Mr. Chairman and Members of the Subcommittee:

On behalf of Time Warner Telecom Inc. I would like to thank the committee for the opportunity to talk to you today about the status of local phone competition. My name is Larissa Herda and I am the President and CEO of Time Warner Telecom ("TWTC"), which has grown to be one of the largest new competitive entities in the telecommunications industry. We exist today because of the pro-competitive policies adopted in the Telecommunications Act of 1996. We are unique in a number of respects.

TWTC builds its own local and regional fiber optic networks and delivers “last-mile” broadband data, dedicated Internet access, and voice services to small, medium and large businesses. We provide service to a diverse customer base across the country. The Company currently serves business customers in 39 U.S. metropolitan areas. We plan to begin offering service in five other metropolitan areas in 2001. (See attached map) Since the passage of the 96 Act, we have invested approximately $2.0 billion in building a network infrastructure and have created nearly 2,500 high-tech jobs nationwide.

My response to the question “Is the Telecom Act promoting competition?” is a qualified yes. To put it in terms that I am familiar with, it’s a good business plan, but the execution of the plan needs improvement. And where improvement is needed is in enforcement. Time Warner Telecom Inc. is providing facilites-based competition just as Congress envisioned

Company History

Time Warner Telecom began in 1993 as Time Warner Entertainment. The focus of the Company was to provide cable/phone services to residential and business customers using hybrid fiber coax (HFC) technology. After an extensive pilot program to test residential service, Time Warner Communications evolved into a company that offers business phone services over fiber-optic networks.

In 1997, the Company added voice circuit switches and began operating as a business CLEC. In 1998, Time Warner Communications became a separate entity from Time Warner Entertainment and began to operate as Time Warner Telecom Inc. During 1999, TWTC became EBITA positive, acquired an ISP, built a national IP backbone and went public, offering 18,000,000 shares on the NASDAQ exchange. We trade under the symbol: TWTC. In August 2000, TWTC successfully bid, during an open auction bankruptcy proceeding, for most of the assets of GST Telecommunications. This allowed us to double the size of the company and extend our operating footprint throughout the Western United States. By end of 2001, TWTC plans to offer telecommunications services over its own fiber optic networks in 44 markets in 21 different states.

Ownership Structure

We are very proud to carry the Time Warner name. As I described earlier, TWTC was initially created as division of Time Warner Entertainment. While Time Warner Inc, now AOL Time Warner, owns 44% of Time Warner Telecom Inc. stock, Time Warner Telecom Inc. is an independently owned and operated company. The most important point, from both your perspective and mine, is that we have no financial backing from AOL Time Warner. We obtain the capital we need to do business the same way the rest of the independent CLECs obtain theirs, through debt and equity offerings in the financial markets and from operating cash flow. Company Growth

During a time when the news is full of stories on bankruptcies and employee layoffs we are expanding our network and hiring new people. In 1996 TWTC had 500 employees, the majority of them located in the corporate headquarters in Littleton, Colorado. Today we have approximately 2500 employees and by the end of 2001 will be providing service and employing people in 21 states. Time Warner Telecom's growth plans focus on geographic expansion, extension into new market segments and development of new data and Internet-based products and services. Our success to date is the result of building and deploying our extensive local and regional fiber optic networks all the way to the end user’s building and providing a diverse physical alternative to the incumbent LEC. Our expertise is in selling complex network services that customers want and need over these networks. We execute and deliver on a sound business plan. We provide high quality broadband service to a diverse segment of the small, medium and large businesses in the country. In 1996 we had already constructed 198,000 fiber miles. Today that has almost doubled to approximately 367,000 fiber miles. TWTC has constructed more route miles than any other local competitive carrier in the U.S. The fiber optic infrastructure we have built is important because it allows us to continue to layer more products and services on our network. One of the distinguishing characteristics of our network is that we have been laying this fiber in metropolitan areas. We’re building fiber where it is needed most, the last-mile. It is important that Congress recognize that the largest competitor in all of our markets, the local ILEC, has the ability to stymie our growth. Vigorous enforcement of the Act is the only elixir to the poison pill of anti-competitive behavior.

Markets Served

Service Provided

This is how we do business. In every city that Time Warner Telecom lays fiber, the sales staff is required to prove in advance that there is business to be had. We don’t build a network just to show growth, we build a network to provide a service that is desired. This serves our customers and our shareholders well because it ensures our continued viability in the marketplace. And I can assure you that there is demand for the service we provide. In many cases we supplement the services that the incumbent carrier provides. Often, companies will come to us for their new business or for a specific portion of their telecom needs. As we prove our ability to provide this service, they give us more and more of their business. As we continue to build a solid business customer base and revenue stream, we will be able to look at other options and may have more flexibility around expansion in residential and rural markets from a business plan standpoint.

The fiber optic networks we have built allow us to offer our customers any technology, product or service solution. With virtually unlimited bandwidth, we can meet the rapidly changing demands of our customers. Our networks allow us to provide voice and data telecommunications services to a diverse customer base including public schools, private schools, universities, health care facilities, banks, the high-tech community, government agencies and military installations, law firms, public utilities, many small businesses, Internet Service Providers, insurance companies and most interestingly many of the telecommunications companies operating in the U.S.

III. The key to successful implementation of the Telecom Act is Enforcement

TWTC has not just spent the last five years building networks. We have also been engaged in legal and regulatory battles across the nation for the right to do so. We are making progress in breaking the monopoly stranglehold, but it has not been quick and it has not been easy. The 96 Telecom Act provided one method for transitioning the local telephone market from a monopoly to a competitive marketplace: The “carrot” of in-region long distance entry for the incumbents if and when they open their local networks to competition. The simple fact is, no company wants to lose business. This creates strong incentives for the monopoly provider to act in anti-competitive ways. But, in order to have a competitive market, the monopoly must lose customers to new entrants. Company policies are driven by financial decisions. It is not in the incumbent’s financial interest to cooperate and assist their competitors in taking their customers. But, without this very activity, competition will not exist. That is the brilliance in the 96 Act. By requiring the incumbents to meet the 14-point checklist prior to entering the long distance market, Congress has given the RBOCs a financial incentive to cooperate.

Interconnection with the RBOCs network

I would like to provide an example of how this has worked for TWTC. When Southwestern Bell Telephone first applied for 271 relief in Texas, TWTC was experiencing an unacceptable amount of call blocking because TWTC and SWBT did not have the right quantity of interconnection trunks connecting the two networks. Through months of negotiations with SWBT under the supervision of the Texas PUC, a set of performance standards was created. These standards clearly outlined the responsibilities of both companies. TWTC had the responsibility of providing accurate forecasts for the amount of interconnection trunking it would require over the year. SWBT was required to plan for that amount of trunking and if TWTC ordered trunks within its forecasted amount, SWBT was required to cooperate in the installation of those trunks in designated intervals. If SWBT fails to meet its end of the obligation, fines are assessed. If TWTC fails to meet its end of the obligation, SWBT is not required pay fines if it does not meet the installation intervals and TWTC risks not have the capacity to add new customers to its network.

As long as the companies have the right amount of trunks in place in a timely manner, customers on both networks can make calls without experiencing call blocking. It is clearly in SWBT’s best interest not to install trunks in a timely manner. If they fail to do this the quality of TWTC’s service is severely diminished because customers cannot make calls and TWTC’s overall business suffers because we cannot grow the business. The 271 process, through performance measures and penalties, provided SWBT with the financial incentive it needed to get the job done. As our business grows and we add more and more customers to our network, SWBT will have more of a natural or “market-based” financial incentive to ensure that adequate trunking exists between it and its competitors. If it fails to do so, a larger percentage of its customers will suffer from poor quality of service. Because of the nature of the marketplace and the fact that until 1996 SWBT had all of the local phone customers, trunking problems today impact a very small percentage of their customer base.

Government intervention and regulation are necessary until a competitive marketplace exists to replace that regulation. In the long run, it is in everyone’s best interest to see this occur. Until it exists, government must stand ready to supply the incentives that the market cannot.

Barriers to Construction

In order for facilities based competition to exist, companies like Time Warner Telecom must be able to negotiate with municipalities and building owners to gain access to the rights of ways and buildings in order to lay fiber and bring that fiber to our customers. Our main competitors, the incumbent LECs already have agreements or have been allowed in without agreements. One of the more unfortunate results of the 96 Act is that cities and building owners are attempting to control the pace of competition by extracting unreasonable rates, terms and conditions for access to a critical pathway to the customer. We are willing to pay for access and meet specific terms of entry; we just want them to be fair and reasonable.

Building Access

Chairman Pat Wood of the Texas Public Utility Commission coined one of my favorite phrases, “access to the last foot.” In order to serve customers with our own facilities, we must obtain access to the buildings where they conduct business. The incumbents were given access in most cases without having to contract with the building owners for rates, terms and conditions. It is our belief that the FCC has the authority today to require fair and non-discriminatory access to buildings so that providers can bring the benefits of competition to businesses in multi-tenant buildings. Last October, the FCC adopted an order that prohibits exclusive contracts between carriers and building owners. This order sent an extremely important message to building owners. However, the order falls short because the FCC did not take the next step of imposing penalties on building owners that deny or delay access to their buildings.

Access to Rights-of-Way

Because of our relationship to Time Warner, our initial ability to access rights-of-ways in municipalities may not have been as difficult and time consuming as for some other CLECs. But as we expand into areas where Time Warner Cable is not in business we face many of the same obstacles that our competitors have been complaining about. Competitors purchasing unbundled network elements from the incumbents talk a lot about access the last-mile. TWTC also needs access to the last mile, but rather than leasing it from the incumbents we prefer to build to the customer. We are willing to pay for this access and to comply with reasonable rules for access to the rights-of-way. But too often municipalities attempt to charge unreasonable rates and put unreasonable terms and conditions on us.

To ensure that competitors are able to gain access to the necessary rights-of way to provide service, Congress should consider amending the Act to give the FCC the ability to ensure fair and consistent public policy by establishing non-discriminatory access on a competitively neutral basis

IV. Description of differences in local and long distance markets Importance of growth in local “last mile” markets”

I believe the Act as written, if vigorously enforced, provides the tools necessary to ensure a successful transition from a monopoly environment to a competitive environment. TWTC is a new entrant in both the local and the long distance market. Our experience entering the local market has been very different from our experience entering the long distance market. To use Ohio as an example, it took TWTC more than $1 million and 2 years to obtain the certification and interconnection agreements necessary to enter the local market. This time and expense does not take into account the huge capital investment required to construct facilities. In sharp contrast, it took $2000.00 and 30 days to obtain approval to offer long distance service in Ohio.

We have spent considerable time and money entering the local markets in states across the nation. It took on average an entire year (often longer) to obtain the required certificates and negotiate the interconnection agreements and obtain the access to rights-of-way that must be in place prior to our ability to provide service. In sharp contrast, getting into the long distance market was a breeze. We didn’t have a network in place so we contracted with a provider to resell theirs. There were five different companies bidding for our business. Once we decided on an underlying carrier, we filed tariffs and filled out simple application forms and we were quickly in the long distance business. It was a completely different experience from the difficult and protracted negotiations required to obtain an interconnection agreement with the local monopoly.

I would like to put this in perspective of the goals of Time Warner Telecom’s business plan and the goal of the 96 Telecom Act. TWTC wants to provide the highest quality broadband telecommunications service to its customers by building its own network. By providing broadband local telephone service, TWTC is providing the ‘last mile’ of the broadband network. For well over a decade companies have been building broadband long haul or long distance networks. While I appreciate the RBOCs desire to be able to offer a long distance product, that product is available to customers and carriers today. In order for consumers to truly enjoy the benefits of a broadband network, we must have competition at the local level. The only true way to incent the RBOCs to provide their customers with broadband telecommunications service is by ensuring that if they don’t, there is another carrier in the marketplace that will. Our ability to meet the goals of our business plan is contingent upon vigorous enforcement of the Telecom Act

V. Conclusion

I agree that today we clearly have a “Digital Divide.” But the divide exists between the long distance broadband fiber optics networks and the local narrowband copper networks. The only bridge that will connect this divide is competition. Time Warner Telecom is committed to building broadband networks in the local markets. Faced with this direct competition, the incumbents will have no choice but to meet us in the marketplace by deploying new facilities or finding more ways to expand the ability of their copper wires to provide broadband services. Congress drafted the right business plan in 1996. Now the FCC and state PUCs need to vigorously enforce that business plan. I wholeheartedly support the statements FCC Chairman Powell recently made before the House Commerce Committee: The enforcement measures that state PUCs and the FCCs employ must be meaningful. They must be something more than just the “price for doing business.” It is naďve to expect the incumbent phone companies to develop policies and procedures that will allow their competitors to steal their customers. But without competitors taking customers away from the local monopoly, you will not have competition.

Again, I very much appreciate to opportunity to appear before you today, and I welcome the opportunity to answer any questions that you may have. Thank you.