‘(1) REQUIREMENT TO FILE APPLICATION WITH ATTORNEY GENERAL OF THE UNITED STATES.—Neither a

Bell operating company, nor any affiliate of a Bell operating company, may begin providing high speed data

service or Internet backbone service in any in-region

State under the authority of subsection (g)(7)—

‘‘(A) unless it files with the Attorney General

of the United States an application to provide

such service; and

‘‘(B) until the Attorney General —

‘‘(i) approves such application before the

expiration of the 90–day period beginning on

the date such application is filed; or

‘‘(ii) fails to approve or to disapprove such

application during such 90–day period.

‘‘(2) AUTHORITY OF ATTORNEY GENERAL.—The Attorney General of the United States—

‘‘(A) may issue rules to establish requirements

applicable to the form and contents of applications

filed under paragraph (1);

‘‘(B) may make recommendations to an applicant regarding—

‘‘(i) withdrawal of an application filed

under paragraph (1); or

‘‘(ii) filing of an application under paragraph (1), with or without modifications, subsequent to the withdrawal of an application

filed under such paragraph; and

‘‘(C) may not approve an application filed in

compliance with this subsection unless the Attorney General determines that the applicant has

demonstrated that it meets the substantive requirements of subsections (c) and (d) with respect

to high speed data service or Internet backbone

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service in the State for which such application is

filed.

‘‘(3) WITHDRAWAL OF APPLICATION.—An application filed under paragraph (1) may be withdrawn by

the applicant at any time before the Attorney General

approves or disapproves such application, but may not

be modified after being filed.’’.

Page 15, line 22, strike ‘‘(c)’’ and insert ‘‘(d)’’.

Page 16, after line 4, insert the following:

(e) CONTINUED FULL APPLICATION OF THE ANTITRUST

LAWS TO MATTERS INVOLVED IN THE TELECOMMUNICATIONS INDUSTRY.—Section 601(b) of the Telecommunications Act of 1996 (47 U.S.C. 152 note) is amended by

adding at the end the following:

‘‘(4) CONTINUING OPERATION OF THE ANTITRUST

LAWS.—The rights, obligations, powers, and remedies

provided under the antitrust laws are in addition to,

and are—

‘‘(A) not preempted by;

‘‘(B) not inconsistent with; and

‘‘(C) not incompatible with;

any of the rights, obligations, powers, and remedies

provided under the Communications Act of 1934 (47

U.S.C. 151 et seq.), under this Act, or under any law

amended by either such Act, regardless of the progress

of competition in any market.’’.

PURPOSE AND SUMMARY

H.R. 1542, as amended by the Committee on the Judiciary, maintains a vital Department of Justice role in reviewing Bell entry into

the long distance provision of high speed data services and Internet

backbone services. In addition, it corrects an erroneous part of the

decision in Goldwasser v. Ameritech Corp., 222 F.3d 390 (7th Cir.

2000), and clarifies the policy expressed in the antitrust savings

clause (§ 601(b)(1)) of the Telecommunications Act of 1996. However, because of the limited nature of the referral, the Committee

was unable to address other antitrust problems raised by the

version of the bill the Committee on Energy and Commerce reported.

BACKGROUND AND NEED FOR THE LEGISLATION

A. HISTORY OF THE JUDICIARY COMMITTEE ROLE IN

TELECOMMUNICATIONS LEGISLATION

Until 1984, America had one dominant telephone company—the

American Telephone & Telegraph Company (‘‘AT&T’’). AT&T provided almost all local and long distance service throughout the

United States, except that in some isolated areas independent

phone companies provided local service. During the AT&T era,

local service rates were kept artificially low, and the substantial

differences in costs of providing local service in urban and rural

areas were not reflected in local service rates. AT&T kept long distance rates, which were paid primarily by business, artificially high

in order to subsidize low local rates. The policy, known as universal

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service, was that all Americans should have access to a telephone

at an affordable rate regardless of the cost of providing the service.

Because AT&T was one company, it was relatively easy to administer this system of subsidies.

As early as 1957, the Judiciary Committee held oversight hearings to examine the monopoly power that AT&T wielded because

of its control of the local exchange and the Department of Justice’s

efforts to limit that power through antitrust enforcement. See The

Consent Decree Program of the Department of Justice: Hearings Before the Subcommittee on Antitrust of the House Committee on the

Judiciary, 85th Cong. (1957 and 1958); Report of the Antitrust Subcommittee on the Consent Decree Program of the Department of Justice, 86th Cong. (1959). These hearings specifically examined the

process by which the Justice Department, in 1956, had entered into

a consent decree with AT&T, under which AT&T agreed to cease

anticompetitive activities in the context of its manufacture and sale

of telephone equipment.

The Judiciary Committee’s ongoing examination of the 1956 consent decree and other Department proceedings led, in 1974, to enactment of the Tunney Act, which strengthened and codified the

process through which the Justice Department could enter into

consent decrees in the antitrust context. Antitrust Procedures and

Penalties Act, Pub. L. No. 93–528, 88 Stat. 1708 (1974). Also in

1974, the Antitrust Division of the Department of Justice sued

AT&T for violating the antitrust laws in a number of ways—most

importantly, not allowing potential long distance competitors to

connect to its local networks. Even as the case was going on, the

Judiciary Committee began to consider the antitrust issues involved. Proposed Antitrust Settlement of United States v. AT&T:

Hearings before the Subcommittee on Monopolies and Commercial

Law of the House Committee on the Judiciary, 97th Cong. (1982);

H.R. 6121, the ‘‘Telecommunications Act of 1980’’: Hearings before

the Subcommittee on Monopolies and Commercial Law of the House

Committee on the Judiciary, 96th Cong. (1980). The 1980 legislation was almost 150 pages long consisting of an extensive FCC regulatory scheme for the industry, and it was referred sequentially

to the Committee on the Judiciary. The 1982 hearings were held

jointly with the Committee on Energy and Commerce.

In 1982, the parties settled the lawsuit, and Judge Harold

Greene of the United States District Court for the District of Columbia entered a consent decree known as the Modification of Final

Judgment or MFJ. United States v. American Telephone & Telegraph Company, 552 F.Supp. 131 (D.D.C. 1982), aff’d, 460 U.S.

1001 (1983). This 1982 consent decree modified the consent decree

entered in 1956 which the Judiciary Committee had studied in its

1957–58 hearings. In doing so, the court followed the Tunney Act

procedures that the Judiciary Committee had written.

The MFJ created a new world. Beginning in 1984, it broke up

AT&T into a new smaller AT&T, which was to provide long distance service in competition with other companies, and seven regional Bell operating companies (‘‘RBOCs’’)—Ameritech, Bell Atlantic, BellSouth, Nynex, Pacific Telesis, Southwestern Bell (now

known as SBC Communications), and US West. There was also one

preexisting independent phone company, GTE Corporation, which

was of a comparable size. These seven regional RBOCs and GTE

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were to provide local service where AT&T had previously been

doing so. Subsequent mergers have reduced these companies to

four: SBC Communications, BellSouth, Verizon, and Qwest.

At the time, the general consensus was that long distance service

could be provided competitively, but that local service remained a

natural monopoly. Based on that assumption, the MFJ prohibited

the RBOCs from entering long distance service and other lines of

business without prior court approval. The court’s procedures

under the MFJ required companies seeking that approval to negotiate with the Department of Justice before filing for the approval.

As a practical matter, DOJ approval was required to get court approval.

In addition, policymakers wanted to maintain the universal service system. To do so, they required the long distance companies to

pay ‘‘access charges’’ to the local companies for completing long distance calls. The local companies used these access charges to maintain low local rates in all geographical areas.

The impetus for the Telecommunications Act of 1996 arose from

the application and effect of the MFJ. In the years following the

MFJ, the long distance industry became highly competitive with

the entrance of numerous companies offering consumers greater

choice and lower prices. In contrast, the local exchange market remained under monopoly control. Because that monopoly control remained, the Judiciary Committee began in 1987 to conduct hearings on the impact of the MFJ and monopoly control of the local

exchange. Competition in the Telecommunications Industry: Hearings Before the Subcommittee on Monopolies and Commercial Law

of the House Committee on the Judiciary, 100th Cong. (1987); The

AT&T Consent Decree: Hearings Before the Subcommittee on Economic and Commercial Law of the House Committee on the Judiciary, 101st Cong. (1989).

In the 102nd Congress, the Judiciary Committee continued to exercise its jurisdiction over the antitrust issues raised by monopoly

control of the local exchange through the consideration of two

bills—the Telecommunications Equipment Research and Manufacturing Competition Act of 1991 (H.R. 1523) and the Telecommunications Equipment Research and Manufacturing Competition Act of

1991 (H.R. 1527). Both bills were jointly referred to the Committee

on the Judiciary and the Committee on Energy and Commerce.

Both consisted almost entirely of amendments to the Communications Act of 1934 directing the FCC to prescribe regulations to

allow the RBOCs into manufacturing. Neither Committee took formal action on these measures.

The Committee on the Judiciary then held a series of oversight

hearings on these issues. Competition Policy in the Telecommunications Industry: A Comprehensive Approach: Hearings Before the

Subcommittee on Economic and Commercial Law of the House

Committee on the Judiciary, 102nd Cong. (1991 and 1992). These

hearings led to the introduction of H.R. 5096, the ‘‘Antitrust Reform Act of 1992,’’ which was referred solely to the Judiciary Committee and which would have established a unified procedure and

standard for the RBOCs to use in applying for authorization to engage in long distance and manufacturing. The Judiciary Committee

reported H.R. 5096 favorably on August 12, 1992. H. Rep. No. 102–

850 (1992). As reported by the Committee, H.R. 5096 contained an

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entry test requiring the Attorney General to determine whether an

RBOC applying for long distance entry had proven that ‘‘there is

no substantial possibility that [it] could use monopoly power to impede competition . . .’’ §§ 2(b)(2)(B)(i) & 2(c)(2)(A)(i) of H.R. 5096 as

reported. On October 1, 1992, the House Committee on Rules held

a hearing on H.R. 5096, but it was never scheduled for floor consideration.

The Committee continued its efforts during the 103rd Congress

with the introduction and consideration of the ‘‘Antitrust and Communications Reform Act of 1994’’ (H.R. 3626), which was referred

jointly to the House Committees on the Judiciary and Energy and

Commerce. H.R. 3626 sought to modify the MFJ by permitting

RBOCs to compete in new lines of business, including the provision

of interchange telecommunications services. Importantly, H.R. 3626

contained language similar to the provision enacted in 1996 expressly establishing a role for the Department of Justice to consult

with the FCC on matters affecting competition within the telecommunications industry. § 101(b) of H.R. 3626 as introduced.

Under H.R. 3626, a RBOC seeking to enter the long distance market would apply jointly to the Department of Justice and the FCC.

Applications would be approved only when the Attorney General

found that ‘‘there is no substantial possibility that such company

or its affiliates could use monopoly power to impede competition in

the market such company seeks to enter,’’ and the FCC found that

granting the application is ‘‘consistent with the public interest, convenience and necessity.’’ § 101(b)(3)(D)(i) & (ii) of H.R. 3626 as introduced. It also included extensive amendments to the Communications Act of 1934 to provide for FCC regulation of manufacturing, alarm monitoring, and electronic publishing.

The Judiciary Committee held 3 days of hearings on H.R. 3626.

H.R. 3626, the ‘‘Antitrust and Communications Reform Act of

1993’’: Hearings Before the Subcommittee on Economic and Commercial Law of the House Committee on the Judiciary, 103rd Cong.

(1994). On June 24, 1994, the Judiciary Committee favorably reported H.R. 3626. H. Rep. No. 103–559, Part II (1994). On the

same day, the Energy and Commerce Committee also filed a report

on the bill. H. Rep. No. 103–559, Part I (1994). A final agreed-upon

substitute version passed the House on June 28, 1994 by a vote of

423–5. 140 Cong. Rec. H 5189–5216, 5246–47 (daily ed. June 28,

1994). The bill failed to become law, however, when a companion

measure stalled in the Senate.

In the 104th Congress, the Judiciary Committee continued its review of the monopoly problems in the telecommunications industry

with its consideration of the Antitrust Consent Decree Reform Act

of 1995 (H.R. 1528) and the Communications Act of 1995 (H.R.

1555). The Speaker referred both measures jointly to the Judiciary

and Commerce Committees. H.R. 1528 was primarily referred to

the Judiciary Committee with a secondary referral to the Commerce Committee. H.R. 1555 was primarily referred to the Commerce Committee with a secondary referral to the Judiciary Committee. Again, this bill contained extensive amendments to the

Communications Act of 1934 designed to address monopoly power

in the local exchange. On May 9, 1995, the Judiciary Committee

continued its long history of hearings on this topic. Telecommunications: the Role of the Department of Justice: Hearings before the

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Committee on the Judiciary, 104th Cong. (1995). On July 24, 1995,

the Judiciary Committee reported H.R. 1528. H. Rep. No. 104–203,

Part I (1995). On the same day, the Commerce Committee reported

H.R. 1555, H. Rep. No. 104–204, Part I (1995). After modification

resulting from extensive negotiations between the two Committees,

the House considered and passed H.R. 1555. 141 Cong. Rec. H

8281–95, 8425–8501 (daily eds. August 3 and 4, 1995). In those negotiations, the Judiciary Committee successfully insisted that the

Department of Justice have an integral role in the decision as to

when RBOCs would be allowed to provide long distance service.

This bill went to conference and ultimately emerged as the Telecommunications Act of 1996. Pub. L. No. 104–104.

More recently, in the 106th Congress, the Speaker referred legislation to modify existing antitrust law with respect to competition

in the broadband market and to provide data relief to the RBOCs

to both the Judiciary and Commerce Committees. The Internet

Freedom Act (H.R. 1686), was referred primarily to the Judiciary

Committee and secondarily to the Commerce Committee. The

Internet Growth and Development Act of 1999 (H.R. 1685), was referred primarily to the Commerce Committee and secondarily to

the Judiciary Committee. Both of these bills contained amendments to the Communications Act of 1934 that were similar in purpose to this year’s H.R. 1542. Again, the Judiciary Committee held

2 days of hearings on these bills. H.R. 1686, the ‘‘Internet Freedom

Act,’’ and H.R. 1685, the ‘‘Internet Growth and Development Act of

1999’’: Hearings before the Committee on the Judiciary, 106th Cong.

(1999 and 2000).

B. THE TELECOMMUNICATIONS ACT OF 1996

The Telecommunications Act of 1996 arose from an antitrust consent decree. That consent decree, the MFJ, prevented the RBOCs

from entering the long distance business because of their monopoly

control over the local exchange. Congress structured the 1996 Act

to offer the RBOCs a basic trade: the RBOCs were to open their

local exchanges to competitors for interconnection and, in return,

they were to be allowed entry into the long distance market.

In particular, it added a new § 271 to the Communications Act

to provide criteria and a process for scrutinizing RBOC efforts to

open their local monopolies. 47 U.S.C. § 271. Given the Justice Department’s unique expertise in competitive matters, Congress expressly provided within § 271 that the Department would review

RBOC compliance with the market-opening provisions of the act

and that the Federal Communications Commission would give the

Department’s analysis substantial weight in making its decision

with respect to an RBOC application to provide long distance service. 47 U.S.C. § 271(d)(2)(A). These provisions were included at the

insistence of the Committee on the Judiciary. In providing this role

for the Department, Congress sought to expand the Department’s

traditional enforcement authority in an effort to prevent anticompetitive harms.

During the 5 years since enactment of the 1996 Act, the Department has fulfilled its statutory obligations in reviewing RBOC applications for entry into long distance service. In fact, after reviewing each of the first five petitions filed by RBOCs under the 1996

Act, the Department concluded that none of the RBOCs met its obVerDate 11-MAY-2000 00:14 Jun 19, 2001 Jkt 073169 PO 00000 Frm 00007 Fmt 6659 Sfmt 6601 E:\HR\OC\HR083P2.XXX pfrm03 PsN: HR083P2
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ligation under the act. The FCC concurred and ultimately denied

each of the first five RBOC petitions.

In 2000, the Justice Department recommended denial of two applications based on antitrust concerns—one involving SBC, the

other involving Verizon. In each instance, the applicant withdrew

and resubmitted its application, in an effort to remedy the antitrust concerns raised by the Justice Department. In five cases, including the two resubmitted applications—New York, Texas, Kansas, Oklahoma, and Massachusetts—the Department did not recommend rejection, but did indicate problems that needed to be addressed before approval. In those five instances, the FCC approved

the applications. Thus, the Justice Department’s § 271 opinion has

essentially determined the outcome of each application that the

RBOCs have filed to date.

C. TELECOMMUNICATIONS SINCE THE 1996 ACT

President Clinton signed the 1996 Act on February 8, 1996. At

that time, the Internet was in its infancy. Most observers thought

that the RBOCs would remain separate companies, that they would

begin competing in long distance quickly, and that they might

enter the cable business. By the same token, most observers

thought that the long distance companies would remain separate

companies, that they would begin competing in local service quickly, and that they probably would not enter the cable business. As

for the cable companies, most observers thought that they would

remain separate companies, that they might enter the telephone

business, and that they would face substantial competition in the

cable business from satellite companies and telephone companies.

In the 5 years since the 1996 Act was signed, the Internet has

changed everything. At that time, it was a technological marvel

that was just becoming available to ordinary people and was hardly

used for commerce. Since then, it has become a means for conducting a substantial and ever growing amount of commerce.

In 1996, data traffic was not a substantial portion of the long distance business. Estimates vary as to what the percentage was, but

it was probably less than 10%. Today, it is probably more than

50%. The demand keeps exploding. As a result, being a carrier of

voice (i.e. traditional telephone calls) has become relatively less important and being a carrier of data has become relatively more important. Moreover, it is now possible to transmit voice telephone

calls over the Internet thus blurring the distinction between voice

and data.

As anyone who has used the Internet knows, it can be frustratingly slow depending on what technology one is using. Both cable

companies and telephone companies are upgrading their networks

in many areas. At the same time, both of these technologies are

getting better and faster, and they are also becoming capable of

carrying voice (i.e. telephone calls), video (i.e. cable programming),

and data (i.e. Internet content) through the same pipe. This is what

is referred to as ‘‘convergence’’ of the technologies.

Most telecommunications companies, irrespective of whether they

started as RBOCs, long distance companies, cable companies, or

something else, now think that their future lies in being capable

of providing a package of all of the ‘‘convergent’’ services on a global basis. Because getting into a new part of this business from

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scratch requires massive investment, many companies have decided to buy another company rather than build from scratch. That

has led to a wave of mergers.

First, the RBOCs began to merge with each other. Bell Atlantic

bought Nynex and GTE. SBC bought Pacific Telesis and Ameritech.

Then, new competitors began to buy existing companies.

WorldCom, a relatively new local competitor, bought MCI, one of

the major long distance companies. WorldCom also tried to buy

Sprint, but the deal failed because of antitrust concerns. Qwest, a

relatively new long distance competitor, bought USWest, an RBOC.

Finally, AT&T, the biggest of the old line long distance companies, bought Tele-Communications, Inc. (‘‘TCI’’) and MediaOne. TCI

and MediaOne were two of the largest cable companies in the nation. These mergers gave AT&T ownership of many cable lines

going into American homes. Again, estimates of the percentage

vary depending on who is counting. At the same time, Microsoft

has purchased a stake in AT&T as part of an effort to accelerate

the deployment of broadband services across the country.

When Congress was considering the 1996 Act, most observers

thought that controlling the transmission of telephone voice calls

was the future. Now, most observers believe that controlling

broadband communications lines, be they phone or cable, is the future. H.R. 1542 seeks to allow the RBOCs to leverage their monopoly control of the local exchange to control the broadband future.

D. THE PROVISIONS OF H.R. 1542

Fundamentally, H.R. 1542, as reported by the Committee on Energy and Commerce, eliminates several of the most important restrictions on the monopoly power of the incumbent local exchange

carriers. In addition, with respect to data, it completely undoes the

basic trade that made the 1996 Act possible: the RBOCs would no

longer have to open their networks in order to offer long distance

data service.

Section 4(a) of H.R. 1542 creates a new § 232 of the Communications Act of 1934. Subsection (a) of that new § 232 provides for a

sweeping prohibition of any Federal Communications Commission

or State limits of any kind on any high speed data service, Internet

backbone service, Internet access service, or network elements used

to provide such services. Section 3(a) of H.R. 1542 defines the

terms ‘‘high speed data service,’’ ‘‘Internet backbone service,’’ and

‘‘Internet access service’’ in very broad terms. For example, ‘‘high

speed data service’’ is defined as any packet-switched or successor

technology that transmits information at a speed generally not less

than 384 kilobits per second. This definition could easily include

voice transmission over the Internet. The desire to let the Internet

grow unfettered is understandable. However, this sweeping language could eliminate even basic anti-fraud protections as well as

many other consumer protection statutes. In addition, this sweeping language could be read to eliminate the rights of the Commission and the State attorneys general to bring antitrust suits under

§§ 4, 4C, and 11 of the Clayton Act. 15 U.S.C. §§ 15, 15c, & 21.

Section 4(b) of H.R. 1542 creates a new subsection (j) of § 251 of

the Communications Act. 47 U.S.C. § 251. Section 251 sets forth

the basic obligations of RBOCs and other incumbent local exchange

carriers to open their local exchanges for competitors to interVerDate 11-MAY-2000 00:14 Jun 19, 2001 Jkt 073169 PO 00000 Frm 00009 Fmt 6659 Sfmt 6601 E:\HR\OC\HR083P2.XXX pfrm03 PsN: HR083P2
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connect. The new § 251(j) contains exemptions that would generally

eliminate their obligations to share the fiber optic parts of their

network, to provide unbundled network elements for high speed

data service, and to provide access to remote terminals as an

unbundled network element. These obligations on incumbent local

exchange carriers allow competitors the ability to provide competing high speed data service. In short, this provision allows the

incumbents effectively to leverage their monopoly control over the

local exchange and exclude competition in high speed data service.

That is troublesome enough, but taken together with the broad definition of high speed data service, it could represent the potential

remonopolization of the industry.

Subsection 6(a) of H.R. 1542 inserts high speed data service and

Internet access service into the definition of incidental interLATA

services contained in § 271(g) of the act. 47 U.S.C. § 271(g). Under

§ 271(b)(3), the RBOCs are allowed to provide incidental interLATA

services without meeting the antimonopoly provisions of § 271. 47

U.S.C. § 271(b)(3). Thus, this provision moves high speed data service and Internet access service out of the § 271 process altogether

and allows the RBOCs to start providing them immediately without any further review by the Department of Justice, the Federal

Communications Commission, or the States. Given the broad definitions of these terms, this provision undoes much of the basis of

the 1996 Act. More specifically, this language would eliminate the

role of the Department of Justice in reviewing much activity that

would currently fall within the parameters of § 271.

Subsection 6(b) of H.R. 1542 creates a new § 271(k) that would

prohibit the RBOCs from offering in any in-region State any

interLATA voice telecommunications service obtained by means of

a high speed data access or Internet access service. This provision

attempts to maintain the § 271 restrictions for voice in the face of

the broad definitions for the two key terms. However, it does not

provide any definition of the term ‘‘interLATA voice telecommunications service.’’ Apparently, this would be left to the FCC. Thus,

in what claims to be a deregulatory bill, the purportedly fundamental distinction between voice and data is left undefined. However, regardless of how voice or data are defined or who defines

them, this provision is intended to, and will, change the parameters of what the Justice Department will review in § 271 applications.

Finally, subsection 6(c)(2) of H.R. 1542 eliminates the act’s requirement that the RBOCs must conduct their interLATA information services through a separate affiliate. The act’s definition of ‘‘information services’’ appears to include high speed data access or

Internet access service. 47 U.S.C. § 153(20). The separate affiliate

requirement was a key provision designed to ensure that the

RBOCs could not leverage their monopoly power over the local exchange to other lines of business. The elimination of this requirement simply adds to the elimination of any restriction on that monopoly power.

In short, H.R. 1542, as reported by the Energy and Commerce

Committee, reverses many of the basic antimonopoly provisions of

the 1996 Act. In doing so, it eliminates potential antitrust actions

by the FCC and the States and substantially limits the role of the

11

Department of Justice in reviewing the monopoly power of the

RBOCs.

E. THE GOLDWASSER CASE

One recent development in the courts particularly interests this

Committee. The Telecommunications Act of 1996 included an antitrust savings clause that read as follows: ‘‘Except as provided in

paragraphs (2) and (3) [which are not relevant here], nothing in

this act or the amendments made by this act shall be construed to

modify, impair, or supersede the applicability of any of the antitrust laws.’’ § 601(b)(1) of the Telecommunications Act of 1996. It

also included a general savings clause that read as follows: ‘‘This

act and the amendments made by this act shall not be construed

to modify, impair, or supersede Federal, State, or local law unless

expressly so provided in such act or amendments.’’ § 601(c)(1) of the

Telecommunications Act of 1996. Until recently, it was widely

thought that this language made clear that nothing in the Telecommunications Act in any way effected any implied repeal of the

antitrust laws.

Recently, however, the Seventh Circuit effectively read these savings clauses out of the law in Goldwasser v. Ameritech Corp., 222

F.3d 390 (7th Cir. 2000). It held:

[S]uch a conclusion [i.e., that the complaint at issue alleged a freestanding antitrust claim] would then force us

to confront the question whether the procedures established under the 1996 Act for achieving competitive markets are compatible with the procedures that would be

used to accomplish the same result under the antitrust

laws. In our view, they are not. The elaborate system of

negotiated agreements and enforcement established by the

1996 Act could be brushed aside by any unsatisfied party

with the simple act of filing an antitrust action. Court orders in those cases could easily conflict with the obligations the State commissions or the FCC imposes under the

sec. 252 agreements. The 1996 Act is, in short, more specific legislation that must take precedence over the general

antitrust laws, where the two are covering precisely the

same field.

This is not the kind of question that requires further development of a factual record, either on summary judgment or at a trial. We therefore agree with the district

court that it was proper for resolution under rule 12(b)(6).

There are many markets within the telecommunications

industry that are already open to competition and that are

not subject to the detailed regulatory regime we have been

discussing; as to those, the antitrust savings clause makes

it clear that antitrust suits may be brought today. At some

appropriate point down the road, the FCC will undoubtedly find that local markets have also become sufficiently

competitive that the transitional regulatory regime can be

dismantled and the background antitrust laws can move to

the fore. Our holding here is simply that this is not what

Congress has mandated at this time for the ILEC duties

that are the subject of the Goldwasser complaint. The disVerDate 11-MAY-2000 00:14 Jun 19, 2001 Jkt 073169 PO 00000 Frm 00011 Fmt 6659 Sfmt 6601 E:\HR\OC\HR083P2.XXX pfrm03 PsN: HR083P2
12

trict court thus correctly rejected the plaintiffs’ antitrust

theory.

Id. at 401–02. The Committee believes that this holding is wrong

and plainly misstates the clear intent of Congress in both savings

clauses. However, for the moment at least, it is the law in the Seventh Circuit. Another case raising the same issue, Intermedia Communications, Inc. v. BellSouth Telecommunications, Inc., is currently pending before the Eleventh Circuit. In that case, the Department of Justice and the Federal Communications Commission

have filed a joint amicus brief arguing that the Seventh Circuit

wrongly decided Goldwasser with respect to this issue.

F. THE REFERRAL

On May 24, 2001, Speaker Hastert referred H.R. 1542 to the Judiciary Committee ‘‘for consideration of such provisions of the bill

and amendment recommended by the Committee on Energy and

Commerce as propose to narrow the purview of the Attorney General under section 271 of the Communications Act of 1934.’’ The referral lasted through June 18, 2001. This referral was narrower

than the Judiciary Committee’s traditional broad jurisdiction over

monopoly problems in the telecommunications industry. Thus, the

Committee was unable to address some of the antitrust problems

raised by the bill—in particular, those raised by § 4.

G. CHAIRMAN SENSENBRENNER’S AMENDMENT

Chairman Sensenbrenner offered an amendment to address two

of the antitrust problems in the bill while attempting to stay within the referral. First, the Sensenbrenner amendment restores current law in § 271 of the Communications Act with respect to Bell

entry into long distance data service except that it makes the Justice Department the decisionmaker rather than the Federal Communications Commission. Second, it adds language clarifying the

meaning of the antitrust savings clause in the Telecommunications

Act of 1996 and reversing the misinterpretation of that clause in

the Goldwasser case. The Committee adopted the Chairman’s

amendment by voice vote.

A great deal of confusion has arisen over the meaning of the part

of the Sensenbrenner amendment that addresses the Goldwasser

decision. In light of that confusion, the Committee wishes to clarify

the following matters. First, the clarification is directed only at

that part of the Goldwasser decision that is quoted above in section

E. This clarification is not intended to disturb other parts of the

decision. Second, the clarification is not limited to the local exchange context, but would apply to any case in which a party

claimed that the Communications Act in some way effected an implied repeal of the antitrust laws.

Third, over the years, case law has added to antitrust law in

ways that are not explicitly set out in the antitrust statutes, like

the primary jurisdiction doctrine, the filed rate doctrine, the State

action immunity doctrine, and other similar matters. The Committee believes these matters are part of the ‘‘rights, obligations,

powers, and remedies’’ provided under the antitrust laws that the

language in the provision intends to save. The provision is not intended to limit or eliminate these or other similar doctrines.

13

Fourth, parties are free to sign contracts that waive their rights

to bring antitrust actions or actions under the Communications

Act. This language is not intended to override any otherwise valid

contract provision that makes such a waiver.

Finally, the Committee emphasizes again the general notion that

the quoted portion of Goldwasser upset. With respect to conduct

within the ambit of the Communications Act, the Act and the antitrust laws are parallel and complementary remedy systems. Conduct may violate the Act and not the antitrust laws; it may violate

the antitrust laws and not the Act; it may violate both; or it may

violate neither. When an action like Goldwasser is filed alleging

conduct violating both the Act and the antitrust laws, a court

should analyze the conduct to see if it violates the Act, and it

should separately analyze the conduct to see if it violates the antitrust laws. The Committee understands the portion of Goldwasser

quoted in section E, above, to hold that such conduct—at least if

it relates to an incumbent local exchange carrier’s obligations

under § 251 of the Act before the local exchange market becomes

competitive—can only be analyzed under the Act and not the antitrust laws.

That is not what Congress intended in 1996. The courts may not

simply read the antitrust savings clause out of the law. Accordingly, the Committee believes this clarification is in order to make

it clear to the courts that the antitrust savings clause meant what

its plain language said.

Because of the narrowness of the referral, Chairman Sensenbrenner’s amendment was not able to address the serious antitrust

problems raised by § 4 of the bill as reported by the Committee on

Energy and Commerce. Nonetheless, he believes that, as to data,

the provisions of § 4 undo the basic trade made in the 1996 Act: the

Bells would open their local exchanges to interconnection by competitors in return for being allowed into long distance. Section 4 allows the Bells to shed parts of that duty immediately including aspects of line sharing and the provision of remote terminals as

unbundled network elements. To get this relief, they do not have

to do anything in return. They do not even have to make any effort

to meet the other requirements to get into long distance. These

changes make it much harder for competitors to provide local telephone or Internet access service. Chairman Sensenbrenner sees no

benefit to consumers in this provision and hopes that it will be addressed if the bill comes to the floor of the House.

H. PARLIAMENTARY ISSUES RELATING TO CHAIRMAN

SENSENBRENNER’S AMENDMENT

During the consideration of the Chairman’s amendment, Representative Boucher raised a point of order arguing that it was outside the scope of the limited referral and that the House Parliamentarian held the same view. Chairman Sensenbrenner overruled

the point of order.

With respect to the restoration of current law concerning RBOC

entry into long distance data transmission, he ruled that his

amendment clearly addresses the provisions referred to the Committee. Subsection 6(a) of H.R. 1542 narrows the purview of the Attorney General under § 271 of the Communications Act by taking

high speed data service and Internet backbone service out of the

14

class of service that is subject to that section. Thus, it narrows the

Attorney General’s consultative role under that section.

In addressing that provision, the referral did not limit the Committee in introducing a new regulatory mechanism for approval of

data, particularly because the Committee on Energy and Commerce removed the FCC from the process. If the Committee were

to return to the status quo by restoring the FCC’s role, it would

surely be criticized for invading the Energy and Commerce Committee’s jurisdiction. Given that Committee’s decision to eliminate

the FCC, this Committee cannot restore a consultative role for the

Department of Justice because there would be no one with whom

the Department could consult. Thus, if the Committee’s policy

choice is to maintain current law, the shape of the amendment necessarily follows from the Energy and Commerce Committee’s action. Therefore, the part of the amendment dealing with the Attorney General’s role in § 271 determinations is within the scope of

the referral.

With respect to the Goldwasser clarification, the Chairman also

ruled that his amendment clearly addresses the provisions referred

to the Committee. In exercising the consultative role under

§ 271(d)(2)(a), the Attorney General may use ‘‘any standard [he]

considers appropriate.’’ Section 6(b) of H.R. 1542 specifically leaves

this process in place for voice telecommunications service. The

Goldwasser case casts doubt on whether antitrust law still applies

to the telecommunications industry and thereby casts doubt on

whether the Attorney General may continue to apply an antitrust

standard in his evaluation of applications under § 271. Reading

§ 6(b) in light of Goldwasser, it reiterates a narrower § 271 process

because of Goldwasser’s change of the law in the Seventh Circuit.

Thus, it narrows the purview of the Attorney General under § 271.

Moreover, because Goldwasser is the law in only one circuit, it

creates confusion as to whether the Attorney General must apply

differing standards to applications from different circuits. If the Attorney General cannot apply an antitrust standard to a § 271 application from the Seventh Circuit, then again his purview under

§ 271—as reiterated in § 6(b)—is narrowed. The Goldwasser fix directly relates to the subject of the underlying text because the consistent application of the law throughout every geographic region

of the country is fundamental to the bill and the pending amendment. For these reasons, he ruled that the part of the amendment

having to do with reversing a part of the Goldwasser case is within

the scope of the referral.

HEARINGS

The Committee on the Judiciary held a hearing on H.R. 1542 on

June 5, 2001. The Committee received testimony from four witnesses: Honorable Tom Tauke, Senior Vice President for Public Policy and External Affairs, Verizon, Washington, D.C.; Mr. Clark

McLeod, Chairman and Co-Chief Executive Officer, McLeodUSA,

Cedar Rapids, Iowa; Ms. Margaret Greene, Executive Vice President for Regulatory and External Affairs, BellSouth Corporation,

Atlanta, Georgia; and Mr. Jim Glassman, Resident Fellow, American Enterprise Institute, Washington, D.C. The Committee also

held a hearing on two related bills, H.R. 1698 and H.R. 1697, on

May 22, 2001. The Committee received testimony from four witVerDate 11-MAY-2000 00:14 Jun 19, 2001 Jkt 073169 PO 00000 Frm 00014 Fmt 6659 Sfmt 6601 E:\HR\OC\HR083P2.XXX pfrm03 PsN: HR083P2
15

nesses: Honorable Terry Harvill, Commissioner, Illinois Commerce

Commission, Chicago, Illinois; Honorable Bill Barr, Executive Vice

President and General Counsel, Verizon, Washington, D.C.; Mr.

Jeff Blumenfeld, Partner, Blumenfeld & Cohen, Washington, D.C.;

and Mr. John Malone, President and Chief Executive Officer, The

Eastern Management Group, Bedminster, New Jersey.

COMMITTEE CONSIDERATION

On June 13, 2001, the full Committee met in open session and,

by voice vote, ordered that the Committee report the bill, H.R.

1542, to the House with an amendment and with the recommendation that the amendment be agreed to and that the bill as amended

not pass, a quorum being present.

VOTE OF THE COMMITTEE

During its consideration of H.R. 1542, the Committee took no

rollcall votes. The Sensenbrenner amendment was adopted by a

voice vote. The Cannon motion to report the bill, H.R. 1542, to the

House with an amendment and with the recommendation that the

amendment be agreed to and that the bill as amended not pass was

adopted by voice vote.

COMMITTEE OVERSIGHT FINDINGS

In compliance with clause 3(c)(1) of rule XIII of the Rules of the

House of Representatives, the Committee reports that the findings

and recommendations of the Committee, based on oversight activities under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated in the descriptive portions of this report.

PERFORMANCE GOALS AND OBJECTIVES

H.R. 1542 does not authorize funding. Therefore, clause 3(c)(4) of

rule XIII of the Rules of the House is inapplicable.

NEW BUDGET AUTHORITY AND TAX EXPENDITURES

Clause 3(c)(2) of House rule XIII is inapplicable because this legislation does not provide new budgetary authority or increased tax

expenditures.

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the

House of Representatives, the Committee sets forth, with respect to

the bill, H.R. 1542, the following estimate and comparison prepared

by the Director of the Congressional Budget Office under section

402 of the Congressional Budget Act of 1974:

16

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, June 18, 2001.

Hon. F. JAMES SENSENBRENNER, Jr., Chairman,

Committee on the Judiciary,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 1542, the Internet Freedom and Broadband Deployment Act of 2001.

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contacts are Ken Johnson and

Lanette J. Walker (for federal spending), who can be reached at

226–2860, Erin Whitaker (for revenues), who can be reached at

226–2720, Shelley Finlayson (for the state and local impact), who

can be reached at 225–3220, and Philip Webre (for the private-sector impact), who can be reached at 226–2940.

Sincerely,

DAN L. CRIPPEN, Director.

Enclosure

cc: Honorable John Conyers Jr.

Ranking Member

H.R. 1542—Internet Freedom and Broadband Deployment Act of

2001.

H.R. 1542 would prohibit the Federal Communications Commission (FCC) and state governments from regulating the provision of

Internet access or high-speed data services, with certain exceptions.

H.R. 1542 also would allow the FCC to impose penalties for violations of certain provisions of the bill, including requirements that

certain telecommunications carriers give consumers the freedom to

choose their Internet service providers. Under the bill, the FCC

also could assess penalties against Bell telephone companies that

offer voice telecommunication services using telephone lines for

data transmission without the agency’s permission.

CBO estimates that implementing H.R. 1542 would have a negligible net impact on spending by the FCC. The increase in gross

spending would be about $1 million in 2002, subject to the availability of appropriated funds. Any such increase would be offset by

fees collected by the FCC.

Pay-as-you-go procedures would apply to this bill, for two reasons. First, the bill would create new penalties, which are recorded

in the budget as governmental receipts (revenues). CBO estimates

that the bill’s provisions would increase collection of FCC penalties

by less than $500,000 a year. Also, enacting H.R. 1542 could affect

the cash flows of the Universal Service Fund (USF). The USF seeks

to provide universal access to telecommunications services by levying charges on some telephone companies (which are recorded in

the budget as revenues) and making payments to others (which

may be spent without further appropriation). CBO cannot estimate

the bill’s gross impact on the revenues and spending associated

with the USF; however, the net impact would be negligible in each

year.

H.R. 1542 contains an intergovernmental mandate as defined in

the Unfunded Mandates Reform Act (UMRA) because it would preVerDate 11-MAY-2000 00:14 Jun 19, 2001 Jkt 073169 PO 00000 Frm 00016 Fmt 6659 Sfmt 6601 E:\HR\OC\HR083P2.XXX pfrm03 PsN: HR083P2
17

empt the ability of states to regulate high-speed data services. CBO

estimates that the costs of complying with this mandate would not

be significant and would not exceed the threshold established by

UMRA ($56 million in 2001, adjusted annually for inflation).

The bill would impose private-sector mandates as defined by

UMRA on the Bell operating companies and other incumbent local

exchange companies providing broadband service. CBO estimates

that a strict interpretation of the mandates would result in a total

mandate cost that would exceed the annual threshold established

in UMRA ($113 million in 2001, adjusted annually for inflation) in

at least one of the first five years that the mandates are in effect.

ESTIMATED COST TO THE FEDERAL GOVERNMENT

Based on information from the FCC, CBO estimates that imple- menting H.R. 1542 would cost $1 million in 2002, assuming the appropriation of the necessary amounts. These funds would pay for

additional staff to develop new regulations necessary to implement

the bill’s provisions. Under current law, the FCC is authorized to

collect fees from the telecommunications industry sufficient to offset the cost of its regulatory programs. CBO assumes that the additional costs of implementing H.R. 1542 would be offset by an increase in collections credited to the FCC’s annual appropriations.

Therefore, H.R. 1542 would not have a significant net impact on

the cost of the FCC’s operations.

H.R. 1542 would authorize the FCC to impose penalties for violations of certain provisions in H.R. 1542. These provisions include

requirements that incumbent telephone carriers give consumers

the freedom to choose Internet service providers, and provisions

that would prevent the Bell telephone companies from offering

voice telecommunication services using telephone data lines unless

authorized to do so by the FCC. Violations would be subject to a

maximum penalty of $1 million per incident, or $10 million for a

continuing violation. H.R. 1542 also would allow the FCC to impose

penalties on the Bell telephone companies for failure to provide

customer access to high-speed data services on a schedule specified

in the bill. Based on information from the FCC and telecommunications firms, CBO estimates that enacting the bill would increase

collections of such penalties by less than $500,000 a year.

Finally, H.R. 1542 could affect the size of the USF, which was

established by the Telecommunications Act of 1996 to provide universal access to telecommunications service throughout the nation.

The FCC assesses charges on telecommunications services and distributes the amounts collected to telephone companies to subsidize

telephone and Internet service for high-cost areas, low-income consumers, schools, libraries, and others. Because H.R. 1542 could affect the telecommunications market in non-rural, high-cost areas of

the country, enacting the bill may cause the FCC to change the

amount of money that would be provided from the USF to companies that serve those areas. USF outlays are mandatory and occur

without appropriation action. Any change in the amount of payments from the USF would cause a commensurate change in the

amount of money collected by the USF, which is considered a revenue in the budget. CBO cannot estimate the magnitude or the direction of these changes in revenues and direct spending; however,

their net effect would be negligible.

18

PAY-AS-YOU-GO CONSIDERATIONS

The Balanced Budget and Emergency Deficit Control Act sets up

pay-as-you-go procedures for legislation affecting direct spending or

receipts. CBO estimates that enacting H.R. 1542 would affect penalties (receipts) by an insignificant amount each year. The bill

could also affect receipts and spending associated with the Universal Service Fund. CBO cannot estimate the magnitude or direction of any change to USF receipts and spending, but in any event,

such changes would have a negligible net impact in each year.

ESTIMATED IMPACT ON STATE, LOCAL, AND TRIBAL GOVERNMENTS

H.R. 1542 contains an intergovernmental mandate as defined in

UMRA because it would preempt the ability of states to regulate

high-speed data services. While data are very limited, CBO estimates that the costs of complying with this mandate would not be

significant and would not exceed the threshold established by the

act ($56 million in 2001, adjusted annually for inflation).

ESTIMATED IMPACT ON THE PRIVATE SECTOR

H.R. 1542 would impose private-sector mandates on local telephone companies, primarily those companies that were part of the

pre-1982 telephone service monopoly—the so-called Bell operating

companies—but also on other telephone companies that enjoyed a

monopoly position in local telephone service—referred to as nonBell incumbent local exchange carriers. CBO estimates that the

total costs of mandates in the bill would exceed the annual threshold established in UMRA ($113 million in 2001, adjusted annually

for inflation), assuming a strict interpretation of those mandates.

Should the language of the mandates be interpreted less strictly,

the total direct costs would not exceed the threshold.

Section 5 of H.R. 1542 would require all incumbent local exchange providers to provide their customers the ability to subscribe

to the Internet service provider of their choice. This would be a

new requirement for the non-Bell incumbent local exchange carriers, although it is currently a requirement for the Bell operating

companies. However, providing such access is currently general industry practice. Consequently, CBO estimates that the incremental

cost to the industry to comply with this mandate would be small.

Section 7 would require the Bell operating companies to deploy

high-speed data services—or broadband services as they are often

called—in each state in which the company or one of its affiliates

is an incumbent local exchange carrier. The bill defines high-speed

data service as the capability to transmit information (using certain technology) at a rate greater than or equal to 384 kilobits per

second in at least one direction. The bill also specifies targets for

accomplishing this goal over five years. The bill would require the

Bell operating companies to upgrade 20 percent of their central offices to have high-speed data capabilities within one year of enactment, 40 percent within two years, 70 percent within three years,

and 100 percent within five years.

Under the bill, a Bell operating company could meet the deployment requirements in either of two ways. First, the Bell operating

company could upgrade both the equipment in a central office and

the access lines of customers who request such upgrades, provided

19

their access line is less than 15,000 feet long. Based on engineering

and industry reports, CBO estimates that the cost of upgrading is

between $175,000 and $230,000 per office, and that the bill’s mandate would require the Bell operating companies to upgrade between 3,300 and 5,000 central offices that would not be upgraded

absent that mandate. Alternatively, the bill provides that a Bell operating company could meet the deployment requirements by providing access to high-speed data services by alternative means, for

example, through a cable television line, a satellite link, or a terrestrial wireless connection.

The total cost of the mandate to deploy high-speed data services

would certainly exceed the UMRA threshold if the Bell operating

companies conformed to the mandate by upgrading their central offices. Alternative means could prove less expensive, and by CBO’s

estimate would fall below the UMRA threshold. But, none of the

alternatives is currently capable of providing broadband service to

‘‘each customer’’ as required by section 7 of the bill.

PREVIOUS CBO ESTIMATE

On May 24, 2001, CBO transmitted a cost estimate for H.R.

1542, the Internet Freedom and Broadband Deployment Act of

2001, as ordered reported by the House Committee on Energy and

Commerce on May 9, 2001. The two versions of the bill and the

CBO cost estimates are similar. The version ordered reported by

the House Committee on the Judiciary includes a requirement that

Bell telephone companies obtain approval from the Attorney General before providing high-speed data service. We estimate that enacting this provision would have a negligible effect on the federal

budget and would not impose an additional intergovermental mandate.

The private-sector mandates in both bills are identical. The

House Committee on the Judiciary approved an amendment that

would affect potential savings to the Bell operating companies

under the bill. The amendment would restore certain current-law

restrictions on the Bell operating companies related to long distance data services that the previous version of the bill would have

lifted. Nonetheless, CBO estimates that the mandate costs in both

versions of the bill would exceed the annual threshold established

by UMRA assuming a strict interpretation of the mandates.

ESTIMATE PREPARED BY:

Federal Costs: Ken Johnson and Lanette J. Walker (226–2860)

Revenue Impacts: Erin Whitaker (226–2720)

Impact on State, Local, and Tribal Governments: Shelley Finlayson

(225–3220)

Impact on the Private Sector: Philip Webre (226–2940)

ESTIMATE APPROVED BY:

Peter H. Fontaine

Deputy Assistant Director for Budget Analysis

20

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House

of Representatives, the Committee finds the authority for this legislation in article I, § 8 of the Constitution.

SECTION-BY-SECTION ANALYSIS AND DISCUSSION

The following section by section analysis describes H.R. 1542 as

reported by the Committee on Energy and Commerce.

Section 1. Short Title. Section 1 provides that this Act may be

cited as the ‘‘Internet Freedom and Broadband Deployment Act of

2001.’’

Section 2. Findings and Purpose. Section 2 sets forth congressional findings and purposes with respect to the bill.

Section 3. Definitions. Section 3 defines the terms ‘‘high speed

data service,’’ ‘‘Internet,’’ ‘‘Internet access service,’’ ‘‘Internet backbone,’’ and ‘‘Internet backbone service’ as they are used in the bill.

Section 4. Limitation of Authority to Regulate High Speed Data

Services. Subsection 4(a) creates a new § 232 of the Communications Act which prohibits the Federal Communications Commission

or the States from regulating high speed data service, Internet

backbone service, Internet access service, or unbundled network

elements used to provide these services except as expressly provided in the act. It also prohibits the Commission from imposing

or collecting any fees or taxes on such services. It contains a savings provision preserving the States’ authority to regulate traditional telephone services and local governments’ authority to regulate cable franchises. It also preserves current law on enhanced

services and universal service.

Subsection 4(b) creates a new § 251(j) of the Communications Act.

The net effect of this new § 251(j) is that incumbent local exchange

carriers are still required to allow competitors access to the old,

copper line parts of their networks as under current law. However,

they are not required to allow them access to the new, fiber optic

line parts of those networks that are used to provide high speed

data service. In addition, they are not required to provide access

to remote terminals as an unbundled network element, and they

are generally not required to provide any unbundled network element for the purpose of providing high speed data service.

Subsection 4(c) provides that nothing in the act shall be construed to affect existing interconnection agreements between

RBOCs and competitors.

Section 5. Internet Consumers Freedom of Choice. Section 5 creates a new § 233 of the Communications Act. This new § 233 requires incumbent local exchange carriers (i.e. the RBOCs and other

independent incumbents) to: allow Internet users to subscribe to

any Internet service provider that connects to the incumbents’ high

speed data service; allow any Internet service provider to acquire

the facilities and services necessary to connect to the incumbents’

high speed data service; allow any Internet service provider to collocate equipment for purposes of interconnection; and allow any

provider access to the incumbent’s facilities so that it can provide

Internet access service within the same time period that the incumbent provides access for itself.

21

Section 6. Incidental InterLATA Provision of High Speed Data

and Internet Access Services. Subsection 6(a) inserts high speed

data service into the list of incidental long distance services contained in § 271(g) of the Communications Act. Incidental long distance services were various services which the RBOCs could provide without meeting the network opening requirements of § 271.

Thus, the effect of this provision is to allow the RBOCs to provide

high speed data services and Internet backbone services over long

distance without meeting the market opening requirements of § 271

and without going through the DOJ and FCC approval process.

Subsection 6(b) adds a new subsection (k) to § 271 to clarify that

the RBOCs must still go through the § 271 process with respect to

long distance voice services. The new subsection (k) also makes

clear that RBOCs may not use high speed data services or Internet

backbone services to provide in-region interLATA voice telecommunications services until they meet the requirements of § 271.

Subsection 6(c) eliminates the Act’s requirement that the RBOCs

must conduct their interLATA information services through a separate affiliate. The Act’s definition of ‘‘information services’’ appears

to include high speed data access or Internet access service. 47

U.S.C. § 153(20). Thus, the effect appears to be to eliminate a separate subsidiary requirement for high speed data services.

Section 7. Deployment of Broadband Services. Section 7 creates

a new § 277 of the Communications Act. Subsection (a) of the new

§ 277 requires the RBOCs to deploy high speed data services in

each of their in-region States in accordance with this section. New

§ 277(b) requires the RBOCs to meet a percentage target for deployment within each State over a period of years culminating with

100% deployment within 5 years. New § 277(c) provides that the

FCC may impose forfeiture penalties on the RBOCs for failure to

comply with these requirements. New § 277(d) requires the FCC to

report annually on deployment of high speed data services in underserved areas.

Section 8. Commission Authorized to Prescribe Just and Reasonable Charges. Section 8 provides for the FCC to impose civil fines

of $1 million per violation for violations of sections 5, 6, or 7 of this

act. For continuing violations, each day shall be considered a separate violation, and an amount of up to $10 million may be assessed.

The Sensenbrenner amendment makes two changes to H.R. 1542

as reported by the Energy and Commerce Committee.

First, it creates a new subsection (l) of § 271 of the Communications Act. This new subsection (l) essentially reinstates current law

with respect to Bell entry into the provision of interLATA high

speed data services and Internet backbone services. The only

change is that the Department of Justice would decide whether the

RBOC had met the § 271 standard for entry rather than the Federal Communications Commission. This new process maintains the

same substantive standards provided in current law.

Second, it creates a new subsection (4) of § 601(b) of the Telecommunications Act of 1996. This language clarifies the meaning

of the antitrust savings clause contained in § 601(b)(1) and the general savings clause contained in § 601(c)(1) of that act. This language reiterates to the courts that the rights, obligations, powers,

and remedies provided in the antitrust laws are not preempted by,

not inconsistent with, and not incompatible with those provided

22

under the Communications Act, the Telecommunications Act, or

any law amended by either such act regardless of the progress of

competition in any market. See also discussion in section E of the

Background and Need for Legislation Section, above.

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the

House of Representatives, changes in existing law made by the bill,

as reported, except as shown below, are shown in Report 107–83

part I, filed May 24, 2001. The differences between the bill as reported by the Committee on Energy and Commerce and as reported

by the Committee on the Judiciary are shown as follows:

Existing law in which no change is proposed by either committee are shown in roman.

New matter proposed to be inserted by the Committee on Energy and Commerce is printed in boldface roman. New matter proposed to be inserted by the Committee on the Judiciary is printed

in italics.

COMMUNICATIONS ACT OF 1934

* * * * * * *

TITLE II—COMMON CARRIERS

* * * * * * *

PART III—SPECIAL PROVISIONS CONCERNING

BELL OPERATING COMPANIES

* * * * * * *

SEC. 271. BELL OPERATING COMPANY ENTRY INTO INTERLATA SERVICES.

(a) * * *

* * * * * * *

(g) DEFINITION OF INCIDENTAL INTERLATA SERVICES.—For

purposes of this section, the term ‘‘incidental interLATA services’’

means the interLATA provision by a Bell operating company or its

affiliate—

(1) * * *

* * * * * * *

(7) of high speed data service or Internet backbone

service, subject to subsection (l).

* * * * * * *

(l) APPLICATION PREREQUISITE TO PROVIDING HIGH SPEED

DATA SERVICE OR INTERNET BACKBONE SERVICE.—

(1) REQUIREMENT TO FILE APPLICATION WITH ATTORNEY

GENERAL OF THE UNITED STATES.—Neither a Bell operating

company, nor any affiliate of a Bell operating company, may

begin providing high speed data service or Internet backbone

23

service in any in-region State under the authority of subsection

(g)(7)—

(A) unless it files with the Attorney General of the

United States an application to provide such service; and

(B) until the Attorney General —

(i) approves such application before the expiration

of the 90–day period beginning on the date such application is filed; or

(ii) fails to approve or to disapprove such application during such 90–day period.

(2) AUTHORITY OF ATTORNEY GENERAL.—The Attorney General of the United States—

(A) may issue rules to establish requirements applicable to the form and contents of applications filed under

paragraph (1);

(B) may make recommendations to an applicant

regarding—

(i) withdrawal of an application filed under paragraph (1); or

(ii) filing of an application under paragraph (1),

with or without modifications, subsequent to the withdrawal of an application filed under such paragraph;

and

(C) may not approve an application filed in compliance

with this subsection unless the Attorney General determines

that the applicant has demonstrated that it meets the substantive requirements of subsections (c) and (d) with respect

to high speed data service or Internet backbone service in

the State for which such application is filed.

(3) WITHDRAWAL OF APPLICATION.—An application filed

under paragraph (1) may be withdrawn by the applicant at any

time before the Attorney General approves or disapproves such

application, but may not be modified after being filed.’’.

* * * * * * *

SECTION 601 OF THE TELECOMMUNICATIONS ACT OF

1996

SEC. 601. APPLICABILITY OF CONSENT DECREES AND OTHER LAW.

(a) * * *

(b) ANTITRUST LAWS.—

(1) * * *

* * * * * * *

(4) CONTINUING OPERATION OF THE ANTITRUST LAWS.—The

rights, obligations, powers, and remedies provided under the

antitrust laws are in addition to, and are—

(A) not preempted by;

(B) not inconsistent with; and

(C) not incompatible with;

any of the rights, obligations, powers, and remedies provided

under the Communications Act of 1934 (47 U.S.C. 151 et seq.),

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under this Act, or under any law amended by either such Act,

regardless of the progress of competition in any market.

* * * * * * *

MARKUP TRANSCRIPT

BUSINESS MEETING

WEDNESDAY, JUNE 13, 2001

HOUSE OF REPRESENTATIVES,

COMMITTEE ON THE JUDICIARY,

Washington, DC.

The Committee met, pursuant to call, at 10:07 a.m., in Room

2141, Rayburn House Office Building, Hon. F. James Sensenbrenner, Chairman of the Committee, presiding.

Chairman SENSENBRENNER. The Committee will come to order. A

working quorum being present, pursuant to notice, I now call up

the Bill H.R. 1542, the ‘‘Internet Freedom and Broadband Deployment Act of 2001,’’ also known as the Tauzin-Dingell Bill, as reported by the Committee on Energy and Commerce for purposes of

markup.

Without objection, the bill will be considered as read and open

for amendment at any point. Without objection, the Chair is authorized to declare recesses of the Committee today at any point.

[H.R. 1542 follows:]

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Chairman SENSENBRENNER. I will yield myself 5 minutes for an

opening statement, and won’t use it. I will make a more detailed

statement later when I offer an amendment to this bill. I would

like to thank all the Members of the Committee who have worked

hard on these difficult issues over the last several weeks.

The referral we received from the Speaker directed us to move

with lightening speed, and in true Judiciary Committee form, we

have. However, I disagree with the scope and length of this referral. Nonetheless, we have abided by these strictures. We’ve had 2

days of informative hearings in which the vast majority of Members on both sides of the aisle participated. Again, thank you all

for your diligent work and attention to this matter, which has allowed the Judiciary Committee to exercise its jurisdiction.

I yield back the balance of my time, ask unanimous consent that

all Members may include opening statements at this point in the

record, and recognize the gentleman from Michigan for 5 minutes.

Mr. CONYERS. Thank you, and good morning, Members of the

Committee.

Mr. Chairman, I think you should be congratulated for holding

this markup, and for your outstanding leadership in protecting the

Committee’s historic jurisdiction over competition in the telecommunications industry.

Under both Democratic and Republican leadership, the Judiciary

Committee has always voted on an overwhelming bipartisan basis

to preserve the Department of Justice’s role in insuring the telecommunications marketplace is open to competitors. We cannot forget that it was the Department of Justice that brought the antitrust suit that ultimately broke up the old telephone system.

In 1996, when we considered the Telecommunications Act, the

Committee again voted overwhelmingly to give the Department of

Justice a co-equal role with the FCC to review the Bell monopoly’s

entry into both voice and data long distance service. Today, the

Committee considers the Tauzin-Dingell Bill, H.R. 1542, which

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would eviscerate the Department of Justice’s role with respect to

Bell entry into the long-distance data market. This is not a nice

thing to do. And we all know that data is the market of the future,

not only because data represents over half of long-distance traffic

and is still growing, but also because it’s impossible to distinguish

between voice and data when everything is transmitted in ones and

zeroes.

If the future—if the problems with the Tauzin bill were limited

to the Department of Justice, no doubt we could find a way to correct them, but unfortunately, this bill—and I hate to say this—is

so deeply flawed, that we cannot, within our narrow referral jurisdiction, fix this bill. So let’s be frank about it. The Tauzin bill guts

the market opening for pro-competitive requirements of the 1996

Telecommunications Act. It’s pretty straightforward in doing that.

By essentially eliminating sections 251 and 271 of the ’96 Act,

which require that local phone monopoly facilities be open to competitors, the Tauzin Bill gives the local Bell monopolies a license

to exclude. This is not a good thing.

The bill would effectively transfer, effectively duplicate the monopoly over local telephone services into broadband DSL services.

This is not—this is another not good thing. Not to mention the fact

that the bill undermines important consumer protections such as

rules against slamming, which prohibit companies from changing a

customer’s service without their consent, privacy regulations, law

enforcement requirements, and protections against obscene and

harassing communications. Competition should be our religion in

telecommunications. It should be our credo. It is the touchstone for

lower prices, better services, and for unleashing the innovative creativity that has built our new economy from the ground up. And

historically, it’s been the role of this Committee, Judiciary Committee, to preserve the basic rules of competition, and I think we

intend to do that this morning.

I urge the Committee then to reject this deeply-flawed bill that

eliminates the Department of Justice’s ability to prevent the remonopolization of the phone network.

And I thank you for the time, Mr. Chairman.

[The opening statement of Mr. Conyers follows:]

PREPARED STATEMENT OF THE HONORABLE JOHN CONYERS, JR., A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF MICHIGAN

I want to thank the Chairman for holding this important markup and for his outstanding leadership in protecting the Committee’s historic jurisdiction over competition in the telecommunications industry.

Under both Democratic and Republican leadership, this Committee has always

voted on an overwhelming bipartisan basis to preserve the Department of Justice’s

role in ensuring that the telecommunications marketplace is open to competitors.

We cannot forget that it was the Department of Justice that brought the antitrust

suit that ultimately broke up the old ‘‘Ma Bell’’ system.

In 1996, when we considered the Telecommunications Act, the Committee voted

overwhelmingly to give DOJ a co-equal role with the FCC to review the Bell monopolies’ entry into both voice and data long distance service.

Today, the Committee considers the Tauzin-Dingell bill, H.R. 1542, which would

eviscerate DOJ’s role with respect to Bell entry into the long distance data market.

And we all know that data is the market of the future. Not only because data represents over 50% of long distance traffic—and growing. But also because it’s impossible to distinguish between ‘‘voice’’ and ‘‘data’’ when everything is transmitted in

‘‘ones’’ and ‘‘zeros.’’

If the problems with the Tauzin bill were limited to DOJ, we could find a way

to correct them.

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Unfortunately, the Tauzin bill is so deeply flawed that we cannot—within our narrow referral—fix this bill.

Let’s be honest: the Tauzin bill guts the market-opening, pro-competitive requirements of the 1996 Telecommunications Act.

By essentially eliminating Sections 251 and 271 of the ’96 Act—which require that

local phone monopoly facilities be opened to competitors—the Tauzin bill gives the

local Bell monopolies a license to exclude.

The bill would effectively transfer—effectively duplicate—the monopoly over local

telephone service, into broadband DSL services.

Not to mention the fact that the bill undermines important consumer protections—

such as rules against ‘‘slamming’’ (which prohibit companies from changing a customer’s service without their consent), privacy regulations, law enforcement requirements, and protections against obscene, indecent, and harassing communications.

Competition should be our religion in telecommunications. It should be our credo.

It is the touchstone for lower prices, better services, and for unleashing the innovative creativity that has built our new economy from the ground up. And historically,

its been the role of this Committee to preserve those basic rules of competition.

I urge the Committee to reject this deeply flawed bill that eliminates the Department of Justice’s ability to prevent the re-monopolization of the phone network.

[The opening statement of Mr. Issa follows:]

PREPARED STATEMENT OF THE HONORABLE DARRELL ISSA, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF CALIFORNIA

Mr. Chairman, I want to thank you for bringing forward H.R. 1542, H.R. 1698

and H.R. 2120 to the full Judiciary Committee. Like many of my colleagues on the

Judiciary Committee, I am frustrated that our committee received an extremely narrow referral of H.R. 1542. My frustration in particular is focused on section 4 of the

H.R. 1542 bill that may inhibit efforts to prohibit spamming.

As we on the Judiciary Committee all recognize, unsolicited commercial electronic

mail, or ‘‘spam,’’ can impose significant economic burdens on Internet access services, small and large businesses, and of course, individuals. That is because the information superhighway can only handle a finite volume of email. Spam can also

negatively affect the quality of service that web users receive and ultimately contributes to a loss of privacy online.

Both the Federal Communications Commission and the states have a substantial

governmental interest in regulating spam. Indeed, this Committee recently addressed the spam issue—taking a measured approach to ensure that spammers do

not cause further damage to our high-tech economy. To date, however, the primary

burden for dealing with spam has fallen on the FCC and the states.

Section 4 of the Tauzin-Dingell bill is intended to completely deregulate the provision of high-speed data services offered by incumbent local exchange carriers. New

section 232, which would be created if H.R. 1542 is enacted, would eliminate the

authority for the FCC and the states to address spam. As the bipartisan, dissenting

views from the Commerce Committee concerning the Tauzin-Dingell bill point out:

‘‘The sweeping evisceration of FCC and state authority raises several questions

about what rules and regulations no longer apply. . . . That means that many important rules, including consumer protection rules, may inadvertently be swept

away.’’ Spam is one of those areas where FCC and state regulations would be nullified.

Given that H.R. 1542 threatens the ability of the FCC and state governments to

deal with spam transmitted using the high-speed data services of Bell companies,

I was prepared to offer an amendment this morning. My amendment—to be added

to the end of Section 4(b) of Tauzin-Dingell—would simply have said: ‘‘Nothing in

this section shall be construed to prevent the Commission or any state from adopting regulations to prohibit unsolicited commercial e-mail messages, or ‘spam.’ ’’

The impact that Tauzin-Dingell would have on consumer protection measures

such as spam regulations causes me great concern. I hope that if H.R. 1542 does,

in fact, reach the floor of the House, all of us who are concerned about this issue

will have an opportunity rectify the situation with a floor amendment.

Again, I thank the Chairman for holding this hearing and for his leadership on

these broadband bills.

[The opening statement of Mr. Cannon follows:]

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PREPARED STATEMENT OF THE HONORABLE CHRIS CANNON, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF UTAH

Mr. Chairman, I want to thank you for offering your amendment to preserve the

interLATA data rules and to reverse the Goldwasser case. It is critical that we protect the jurisdiction of this Committee on issues pertaining to competition in the

telecommunications marketplace. More importantly, however, there are real, substantive problems with H.R. 1542 that I would have liked to address. But given the

narrow terms of the referral we received from the Parliamentarian, this Committee

is not permitted to do so.

Should we have had a broader referral, I would have proposed two amendments.

The first amendment would have addressed the issue of privacy and the second

amendment would have preserved FCC authority to address slamming and cramming.

PRIVACY

During consideration of the 1996 Telecommunications Act, Congress recognized

that new competitive market forces and technologies had the potential to threaten

consumer privacy interests. Congress enacted Section 222 of the ’96 Act to ensure

that telecommunications carriers protected the privacy of customer proprietary network information (‘‘CPNI’’) and other customer information they obtain when they

provide telecommunications services.

The Federal Communications Commission has adopted rules to implement and

enforce Section 222. Because Section 4 of HR 1542 can be construed to completely

deregulate the high-speed data services offered by incumbent local exchange carriers

(‘‘ILECs’’), it could jeopardize the Commission’s ability to protect the privacy of sensitive customer information obtained by ILECs when they provide high-speed data

services.

As such, I would have offered the following amendment:

‘‘At the end of the existing text of subsection 4(b), insert the following:

‘Nothing in this section shall be construed to limit or affect the authority

of the Commission under Section 222 of the Communications Act, 47 U.S.C.

222 et seq.’ ’’

This amendment would have protected consumers in the event of the passage of

H.R. 1542. Specifically, it would have preserved the Commission’s authority to regulate ILECs’ usage of customer information, even if they obtain that information from

their provision of high-speed data services.

Unfortunately, such an amendment is beyond the scope of our referral this morning, and thus, would have been ruled out of order. The fact that H.R. 1542 would

potentially undermine privacy protections provided by the Federal Communications

Commission can only increase my concerns about the Tauzin-Dingell legislation.

SLAMMING AND CRAMMING

In addition to privacy issues, I am also concerned about the Tauzin-Dingell legislation because it fails to preserve FCC and state authority to prevent slamming and

cramming.

The FCC currently has statutory authority to regulate the practice of ‘‘slamming,’’ where a company changes a subscriber’s chosen provider of telecommunications

services without the subscriber’s knowledge or authorization, and ‘‘cramming,’’ where a company places unauthorized, misleading, or deceptive charges on consumers’ telephone bills. Certain states also prohibit or regulate slamming and cramming under state consumer protection statutes or regulations.

Slamming and cramming are fraudulent practices that distort the market for telecommunications services. I know of no one who supports the right of Bell companies

to slam or cram consumers.

Unfortunately, Section 4 of H.R. 1542 could be construed to completely deregulate

the high-speed data services offered by Bell companies; as such, it threatens the authority of the FCC and the states to prevent slamming and cramming by telecommunications companies.

I had hoped to offer an amendment to address this oversight in the Tauzin-Dingell legislation. Specifically, my amendment would have said:

‘‘At the end of the existing text of subsection 4(b), insert the following:

‘Nothing in this section shall be construed to limit or affect the authority

of the Commission under 47 U.S.C. 258 to prohibit and otherwise regulate

illegal changes in subscriber carrier selections (‘‘slamming’’) or the authority of the Commission under 47 U.S.C. 201(b) to prohibit and otherwise regulate the imposition of charges on telephone bills for unauthorized services

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(‘‘cramming’’). Nothing in this section shall be construed to limit or affect

the authority of any State to regulate slamming or cramming under state

consumer protection statutes or regulations.’ ’’

This amendment would have ensured that consumers remain protected by preserving FCC and state authority to prevent slamming and cramming.

Unfortunately, the Judiciary Committee’s narrow referral of H.R. 1542 precludes

my offering such an amendment. Since our Committee is unable to address the

slamming and cramming issues within the scope of its referral, I hope the House

will consider and accept such an amendment if H.R. 1542 reaches the floor.

Thank you, Mr. Chairman, for your indulgence on these issues. I yield back the

balance of my time.

Chairman SENSENBRENNER. The bill is now open for amendment,

and I have an amendment at the desk.

Mr. BOUCHER. Mr. Chairman, I reserve a point of order on the

amendment.

Chairman SENSENBRENNER. Point of order is reserved.

Clerk will report the amendment.

The CLERK. Amendment offered by Mr. Sensenbrenner to the

Committee Print, showing the text of H.R. 1542 as reported by the

Committee on Energy and Commerce, dated June 8, 2001.

Chairman SENSENBRENNER. Without objection, the amendment is

considered as read, and I will recognize myself for 5 minutes.

[The amendment follows:]

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Chairman SENSENBRENNER. Let me say first that I was disappointed at the narrow referral that we have received, because I

was hopeful that we would be able to address all of the antitrust

issues raised by H.R. 1542. Unfortunately, however, I believe that

given the limited scope of the referral, we are only able to address

two of the antitrust issues raised by the bill. My amendment deals

with both of them.

First, it would restore current law with respect to Bell entry into

interLATA data, except that the Department of Justice would become the decisionmaker rather than the FCC. With respect to this

issue, I am not ready to give up the Justice Department’s role in

reviewing the antitrust implications of Bell entry into long distance, even for data. I understand that the Energy and Commerce

Committee has worked its will, and that it is ready to give up the

role of the FCC, at least for data. That’s fine. However, on this

Committee, we have a longstanding bipartisan position that the

Justice Department should have a role here, and this amendment

vindicates that long-held position.

Second, my amendment would fix what I believe to be a part of

the Goldwasser decision that was wrongly decided by the Seventh

Circuit. In the 1996 Act, Congress expressly stated that nothing in

that act in any way changed the antitrust laws. In one part of the

Goldwasser decision, the Seventh Circuit appears to hold that Congress impliedly repealed the antitrust laws by passing the 1996

Act. I do not see how a court can imply a repeal of the antitrust

laws when we expressly state that we are not repealing them. So

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I believe that this fix is necessary to make it clear to the courts

what Congress intended.

I believe that both parts of this amendment are important to the

Committee’s future jurisdictional interest, and I urge all of the

Members to support this effort to maintain our jurisdiction.

And yield back the balance of my time.

[The prepared statement of Chairman Sensenbrenner follows:]

PREPARED STATEMENT OF THE HONORABLE F. JAMES SENSENBRENNER, JR., A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN

Let me say first that I was disappointed at the narrow referral that we received

because I was hopeful that we would be able to address all of the antitrust issues

raised by H.R. 1542. Unfortunately, however, I believe that given the limited scope

of the referral, we are only able to address two of the antitrust issues raised by the

bill.

My amendment deals with both of them. First, it would restore current law with

respect to Bell entry into interLATA data except that the Department of Justice

would become the decisionmaker rather than the FCC. With respect to this issue,

I am not ready to give up the Justice Department role in reviewing the antitrust

implications of Bell entry into long distance even for data. I understand that the

Energy and Commerce Committee has worked its will and that it is ready to give

up the role of the FCC at least for data. That is fine. However, on this Committee,

we have a longstanding bipartisan position that the Justice Department should

have a role here, and this amendment vindicates that long held position.

Second, my amendment would fix what I believe to be a part of the Goldwasser

decision that was wrongly decided. In the 1996 Act, Congress expressly stated that

nothing in the Act in any way changed the antitrust laws. In one part of the

Goldwasser decision, the Seventh Circuit appears to hold that Congress impliedly

repealed the antitrust laws by passing the 1996 Act. I do not see how a court can

imply a repeal of the antitrust laws when we expressly state that we are not repealing them. So, I believe that this fix is necessary to make it clear to the courts what

Congress intended.

I believe that both parts of this amendment are important to the Committee’s future jurisdictional interests, and I urge all of the Members to support this effort to

maintain our jurisdiction.

Mr. BOUCHER. Mr. Chairman, I insist upon my point of order.

Chairman SENSENBRENNER. The gentleman will state his point of

order.

Mr. BOUCHER. Mr. Chairman, I must insist upon this point of

order because the amendment exceeds the scope of the Committee’s

referral of the underlying bill under rules 10 and 12 of the Rules

of the House. The Speaker granted this Committee a sequential referral of H.R. 1542 under the provisions of rules 10 and 12 until

the 18th of June 2001. That referral specifically and expressly limited the scope of the referral to the consideration of, quote, ‘‘such

provisions of the bill and amendment recommended by the Committee on Energy and Commerce as proposed to narrow the purview of the Attorney General under section 271 of the Communications Act of 1934,’’ end of quote.

The amendment addresses matters outside the scope of this very

limited referral for two reasons. First, the amendment fundamentally changes the consultative role of the Attorney General in section 271 proceedings, and that consultative role is the basis for this

Committee’s referral. Current law requires the Attorney General—

I’m sorry. Current law provides to the Attorney General only a consultative role in the section 271 process. The Attorney General may

submit comments in writing to the Federal Communications Commission, but the statute makes clear that the evaluation by the Attorney General, and I quote again, ‘‘shall not have any preclusive

effect’’ on the Federal Communications Commission’s determinaVerDate 11-MAY-2000 00:14 Jun 19, 2001 Jkt 073169 PO 00000 Frm 00055 Fmt 6659 Sfmt 6601 E:\HR\OC\HR083P2.XXX pfrm03 PsN: HR083P2
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tion. And that is found in section 271(d)(2)(A) of the Communications Act.

Instead of a consultative role, the Chairman’s amendment gives

the Attorney General a dispositive role over Bell Company provision of high-speed Internet services across LATA boundaries. That

is not a role that the Attorney General exercises today. Therefore,

it is not related to the proposed narrowing of the Attorney General’s role as proposed by the Committee on Energy and Commerce,

and it is only the proposed narrowing of the Attorney General’s role

that this Committee may consider under the referral to this Committee from the House.

Secondly, the balance of the amendment deals with antitrust

matters that have nothing to do with the consultative role of the

Attorney General under section 271. Because the operation of the

antitrust laws doe not address the consultative role of the Attorney

General under that section, and any narrowing of that role by the

bill reported by the Energy and Commerce Committee, the second

half of the amendment is clearly outside of the scope of this Committee’s referral as well.

Mr. Chairman, it is my understanding that the House Parliamentarian has had the opportunity to review the amendment that

is now pending, and it is also the opinion of the House Parliamentarian that this amendment exceeds the referral granted to this

Committee, and I’m confident the Chairman and his staff are well

aware of that fact. I must insist upon my point of order because

his amendment exceeds the scope of the referral to this Committee.

Chairman SENSENBRENNER. Anybody else on the point of order?

If not, the Chair is prepared to rule. The Chair overrules the point

of order. The Speaker referred the bill to the Committee, quote, ‘‘for

consideration of such provisions of the bill and the amendment recommended by the Committee on Energy and Commerce as proposed to narrow to purview of the Attorney General under section

271 of the Communications Act of 1934,’’ unquote. H.R. 1542 narrows that purview by taking high-speed data service and Internet

backbone service out of the class of service that is subject to section

271. Thus, it narrows the Attorney General’s consultative role

under that section.

In exercising his consultative role under section 271(d)(2)(A), the

Attorney General may use, quote, ‘‘any standard he considers appropriate,’’ unquote. section 6 of H.R. 1542 specifically leaves this

process in place for voice communication service. The Goldwasser

case cast doubt on whether antitrust law still applies to the telecommunications industry, then thereby cast out on whether the Attorney General may continue to apply an antitrust standard in his

evaluation of applications under section 271.

Reading section 6 in light of Goldwasser, it reiterates a narrower

section 271 process because of Goldwasser’s change of the law in

the Seventh Circuit. Thus, it narrows the purview of the Attorney

General under section 271. Moreover, because Goldwasser is the

law in only one circuit, it creates confusion as to whether the Attorney General must apply differing standards to applications from

different circuits. If he cannot apply an antitrust standard to a section 271 application from the Seventh Circuit, then again his purview under section 271, as reiterated in section 6, is narrowed. The

Goldwasser fix is directly related to the subject of the underlying

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text because the consistent application of the law throughout every

geographic region of the country is fundamental to the bill and the

pending amendment.

For these reasons, I rule that the part of the amendment having

to do with reversing a part of the Goldwasser case is within the

scope of the referral and is germane to the bill. Moreover, the

amendment is germane for an additional reason. The pending

amendment reestablishes the Attorney General’s role in section 271

decisions, whereas the underlying amendment removes the Attorney General from the process. The pending amendment would have

to RBOCs apply to the Attorney General for authorization to provide interLATA high-speed data services and Internet backbone

services. The bill says they should be able to provide that service

now without any further process. If my amendment passes, there

again would be confusion as to whether the Attorney General could

apply an antitrust standard in evaluating applications under my

amendment. Thus, I rule that the amendment is germane for that

reason as well.

Also under my amendment, we reinstate the current process with

respect to data, except that instead of having the FCC make the

final decision, the Department of Justice will make the final determination.

The referral we received from the Speaker permits the Committee to consider such provisions of H.R. 1542, quote, ‘‘as proposed

to narrow the purview of the Attorney General under section 271

of the Communications Act of 1934,’’ unquote. This amendment

clearly addresses those provisions. We are not limited in introducing a new regulatory mechanism for approval of data, particularly because the other committee removed the FCC from the process.

This amendment is closely related to the underlying bill. It is

clearly within the jurisdiction of the Committee, and as a regulatory process, similar to current law in all but one respect, and

therefore, the part of the amendment dealing with the Attorney

General’s role in section 271 determinations is germane.

Let me say that if we were to return to the status quo by restoring the FCC’s role, which was taken out of the bill by the Commerce Committee, we would surely be criticized for invading the

Commerce Committee’s jurisdiction, and I would never want to do

that. [Laughter.]

Chairman SENSENBRENNER. We cannot restore a DOJ consultative role if there’s no one to consult with, and the Tauzin-Dingell

Bill took that FCC out of the business, so the DOJ can’t consult

with anybody under the Tauzin-Dingell Bill. Thus, if our policy

choice is to maintain current law, I cannot conceive an amendment

more germane and more precisely within the scope of the referral,

and the point of order is overruled.

Is there further debate on the amendment?

Mr. CONYERS. Mr. Chairman, I seek recognition.

Chairman SENSENBRENNER. The gentleman from Michigan

moves to strike the last word, and is recognized for 5 minutes.

Mr. CONYERS. Thank you very much. This is back on to the

amendment that you have brought forward, and what it seems to

me is that this amendment attempts to lay claim to the Committee

on Judiciary’s rightful jurisdiction over antitrust laws in the teleVerDate 11-MAY-2000 00:14 Jun 19, 2001 Jkt 073169 PO 00000 Frm 00057 Fmt 6659 Sfmt 6601 E:\HR\OC\HR083P2.XXX pfrm03 PsN: HR083P2
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communications industry, and it reaches to the full extent of our

referral in trying to improve a troubled product that we have received from the Commerce Committee.

The amendment’s Goldwasser fix reaffirms what we thought we

made clear in the 1996 Act, namely, the telecommunications industry must comply with both the ’96 Act and the antitrust laws. Let’s

not have any fooling around in trying to limit antitrust application

to the telecommunications industry. Congress and all but this one

court—the unnamed number of the appellate court I will not reveal

at this time—but this one—outside of this one misguided court,

everybody’s understood and recognized the application of the antitrust laws to the telecommunications industry. I never thought

we’d have to go and make this clear to the courts. But this amendment, once again, makes our position clear, and it’s totally within

the scope of our referral.

Now, the amendment narrows the Tauzin measure to some extent. In its current form, the bill destroys the bargain made in the

’96 Act. It permits, Tauzin does, the Bells to provide long-distance

data services before meeting the competitive checklist in section

271 of the ’96 Act. Can’t do that, fellows. Cannot do that. You cannot modify the ’96 Act on this very, very important provision.

And in addition, Tauzin eliminates the Attorney General’s historic role in identifying anticompetitive behavior by the Bell companies, and that’s what this amendment tries to do, merely to restore

the Attorney General’s role by requiring the Bells to demonstrate

that they have opened their local telephone monopoly to competition before they can offer long-distance data services. What’s wrong

with that? It’s the current law as it presently exists, and as many

of you on the Committee know, that this amendment only goes a

small part of the way in trying to repair the product we’ve got from

the Commerce Committee.

Due to the narrow referral, we are unable to amend the most

broken parts of the bill. The amendment—this amendment does

not and can’t fix section 4 of that bill, Tauzin, which rolls back the

line sharing and unbundling requirements contained in section 251

of the 1996 Act, and as a result, even if this amendment is adopted, the Bells can still act in a monopolistic way and abuse their

power by denying competitors access to the local loop. This is not

a good situation.

Secondly, the amendment doesn’t and cannot correct the fact that

the Tauzin bill would severely limit Federal and State authority

over the Internet to prevent spam, invasions of privacy, obscenity

and pornographic materials that ought to be restricted, and other

protections critical to consumers.

And, finally, the bill—this amendment doesn’t and can’t fix the

inadequate broadband buildout requirement that does not require

the Bells to deploy any new broadband facility anywhere for two

solid years, which allows the Bells to escape these requirements all

together, merely by selling off their rural exchanges. Bad deal.

And so I urge the Members to support the Sensenbrenner

amendment and return any time.

Chairman SENSENBRENNER. Time of the gentleman has expired.

For what purpose does the gentleman from Virginia seek recognition?

Mr. GOODLATTE. Mr. Chairman, move to strike the last word.

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Chairman SENSENBRENNER. The gentleman is recognized for 5

quick minutes because there’s a vote on.

Mr. GOODLATTE. Mr. Chairman, I will be very quick. I am a

strong supporter of the Tauzin-Dingell legislation as it is written

because I think it promotes competition and creates fairness. All of

their competitors in the high-speed Internet market are not regulated. Cable and wireless and satellite, these folks are heavily regulated and they are losing this battle as a result of that.

I must reluctantly oppose the Chairman’s amendment, not because of the Chairman’s effort to protect the jurisdiction of the

Committee and the role of the Justice Department. I think that is

a very important function, but I think this amendment goes too far

in that it creates an affirmative step that must be taken by the Attorney General before companies can get into competition in a business area, and that is highly unusual except in the area of mergers. This is something that effectively rolls back the situation. It

eviscerates the Tauzin-Dingell Bill because it has the effect of saying that we’re simply transferring all of the responsibility from the

FCC that we’re trying to get relief from, we’re trying to deregulate

from, and turns that over to the Justice Department with a big

question mark as to exactly how the Attorney General and the Justice Department would apply that standard.

To me, this is a step backward, and as a result, I must reluctantly oppose the amendment.

Chairman SENSENBRENNER. The question is on the amendment.

Mr. BOUCHER. Mr. Chairman, I want to speak in opposition to

the amendment. Would the gentleman consider perhaps a brief recess while we vote on the floor so that we can continue our discussion of this amendment?

Chairman SENSENBRENNER. The Committee stands in recess.

Please come back right after you vote.

[Recess.]

Chairman SENSENBRENNER. When the Committee recessed for

the Journal vote, pending was an amendment by the Chair to H.R.

1542. For what purpose does the gentleman from Virginia, Mr.

Boucher, seek recognition?

Mr. BOUCHER. Mr. Chairman, I rise in opposition to the amendment.

Chairman SENSENBRENNER. The gentleman is recognized for 5

minutes.

Mr. BOUCHER. Mr. Chairman, this amendment goes well beyond

whatever the Committee might deem to be necessary to address

whatever concerns Members of the Committee might have with the

recent Goldwasser decision.

The amendment does a number of things that I think are inappropriate. First of all, it establishes new telecommunications regulatory policy in an antitrust agency. It does that without the Department of Justice having had the opportunity to comment to this

Committee on whether it wants this authority. It does that without

the Department of Justice having indicated to this Committee that

it has either the resources or the expertise to carry out these regulatory duties. And most importantly, I think that the amendment

would eliminate the immediate relief for interLATA data services,

which the Tauzin-Dingell measure provides. And that relief is essential and is much needed for three major reasons.

60

First of all, the provision of immediate interLATA data relief

would promote competition in the offering of Internet backbone

services. That competition would provide better pricing, and would

affect in a favorable way the prices that all of us pay to our Internet service providers for monthly Internet access service.

Secondly, the provision of immediate interLATA data relief

would provide for more rapid deployment of DSL services by the

Bell operating companies. They would be able to maximize their investment from the deployment of DSL service as they would be

able to carry the DSL traffic, the data traffic, from the originating

user through the entire Internet backbone, and that would significantly increase the interest and the willingness of the Bell operating companies in deploying DSL services more rapidly.

Third, and from the standpoint of those of us who represent rural

America, perhaps most importantly, the immediate interLATA data

relief that the Tauzin-Dingell Bill provides would create a much

greater willingness on the part of the Bell operating companies to

deploy Internet hubs, Internet points of presence in much greater

numbers in rural America. Study after study has shown a marked

active investment in sufficient numbers of Internet points of presence to assure the availability of truly affordable, high-speed Internet access services, primarily for businesses in rural America. The

fact is, if you’re a business in a place that is served by a Bell operating company today, and it happens to be a rural area, you are

probably going to pay far more for high-speed Internet access than

you would if you are a business in a city or if you’re a business in

some rural area that is served by a local exchange carrier that is

not a Bell operating company.

Now, why do we find this phenomenon? The basic reason is that

the Bell operating company is required to hand off the data traffic

that comes to its Internet hub when that traffic reaches the first

LATA boundary. And there simply isn’t a great deal of financial incentive for the Bell Company to deploy hubs if they have to hand

the traffic off from that hub very quickly to some other carrier,

some other provider. But that is the circumstance we face today,

and that is the circumstance that would be remedied in a very effective way in the Tauzin-Dingell measure, offering immediate relief from interLATA data services.

This amendment would reverse that, and would deny that immediate relief. It would prevent these three advances that I have

mentioned, which I think are very important, from being realized

by the American public.

The bill would also lead to the reimposition of a range of burdensome regulations that have hampered the deployment of DSL services. The cable industry today has 70 percent of the broadband

market locally, and that’s because it’s essentially unregulated. The

Bell operating companies are burdened by legacy regulations from

the previous telecommunications era, as they seek to roll out their

advanced services. The Tauzin-Dingell Bill would remove those regulations, create regulatory parity, and dramatically increase the

willingness of Bell companies to deploy DSL.

If you’re interested in the deployment of DSL service, if you’re

interested in extending broadband to your constituents, a no vote

on this amendment is required.

Thank you, Mr. Chairman. I yield back.

61

Chairman SENSENBRENNER. For what purpose does the gentleman from Utah seek recognition?

Mr. CANNON. To strike the last word.

Chairman SENSENBRENNER. The gentleman is recognized for 5

minutes.

Mr. CANNON. Thank you, Mr. Chairman. I would like to voice my

support for this amendment to H.R. 1542. This amendment focuses

on one of the many fatal flaws of this bill, that is the anticompetitive behavior—correction—let me call that the predatory behavior

of the regional Bell operating companies. If the underlying bill

were to pass as is, any and all checks to insure a fair and level

field of competition on communications facilities would be tossed

out. By overturning the errant decision of an activist judge in the

Goldwasser case, we will be reaffirming this Committee’s belief and

the belief of Congress that the established antitrust laws do in fact

apply to the telecommunications industry. We do this despite the

best efforts of attorneys representing the RBOCs in a number of

antitrust actions pending around the country. We do this to preserve the explicit antitrust savings clause of the ’96 Telecommunications Act, which this Committee and the entire Congress supported.

Proponents of this bill invoke deregulation and claim this piece

of legislation is the best way to expedite the rollout of advanced

services. Some form of deregulation it may be, but I fear the cost

of this form of deregulation is remonopolization.

The Energy and Commerce Committee should know, especially

now, given what is happening in California, that flawed deregulation will only create problems and headaches down the road. In

this context, it will create blackouts in competition on the nation’s

information super highway.

As Northpoint, Telegint, Rhythms, Harvard Net and others can

attest, the Bells cannot be trusted to preserve competition on their

own accord. The ’96 Telecommunications Act was quite effective at

pointing the way to deregulation by conditioning interLATA data

on opening of the local loop. The Tauzin-Dingell Bill moves backwards by removing all regulatory authority over all advanced services. Some Members of the Energy and Commerce Committee

feel—may feel all right about unleashing the Bells in toto. I, however, believe that we should acknowledge our jurisdiction and affirm the role of the Attorney General and the Justice Department

to review the actions of these companies and protect consumers

from bad actors who abuse monopoly power.

While I applaud and offer my support of the amendment proposed by the Chairman, I must, however, acknowledge its limitations. Given the narrow and overly restrictive nature of the referral

granted to this Committee, the Chairman has done all he can to

salvage what is a very bad bill. If H.R. 1542—it does make H.R.

1542 better, but it is still—it still is a very bad bill.

Given the nature of this referral, I cannot offer any of the

amendments I would, amendments to preserve the FCC’s and

states’ authority to address such topics as CALEA, spamming,

slamming, cramming, pornography, privacy, unbundling and interconnection should be added. All are and should rightly be important issues to the Members of this Committee, but our hands are

tied.

62

I thank the Chairman and his staff for the substantial work they

have done in crafting an amendment that addresses the only concern possible under this unusually narrow referral. I urge a yea

vote on the Sensenbrenner amendment.

Thank you, Mr. Chairman. I yield back the balance of my time.

Chairman SENSENBRENNER. For what purpose does the gentlewoman from Texas, Ms. Jackson Lee, seek recognition?

Ms. JACKSON LEE. Rise to strike the last word.

Chairman SENSENBRENNER. The gentlewoman’s recognized for 5

minutes.

Ms. JACKSON LEE. Thank you very much, Mr. Chairman.

Four years ago on this Committee I supported the work that we

did on the Telecommunications Bill with respect to the importance

of the antitrust provision, 217. Still continue to believe that the

issue of competition is extremely important. My disappointment

and dissatisfaction today is that we, with the limited jurisdiction

of our Committee, could not frame, if you will, and could not receive support for a reasonable approach, which is to compromise

and to recognize that there are monopolies on both sides.

There are monopolies on the side of the larger, long distance

company with respect to their ability to garner the market on cable

companies which are not regulated. And there are likewise monopolies, as it relates to local service and local jurisdictions.

I believe that we need to solve this, not by a sledge hammer, but

by a compromise, and I’m going to be looking at some of the legislative compromises that have been offered.

I do want to applaud the Ranking Member and Chairman for the

commitment to the competitive necessities of this particular market, but I am concerned as to whether or not the amendment before

us is too harsh and too stringent, and cannot be handled more with

the frame of amendment that I had, which is to monitor and potentially intercede the Attorney General of the Department of Justice

Antitrust Division when the monopolies are determined. I am concerned that the amendment before us does exceed its present—or

the necessities of reform, and am concerned as well that we are

going too much in the direction of an existing entity that has as

much a monopoly as anyone else, of anyone who’s trying to get

cable service and get any improvement in the cable service, they

will be waiting in line for ages and ages and ages, and most likely

it’s poor service, and I have experienced that as much as my constituents have.

So I believe that what we should be trying to do between the

committees of jurisdiction is to find a reasonable approach to resolving these concerns as opposed to taking lock-step positions on

one side or the other, because there are no clean hands in this

room.

I yield back the balance of my time.

Chairman SENSENBRENNER. For what purpose does the gentleman from California rise?

Mr. SCHIFF. Move to strike the last word, Mr. Chairman.

Chairman SENSENBRENNER. The gentleman’s recognized for 5

minutes.

Mr. SCHIFF. Mr. Chairman, Members, the 1996 Act provided that

nothing in that act shall be construed to modify, impair or supersede the applicability of the antitrust laws. If that wasn’t enough,

63

it goes on to provide that nothing in the act shall be construed to

modify, impair or supersede Federal, State or local law unless expressly so provided. Nothing expressly so provided with respect to

the antitrust laws. In fact, exactly the opposite. And therefore, I

think that Goldwasser was wrongly decided.

Part of the amendment would overturn Goldwasser, and I think

that would be good law. That would provide that the antitrust laws

continue to apply and are not superseded, if there was any question about that fact.

But the amendment goes well beyond overturning Goldwasser, and in doing so, provides that the Attorney General will play an

unprecedented role in this area. I would like to see an amendment

that was confined to overturning Goldwasser, but does not establish a new regulatory mechanism which may prove more flawed

than the one that we’ve been through.

For that reason, I must reluctantly oppose the amendment.

Ms. LOFGREN. Mr. Chairman?

Chairman SENSENBRENNER. The gentlewoman from California.

Ms. LOFGREN. Strike the last word.

Chairman SENSENBRENNER. Recognized for 5 minutes.

Ms. LOFGREN. Mr. Chairman, I understand the reluctance being

expressed by some of my colleagues relative to the amendment, and

my colleague from California is correct, this is—the amendment

would not actually establish the status quo that we, I think, many

of us seek. Goldwasser was wrongly decided. We do need to overturn that.

But I guess I come down on the other side of the issue, because

we do have very limited jurisdiction here. And since the Commerce

Committee has essentially removed the FCC from its important

role, the only thing that we can do to more or less essentially protect the status quo, is what the Chairman has suggested in his

amendment. So in an ideal world, without the narrow jurisdiction

that this Committee has been saddled with, we might do something

slightly different. But given the referral, I really am at a loss to

see how we could do anything other than what the Chairman has

suggested in his amendment, and therefore, I think we really are

constrained to support this amendment, even though we might,

had we had a freer hand, come up with something slightly different.

And I thank the Chairman for his amendment, and I yield back

the balance of my time.

Chairman SENSENBRENNER. For what purpose does the gentleman from New York seek recognition?

Mr. NADLER. To strike the last word, Mr. Chairman.

Chairman SENSENBRENNER. The gentleman is recognized for 5

minutes.

Mr. NADLER. Thank you, Mr. Chairman. I was one of the 16

Members of the House, who, 5 years ago, voted against the Telecommunications Act of 1996. And one of the reasons I voted against

the act was that I feared that it would lead to further concentration of ownership in the media and that it might lead to further

concentration of ownership in telecommunications.

I certainly think that the basic bargain that was struck in the

bill, that the baby Bells, the RBOCs, cannot go in to compete with

long distance until they open up their local monopolistic markets

64

to competition from others, from the long-distance carriers and

from others, is the basic minimum we ought to expect. And the

Tauzin-Dingell Bill goes in exactly the wrong direction, and would

lead to what has become, in a number of different fields, a pretty

standard course for deregulation. You start with a regulated monopoly. You break it up. You have then competition. The consumers

benefit. Then the mergers and acquisitions start, and eventually

you come to an unregulated cartel. And especially if Tauzin-Dingell

passes, I think that that will just accelerate that process, and that

the present long-distance carriers will probably be eaten up by the

RBOCs and we’ll probably end up with one or two RBOCs running

all the telecommunications in the country. And then we’ll wait and

hope that the cable companies can compete with them.

I don’t think that’s what we want, and therefore, I would oppose

Tauzin-Dingell, and I think that the Chairman’s amendment goes

in the right direction. I wish we had a broader referral, but given

the limited nature of the referral, the Chairman’s amendment goes

in the right direction, and I would support it, and urge my colleagues to vote for it, not only to protect the jurisdiction of the

Committee and to protect the existence of antitrust law in this

area, but to protect the existence of competition if we hope to see

any competition remain in this field at all.

Just one further observation. We’re told by the supporters of

Tauzin-Dingell that, well, in 1996, it wasn’t anticipated that—you

know that there be all this data transmission. Well, we’re going

into a digital era. Everything is going to be data, including voice.

And if Tauzin-Dingell passes without this amendment, what you’re

going to end up with is the RBOCs, the baby Bells, having carte

blanche to compete in everything without opening up—on everything nationally without opening up anything locally, and that’s a

situation for going very swiftly to a very limited cartel running everything in the country on telecommunications.

So I support the Chairman’s amendment, and I thank him for it.

I yield back.

Chairman SENSENBRENNER. For what purpose does the gentleman from Arkansas seek recognition?

Mr. HUTCHINSON. Move to strike the last word.

Chairman SENSENBRENNER. The gentleman’s recognized for 5

minutes.

Mr. HUTCHINSON. Thank you, Mr. Chairman. And I do support

the Chairman’s amendment. I think it preserves a tradition of the

Justice Department in antitrust review. I probably could have

drafted it a little bit differently if I was doing it myself, but I think

it makes an important statement as to the importance of antitrust

review by the Justice Department.

I also want to take this opportunity to raise a concern that hopefully will be addressed down the road, in reference to the underlying Tauzin-Dingell Bill, and that is in reference to the implications that it will have for CALEA, which is the Communications

Assistance for Law Enforcement Act of 1994. And that was enacted

in order to insure that law enforcement officials with proper authorization are able to conduct electronic surveillance effectively

and efficiently in the face of rapid advances in telecommunications

technology. CALEA requires all telecommunications carriers to

build into their networks the technical capabilities that are necVerDate 11-MAY-2000 00:14 Jun 19, 2001 Jkt 073169 PO 00000 Frm 00064 Fmt 6659 Sfmt 6601 E:\HR\OC\HR083P2.XXX pfrm03 PsN: HR083P2
65

essary to assist law enforcement with authorized interception of

communications and call identifying information. The technologies

used to provide the high-speed data services are deregulated under

section 4 of H.R. 1542, and they are the ones that Congress, this

Committee, were concerned were posing problems for law enforcement officials. Because section 4 could be construed to completely

deregulate these facilities, the bill threatens the FCC’s authority to

implement and enforce CALEA, and therefore, also threatens the

ability of law enforcement officials to conduct electronic surveillance of communications transmitted using high-speed data services.

This amendment insures the commissions—well, the bill, I hope

will be considered in terms of correcting this possible problem, and

I raise this for the Committee’s consideration on the underlying

bill, and I hope that that can be remedied, because I do believe

that the Tauzin-Dingell Bill does enhance competition, which is

very important, but I hope that we can address the concerns of the

law enforcement community on how it would apply to enforcing

CALEA.

And with that, Mr. Chairman, I yield back.

Chairman SENSENBRENNER. The gentleman’s time has expired.

The question is on the amendment offered by the Chairman to H.R.

1542. Those in favor will say aye.

Opposed, no.

The ayes appear to have it. The ayes have it, and the amendment is agreed to. Are there further amendments to H.R. 1542?

Ms. WATERS. Mr. Chairman, I do have an amendment to the——

Chairman SENSENBRENNER. The clerk will report the amendment.

The CLERK. Mr. Chairman, I don’t have the amendment.

Ms. WATERS. The amendment should be at the desk.

Mr. BOUCHER. Mr. Chairman, I reserve a point of order.

Chairman SENSENBRENNER. A point of order is reserved by the

gentleman from Virginia. The clerk will report the amendment,

which is Waters 002.

The CLERK. Amendment offered by Ms. Waters to the Committee

Print, showing the text of H.R. 1542 as reported by the Committee

on Energy and Commerce, dated June 8, 2001, 2:51 p.m.

Beginning on page 7, strike line 4 and all that follows through

the end of page 12, and insert the following:

Section 4. Clarification Regarding Requirements——

Chairman SENSENBRENNER. Without objection, the amendment is

considered as read, and the gentlewoman from California is recognized for 5 minutes. A point of order has been reserved.

[The amendment follows:]

66

Ms. WATERS. Thank you very much, Mr. Chairman.

I am introducing this amendment to address a serious problem

the competitive local exchange carriers have encountered when

they try to enter the local telephone markets under the Telecommunications Act of 1996. As we all know, the Telecommunications Act was enacted as a way to insure competition in local

telephone service areas. After its—well, basically in local telephone

service.

After its enactment, hundreds of CLECs entered the market. I

think we were all optimistic that the 1996 Act was going to have

the necessary effect we had intended. Unfortunately, more and

more of these CLECs have now filed for bankruptcy. The remaining

ones are by and large in severe financial straits. There are several

reasons for this, but the most pervasive is the fact that the Bell

companies have successfully impeded the entry of CLECs into the

local telephone market.

For example, some CLECs have gone out of business while they

instigate lawsuits, lawsuit after lawsuit, in an attempt to get the

Bell companies to comply with the 1996 Act. Other CLECs have fiVerDate 11-MAY-2000 00:14 Jun 19, 2001 Jkt 073169 PO 00000 Frm 00066 Fmt 6659 Sfmt 6601 E:\HR\OC\HR083P2.XXX pfrm03 PsN: HR083P2
67

nancially—been financially handicapped by long delays on the part

of the Bell companies.

I want to talk about one problem that I kind of monitor, that I

know something about, and I’ve heard about, where the Bell companies follow the letter of the law, but not the spirit of it, as they

did, for example, when one CLEC attempted to share a tower. The

Bell company in that case did give the CLEC access to the tower,

but refused to share the entrance and the stairway into the tower.

The CLEC was forced to create its own entrance and stairway at

considerable time and expense. What we have here is a group of

monopolistic companies who have essentially thumbed their noses

at the legislation we passed 5 years ago.

I see no reason why those same companies should be rewarded

for their anticompetitive actions at this time. Instead, we need to

address these problems. And I think my amendment would do just

that, by prohibiting the Bell companies from using any unreasonable impediments with regard to line sharing and unbundling. This

does not impose an unattainable standard. It merely says that they

must behave in a reasonable fashion when responding to requests

to line share or to unbundle or to resell.

Mr. Chairman and Members, we talk a lot about small business

in this Congress, and some of us talk a lot about minority business

in this Congress. Those of us who are sent here by our constituents

to just open up opportunities, to see that they get a little break,

just a fair share, ask us to do what we can when we’re making

public policy, to give them an opportunity to do what America says

they can do.

Well, I am disgusted with the kinds of actions that have taken

place since 1996, where on the one hand, we have people that we

have supported time and time again, who are always willing to

come to our dinners and buy a table, but will do nothing to open

up opportunity to small and minority business. I’m sick and tired

of it, and I may be ruled out of order. I may be ruled out of order,

and it may be clear, or it may be some question about whether or

not we have jurisdiction. I don’t think this interferes at all with the

jurisdictional questions. But I want all of those Bell companies to

know that I know what has been happening. I’m not pleased about

it. You have done nothing to open up and share opportunities. You

have done nothing substantial for minority business, and you have

closed out small businesses from being able to share in this opportunity that we all sat here and voted for in 1996. And I don’t like

it. And if I don’t get you today, I’ll get you eventually. [Laughter.]

Mr. BOUCHER. Mr. Chairman?

Chairman SENSENBRENNER. The gentleman insist upon his point

of order?

Mr. BOUCHER. Mr. Chairman, I do insist upon the point of order.

Very briefly, I would say that this amendment deals with regulation only. It has nothing to do with the Attorney General’s consultative role under section 271, and it is the consultative role that

provides the basis of the referral to this Committee.

Chairman SENSENBRENNER. Anybody else on the point of order,

because the Chair’s already made up his mind? [Laughter.]

Mr. DELAHUNT. Mr. Chairman?

Chairman SENSENBRENNER. The gentleman from Massachusetts.

68

Mr. DELAHUNT. Just for a moment. I want to add something to

the statement by the gentlelady from California.

Chairman SENSENBRENNER. The question is on the point of order

raised by the gentleman from Virginia.

Mr. DELAHUNT. On the point of order—— [Laughter.]

Mr. DELAHUNT. I mean there has been testimony before this

Committee which has not been refuted, that the mere introduction

of Tauzin-Dingell had a devastating impact on new entrants by

drying up access to capital. And there’s a recent out by AEI and

MIT that reports an 84 percent decline in capitalization over the

last 14 months, among the largest CLECs, from 242 billion to 38

billion. And I think that emphasizes the point made by Ms. Waters.

Chairman SENSENBRENNER. The Chair is prepared to rule. The

gentleman from Virginia, Mr. Boucher, raises a point of order that

the amendment is not germane to the bill. The referral that has

been given to us by the Speaker relates to the Attorney General’s

consultative power under section 271. The amendment proposed by

the gentlewoman from California proposes to amend section 251 of

the Telecommunications Act. It is outside the scope of the sequential referral that the Speaker has given this Committee. Therefore,

it is not germane, and the Chair sustains the point of order by the

gentleman from Virginia.

Are there further amendments to the bill?

If not, the Chair recognizes the gentleman from Utah, Mr. Cannon, for a motion.

Mr. CANNON. Thank you, Mr. Chairman. I move that the Committee report the bill, H.R. 1542, to the House with amendments

and with the recommendation that the amendments be agreed to,

and that the bill, as amended, not pass.

Chairman SENSENBRENNER. The question is on the motion. Those

in favor will signify by saying aye.

Opposed, no.

The ayes appear to have it. The ayes have it, and the motion to

report the bill as amended, unfavorably, is agreed to.

Without objection, the Chairman is authorized to move to go to

conference pursuant to House rules, and without objection, the

staff is directed to make any technical and conforming changes. All

Members will be given 2 days, as provided by House rules, in

which to submit additional dissenting supplemental or minority

views.

I’ll let the Chair state at this point in time that the sequential

expires on June 18th. So if you wish to insert your prose in the

Committee Report, that is a deadline that is established by the

Speaker, and please meet it.

(69)

1 H.R. 6121, the ‘‘Telecommunications Act of 1980,’’ H.Rept. 96–1252, pt. 2, 96th Cong. 2d

Sess. (Oct. 8, 1980) (adversely reporting H.R. 6121 out of the Committee on the Judiciary). 2 Under both Democratic and Republican leadership, this Committee has always voted on an

overwhelmingly bipartisan basis to preserve the Department of Justice’s role in ensuring that

the telecommunications marketplace is open to competitors. We must not forget that it was the

Department of Justice that brought the antitrust suit that ultimately broke up the old ‘‘Ma Bell’’

system. The Department of Justice, through Republican and Democratic Administrations alike,

has applied its antitrust and telecommunications industry expertise to these markets, to foster

competition and deter and redress anti-competitive activity. In 1996, when we considered the

Telecommunications Act, the Committee voted overwhelmingly to give the Department of Justice a co-equal role with the FCC to review the Bell monopolies’ entry into both voice and data

long distance service. 3 Cong. Rec. H2709, (daily ed. May 24, 2001).

ADDITIONAL VIEWS

We concur with the Committee’s views and strongly endorse the

Committee’s unfavorable recommendation of H.R. 1542. To our

knowledge, the Committee’s last adverse report on a telecommunications-related bill was over twenty years ago on H.R. 6121,1 the ‘‘Telecommunications Act of 1980,’’ which would have severely undermined the Government’s antitrust litigation that was then

pending against AT&T, and which would have lifted critical portions of the 1956 judicial consent decree against AT&T. Now, as in

1980, this Committee must vigorously protect against legislation

designed to benefit monopolists, impede competition, and hurt consumers. In 1980, the Committee’s adverse report stopped H.R. 6121

dead in its tracks, and we envision history repeating itself here. No

stronger message could have been sent to the House—H.R. 1542 is

bad policy and bad for the people of the United States.

In its current form, H.R. 1542 destroys the bargain made in the

Telecommunications Act of 1996 (the ‘‘1996 Act’’) by permitting the

Bells to provide long distance data services before meeting the competitive checklist in section 271 of the 1996 Act. In doing so, the

bill also eliminates the Attorney General’s historic role in identifying anti-competitive behavior by the Bell companies. We support

the Sensenbrenner Amendment because it restores the Attorney

General’s role by requiring the Bells to demonstrate that they have

opened their local telephone monopoly to competition before they

can offer long distance data services.2 In effect, the market opening

requirements of section 271 of the 1996 Act which were taken out

of H.R. 1542, were re-imposed by the Sensenbrenner Amendment.

However, the Judiciary Committee’s referral on H.R. 1542 was

extremely limited, relating only to provisions that ‘‘propose[d] to

narrow the purview of the Attorney General under section 271 of

the Communications Act of 1934.’’ 3 As a result, the Committee was

unable to amend section 4 of the bill—arguably the most offensive

portion of the bill.

We take this opportunity to put into context the historic role that

the Judiciary Committee has played in ensuring that antitrust considerations are taken into account when setting telecommunications policy. We also expand on the two most egregious portions

70

4 United States v. American Telephone and Telegraph Co., 552 F. Supp. 131 (D.D.C. 1982)

aff’d, 460 U.S. 1001 (1983) 5 AT&T, 522 F. Supp. at 231.

of H.R. 1542 that were deemed to be outside the Committee’s referral. First, section 4 of H.R. 1542 rolls back key portions of the 1996

Act regarding unbundling and line sharing, which likely will have

a negative impact on competition in the telecommunications industry. Second, section 4 completely deregulates high speed data services offered by the Bell operating companies, which would deregulate two areas over which the Committee has repeatedly exercised

jurisdiction: ‘‘spamming’’ and law enforcement in telecommunications. We therefore strongly oppose H.R. 1542 and urge the

House, based upon our adverse recommendation, not to consider

this bill.

I. HISTORICAL BACKGROUND

From the late 19th century until the historic 1982 antitrust consent decree was entered, the American Telephone & Telegraph

Company (‘‘AT&T’’) dominated the American telecommunications

market. The government made several efforts to control AT&T’s

monopoly power—a Department of Justice antitrust suit brought in

1913, the passage of the Communications Act of 1934, and a second

Department of Justice antitrust suit brought in 1949. None of these

efforts succeeded in opening the telecommunications market to effective competition.

Because AT&T continued to take advantage of its monopoly

power to the detriment of consumers, DOJ brought a third antitrust action against AT&T in 1974. In the 1974 case brought by Republican Attorney General William Saxbe, the government sought,

in part, to prevent AT&T from using its local telephone monopoly

to discriminate against its competitors in long distance and equipment manufacturing and to use revenues from its regulated monopoly in local telephone service to subsidize its other non-regulated

business ventures, a practice known as cross-subsidization. That

action led to a settlement and consent decree entered in 1982 during the Reagan Administration.4 This consent decree is commonly

known as the Modification of Final Judgment or the ‘‘MFJ.’’

Under the terms of the MFJ, AT&T retained its long distance

and manufacturing businesses, but divested itself of its local telephone exchange monopoly. Effective January 1, 1984, the local telephone exchange monopolies were taken over by seven regional Bell

operating companies (‘‘RBOCs’’)—NYNEX, Bell Atlantic, BellSouth,

Ameritech, SBC Communications, Inc. (formerly known as Southwestern Bell), U.S. West, and Pacific Telesis.

The MFJ required an RBOC to demonstrate that there was ‘‘no

substantial possibility that it could use its monopoly power to impede competition in the market it seeks to enter’’ 5 before it could

enter four lines of business: (1) providing long distance service; (2)

manufacturing or providing communications equipment and manufacturing customer premises equipment; (3) providing information

services; and (4) entering into any other non-telecommunications

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6 United States v. Western Electric Co., 767 F. Supp. 308, 327 32 (D.D.C. 1991) (removing information services bar), aff’d, 993 F. 2d 1572 (D.C. Cir.), cert. denied, 114 S. Ct. 487 (1993);

United States v. Western Electric Co., 673 F. Supp. 525, 602–03 (D.D.C. 1987) (removing nontelecommunications business bar), aff’d in relevant part, 900 F. 2d 283 (D.C. Cir.), cert. denied,

498 911 (1990). 7 Upon passage of the 1996 Act, section 251 was immediately tied up in litigation. Not until

January 1999—nearly three years after enactment of the 1996 Act—did the U.S. Supreme Court

rule that the FCC had the authority to prescribe crucial rules to implement section 251. Iowa

Utilities Board v. FCC, 119 S. Ct. 721 (1999). Still pending before the Supreme Court is a separate challenge to the FCC’s principles for pricing interconnection and network elements. Verizon

Communications, Inc., et al. v. FCC, et al., 219 F.3d 744 (8th Cir. 2000), cert. granted, Jan. 22,

2001. The uncertainty resulting from these lawsuits has delayed implementation of the marketopening requirements of the 1996 Act. Adding further to this delay and uncertainty, the RBOCs

also challenged the constitutionality of section 271 as an unlawful bill of attainder, despite their

support for the legislation at the time of enactment. These challenges were unsuccessful. SBC

Communications, Inc. v. FCC, 154 F.3d 226 (5th Cir. 1998); BellSouth Corp. v. FCC, 162 F.3d

678 (D.C. Cir. 1998). 8See sections 271(c)(2)(B), 271(d)(3)(a)(ii).

9See sections 271(c)(1)(A) and (B).

10See section 271(d)(3)(b).

business. The courts subsequently removed the restrictions on information services and non-telecommunications businesses.6

In the years following the MFJ, the long distance industry became highly competitive with the entrance of numerous companies

offering consumers greater choices and lower prices. In contrast,

the RBOCs resisted opening their networks to competitive providers of local telecommunications services, despite some Federal

and State regulatory initiatives to require them to do so. As a result, the local telephone exchange market remained under monopoly control by the RBOCs.

The impetus for 1996 Act arose from the application and effect

of the MFJ. The MFJ prevented the RBOCs from entering the long

distance business because of their monopoly control over the local

exchange. Congress structured the 1996 Act to offer the RBOCs a

basic trade: the RBOCs were to open their exchanges to local competitors and, in return, they were to be allowed entry into the long

distance market. The 1996 Act sought to accomplish this largely by

two interrelated provisions. The first is section 251, which empowers the FCC to impose access and interconnection obligations on Incumbent Local Exchange Carriers (‘‘ILECs,’’ the largest of which

were the RBOCs and GTE, before GTE merged with Bell Atlantic

to form Verizon) to ensure competition in local exchange and exchange access carriers.7

The second ‘‘pro-competitive’’ provision of the 1996 Act is section

271, which presents the formal test by which the RBOCs can obtain authority to provide in-region long distance service. Elements

of the test include: (1) compliance with a competitive checklist

based in significant part on section 251’s interconnection and

unbundling requirements, which is designed to assure that the

RBOC local exchange market is open to competition; 8 (2) existence

of a ‘‘facilities based’’ competitor, or in the absence of such a competitor, a State-approved statement of generally available terms to

interconnection and access; 9 (3) compliance with a separate affiliate requirement and non-discrimination safeguards described in

section 272 of the Act; 10 and (4) a finding by the FCC that authorization is consistent with the ‘‘public interest, convenience and necessity.’’ The 1996 Act requires the FCC to give ‘‘substantial

72

11 Id.

weight’’ to the Department of Justice’s opinion in the ultimate determination regarding Bell entry.11

When the 1996 Act was enacted, many observers predicted that

the RBOCs would quickly comply with the competitive checklist so

that they could begin competing in long distance. The RBOCs also

indicated that they planned to enter the cable television business.

Observers also believed that the long distance companies would be

able to obtain the interconnection and access to the incumbents’

network elements necessary for the provision of local service. As for

the cable companies, most observers hoped that some or all of them

would enter the telephone business, and that they would face substantial competition in the cable business from satellite companies

and telephone companies. Unfortunately, these developments largely have not come to pass.

Believing in the promise of the 1996 Act, companies who compete

with the Bells to provide broadband service, called competitive local

exchange carriers (‘‘CLECs’’), invested tens of billions of dollars,

created 100,000 jobs, and began the enormously difficult work of

providing choice to consumers and businesses. But today, most of

those companies have been devastated by the anti-competitive behavior and procrastination of the Bell monopolies. Tens of thousands of newly created jobs disappeared, billions of dollars of value

are gone, many CLECs are bankrupt, and the capital markets are

nearly closed to many of the competitors.

The limited development of competition in the past five years is

not an indication that the 1996 Act has failed. We continue to believe that the principles and procedures embodied in that statute,

properly implemented and enforced, offer a foundation for a competitive telecommunications marketplace. Rather, what the past

five years have shown is that legislating the removal of the legal

barriers to entry does not by itself bring competition into being. Instead of seeing the RBOCs eager to enter each others’ businesses,

there has been a general reluctance to compete. While the RBOCs

could have entered the long distance business by opening their

local markets, they have largely chosen not to do so.

Consumer groups and CLECs have seen the Bells slow to open

up their networks to competition, as is evidenced by the fact that

more than 90% of long distance calls still go through some component of the Bells’ network. While innovation has flourished and

prices have been slashed in the area of long distance, the reverse

has occurred in the local network. In addition, in the past five

years, we have seen unprecedented industry consolidation. Instead

of seven RBOCs and GTE, we now have only four: Verizon,

BellSouth, SBC, and Qwest. This consolidation has also reduced

the prospects for competition.

Now, some want to bring the same competition problems we have

seen in the local loop to the broadband market. Broadband is the

critical condition to bringing the promise of the Internet home to

millions of American consumers and businesses through streaming

audio and video and other high end uses. The last thing we need

to do is bring the same high prices, shoddy service and stifling of

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innovation we have seen in the local telephone market to the high

speed Internet market.

II. SECTION 4 OF H.R. 1542 SEVERELY HARMS COMPETITION BY ROLL- ING BACK THE UNBUNDLING AND LINE-SHARING REQUIREMENTS OF

SECTION 251 AND BY PREEMPTING FCC AND STATE REGULATIONS

The Sensenbrenner Amendment greatly improved H.R. 1542 by

restoring the Attorney General’s role in the section 271 application

process, thereby ensuring that the RBOCs open their networks to

competition before being permitted to offer long distance data services. Unfortunately, due to the Committee’s narrow referral on H.R.

1542, we were unable to address section 4 of the bill, which contains some of the most anti-competitive provisions.

First and foremost, the Sensenbrenner Amendment could not fix

the portions of the bill that roll back the line-sharing and

unbundling requirements contained in section 251 of the 1996 Act.

Even as amended, H.R. 1542 would allow the Bells to continue to

act as monopolists and abuse their power by denying competitors

access to the local loop.

Second, the amendment could not correct the fact that H.R. 1542

would severely limit Federal and State authority to prevent

‘‘spamming’’ over high speed Internet services and to ensure that

law enforcement officials with proper authorization are able to conduct electronic surveillance effectively and efficiently in the face of

rapid advances in telecommunications technology. The remainder

of this section discusses these problematic portions of H.R. 1542

that were unamendable due to the referral, yet clearly fall within

the Committee’s jurisdiction.

H.R. 1542 Eviscerates the Market-Opening Requirements of Section

251 of the 1996 Act

The Committee was unable to amend some of the most offensive

portions of H.R. 1542 that dismantle the market-opening requirements of section 251 of the 1996 Act. section 251’s ‘‘unbundling’’

and ‘‘line-sharing’’ requirements are the principal bases upon which

many competitors (predominantly CLECs) are currently able to

provide voice and data services that compete with the local phone

companies (ILECs). H.R. 1542 undermines the unbundling and

line-sharing requirements so severely that it could effectively kill

off competition.

‘‘Unbundling’’ is the requirement that the ILECs make the components of their networks available to competitors at cost-based

prices. ‘‘Unbundled network elements’’ (or ‘‘UNEs’’) are the piecepart elements of the local phone network. They include the ‘‘local

loop’’ that runs from people’s homes to the ILEC’s central office and

the ‘‘trunk’’ that leads from the central office to the long distance

phone network. Under the unbundling requirements of section 251,

companies can lease the UNEs from the ILECs and use them in

conjunction with facilities they own and deploy in order to provide

competitive voice and data services. A CLEC also has the right

under section 251 to ‘‘co-locate’’ its own equipment in the ILEC’s

central office.

Section 4(b) of H.R. 1542 rolls back the FCC’s unbundling rules,

depriving new entrants of access to the facilities (the UNEs) they

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12This yields benefits for consumers (faster, more available DSL service) and for the phone

company (lower maintenance costs). 13The remote terminal is a piece of equipment that multiplexes the signals from several copper loops onto the fiber optic line. Currently, 35% of American homes are served by remote terminals with a mixed fiber/copper architecture, and this number is expected to grow rapidly, as

the ILECs expand their plans to upgrade their facilities.

need to compete. Specifically, CLECs would no longer be able to

lease various network elements available under current FCC rules

to provide high speed data service. Under H.R. 1542, the only way

that a company could provide such service would be to build an extensive network from scratch. No new entrant—not even a company that plans eventually to operate its own network—can be expected to build out that network before signing up a single customer. MCI and Sprint began as resellers of AT&T, building up a

customer base and market credibility that enabled them to make

the investments in their own networks. Local competition in high

speed data services can develop the same way, but CLECs must

have the same opportunities provided to the original long distance

competitors.

Furthermore, section 4(b) could have an extremely harmful effect

on competition for voice services as well as data services. This is

because section 4(b) exempts the ILECs from providing the network elements used to provide high-speed data services. Network

elements are often facilities (i.e. the loop and trunk) that are used

for both voice and data services. It is impossible to distinguish between voice and data traffic, since they are both increasingly transmitted in digital form that consists of ‘‘ones’’ and ‘‘zeros.’’ Almost

every CLEC provides both voice and data services to their customers over the same facilities. If the CLEC cannot obtain a network element because that network element is used for data service, the inability to obtain that network element is almost certain

to limit the CLEC’s ability to provide voice services as well.

H.R. 1542 also places severe limitations on the ‘‘line-sharing’’ rules adapted by the FCC pursuant to section 251 of the 1996 Act.

‘‘Line-sharing’’ is the unbundling of the high frequency portion of

the local loop used to provide high speed data service. CLECs lease

this portion of the loop to provide digital subscriber line (‘‘DSL’’)

service to customers in competition with the ILECs. Line-sharing

makes it much more convenient and much more economical for residential customers to get DSL. The FCC ordered the ILECs to

allow competitors to line-share in November 1999. Since that time,

residential DSL competition has exploded, with both the ILECs

and competitors providing line-shared DSL.

To the extent that the lines between people’s homes and the

ILECs’ central offices are all copper, competitors can access the

high frequency portion of the loop at the central office. Recently,

ILECs have begun to replace some of the copper lines with fiberoptic lines.12 The lines that are closest to people’s homes are still

made of copper. The place where the fiber ends and the copper begins is referred to as a ‘‘remote terminal.’’ 13

When fiber is ‘‘pushed out’’ to remote terminals in neighborhoods,

competitors must be able to locate their own DSL equipment in the

remote terminals in order to provide DSL service, or they must be

able to get access to their subscribers’ data traffic in the central office. The FCC and several States have ruled that competitors must

75

14 Although the ILECs claim that it is technically infeasible to line-share over a mixed copper/

fiber architecture, this is simply untrue. Competitors can access fiber networks by interconnecting their equipment with the ILECs’ facilities in the central office where the fiber loops

terminate. Competitors can also interconnect with fiber facilities at the remote terminals, where

the copper lines meet up with the fiber. There are no technical impediments to these interconnections and, in fact, this is the same way that the Bells offer their own broadband services.

Even Qwest Communications has recognized that competitors need access to loops in order to

provide broadband service. See Comments of Qwest Communications at 3, Deployment of

Wireline Services Offering Advanced Telecommunications Capability, CC Docket No. 98–147, Second Further Notice of Proposed Rulemaking; Implementation of the Local Competition Provisions

of the Telecommunications Act of 1996, CC Docket No. 96–98, Fifth Notice of Proposed Rulemaking (filed Feb. 27, 2001). And Verizon has stated that an architecture of fiber and copper

could be offered to competitive carriers. See Letter from Gordon R. Evans, Vice President, Federal Regulatory Affairs, Verizon, to Dorothy Attwood, Chief, Common Carrier Bureau, FCC, Apr.

26, 2001, at 2, filed May 1, 2001 in connection with Bell Atlantic/GTE Merger Order, CC Docket

No. 98–184. 15Section 4(a) provides that ‘‘[e]xcept to the extent that high speed data service, Internet

backbone service, and Internet access service are expressly referred to in [the Communications]

Act, neither the Commission, nor any State, shall have authority to regulate the rates, charges,

terms, or conditions for, or entry into the provision of, any high speed data service, Internet

backbone service, or Internet access service, or to regulate any network element to the extent

it is used in the provision of any such service.’’ 16These include subscriber privacy, foreign government ownership of telecommunications facilities, ‘‘slamming,’’ obscene or harassing telephone calls, and services for hearing-impaired and

speech-impaired individuals.

have access to remote terminals in order to continue to provide

their DSL service.

H.R. 1542 would overturn these FCC and State decisions and

make it more difficult for consumers to obtain high-speed service

from competitors. H.R. 1542 would preclude line-sharing for customers that are served by hybrid copper/fiber loop facilities and remote terminals.14 This would deny competitors the ability to serve

those customers, who will remain captive to the ILECs, a monopolist provider, for voice and data service.

H.R. 1542 Preempts FCC and State Regulations that Govern the

Internet

Section 4(a) of H.R. 1542 may be construed to completely deregulate high speed data services offered by the RBOCs.15 As a result,

a wide range of current consumer protection and other requirements may not apply to broadband services.16 The Committee’s

narrow referral on H.R. 1542 prevented us from addressing our

concerns in two areas that fall squarely within the Committee’s jurisdiction: ‘‘spamming’’ and the Communications Assistance for

Law Enforcement Act (‘‘CALEA’’).

Unsolicited commercial electronic mail, or ‘‘spam,’’ can impose

significant economic burdens on Internet access services, businesses, and other recipients because of the finite volume of email

that recipients can handle. This issue has recently been addressed

by the Judiciary Committee. On May 23, 2001, the Committee

marked up H.R. 718, the ‘‘Unsolicited Commercial Electronic Mail

Act of 2001’’ to regulate the distribution of unsolicited commercial

electronic mail messages. Yet despite the government’s interest in

protecting recipients from spam, section 4(a) of H.R. 1542 may severely restrict Federal efforts to regulate spam transmitted using

the RBOCs’’ high speed data services.

Similarly, Congress enacted CALEA in 1994 to ensure that law

enforcement officials with proper authorization are able to conduct

electronic surveillance effectively and efficiently in the face of rapid

advances in telecommunications technology. Section 4 of H.R. 1542

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deregulates technologies that are used to provide high speed data

services. These are the very technologies that Congress and this

Committee intended CALEA to cover. Section 4 threatens the government’s authority to implement and enforce CALEA, and therefore, also threatens the ability of law enforcement officials to conduct electronic surveillance of communications transmitted using

high speed data services.

CONCLUSION

Competition should be our credo in telecommunications. It is the

touchstone for lower prices, better services, and for unleashing the

innovative creativity that has built our new economy from the

ground up. And historically, it has been the role of this Committee

to preserve those basic rules of competition. Unfortunately, the limited referral given to the Committee prevented us from amending

or improving section 4 of H.R. 1542, which raises serious antitrust

concerns that in any other context would be within the Committee’s jurisdiction and will be in the future.

JOHN CONYERS, JR.

CHRIS CANNON

JERROLD NADLER

DARRELL E. ISSA

(77)

DISSENTING VIEWS

I disagree with the motion approved by the Committee that the

bill H.R. 1542 be reported unfavorably, but that the amendment to

the bill adopted by the Committee be reported favorably. I would

have preferred that the Committee report the bill favorably and

without amendment. The bill that was referred to the Committee

for consideration was a good piece of legislation, as it would promote competition and reduce regulation in order to encourage the

rapid and widespread deployment of high-speed telecommunications networks.

I. SECTION 271 AMENDMENT ADOPTED IN THE JUDICIARY

COMMITTEE—A HARMFUL AMENDMENT

In the Committee, an amendment was adopted that I believe did

significant harm to H.R. 1542. This amendment provides that a

Bell operating company may not provide, on an interLATA basis,

any high speed data service or Internet backbone service as authorized by H.R. 1542, until the Bell operating company (BOC) has

filed an application with the Attorney General upon which the Attorney General has 90 days to act. The Attorney General may not

approve an application, unless he/she determines that the applicant has demonstrated that it meets the substantive requirements

of Section 271(c) and (d). ‘‘Substantive Requirements’’ mean the

competitive checklist and the public interest test.

In my view, it is entirely inappropriate for Congress to turn the

Department of Justice into a regulatory agency with a dispository

role in such a process. When the 1996 Act was considered, such a

decision-making role for the Justice Department was considered

and rejected by both the House and the Senate in recorded votes.

On June 13, 1995, while considering S.652, which was the Senate

bill which went to Conference with House Bill H.R. 1555, the Senate defeated by a vote of 57–43, an amendment offered by Senator

Thurmond, then Chairman of the Senate Judiciary Committee, to

give the Department just such a dispository role. In the House, two

months later, a similar result was reached on August 4, 1995 when

a decision-making role for the Department in the interLATA long

distance approval process was overwhelmingly defeated, by a vote

of 271–151 [Roll Call No. 630].

A dispository and regulatory role for the Department of Justice

was not a good idea then nor a good idea today. In fact, H.R. 1542

eliminates the Federal Communications Commission (FCC) from

any regulatory role in this process with respect to the provision

interLATA Internet backbone services. H.R. 1542 does this, because there is no need for any FCC review of Bell provision of these

services, and because the elimination of these regulations will lead

to increased consumer choice and competition in the interLATA

backbone service market. Reimposing regulatory conditions preceVerDate 11-MAY-2000 00:14 Jun 19, 2001 Jkt 073169 PO 00000 Frm 00077 Fmt 6601 Sfmt 6601 E:\HR\OC\HR083P2.XXX pfrm03 PsN: HR083P2
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dent as the Committee adopted amendment does will have the opposite effect.

The Committee adopted amendment will institute a totally new

regulatory scheme, with the Attorney General as regulator in

Chief. This is an unnecessary role for the Justice Department, as

well as one that is needlessly regulatory, which is not warranted

by the competitive circumstances in the first instance.

A major inhibiting and limiting factor to broadband deployment

throughout the United States, which H.R. 1542 would eliminate, is

the Local Access and Transport Area (LATA). The LATAs were created by the Modification of Final Judgment (MFJ), which settled

the antitrust case brought against AT&T in 1974 and which resulted in the divestiture of the BOCs from AT&T. The Congress

eliminated the applicability of the MFJ with the passage of the

1996 Act. One remnant does remain, however, as LATAs were

transported largely intact to the FCC by the 1996 Act. The Bell

System’s territory was divided in 1983 into 163 LATAs which thus

remain intact today.

The LATAs of 1983 have no relevance today to Internet traffic

and the World Wide Web, and H.R. 1542 addresses and corrects

that issue squarely. There was no commercial Internet in 1983

when LATAs were adopted by Judge Greene (560 F. Supp. 990,

994). Yet, they are being applied today to the Internet, and this is

frustrating the deployment of broadband facilities, due to the fact

that BOCs cannot cross these LATA lines with their data services.

H.R. 1542 eliminates the LATA as such an obstacle.

II. MAIN COMPONENTS OF H.R. 1542

H.R. 1542, the bill which I supported prior to its amendment by

the Committee, has three main components. First, the bill broadly

preempts, with certain narrow exceptions, State and federal regulation of high speed data service, Internet backbone service, and

Internet access service. Second, the bill clarifies that Internet backbone and high-speed data services are not subject to the interLATA

restriction in section 271 of the 1996 Act. Third, the bill ensures

freedom of choice to Internet users by requiring each incumbent

local exchange carrier to allow Internet service providers to interconnect with the incumbent local exchange carrier’s high speed

data service for the provision of Internet access service.

III. WHY H.R. 1542 IS NEEDED

Until five years ago, local telephone service in the United States

was largely a regulated monopoly. In each local service area, a single telephone company, known as an incumbent ‘‘local exchange

carrier’’ or ‘‘LEC,’’ was the dominant, if not the sole, provider of

service. State regulators treated that company as a public utility—

requiring it, for example, to provide basic local service to residential customers at relatively low rates. This system resulted in incumbent LECs providing the overwhelming share of local telephone

service in each local service area. And because of concerns relating

to the potential for discrimination by these providers of local service, the largest of them—the Bell operating companies (‘‘BOCs’’)

that had been divested from AT&T in 1984 pursuant to the ModiVerDate 11-MAY-2000 00:14 Jun 19, 2001 Jkt 073169 PO 00000 Frm 00078 Fmt 6601 Sfmt 6601 E:\HR\OC\HR083P2.XXX pfrm03 PsN: HR083P2
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fication of Final Judgment—were precluded from, among other

things, providing most interLATA services.

As part of the Telecommunications Act of 1996, Congress replaced this system with a pro-competitive, deregulatory framework

for the provision of local and long distance telephone service. The

overriding premise of the 1996 Act was and is that competition, not

regulation, is best suited to ensure low prices and improved services.

At the same time as it enacted these measures to facilitate local

voice competition, the 1996 Act also took steps to increase competition in long distance. In particular, Congress recognized that, except for a few services that were uniquely related to the local voice

telephone market—in particular, long distance voice service—there

was no reason to prohibit the BOCs from providing interLATA

services. Moreover, even as to those services that were related to

BOC control over the local voice market, the Act allowed BOCs to

provide such services, provided that the BOC could show, on a

state-by-state basis, compliance with a precisely delineated 14-

point checklist designed to ensure that the local market in question

was open to competition.

Although the primary purpose of these provisions is clear—to facilitate local and long-distance competition—in the five years since

the enactment of the 1996 Act, the FCC has taken a number of

steps that contradict that purpose. First, the FCC has substantially

diminished, if not eliminated, any incentive a new entrant may

have to deploy its own local service facilities. At the same time that

it adopted policies that have deterred sustainable, facilities-based

local competition, the FCC also put off the long-distance competition that the Act envisions. As noted above, the 1996 Act allows a

BOC to provide interLATA services in an in-region State if it can

demonstrate to the FCC that it has satisfied the 14-point checklist.

The FCC has, however, expanded that 14-point checklist beyond

recognition, thereby delaying BOC entry into long-distance far beyond anything Congress envisioned in 1996. H.R. 1542 is needed to

address these problems of implementation of the 1996 Act.

IV. INTERNET BACKBONE SERVICES

The FCC has construed the 1996 Act to preclude BOCs from providing in-region interLATA Internet backbone services and highspeed data services, absent FCC approval pursuant to section 271.

As with the FCC’s treatment of incumbent LEC provision of highspeed Internet access, this interpretation is contrary to the de-regulatory intent of the 1996 Act. The 1996 Act lifted the prohibition

on BOC provision of interLATA services, except where Congress determined that an interLATA market was uniquely related to local

voice service. The Internet backbone market is not such a market.

Because the BOCs’ historic control over the local exchange provides

no inherent advantage in the Internet backbone market, there is

no basis on which to continue to restrict their provision of

interLATA high-speed or Internet backbone services.

The immediate entry of BOCs into the Internet backbone market

will increase consumer choice and enhance public welfare. This is

why I opposed the Committee-approved amendment requiring prior

Justice Department review. The Internet backbone is highly conVerDate 11-MAY-2000 00:14 Jun 19, 2001 Jkt 073169 PO 00000 Frm 00079 Fmt 6601 Sfmt 6601 E:\HR\OC\HR083P2.XXX pfrm03 PsN: HR083P2
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centrated, with the bulk of backbone revenues as well as ISP connections resting in the hands of a few major providers. With their

broad geographic reach, BOCs are well suited to compete in this

market, especially in those areas of the country that have limited

backbone capacity. BOC entry into the Internet backbone market

will increase competition in the market, leading to lower prices and

improved service. In addition, this prohibition places the BOCs at

a further disadvantage to competing providers of high-speed data

services and Internet access services. All of these providers, including the cable providers that dominate high-speed services are allowed to provide Internet backbone as part of their service offerings. H.R. 1542 thus exempts high-speed data services and Internet

backbone services from section 271 of the 1996 Act.

V. CHOICE OF INTERNET SERVICE PROVIDERS

Consumers will benefit not just from the widespread deployment

of high-speed data networks, but also from a choice of Internet

service providers that can provide service over those networks. Historically, such a choice has not been available to customers that receive high-speed Internet access from cable operators. H.R. 1542

accordingly guarantees Internet service providers the opportunity

to interconnect with incumbent LECs’ high-speed data services for

the provision of Internet access services, and it requires incumbent

LECs to allow Internet users to subscribe to any Internet service

provider that interconnects with the incumbent LECs’ high-speed

data service.

VI. GOLDWASSER DECISION

I am also concerned with the section of the Committee adopted

amendment that seeks to ‘‘fix’’ the Goldwasser case problem. I believe this section attempts to fix a problem that does not exist. The

amendment attempts to address a small portion of a single decision

by a single panel of a single Court of Appeals in a case the losing

parties chose not to take to the Seventh Circuit en banc or to the

United States Supreme Court for review on the record. The decision in question is Goldwasser v. Ameritech Corp., 222 F.3d 390

(7th Cir. 2000).

There have been repeated suggestions that the decision is very

broad—that is, that it exempts the entire telecommunications industry or portions of that industry from antitrust scrutiny. Stated

differently, the assertion has been made that the Goldwasser opinion creates some sort of ‘‘implied immunity’’ for conduct that would

otherwise be subject to antitrust remedies because that conduct

violates the antitrust laws. In my view, this is not the case.

The Court in the Goldwasser case declared and held that :

Our principal holding is thus not that the 1996 Act confers implied immunity on behavior that would otherwise violate the

antitrust law. Such a conclusion would be troublesome at best

given the antitrust savings clause in the statute. It is that the

1996 Act imposes duties on the ILECs that are not found in

the antitrust laws. Those duties do not conflict with the antitrust laws either; they are simply more specific and far-reaching obligations that Congress believed would accelerate the deVerDate 11-MAY-2000 00:14 Jun 19, 2001 Jkt 073169 PO 00000 Frm 00080 Fmt 6601 Sfmt 6601 E:\HR\OC\HR083P2.XXX pfrm03 PsN: HR083P2
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velopment of competitive markets, consistently with universal

service (which, we note, competitive markets would not necessarily assure).

There is no way to read this explicit rejection by the Goldwasser

court of ‘‘implied immunity’’ as an activist attempt to undo the

1996 Act or its savings clause. This language explicitly rejects implied immunity and explicitly recognizes and applies the savings

clause. The savings clause, after all, does not suggest that duties

created under the 1996 Act shall be considered to be and enforced

as antitrust laws. The savings clause essentially states the new law

does not displace existing duties under the antitrust laws or prevent them from being enforced as they were before the 1996 Act

took effect.

Having rejected implied immunity, the Goldwasser court considered whether the plaintiffs had stated an antitrust claim—that is,

a claim under the antitrust laws that was based on the violation

of duties that existed under those laws. The plaintiffs claimed that

they had alleged such a claim under a doctrine known as the ‘‘essential facilities’’ doctrine. The problem with the plaintiffs’ essential facilities claim, however, was that the competitors actually did

have access to the specific facilities alleged to be essential through

the specific processes established under the 1996 Act. Those processes not only provided for access in general but specified the precise manner in which both price and nonprice terms of access

would be established and enforced. In short, the claims that plaintiffs portrayed as ‘‘freestanding’’ antitrust claims were nothing of

the sort. The so-called freestanding claims were instead ‘‘inextricably linked to the claims under the 1996 Act.’’ Id.

Nothing in this decision suggests that telecommunications carriers are immune from liability for conduct that violates the antitrust laws. The need for the Committee’s action to overrule that

case, therefore, does not exist.

The Internet is a significant engine of growth in the nation’s

economy. That growth depends, however, on competition—in particular, on telecommunications carriers competing with one another

to deploy the high-speed data networks that can carry the ever-increasing amount of data traffic sought to be transmitted over the

Internet. The purpose of the bill that was referred to us was to facilitate that competition, by implementing a de-regulatory framework for the provision of Internet backbone services and high-speed

data and Internet access services, and by ensuring that all providers of such services are allowed to compete on an equal footing,

regardless of the technology or platform they use to provide service.

The amendment adopted by the Committee would render this

framework ineffective. Consequently, we need prompt passage of

this important legislation without the inclusion of the Committee’s

amendment in order to keep this economic engine running at maximum speed.

BOB GOODLATTE

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