Bell monopolies push to disconnect competition.........
Seven years ago, Congress set out to break up the local Bell telephone monopolies and bring competition to consumers' homes. But just as states are finally figuring out how to make that promise a reality, and some communities are seeing phone bills drop, federal regulators may unplug the competitors at the behest of the four Bell monopolies.
The Bells want to gut rules spurring competition that were enacted in the wake of the 1996 Telecommunications Act. They require the Bells to rent their networks at reasonable prices to potential rivals that may want to offer local phone service but can't afford to set up their own phone networks.
For years, the law wasn't an issue because states let the Bells charge exorbitant fees that kept competitors out of their markets. Now that several states are ordering them to cut their network fees, competition is emerging, and phone rates are decreasing. On Monday, AT&T announced plans to compete in Washington, D.C., after the local government cut the charges for tapping into the network operated by Verizon. Nationwide, 11% of local phone lines were serviced by competitors through last June, nearly double their share two years earlier.
Faced with the first real threat to their grip on local service, Verizon and the other Bells are crying to the Federal Communications Commission (news - web sites) (FCC (news - web sites)) that they're forced to rent their networks at a loss. They want to go back to the way it was: higher fees for rivals and less choice for consumers.
Though a court-ordered decision won't come for a month, all five FCC commissioners have an opportunity to make clear which side they're on when they testify today at a hearing before the Senate Commerce Committee. If the agency buys the Bells' argument, consumers stand to lose out on $9 billion in savings that competition could bring, according to a new report by the Competitive Telecommunications Association, which represents Bell rivals. In Michigan, for example, competition forced SBC Ameritech to cut rates 33% in June. In New York, where Verizon competitors provide 25% of dial tones, customers save $700 million a year.
The advantages of ensuring an open field are obvious. Even so, the FCC has a long history of undermining competition. Consider:
* Cable TV. For a decade starting in the mid-1960s, the FCC hampered development of cable TV to protect the interests of local broadcasters, who saw cable as a threat. Cable systems couldn't show movies less than 10 years old or duplicate programs on over-the-air stations. When the FCC finally lifted the roadblocks, cable service exploded.
* Cellphones. The FCC delayed cellphone service nearly a decade, costing the country $86 billion in economic benefits, according to a 1991 study by several economists. Then in the 1980s and early 1990s, the commission limited the number of providers to just two in most markets, thinking that best served consumers. When the FCC abandoned those restrictions in 1994, competition took off, and prices plummeted.
* FM radio. The FCC hampered the spread of FM radio for decades. In 1945, some 55 stations broadcast in FM to 400,000 receivers; but then the FCC decided to give FM frequencies to TV. FM didn't recover from that setback to become a viable competitor to AM radio until the late 1960s.
The Bells hope to repeat history by persuading the FCC to let them charge competitors higher prices for access to switches needed to direct calls to the right phone. They claim that the states are forcing them to subsidize this piece of the network. What's needed instead, they argue, is for rivals to build their own networks to produce ''sustainable'' competition.
Both arguments fall flat. The states base their access fees on the Bells' own cost data. And sustainable competition won't emerge if competitors can't even get in the door. If the Bells are able to raise their fees, AT&T, MCI and others say they will abandon efforts to break into local residential markets, leaving consumers once again stuck with their monopoly provider.
What the Bells really want is as little competition as possible. Ever since the 1996 law was passed, they have tried to block rivals using an array of legal maneuvers and technical tricks. Along the way, they racked up an astonishing $2 billion in federal and state fines for undermining competition. They also broke promises to compete with other regional Bells in exchange for mergers that shrank the original seven Bells into four.
Despite that past, FCC Chairman Michael Powell appears sympathetic to the Bells' pleadings. Recently, he has called for companies to move away from renting phone networks and build their own.
Stripping away the current rules, however, would sacrifice real competition today for the promise of consumer choices sometime in the future. The Bells' track record suggests such a future is dubious.
States increasingly are appealing to the FCC to do the right thing for consumers. That's a powerful call the commissioners would do well to answer.
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