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Mr. Chairman, thank you for
holding this important hearing today. The
telecommunications sector has sunk into a state of economic malaise.
Revenues for service providers have been shrinking.
Capital expenditures by service providers have been plummeting.
Capital expenditures for just the four Baby Bells dropped $17.5 billion
from 2001 to 2002.
This has obvious implications
for consumers because it means that service providers have less money to spend
on making improvements to their current infrastructure and on deploying new
equipment in order to offer advanced services.
But the reduction in capital
expenditures has much worse implications for equipment manufacturers.
The U.S. high-tech equipment manufacturing base is dying.
These companies have laid off hundreds of thousands of employees and
idled many plants that were the economic backbones of their communities.
Lucent, which employed 150,000
people in 1999, has announced plans to cut its workforce to 35,000 by the end of
this year. Corning has been forced
to idle four of its five fiber optics plants.
These companies cannot afford
to starve for much longer. While
there are business and general economic reasons that affect capital
expenditures, government policy does play a part, and the FCC’s current
unbundling regulations are killing these companies.
Rules that require a company to
share parts of its network, even new parts of its network, with competitors are
perverse. These rules stifle
investment by giving ILECs a disincentive to deploy new facilities.
Why would you deploy new facilities when competitors can use that
equipment to steal your customers?
The
FCC’s current rules also provide a disincentive for CLECs to deploy their own
facilities. Under the FCC’s
twisted scheme, it is more cost-efficient for a CLEC to use all of an
incumbent’s facilities than to deploy its own equipment.
And the fact that neither the ILECs nor the CLECs have an incentive to
deploy new facilities means one thing for equipment manufacturers – they will
continue to lay off people and close plants important to many of our
communities.
Mr. Chairman, Michael
Powell’s FCC needs to rip the rules put in place by Al Gore and Reed Hundt out
by the roots and throw them away. At
the very least, our Republican FCC Commissioners should want a wholesale change
to the overly-regulatory approach taken by Al Gore and Reed Hundt.
The FCC must show leadership and vision in this area.
The so-called UNE-P must be abolished and new facilities, especially
fiber, should not be subject to the unbundling rules.
Only through these changes will
all companies have the proper incentive to invest in new facilities.
And only through these changes will equipment manufacturers ever recover.
Mr. Chairman, thank you again
for holding this hearing today, and I look forward to hearing the testimony of
our witnesses.
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