Copyright 2000 Chicago Sun-Times, Inc.
Chicago
Sun-Times
February 21, 2000, MONDAY, Late
Sports Final Edition
SECTION: FINANCIAL; Pg. 50
LENGTH: 845 words
HEADLINE:
Fighting over local service;
Competition creeps into residences
SOURCE: RICH HEIN
BYLINE: BY
ROBERT MANOR
BODY:
As if it wasn't tough enough
figuring out what long distance service to choose, sooner or later Illinois
residents will have to decide on the local phone service they want.
Competitors in Chicago and elsewhere are starting to nibble away at the
Ameritech monolith, offering phone service in some locations at a discount along
with cheaper long distance, Internet access and cable TV.
Ameritech
still maintains a near monopoly on local phone service for
residents -- the company says it has 92 percent of the residential
market. But that is about twice as much competition as the average for the
nation. The Federal Telecommunications Act of 1996 deregulated
the telephone industry. At the time it was thought that phone, cable and
cellular companies would rapidly invade each other's business. One goal was to
create competition for residential phone service to drive rates down and create
new services.
For the vast majority, competition isn't here just yet.
But it's coming.
"At some point, competition is going to
accelerate very rapidly," said Douglas Dougherty, president of the Illinois
Telecommunications Association. "It's within three to five years."
Dougherty said several credible competitors have sprung up to win
residential customers from Ameritech in some parts of the state.
McLeodUSA is rolling out phone service to small- and mid-size cities
such as Springfield and Peoria. 21st Century Telecom Group is making a major
push in parts of Chicago. AT&T, the behemoth of the industry, will begin
offering phone service through its huge cable TV operations here next year.
Dougherty said Ameritech's competitors are bundling
services -- local, long distance, Internet or cable
TV -- and offering progressively higher discounts.
"You could
basically get free telephone service if you buy the other services from the
company," he said.
There is a downside to competition.
Consumer
advocates say people may be as bewildered by a barrage of offers for local phone
service as they are now confused by offers for long distance.
Very few
people can be certain they are getting the cheapest long distance deal. That
same uncertainty will apply to obtaining the cheapest local service.
The
Citizens Utility Board says people who simply want a phone, not a
telecommunications network, could find themselves ignored as phone companies
market themselves to more lucrative customers.
It costs a lot of money
to go after any of Ameritech's customers.
21st Century Telecom has bet $
250 million that Chicagoans living within walking distance of the lakefront
would like to ditch Ameritech. The company says it is close to attracting 11,000
customers.
The company has strung a fiber-optic backbone beneath the
tracks of the CTA's Red Line to serve buildings near the lake.
"We
launched our service late last year," said Marc Miller, vice president of
marketing for 21st Century. "We have found a really high demand, much higher
than we expected, from people who do want a choice."
21st Century is
pursuing an as-yet-unproved theory: Sell someone phone service at a discount,
and they are apt to sign up for more profitable long distance and Internet
access and cable TV as well.
"We want to get people on our network and
sell them multiple services," Miller said.
The company guarantees that
its local phone service will be 15 percent cheaper than Ameritech's. The
discount grows greater as the customer adds services. It is possible to save 30
percent on local service by taking 21st Century's cable TV, Internet and long
distance. Long distance is a cheap 9.9 cents a minute, with no monthly charge.
21st Century is relatively small, currently able to serve no more than
350,000 households.
A much larger competitor is looming over Chicago.
AT&T plans to offer residential phone service through its cable TV
network next year. AT&T bought TCI last year and can serve up to 2.7 million
households throughout Chicago and the suburbs.
"By 2001 or 2002, our
goal is to be a competitor," said AT&T cable spokeswoman Pat Keenan.
AT&T will offer a bundle of telecommunications at a discount. The company
has not disclosed its pricing.
Competition is fine, says Martin Cohen,
executive director of the Citizens Utility Board, but it may not benefit
everyone.
"If competition doesn't produce lower rates and better
service, what good is it?" asked Cohen. "The mantra in the industry is
competition for its own sake."
Cohen said people who buy long distance
and cable and Internet service are likely to see their local phone service costs
go way down.
"But that bundle might cost you $ 150 or $ 200 a month," he
said. Meanwhile, people who simply want a telephone will gain little.
Then there is the confusion factor -- how can anyone be
certain they are getting the best deal possible? If it is difficult to find the
best long distance carrier, how hard will it be to find the best bundle of
telecommunications services?
"Consumers are at risk of making mistakes
due to the bewildering offers we are beginning to see," Cohen said.
GRAPHIC: Marc Miller is vice president of marketing for
21st Century Telecom, which began service late last year and is making a major
push in parts of Chicago. "We want to get people on our network and sell them
multiple services," Miller said. A technician works on 21st Century Telecom's
fiber-optic network. The company has built a backbone beneath the Red Line
tracks. MAP; See roll microfilm. See also related story.
LOAD-DATE: February 22, 2000 
