HOUSE BILL REPORT

HB 323

BYRepresentatives Jacobsen, Todd, Nealey, Vekich, Unsoeld and Holm

Providing for telecommunications infrastructure planning for economic development.

House Committe on Trade & Economic Development

Majority Report:     Do pass with amendments. (13)

     Signed by Representatives Vekich, Chair; Wineberry, Vice Chair; Belcher, Braddock, Cantwell, Doty, Hargrove, Holm, Kremen, McMullen, Moyer, Rasmussen and Schoon.

Minority Report:     Do not pass.  (2)

     Signed by Representatives Amondson and Beck.

House Staff:Stephen Hodes (786-7092)

AS REPORTED BY COMMITTEE ON TRADE & ECONOMIC DEVELOPMENT

FEBRUARY 5, 1987

BACKGROUND:

The rapid changes in the telecommunications industry as a result of the break-up of AT&T and the deregulation of much of the industry have left the state and local governments with a number of major new areas of responsibility.  These changes are themselves the consequence of the blurring of the distinctions between the telephone and computer industry which have occurred in recent years.  Telephone lines now serve as major conduits for the transmission of computerized data.  Such data transmission is critical to a number of industries, with special importance for finance and insurance industries and to other industries providing services to business.  The dramatic growth of the service economy in Washington state, and the slow growth in most manufacturing and natural resource sectors of the economy has made telecommunications a more critical factor of production in the state's economy than was previously the case.

The telecommunications industry itself has been transformed, as deregulation and new technologies have created a variety of means for transmitting both traditional telephone communications and computerized data.  Private firms have made investments which have removed their internal communications from the telephone system through the purchase of PBX and internal phone exchange systems.  The increase in such systems and in satellite communications has allowed firms to bypass much of the regional and national telephone system.  This has reduced the customer base which supports basic telephone service, and made the investments in new technology which are important for future regional economic growth, such as fiber optic cable networks, more difficult.  In addition, the deregulation of the industry has made the availability and the affordability of basic telephone service a major concern of public officials.

Telecommunications has become a more critical part of the state's post-industrial infrastructure base as the industries in which it plays a critical role have increased their importance in the state's economic life.  The telecommunications infrastructure, composed of land lines, microwave towers, switching networks, satellites, and fiber optic cables, is entirely in private hands.  The adequacy of that system, however, and the availability both of basic telephone service and of new data transmission capacity will have an increasing impact on the state's ability to sustain new economic activity in growing industries.

The state's regulatory role in telecommunications has been transformed since deregulation, forcing states to assess the adequacy of governmental capacity to understand the impacts of the shifts in telecommunications service and technology.  The dramatic changes in the industry and in the state's role have led other states and local governments to undertake inventories of their telecommunications infrastructure and to assess the impacts of the adequacy of these systems on economic health and on economic development strategies.  These inventories have thus far been focused either in areas in which new service industries have particular economic importance, or in more rural areas where deregulation may impact basic telephone service or where inadequate telecommunications infrastructure may limit future economic growth.

Key questions for future legislative action include:

o The maintenance of affordable basic telephone service for all users and regions;

o The adequacy of telecommunications infrastructure to sustain economic activity in growth industries;

o The availability of new telecommunications services (such as adequate data transmission capacity) to all regions to permit service industry growth in non-metropolitan areas of the state and an assessment of the likelihood of such growth;

o How costs of service are spread among classes and categories of users;

o Determination of appropriate state governmental roles the post-monopoly environment.

SUMMARY:

BILL AS AMENDED:  The bill directs the Utilities and Transportation Commission (UTC) to undertake an inventory of the telecommunications systems in each region of the state to assist the state in the development of a telecommunications infrastructure plan.  The inventory is to include key telecommunications systems, such as:  telephone systems, fiber optic cables, cellular radio systems, satellite systems, rights of way, cable television systems, and microwave transmission capacity.

The inventory is to be followed by a needs assessment, to include a determination of future telecommunications needs, based on the perceived needs of consumers, business, and government.  The goal of the needs assessment is to determine the adequacy of current telecommunications and services.  The Utilities and Transportation Commission is also directed to address the link between telecommunications and economic development in the state and to determine whether the quality or availability of particular telecommunications services in various regions may impact business location decisions.

The Utilities and Transportation Commission is directed to prepare an annual report to the Legislature, which is to include recommendations on filling unmet needs.  The bill does not include an appropriation.

AMENDED BILL COMPARED TO ORIGINAL:  The inventory the bill directs the UTC to conduct may utilize sampling methods in its development as opposed to counting each telecommunications facility.  The partial list of telecommunications users to be contracted in the conduct of the need assessment the Commission is removed.

Fiscal Note:    Not Requested.

House Committee ‑ Testified For:     Representative Jacobsen; William Blazer, telecommunications policy consultant, Minnesota; Dr. Jon Oakes, Ph.D., farmer, Walla Walla area, member Washington Association of Dry Pea and Lentil Producers; Dr. Don Dillman, PhD., Director, Social and Economic Sciences Research Center, Washington State University; Karl Kottman, Washington Association of Farmer Cooperatives.

House Committee - Testified Against: None Presented.

House Committee - Testimony For:     Service industries are the fastest growing industries in the nation.  Telecommunications infrastructure is a critical factor for a number of these industries.  The 1986 Utilities and Transportation Commission study is excellent, but not oriented toward economic development policy needs.  There is a need to know the supply of telecommunications facilities in the state and the demand for such facilities to meet economic development needs.  Such a study would cost approximately $35,000.  This information would be valuable in the development of local economic development strategies for telecommunications-dependent sectors.  For farmers, computers and telecommunications can be a powerful marketing and planning tool, but adequate telecommunications infrastructure is necessary to utilize these tools effectively.  Study could be a valuable rural development tool.

House Committee - Testimony Against: None Presented.