Copyright 1999 Boston Herald Inc.
The Boston Herald
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February 8, 1999 Monday ALL EDITIONS
SECTION: FINANCE; Pg. 029
LENGTH: 1472 words
HEADLINE:
This act gets panned; Many have hung-ups with telecom law; Telecom Act gets
panned
BYLINE: By JENNIFER HELDT POWELL
BODY:
In 1996, Congress passed a law to bring
competition to the local phone and cable service amid much fanfare over expanded
consumer choice and lower rates.
But your cable bill is most likely
higher than it was three years ago and your phone bill probably hasn't dropped
either. As for choice, most people have little more, if any, than they did
before the law changed.
Aside from a few large buildings in Boston, only
Arlington and Somerville residents can chose a cable TV service and a local
phone service, along with a long-distance company. Everyone else in
Massachusetts has to settle for the local monopoly in at least one of these
categories. To date, the 1996 Telecommunications Act appears to have been a
virtual failure, according to industry insiders and observers.
Nationwide, cable TV companies go head-to-head in fewer than 100 cities
and most residential phone customers have no options for local service. None of
the regional bells has been allowed into the long distance market.
While
some big-city and suburban residents can get fast Internet access over cable TV
networks, consumers in less populated areas often feel completely left out.
"Nobody seems to care about us," said North Adams Mayor John Barrett.
"We're getting hit hard because we don't have any effective competition."
What went wrong?
An ambiguous law spawned numerous legal
challenges that delayed moves within the phone and cable industries. Questions
over regulations have kept newcomers at bay. And it has taken time to put in
place the systems that will allow competition.
But all of that should
have been anticipated, according to some industry observers.
"It is
working modestly well - as well as could reasonably have been expected," said
Gerald W. Brock, a telecommunications professor at George Washington University
and former Federal Communications Commission common carrierbureau chief. "There
has been more litigation than optimists would have expected, but no one should
have been surprised given past practices."
By the time the law was
passed, cable companies were already upgrading their lines to someday offer
phone service and Internet access. The regional Bell telephone companies, which
had been confined to local monopolies since being carved out of the old American
Telephone & Telegraph Co. a decade earlier, were looking for new ventures.
The law allowed the Bells to move into long distance if they would first
open their local markets to competitors. The FCC set up a 14-point check list
for the Bells to follow.
"The presumption was that long distance
carriers would be so anxious to get into local service and local carriers would
be so anxious to get into long distance, that they would put all their
commercial disagreements behind them," said Paul Levy, a former Department of
Telecommunications chairman.
But that didn't happen.
The local
phone system is complex. Massive amounts of new equipment had to be installed to
be able to hook customers up to other companies. In addition, complicated
interconnection agreements must be hammered out.
That has taken
countless hours, said Levy, now an arbitrator helping to work out those
agreements.
AT&T and other carriers looking to move into the local
market said Bell Atlantic has stalled at every opportunity. It's difficult for a
monopoly to do things that will result in a loss of market share, said Michael
J. Morrissey, AT&T vice president.
"It goes against about a million
years of human nature," he said speaking from the perspective of a company that
has been on both sides.
Bell Atlantic and other regional Bells lay the
blame on long distance companies and complicated rules. They say the local
market is open.
"We're disappointed that we're losing market share, but
we haven't gotten our half of the bargain yet," said Jim Cullen, Bell Atlantic
president and chief operating officer. "The toughest part of this is figuring
out exactly what is required by the FCC and the Justice Department to get
approvals. It's a moving target."
Increasingly, companies are looking
for a way to avoid the old Bell system altogether by building their own
networks.
Cable operators are the furthest along in this effort, making
them attractive partners for long distance phone companies. AT&T, for
instance, is in the process of acquiring one of the nation's biggest cable
operators, TeleCommunications Inc., and partnering with another, Time Warner
Inc.
MediaOne offers local phone service over its cable lines to 27 of
the 134 communities it serves in the Bay State. Cablevision Systems Corp. plans
to launch phone service soon for some of its thousands of Bay State customers.
RCN Corp. already offers phone, Internet access and cable TV service in parts of
Boston, Arlington and Somerville and is spreading its network.
In some
places, RCN uses a fiber optic system installed by Boston Edison. That network
was initially built to monitor electrical lines and later expanded in
anticipation that it might someday be used for telecommunications.
But
these forays are not nearly enough in the eyes of consumer advocates.
Most who benefit from the law so far appear to be high-end users, a
recent study by Consumers Union and the Consumer Federation of America found.
The advocacy groups say about a quarter of the nation's households fall into
that category.
"The rest of us are sort of left behind in a virtual
monopoly," said Consumers Union spokeswoman Kathleen McShea. "In fact, we're
subsidizing the deals those high-end users are getting."
The heavy users
getting a break spend an estimated $ 200 a month on cable, phone and other
communications services and have a median income of $ 54,000, the study found.
Low-volume users, with a median annual income of $ 23,000, spend an estimated $
60 a month on phone and cable services.
One result has been a division
of societyinto technological haves and have-nots, the groups claim.
"They're getting away with it because the regulators aren't cracking
down and this is a greedy industry," McShea said.
Her group wants the
government to step in with price protections for consumers who make few
long-distance calls or live in less financially attractive areas, such as
Western Massachusetts.
Satellite TV services, which can be costly to
install, lack local broadcast stations, said Mayor Barrett of North Adams. He
said a lack of high-speed Internet access - not offered by local cable or phone
providers - is "strangling our economy."
But there are many who believe
the law should be left alone, at least for now. Competition may have gotten a
slow start, but it is gaining momentum, they said.
"It's definetly
moving in the right direction," said U.S. Rep. Ed Markey, D-Malden, who worked
on the original bill. "Every industry now accepts that there will be competition
in their own market."
The Bay State will take a giant leap toward
widespread local phone competition in April when the regional toll market is
made more accessible.
Until then, consumers who want to use a company
other than Bell Atlantic for regional toll calls must dial a special code before
the number they want to reach. As of April, customers can pick a company for
regional toll calls just as they do for long distance.
By the end of the
year, Bell Atlantic hopes to gain approval to move into the long distance
market. But by that time, the local giant could face an equally huge competitor
in SBC Communications, a Texas-based Bell in the process of acquiring
Chicago-based Ameritech, another of the original Baby Bells.
In
addition, two major court battles have recently been settled.
The
Supreme Court refused to take up a challenge to the '96 Telecom Act brought by
GTE and Bell Atlantic. The local phone companies claimed it was
unconstitutional. Uncertainty over whether the law would survive that challenge
led to some hesitation by would-be competitors, but the nation's high court
erased those doubts. The court's refusal to consider that argument firmly
established the legality of the act.
A few days later, the high court
ruled that only the FCC can set rates that the Bells charge other companies that
use their equipment. This ended delays in many states, where local regulators
sought to set rates. It also removed uncertainties for companies that want to
move into local service, industry observers said.
Gradually, wireless
phone service is becoming an option for phone customers, as prices come down.
Although wireless phone services have had little effect on the market so far,
industry experts predict they will gain ground as networks are built and
expanded. Already companies like AT&T offer one-rate plans that include
local and long distance service.
"Up until now it's been a failure,"
said Fred Voit, Yankee Group senior analyst, "Is it coming? You bet it's
coming."
LOAD-DATE: February 08, 1999
