February 5, 2003

Thank you, Mr. Chairman. I want to commend you for holding this Subcommittee’s first hearing of the 108th Congress on the dismal financial state of our Nation’s telecommunications industry. Corrective action is needed now to restore vigor to this vital sector of our Nation’s economy.

In the last three years, we have lost approximately 600,000 jobs among telecommunications carriers and equipment vendors. These were good, rewarding, and productive jobs; many were union jobs. Capital investment is decreasing by tens of billions of dollars annually. In 2002 alone, there was a decline of roughly 47 percent in capital expenditures for the telecommunications industry. Without investment, our ability to innovate and to keep these high-paying manufacturing jobs in America over the long-term will be put at risk.

Telecommunications companies and their equipment suppliers have lost more than $2 trillion in value since March 2002. Millions of retirees and pensioners have been left with far fewer assets to tend to their needs as they grow older. And bankruptcies litter the telecommunications landscape. Although the economic toll is great, the human toll may be even greater.

Last year, we in the House did our part to revive the telecommunications sector. By nearly a 2-to-1 margin, we passed the Tauzin-Dingell Bill to facilitate and accelerate the deployment of broadband services to all Americans. That legislation, had it been enacted, would have reversed the cycle of disinvestment and created the proper regulatory framework for new investment in broadband networks. The high tech industry has made it clear in filings before the FCC and in numerous public statements that liberating the last mile to the home from outdated and unsuited old telephone network regulation is critical to unlocking investment in broadband infrastructure and services. Our bill did that while preserving the access of Internet Service Providers to these networks. Unfortunately, that bill died in the Senate. An opportunity was lost, precious time has been wasted, and the American people have suffered.

But another opportunity lies immediately in front of us. The FCC has five major pending proceedings before it, the outcomes of which have the potential to reshape the telecommunications industry. The most imminent of these decisions involves the re-examination of the obligation of incumbent local exchange carriers to unbundle their network elements and provide them to competitive local exchange carriers at wholesale rates.

Last week, I joined Chairman Tauzin, Subcommittee Chairman Upton, and 19 other Members of this Committee in sending a letter to Chairman Powell outlining our views regarding key aspects of the Commission’s Triennial Review. I would counsel the FCC to read that letter with great care.

Let me reiterate a few key points. First, it is time to abolish the UNE-Platform or UNE-P method of resale. It was a bizarre invention of the Commission that subverted the language and clear intent of the 1996 Telecommunications Act. Perhaps more than any failing of the Commission in implementing the 1996 Act -- and its failings have been numerous -- UNE-P has been destructive of capital and infrastructure investment in the telecommunications sector.

Second, as part of its statutory and court mandated analysis of what network elements must be unbundled, the Commission should conclude that there is no ILEC obligation to provide unbundled access to fiber loops and subloops used for transmission of packet based services. Such a ruling would open the door to new investment in broadband networks, enabling consumers to reap the benefits of high speed Internet services.

Finally, the FCC must discharge its clear responsibilities under the 1996 Act, which do not permit it to defer to the states as it undertakes its review of which network elements must be provided on an unbundled basis.

This is a defining moment for the Commission. It can put us back on the road to facilities-based competition. It can reconfigure the regulatory environment to provide incentives for investment in equipment and infrastructure. Now is the time for decisive Commission action. If the Commission fails, then the Congress must act.