The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 7:00 a.m. on Wednesday, February 24, 1999, in Room 2135 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Randolph J. Townsend, Chairman

Senator Ann O’Connell, Vice Chairman

Senator Mark Amodei

Senator Dean A. Rhoads

Senator Raymond C. Shaffer

Senator Michael A. (Mike) Schneider

Senator Maggie Carlton

STAFF MEMBERS PRESENT:

Scott Young, Committee Policy Analyst

Beverly Willis, Committee Secretary

OTHERS PRESENT:

Senator Mark E. Amodei, Capital Senatorial District, noted the reasons for this legislation was to allow credit unions the ability to hold governmental entity and political subdivision deposits.

Marsha Burgess, Chief Executive Officer, Greater Nevada Credit Union, noted credit unions have a limited ability to be used as federal depositories. She claimed this legislation would provide a greater expansion and earn a better yield in investment profits. At this time, "Credit Unions: Expanding Repositories for Local Government Deposits" (Exhibit C) was presented.

Senator O’Connell declared her husband is the chairman of a bank. Senator O’Connell raised questions pertaining to any taxes that might be generated due to this legislation, with Ms. Burgess asserting credit unions were not-for-profit organizations. Ms. Burgess maintained she wanted local governments to have the opportunity to use credit unions.

Senator Amodei clarified by noting, "The point of the bill is to allow credit union entities to compete for deposits from political subdivisions and governmental entities." Senator Amodei, Senator O’Connell and Ms. Burgess pursued the difference in restrictions on credit unions and banks, along with differences in operations. Senator Amodei claimed, to the best of his knowledge, banking interests he had contacted did not oppose S.B. 39. Ms. Burgess maintained the main difference is credit unions are member owned; they are cooperatives and their shareholders are those who deposit with the credit union. She claimed all earnings go back into services for the members.

Senator Townsend declared he is a board member of a bank and a shareholder. He asked if there was any advantage a not-for-profit or cooperative might have over those who pay a normal tax rate and are taxed in a normal business sense. Glen A. Reese, Consultant, Nevada Credit Union League, declared there were no advantages or disadvantages by this proposed legislation. He noted earnings are passed back in a cooperative concept. Mr. Reese claimed credit unions in Nevada pay their own way and do not use tax dollars for support. He asserted the monies go back to the members with only enough retained to build adequate reserves.

Ronald K. Fong, Assistant Director of Legislative Affairs, Nevada Credit Union League, concurred with remarks voiced by Mr. Reese. He maintained his opinion was credit unions would not be major competition to banks. Ms. Burgess and Mr. Fong declared this legislation could give local government the option of depositing funds with a credit union if they so desire.

Senator O’Connell and Senator Amodei reviewed reasons for this legislation, specifically referring to rural areas. Senator Amodei noting a number of rural areas had little access to a banking facility, presented reasoning for this bill, stating:

Senator O’Connell expressed her interest in any possible benefit derived by diversification due to improved economy because of this legislation. Further examination on the need for this legislation took place between Senator O’Connell and Mr. Fong.

Jean Peterson, President, Hawthorne Credit Union, maintained various civic/governmental organizations in her area would welcome the opportunity to be able to deposit funds in a credit union. Ms. Peterson concurred with previous remarks pertaining to the ability of a credit union to offer better interest rates and services to their customers.

Alvin P. Kramer, Treasurer, Carson City and Glen Adair, Principal, Carson High School, Greater Nevada Credit Union, offered their support of this legislation, citing several reasons. Senator Amodei noted he, along with Ms. Burgess had coordinated with several entities, including the Nevada League of Cities and Municipalities, the state treasurer, and the attorney general’s office, gaining their support. Mr. Adair noted there was a credit union at the Carson High School in order for students to become involved with the financial world. He pointed out students staff the on-campus credit union. Mr. Adair introduced Megan Elliott, Student Teller, Greater Nevada Credit Union, Carson High School; and Adam Heinz, Student Teller, Greater Nevada Credit Union, Carson High School/Eagle Station. Ms. Elliott and Mr. Heinz related events and experiences they feel would be beneficial in later years.

Chairman Townsend closed the hearing on S.B. 39.

Senator Townsend opened the discussion on telecommunications and noted he hoped to explore the area where the telecommunications industry is positioned, technologically as well as statutorily.

Michael B. Fuller, President, Local Telecommunications Division, Sprint, claimed his purpose would be to share some thoughts on the current state of telecommunications in general and particularly in southern Nevada. Mr. Fuller presented his written remarks (Exhibit D), proceeding to read them into the record. He noted his background was primarily in finance and strategic planning, however, he declared he would endeavor to explain this process. Mr. Fuller presented information on the Sprint organization (Exhibit E), delineating various aspects of the corporation. He pointed out several areas of expansion, in particular Sprint PCS (Personal Communication System), and a product called the Integrated On Demand Network (ION), an integrated voice and data service. Mr. Fuller maintained his company had debated internally on regulatory and legislative policy in telecommunication, with the emphasis placed on competition. Mr. Fuller continued his dissertation, referring to Exhibit D and Exhibit E. He emphasized the influence of computers and the impact they have; i.e., the data network. Mr. Fuller highlighted advantages presented by Sprint, both to customers and employees. Mr. Fuller continued his presentation referring to several charts displayed on an easel. He alluded to major investment on the part of Sprint, due to the increase of usage in the home and business because of more lines needed for fax machines, and the aforementioned use of the computer. Mr. Fuller reiterated the investment made by Sprint, especially in southern Nevada. He claimed Sprint remained committed to keep pace with growth and demand in southern Nevada, stating it was an obligation taken seriously by Sprint. Mr. Fuller noted, however, he had concerns about Sprint’s ability to obtain return on that investment. Due to the unique situation in southern Nevada; i.e., lower prices along with enormous growth, Mr. Fuller stated, ". . . we filed with the Public Utility Commission of Nevada [PUCN] a proposal to extend the plan of alternative regulation by an additional 2 years to broaden our lifeline program and to request a review of our price structure."

Senator Rhoads, Senator O’Connell and Mr. Fuller discussed rates charged in states other than Nevada. Answering inquiries by Senator Townsend, Mr. Fuller claimed a large portion of monies indicated in Exhibit D and Exhibit E would be used for basic growth, serving new subdivisions and servicing older subdivisions, as well as new switching equipment.

Lora K. Watts, President, Nevada Bell, presented her written remarks (Exhibit F), proceeding to read them into the record. Ms. Watts maintained, service represented a major priority to her company. In particular, she focused on four specific areas as noted in Exhibit F. Ms. Watts emphasized her commitment to offer services to rural as well as urban customers. Ms. Watts stressed her feeling the telecommunications industry needed to be ruled more by the marketplace than by regulation. She reiterated her support of open competition in all markets.

Senator Shaffer inquired about the perils of an open/competitive market. Ms. Watts asserted her company was ready for an open market, claiming there were a number of resources for expansion available. She noted in the case of illegal practices, there would need to be protections.

Brian Herr, Lobbyist, Executive Director, External Affairs, Nevada Bell, maintained protections were needed and felt directives were available for that purpose. He claimed the road to success in the future, would be for Nevada Bell to have the right line of product. Mr. Herr itemized a few long distance services; Internet service, wireless service, etc. In other words one-stop shopping for the customer needs. He maintained customer service was of prime importance. Mr. Herr presented several articles (Exhibit G) explaining changes in the industry.

Robert A. Ostrovsky, Lobbyist, Cox Communications, indicated he was spokesman for a group of competitive phone companies. Mr. Ostrovsky stated he would introduce people who represent competitive local exchange companies. Mr. Ostrovsky proceeded with his introductions of Charles Clay, MGC Communications; James T. Endres, Lobbyist, AT&T; Marsha L. Berkbigler, Lobbyist, TCI Cablevision of Nevada, Inc., Robert Gastonguay, Lobbyist, Nevada State Cable Telecommunications Association; Richard Scheer, Nextlink; Steve G. Schoor, Lobbyist, Cox Communications; Tom R. Skancke, Lobbyist, AT&T and Espire Communications; Philip Craig Peckman, Lobbyist, Cox Communications, and Nextlink; Samuel P. McMullen, Lobbyist, AT&T; Steve Tackes, Lobbyist, MCI Worldcom; and Jim Campbell, Cox Communications. Mr. Ostrovsky concluded his remarks and introduced Gardner F. Gillespie, Lobbyist, Cox Communications.

Mr. Gillespie stated he was speaking on behalf of a coalition comprised of cable, interchange companies and new local competitors. He read from his written remarks (Exhibit H), claiming members of this coalition had several things in common. He stated members would like to provide local telecommunications competition; however, they were having a difficult time. Mr. Gillespie indicated great strides had been made in order for transitional competition to occur. He explained transitional competition required telephone companies to permit their facilities to sell services to competitors at a discount, in order for them to be sold. Mr. Gillispie continued his remarks pointing out problems and solutions to these mandates. He claimed when there is a truly competitive market, regulation would not be needed. Mr. Gillespie maintained, in Nevada, local phone service, to a large degree, had already been deregulated. He contended the question now, was whether there was justification for further deregulation. Mr. Gillespie commented on growth in southern Nevada and the part played by Sprint and other companies in the area. He asserted the telecommunications industry was doing well in Nevada; however, incumbents were benefiting most. Mr. Gillespie maintained responsibility for dealing with unsolved problems should be with the Public Utility Commission of Nevada (PUCN). Senator Amodei and Mr. Gillespie explored reasons why competition has not progressed in the most advantageous respect. Mr. Gillespie reiterating views on regulatory power and the PUCN, stated, " . . . what we want is the commission [PUCN] to have procedures and clear authority for a competitor, or an incumbent, as well."

Senator Townsend and Mr. Gillespie discussed problems associated with obtaining services for the residential customer, as companies might not be anxious to service the residential customer since profits might not be as great. Mr. Gillespie claimed several services bundled together could be a solution. Mr. Gillespie maintained technology moved very fast, however, he felt there was small advance in competition.

Senator Rhoads inquired if there was any area in the United States where true competition might be found. Mr. Gillespie replied there was not. He noted it was very difficult to obtain this kind of information, but claimed Nevada was doing as well as most states to advance competition.

James T. Endres, Lobbyist, Assistant Vice President, Law and Government Affairs, AT&T, noted his organization was a member of the coalition, mentioned by Mr. Ostrovsky. Mr. Endres gave background on the long distance industry, maintaining there had been regulatory adjustments to accommodate other changes that have occurred in their industry in terms of competition. He asserted a major concern for all legislative bodies would be to address consumer issues. Mr. Endres touched on the issue of slamming; asserting their industry was very much opposed to slamming.

Frederick Schmidt, Consumer’s Advocate, Bureau of Consumer Protection, Chief Deputy Attorney General, Office of the Attorney General, outlined several pieces of legislation to be introduced through this committee. He indicated that Senator Amodei might have already addressed one piece of proposed legislation.

As there was no further business, the meeting was adjourned at 10:50 a.m.

RESPECTFULLY SUBMITTED:

Beverly Willis,

Committee Secretary

APPROVED BY:

Senator Randolph J. Townsend, Chairman

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