Independent's eye view of Bell breakup
People wanting to know how the Jan. 1 breakup of American Telephone & Telegraph (AT&T) will affect customers have tended to focus on the 22 about-to-be-spun-off Bell operating companies.
But those companies aren't the whole pie. One in five telephones in the country is served by one of the 1,432 independent phone companies operating across the United States. They range from mom-and-pop businesses, small family-owned companies serving only a few thousand households, to corporate giants whose stock is traded on the Big Board.
What will divestiture mean for them?
About the same thing it will mean for the Bell operating companies. Both the Bell and non-Bell companies will lose subsidies from AT&T long-distance service and are expected to raise local service rates to compensate. And both types will have new opportunities to expand into new technologies.
The distinction will be not between Bell and non-Bell companies, but between companies who can take advantage of these opportunities and those who cannot.
''I think our members are for the most part looking forward to the new environment,'' says Robert M. Pirnie, former president of the United States Telephone Association (USTA), the independents' trade association. ''We like to think that we can rely on our innovativeness in order to move our companies ahead, rather than look to our public-service commissions.''
For the independents, as for the rest of the telecommunications industry, survival and prosperity under deregulation will hinge on aggressive marketing of new services.
''Obviously, it will do us well to stick to our knitting and concentrate on being the network of choice within our franchised areas,'' J.L. Johnson, president of the Telephone Operating Group of GTE Service Corporation, told USTA's convention here last month. But ''in rural communities certainly, the telephone company stands the obvious opportunity to be the source of total community and areawide telecommunications. This may involve new or expanded ventures'' into cable, satellite, and other technologies.
However, both the independents and the Bell operating companies have been left somewhat in the lurch by the Federal Communications Commission's (FCC) announcement that the controversial access charge will not be imposed until April 3, 90 days after divestiture. The FCC had ordered local phone companies, Bell and non-Bell, to charge residential customers $2 a month and business users Meanwhile, legislation to restrict or kill the charges is pending in Congress.
The local companies were counting on income from access charges to make up for the cutoff of funds from AT&T's long-distance arm. But now, ''there is no mechanism for the transfer of funds'' from AT&T to the independents and soon-to-be-divested operating companies, Mr. Pirnie says, although he plays down the problem.
Before the FCC announcement, USTA had endorsed the access charge, as long as strict monitoring found the charges didn't force poor people to give up their phones.
Enthusiasm within USTA for the access charges was less than overwhelming, however. Asked about this, Pirnie, who is president of the 4,000-station Union Springs, Ala., Telephone Company, conceded that there was some skepticism, particularly among smaller members. ''But I think the prime reason for that is that the larger companies have a little better understanding at this point, because of their staffs and their ability to project their long-term revenue streams.''
The smaller companies were skeptical about loss of revenue from long-distance service. The popular wisdom is that a number of them will be bought out by their larger brethren.
''The access charge will help in the short run, because of the revenue it will provide, but it will hurt in the long run,'' says Mark Clay, assistant manager of the Hutchinson Telephone Company in Hutchinson, Minn. ''People will see their rates go up once (as a result of the access charge) and then they'll see them go up again,'' he says, echoing the widely held perception that access-charge revenue will not prevent local rates from rising fairly soon. ''The public will rebel.''
High rates are already driving customers off the system, he maintains - disagreeing with Pirnie, who cites studies that flat rates of $20 to $25 monthly will exclude only 1 to 1.5 percent of the customers.
Mr. Clay also questions how realistic new services are for smaller companies. ''The big independents can get into exotic technologies, but the little ones can't. It costs $100,000 just to do research for a license for videotext, for example,'' he says.
But Pirnie argues that ''divestiture offers more opportunities to our customers than to our companies at the moment, and that competitive environment I think then will bring forth greater opportunities for our companies. It's going to be harder to run our companies, but it's going to be better for the customer.''
Crucial to this scenario is the assumption that costs of new technology will fall fast enough for small companies to take advantage of it in time to forestall acquisitions.
One major development Pirnie foresees is the demise of flat rates for unlimited local dialing.
''The average person's phone is in use for only 20 minutes out of 24 hours,'' he says. Flat rates may indeed rise into the $30-$40 monthly range. But local measured service - ''message units'' - is typically available for around one-third that much.
Moreover, the phone companies are likely to find their path to survival by offering customers more services on equipment already in place.