U.S. Telecommunications Regulatory Environment Criticized in New Report
CompTel/ALTS Releases Report Indicating Negative Impact on
U.S. Businesses and Consumers of FCC Implementation of the 1996 Act

WASHINGTON, DC - June 2, 2005 - CompTel/ALTS, the leading industry association representing competitive communications providers, released a report today that shows the United States is lagging behind European countries when it comes to implementing policies necessary for sustainable competition in the communications sector. The report explains the precipitous drop in the United States' international standing in broadband penetration.

Although the FCC often cites statistics showing increased broadband deployment in this country, it is broadband penetration (the number of subscribers that actually purchase broadband service) that truly measures the success of regulatory policies. Last week the Organization for Economic Cooperation and Development (OECD) reported that the U.S. dropped from 10th to 12th place in the OECD report on broadband penetration. OECD reported that 12.8 percent of Americans subscribed to broadband service in December 2004 -- compared with 24.9 percent in world-leader South Korea and 19 percent in the Netherlands, which is was in second place. Broadband penetration requires affordable broadband prices from a choice of providers, which will only be available to consumers in a robustly competitive marketplace. The CompTel/ALTS report concludes that although the statutory framework for the creation of a competitive communications marketplace - the Telecommunications Act of 1996 - contains all the necessary tools to foster widespread broadband penetration, the Federal Communications Commission (FCC) has failed to properly implement the statute. Specifically, the report concludes that "the USA is brought down by implementation of regulation rather than the structure or the regime" adopted by Congress in the 1996 Act.

"For the past several years, the FCC has failed to adopt regulations that properly implement the network access provisions of the 1996 Act," said Earl Comstock, CEO of CompTel/ALTS. "Congress created a regulatory framework so that businesses and consumers would have lower prices and more choices for broadband services. This report illustrates that the FCC has the authority to fix the problem of broadband penetration if it wants to. This report also demonstrates that U.S. regulators - in their zeal to appear "deregulatory" - have closed networks to competition and denied consumers the benefits of the 1996 Act. As a result, the U.S. continues to fall further behind the broadband penetration levels of countries that maintain consistently enforced regulatory regimes that guarantee network access at nondiscriminatory rates."

The purpose of the scorecard is to provide an objective measure of the effectiveness of different national regulatory environments. According to the report, the U.S. regulatory environment beats out only Germany and Belgium, giving it the third lowest score of the 11 countries surveyed. The United States scores particularly poorly on criteria related to "dispute settlement," because FCC dispute procedures are long and drawn out, harming a carrier's ability to enter the market effectively. The scorecard puts the U.S. well behind the core European markets, where broadband penetration has been advancing rapidly, and where prices have continued to fall to the benefit of consumers and business customers. FCC statistics released last week echo the findings that a lack of competition results in higher prices for all communications services: in 2004, businesses in the U.S. paid an average of $43.75 for a phone line, compared to $41.96 in 2003, an increase of 4.3%.

Denmark, the Netherlands and the United Kingdom were markets that topped the scorecard and were considered most likely to attract new entrants and investment. These countries also scored high on the OECD broadband penetration report, which indicates a strong correlation between regulatory policies that promote network access and the success of broadband penetration.

The report was jointly produced by Jones Day and the Strategy and Policy Consultants Network, and follows the methodology of the European Competitive Telecommunications Association (ECTA) scorecard, a well respected and highly detailed report on the effectiveness of regulatory regimes. Its release comes less than a month after the International Telecommunications Union (ITU) dropped the United States to 16th in its annual broadband penetration rankings. The U.S. ranked fourth as recently as 2001.

"There is a general assumption that the U.S. is ahead of the game when it comes to pro-competitive regulation; however, in the telecom sector it is clear that the U.S. is failing to provide the necessary measures that are required to make the market more effective, transparent and competitive," said Richard Cadman of Strategy and Policy Consultant Network, principal researcher for the study. "Where the EU regulatory framework has been properly implemented, it has proved to be more robust than the U.S. at ensuring that competitors have access to key wholesale products on fair and equitable terms."

* * * * *

CompTel/ALTS was formed in March 2005 by the merger of CompTel/ASCENT and the Association for Local Telecommunications Services (ALTS). With more than 350 members, CompTel/ALTS is the leading industry association representing competitive facilities-based telecommunications service providers, emerging VoIP providers, integrated communications companies, and their supplier partners. CompTel/ALTS members are building and deploying packet and IP-based networks to provide competitive voice, data and video services in the U.S. and around the world. The association, based in Washington, D.C., includes companies of all sizes and profiles, from the largest next-generation network operators to small, entrepreneurial companies. CompTel/ALTS members share a common objective: To create and sustain true competition in the telecommunications industry. For more information, call CompTel/ALTS at 202/296-6650.

About the Authors of the Regulatory Scorecard
Jones Day is an international law firm with 30 locations in centers of business and finance throughout the world. With more than 2,200 lawyers, including more than 400 in Europe, it ranks among the world's largest law firms.

SPC Network is a strategy, policy and economics consultancy specializing in electronic communications markets working for a variety of electronic communications companies across Europe. For further information visit www.spcnetwork.co.uk