Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, March 7, 1994 TAG: 9403080023
SECTION: EDITORIAL PAGE: A-7 EDITION: METRO
SOURCE: By JAMES M. SMITH
DATELINE: LENGTH: Long
But while the offspring of Ma Bell continue to spread their tentacles, grabbing today's headlines and tomorrow's market share, current long-distance consumers may want to grab their wallets. Legislation in the House of Representatives would allow the Bell companies to provide many long-distance services - including unlimited intrastate services - prohibited under the antitrust judgment that broke up the Bell System a decade ago because of its anti-competitive abuse of its local service/long-distance monopoly.
Since the breakup of the Bell System and the competition that followed, consumers have become accustomed to paying dramatically lower prices for higher quality long-distance service. A recent economic analysis of the long-distance industry by Stanford University economist Robert Hall revealed that such competition , along with increased productivity, has lowered long-distance prices by 63 percent relative to the general price level. In other words, the same long-distance phone call that cost 41 cents in 1985 now costs about 14 cents.
One would be hard-pressed to think of any other product or service that costs nearly two-thirds less today than it did almost a decade ago. Over the same period, consumers also have become accustomed to higher prices for the Bell companies' local phone services.
In addition to lower consumer prices, long-distance customers now benefit from tremendous improvements in quality, including the virtual elimination of background noise, cross-talk, echoes and dropped calls. Moreover, an explosion of technological developments has led to such new services as videoconferencing, new 800 services and virtual data networks.
Likewise, about 400 long-distance competitors, battling for market share, are catering to customers through a variety of discount and customized calling plans, like MCI's ``Friends & Family,'' Sprint's ``Most'' and many others offered by providers without national name recognition but with strong regional reputations.
So, what's the problem? Well, those same Baby Bells who haven't tended to their own local ramps onto the information superhighway can't seem to get the long-distance market out of their minds. They already obtain huge revenues from long-distance companies - about 45 cents of every long-distance dollar is paid to the phone companies for access to local customers. Now the Bells evidently want the other 55 cents. This, even as all acknowledge that the Bells maintain bottleneck local monopolies handling more than 99 percent of local calls and the local beginnings and ends of virtually all long-distance calls.
As the Bell companies lobby Congress and the FCC to lift or gut restrictions that were carefully designed a decade ago to prevent their gaining control of both local and long-distance telephone service, consumers are faced with the prospect of going ``back to the future.'' Such a trip could return them to a past marked by higher prices and fewer choices.
Unlike the long-distance industry, which has reduced prices and passed the savings from technological innovations on to consumers, the Bell companies have used their monopoly position in local markets to increase profits at the expense of their customers. It is no surprise, then, that these companies jealously guard their local monopolies even as they beckon to extend their reach to long-distance. By the same token, it's a safe bet that the Baby Bells are not as interested in extending the fruits of competition in long-distance as they are in seeking a stranglehold over both the local and long-distance market.
Once this control is achieved, the Bell companies will be perfectly positioned to resume the anti-competitive practices outlawed at the time of divestiture. Indeed, they recently pledged to increase their local telecommunications infrastructure spending by $120 f+ibilliono over the next 15 years - f+iifo they're allowed to provide long-distance services. Clearly, they must be assuming they will quickly regain domination over these services.
Stanford's Hall notes that if the current structural separation is abandoned and there is joint control of local and long-distance service, conditions for effective competition among long-distance carriers may be compromised. Local telephone companies could favor their own long-distance arms over their competitors. A local telephone company could conceivably subsidize its long-distance operations by charging some of those expenses to its regulated local business. Ultimately, such activity translates into higher prices and limited choices for long-distance consumers.The future is bright enough for the Baby Bells, with new possibilities for growth and expansion into the new frontiers of telecommunications. (Today, the nation's largest cable operator, tomorrow, the largest movie and televison studio?) Seen in this light, their clamor to re-enter the long-distance market rings hollow. To consumers, it should sound an alarm.
Separate control of local and long-distance service is today, as it was nearly a decade ago, a matter of sound economics, and it has been an extraordinary American success story. It is the most effective way to ensure reliable, efficient long-distance service, provide consumers freedom of choice among long-distance carriers and help consumers hold onto their wallets. Ma Bell's children are at that awkward age of adolescence - gangly, defiant of authority and a little self-centered. We must enforce the benevolent discipline imposed by the restrictions that maintain the separation of ownership of monopoly local telephone service and competitive long-distance service.
James M. Smith is president of the Competitive Telecommunications Association, which is composed of more than 100 long-distance telecommunications companies throughout the nation.
by CNB