Call to Order and Roll Call
The 6th meeting of the Interim Joint Committee on Economic Development and Tourism was held on Thursday, November 20, 2014, at 1:00 PM, in Room 154 of the Capitol Annex. Senator Alice Forgy Kerr, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Alice Forgy Kerr, Co-Chair; Representative Keith Hall, Co-Chair; Senators Julian M. Carroll, Denise Harper Angel, Ernie Harris, Jimmy Higdon, Dennis Parrett, and Mike Wilson; Representatives Julie Raque Adams, Lynn Bechler, Kevin D. Bratcher, Larry Clark, Leslie Combs, Tim Couch, Jim DeCesare, Mike Denham, Bob M. DeWeese, Jeffery Donohue, C.B. Embry Jr., Jim Gooch Jr., Mike Harmon, Richard Heath, James Kay, Kim King, Brian Linder, Tom McKee, David Osborne, Ruth Ann Palumbo, John Short, Arnold Simpson, Fitz Steele, Wilson Stone, Russell Webber, and Jill York.
Guests: Erik Dunnigan, Deputy Secretary and Hollie Spade, Chief of Staff, Kentucky Cabinet for Economic Development; David Adkisson, President and Chief Executive Officer, Kentucky Chamber of Commerce, and Hood Harris, President, AT&T Kentucky.
Legislative Guests: Senator Paul Hornback
LRC Staff: John Buckner, Louis DiBiase, and Dawn Johnson.
Approval of Minutes
A motion by Representative Simpson, seconded by Representative Palumbo, to approve the October 16, 2014, minutes carried by voice vote.
Telecommunications Modernization
Senator Paul Hornback said it is critically important for all Kentuckians to have access to high speed internet service—not just those who live in more urban areas. Recently, Governor Steve Beshear and Congressman Hal Rogers obtained funding to run fiber networks to many areas where none previously existed. However, many areas remain underserved. While government helps in providing quality high speed internet service, private investment plays an even larger role. Modernizing telecommunication laws will help meet this need.
Hood Harris, President of AT&T Kentucky spoke about 2014 SB 99, what the components of the bill involved, and the need for a similar bill in the 2015 legislative session. Emphasis was given to the rapid pace of technological change in telecommunications. In the span of barely a decade, rotary dial phones have been increasingly replaced with modern wireless and IP-enabled services that offer video and data services along with voice service. The speed of data transmission has also increased exponentially, which has served to render the physical distance between businesses less important. Now businesses in rural Kentucky can communicate with firms nationally or internationally as easily as they can with those in urban areas of the state. To bring modern communication services to all areas of the state is costly, and to help speed the process of this transition, the state’s regulatory statutes need to be changed.
Mr. Harris emphasized that neither AT&T nor any other telephone company will unilaterally take out of service existing equipment used to provide telephone service. In rural areas, or exchanges with less than 15,000 housing units, this bill guarantees every rural customer the legal right to receive voice service from the provider, and that voice service must have the functionality required by federal law. At rural locations where the provider has already installed the facilities needed to provide basic local exchange service, nothing changes the day this bill passes — if those customers request basic local exchange service, the provider is still required to provide it. If one of those rural customers later decides to order a service different from the one they currently have, the provider can use modern IP enabled or wireless service to fill that new order, but if it does, the provider must tell the customer two things. First, it must tell the customer that it is using a modern technology to fill that new order, and second, the provider must tell the customer that they have 30 days to notify the provider if they decide they no longer want that new service. If that customer notifies the provider within 30 days that they no longer want the new service, the PSC can continue to require the provider to give basic service at that location. On the other hand, if that customer keeps the new service for longer than 30 days, the provider is no longer required to provide basic service at that location, but, as is the case for every rural location under the bill, the provider remains obligated to provide voice service with the functionality required by federal law. It was further emphasized that the bill would provide rural Kentuckians a second layer of protections above and beyond those provided by the rules of the Federal Communications Commission (FCC). First, AT&T must prove to the FCC that its new services give consumers what they want. Second, AT&T will have to prove that to every existing rural customer in Kentucky.
Responding to Representative Palumbo’s question, Mr. Harris said passage of broadband legislation would benefit educational programs like the Microsoft TEALS (Technology Education And Literacy in Schools) program at Lee County High School.
Responding to Senator Parrett’s question, Mr. Harris said the new legislation will contain language ensuring the current wholesale agreement between telephone service providers.
In response to Representative Kay’s question, Mr. Harris explained that currently, AT&T expenditures include maintaining antiquated systems rather than consumer-driven investment in new technologies. Representative Kay said Kentucky’s future lies in education and technology which go hand-in-hand. Kentucky needs to be a technology pioneer.
Responding to Representative Webber’s question Mr. Harris said AT&T has heard no objections to the legislation from the Public Service Commission. Representative Webber said as a representative from a high growth area he supports the legislation to create a favorable job climate. He noted that the Bullitt County Chamber of Commerce again endorsed the 2015 legislation.
Senator Wilson said as chairman of the Education Committee he supports increasing broadband access.
Dave Adkisson, President of the Kentucky Chamber of Commerce expressed support for modernizing telecommunications regulations, stating that Indiana and Tennessee have already done so and that Kentucky needs a level playing field in order to entice more investments and businesses to expand or relocate here.
Responding to Representative Linder’s question Mr. Adkisson said on the economic development front, Kentucky is falling behind other states in telecommunications. This legislation allows Kentucky to become more competitive in recruiting and retaining businesses at no cost to the state.
Responding to Representative Combs’ concerns Mr. Harris said under the legislation rural area customers with basic local exchange service retain the right to keep their landline phone.
Responding to Senator Harper Angel’s question Mr. Harris said that, while the legislation does not guarantee service in urban areas, the competitive marketplace will provide assurances that those services will be available.
In response to Representative Bechler’s questions Mr. Harris said AT&T’s priorities include expanding in rural and metropolitan areas. He explained that expanded services have already decreased consumer costs.
Responding to Representative Clark’s question Mr. Harris said the bill contains different protections for rural and urban areas. Urban areas have federal protections as well as marketplace competitiveness.
The Cabinet for Economic Development’s Deputy Secretary Erik Dunnigan and Chief of Staff Hollie Spade spoke about factors that influence business location and investment decision. One factor that is often important to many businesses is the availability and speed of modern telecommunications. A decade ago, high-speed broadband technology was not a common factor in business location and investment decisions; however, now it is often a “top-five” factor. It was also mentioned that the average Internet speed in Kentucky is approximately 7.5 Mbps, while the national average is 12 Mbps, and the national average in Japan is 125 Mbps.
Tom FitzGerald, President of Kentucky Resources Council expressed concern over the proposed changes to telecommunications statutes. He said that landlines are still a vital means of telecommunications, particularly in mountainous, rural areas, and that the proposal does not go far enough to guarantee continued landline access.
There being no further business, the meeting was adjourned at 2:45 PM.