A Statement on Competition

In his testimony to the Hearing on State and Local Competition of the U.S. Senate Committee on Commerce, Science, and Transportation, Royce Holland, chairman, co-founder, and CEO of Allegience Telecom, defends the Telecommunications Act of 1996.

by Royce Holland [Feruary 14, 2002]

Royce Holland has more than twenty-five years of experience in the telecommunications, independent power and engineering/construction industries. In his current position, Holland is chairman and chief executive officer of Allegiance Telecom, Inc. Along with Tom Lord, Allegiance's executive vice president, Holland is co-founder of Allegiance. Previously, Holland was president and one of several co-founders of MFS Communications Company,Inc., the largest CLEC with operations in 52 metropolitan areas in North America, Europe and Asia. Under his leadership, MFS grew from a privately held start-up operation to one of the Nasdaq 100 Index companies with annual revenue of about $1 billion and a market value of approximately $13 billion when the merger between MFS and WorldCom was completed on December 31, 1996. In January 1993, Holland was appointed by President George Bush to the National Security Telecommunications Advisory Committee. Holland is a former chairman of ALTS, the Association for Local Telecommunications Services. He earned a bachelor's degree in engineering from the University of Texas and a master's degree in engineering from the University of Pennsylvania.

The Telecommunications Act of 1996 was landmark legislation that offered telephone users the promise of a choice of local telephone service providers for the first time in any of our lifetimes. Six years ago, in my capacity as President and Chief Operating Officer of MFS Communications, I testified before Senate and House Committees regarding legislation that was ultimately enacted as the Telecommunications Act of 1996.

My testimony at the time reflected the fact that the Telecom Act was about transition—transition from regulated telephone monopolies to full-blown competition in the local exchange market. We knew that local competition would not happen overnight, but with the right conditions and legal requirements, market forces would break through the resistance of the monopolies to allow competition to take root and flourish.

CLECs knew that they would have to deploy their own facilities to compete with the incumbents, but they also knew they could never duplicate the incumbent carrier's network—particularly, the "last mile." CLECs knew they would have to have access to the Bell companies' network elements and combine them with their own facilities. They knew that network elements and colocation had to be made available to competitors at cost—the Bell companies should have no pricing advantage simply because the government gave them their monopoly.

The most critical element that competitors needed then and now from the incumbent—access to the local loop—had to be provided at cost, on commercially viable terms, and within time frames that the Bell company provided to itself. Unless competitors had a level playing field, unless CLECs could compete with the Bells on the same terms that the Bell companies provided service to itself, there would be little hope for true competition.

In 1995, I testified before the Senate Judiciary Committee and the House Telecommunications and Finance Subcommittee to impress upon Congress the need for clear, strong language that would compel the Bell companies to open their markets and networks to competitors. I also called for tougher and swifter FCC enforcement mechanisms. With its market power and control over essential facilities, an incumbent that merely failed to be responsive to the requests of competitors could foreclose competition by inaction as readily as with overt anticompetitive practices. The monopolist must be told by the regulator in unambiguous language what it must do, when it must do it, and what would happen if it didn't do it.

To ensure that the promise of the Telecom Act is fulfilled, Congress should significantly increase the penalties for violations of the Act to a maximum penalty of 1 percent of a company's quarterly revenues. The FCC should adopt a comprehensive set of self-enforcing performance standards governing the provision of interconnection and unbundled network elements because we now know that RBOC compliance with the law falls off after they receive 271 authority. The FCC should adopt rules to implement an expedited complaint process to combat the ever-growing "Deadbeat Dominant Carrier" syndrome, an affliction whereby large carriers do not believe they have to pay their bills to small carriers. In addition, the Congress should provide the FCC with the resources necessary to hire 25 Special Masters to handle disputes amongst carriers on an expedited basis. And finally, as a last resort, if increased fines combined with self-enforcing performance standards do not change the Bell mega-monopolies' anticompetitive behavior, then Congress should consider some form of structural or functional separation in order to achieve the full benefits of a competitive local marketplace.

To read the full text of the remarks, click here

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