Steeper Fines Might Leave Baby Bells Crying

By SmallBusinessComputing Staff | Posted August 01, 2001
by William C. Gillis

The Telecommunications Act of 1996 was a landmark piece of legislation, designed to foster competition by providing smaller, independent telecommunications companies access to the telecommunications networks maintained by the incumbent Baby Bell companies.

But Federal Communications Commission chairman Michael Powell, for one, doesn't believe the Baby Bells (companies such as Verizon, BellSouth, and SBC Communications) are actually providing the fair access mandated by the act. In May, Powell sent a letter to the Senate and House Commerce Appropriation Committees, asking them to consider raising FCC fine limits from $1.2 million to $10 million per violation for local telephone carriers failing to allow competitors open and easy access to their networks.

According to Powell, the current fine amount is insufficient to punish and deter violations because of the Bells' vast financial resources. "In some cases, CLECs [competitive local exchange carriers] may have been stymied by practices of incumbent local exchange carriers [ILECs] that appear designed to slow the development of competition," Powell wrote.

John Windhausen, Jr., president of the Association for Local Telecommunications Services, a CLEC-industry organization that promotes telecommunications competition, agrees that the current fines are not changing the Bells' behavior. "These fines are treated [by the Baby Bells] as a way of doing business," Windhausen says. "The levels don't affect their bottom line."

At a hearing before a House subcommittee on telecommunications and the Internet, Royce Holland, CEO of Dallas-based CLEC Allegiance Telecom, testified that businesses are being victimized by the Bells' unfair practices. "More often than not," he said, "you remain at the whim of the local monopolist if you are a small- or medium-size business."

Congress has acted on Powell's recommendation. Late in May, Rep. Fred Upton, R-Mich., introduced H.R. 1765, which would authorize the $10 million fines Powell is seeking, with double fines for repeat offenders. For businesses faced with few telecommunications options besides the Baby Bells, healthy competition in the telecommunications market would be a welcome change.

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