Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, July 20, 1995 TAG: 9507200018
SECTION: EDITORIAL PAGE: A-11 EDITION: METRO
SOURCE: HUGH STALLARD
DATELINE: LENGTH: Long
Because the long-distance market is much less competitive than AT&T, MCI and Sprint would like you to believe.
That is the heart of a debate under way on Capitol Hill over legislation to reform the antiquated rules that govern America's communications industry. Those rules have helped the long-distance industry operate a cozy business protected by federal red tape. That stifles innovation, inflates costs to consumers and drastically limits customer choices.
On one side of the debate are Bell Atlantic and other companies that provide America's universal local telephone service. The American public and others who believe in additional competition join us. According to a recent public opinion survey by the Mellman Group and Public Opinion Strategies, 75 percent of Americans want full and open competition introduced immediately in all communications markets: cable television, local telephone service and long distance.
Bell Atlantic and the other Bell companies couldn't agree more. We are, in fact, so strongly committed to full competition in all markets that we are backing legislation now before Congress to end regulations that are responsible for any monopoly advantages we enjoyed in the local telephone market in the past.
We're ready to go head to head with new competitors as long as we have the ability, at the same time, to offer long distance and cable television to consumers, giving them more choices, better service and lower prices. We support full competition in all markets - including local, long distance, cable television and manufacturing.
On the other side of the debate are the long-distance giants AT&T, MCI, and Sprint. They say they too support full competition. What they really support is open competition in every market but their own. In fact, they have strongly opposed any bill that would allow the Bell companies to compete in long distance any time in the foreseeable future.
The reason is traced back to the $1.8 billion question. Current regulations prevent the Bell companies from competing in long distance, which has left the Big Three exercising their chummy control over some 90 percent of that market.
Consider first the windfall in access-charge reductions AT&T reaps on a regular basis. Access charges are the costs AT&T pays the Bell companies to complete calls through our local phone networks. The National Economic Research Associates found that in 1994 alone, AT&T, already one of the wealthiest companies in the world, pocketed nearly $1.8 billion in cost reductions from Bell Atlantic and the other local telephone companies. Those cost reductions were supposed to lead to a decrease in ordinary long-distance rates, but AT&T kept the money for itself. Not surprisingly, the study concluded that the long-distance market is not competitive, and that consumers pay a high price for the lack of competition.
That $1.8 billion is just a small part of what the Big Three's protection from competition costs consumers. AT&T, MCI and Sprint have used their domination of long distance to raise their rates six times in five years, acting virtually in lockstep, according to an analysis released earlier this year by The WEFA Group, a well-respected econometric think tank.
Just this past May, AT&T announced a 5.3 percent rate increase - barely one week after Bell Atlantic and the other Bell companies had announced new reductions in charges to AT&T. According to The Wall Street Journal, AT&T plans to ``pocket another $330 million'' of reductions in local-access charges rather than pass them on to consumers.
The long-distance giants can't deny that they have raised rates in the face of lower costs, so they argue that increasing basic rates doesn't affect consumers. They claim that most calls are made using a variety of discount-calling plans available to consumers. ``Nobody, absolutely nobody, pays sticker price,'' MCI President Gerald H. Taylor has claimed.
He's dead wrong.
A recent analysis of individual phone bills by PNR Associates, a survey research firm, found that fewer than one-third of domestic long-distance calls are discounted. More than 68 percent are billed a full price at rates the Big Three have increased steadily. Other studies by the Yankee Group also found that two-thirds of American consumers don't benefit from the discount plans.
The long-distance giants also like to point to the television ads they run attacking one another. In fact, the ads are like pro wrestling: Despite all the noise, threats and name calling, in the end everybody is in it together. In fact, the long-distance companies appear to be funding their ``ad wars'' through rate increases.
AT&T, MCI and Sprint reap so many benefits from what amounts to a government-protected oligopoly that they are doing everything they can to hang on to it as communication reform moves through Congress. They have raised objection after objection to any bill that takes important steps to full competition. If they can't protect the privileges they now enjoy, it seems clear they are willing to see communications reform fail.
Bell Atlantic and the other Bell telephone companies believe the surest way for consumers to get better prices, better service and new choices is to begin full competition in all communications markets now. We want Congress to do just that. Anything short of full competition will mean more windfalls for AT&T and friends, with consumers footing the bill.
Hugh Stallard is president of Bell Atlantic, Virginia.
by CNB