Razing House Ma Bell Built
IN 1984, the United States broke Ma Bell's monopoly on the telephone business and opened the floodgates to long-distance competition. Ten years later, Congress is trying to finish the job.
The House of Representatives has passed, and the Senate next month is expected to take up, legislation that would tear down the remains of a 60-year-old monopoly. Such legislation would have far-reaching effects for consumers.
Within a few years, families might make phone calls through the same lines that carry their television cables. More importantly, by allowing local telephone, long-distance, and cable-TV companies to get into each others' businesses, Congress hopes to spur the building of a 21st-century communications network.
``What everybody is anticipating is that when you have much better facilities to send information, you're going to have some entrepreneurship and you're going to have new services developed ... to everybody's home,'' says Larry Clinton, executive director of government relations for the US Telephone Association in Washington.
Whether consumers really want such things is still an open question. Even if these new services aren't as successful as some predict, consumers can still count on several concrete benefits. Most consumers will be able to choose their local telephone company, just as they choose their long-distance carrier today.
And with lower rates and, more competitors offering local service, prices should drop. Currently, nearly half of each dollar spent on long-distance gets funneled back to the regional Bell telephone companies in the form of access fees. With more competition, access fees should drop, allowing long-distance rates to fall as well.
Congress will have to tread carefully to make this happen. Currently, business and urban customers subsidize the higher costs of getting local service to rural regions. If the new telephone providers merely serve highly lucrative business customers, the current local phone companies won't be able to afford the $20 billion they say they pay annually to subsidize rural service.
The newcomers are supposed to pay into a subsidy fund, but local telephone companies say the language of the Senate bill leaves too many loopholes. That lawmakers have gotten as far as they have is remarkable. After years of hostile debate among the various industries, in June the House passed a bill to liberalize the telecommunications industry. Prospects brightened further this month when the US Senate Committee on Commerce, Science, and Transportation approved related legislation by a strong 18 to 2 vote.
Before the Senate committee vote, chances of passage were about 50-50, says Herb Linnen, spokesman for AT&T, the long-distance telephone giant. Now, ``it has moved to 60-40'' in favor of passage.
Not everyone is so sanguine about the Senate bill pushed through by Sen. Ernest Hollings (D) of South Carolina. ``We have a 30 to 40 percent chance of getting a decent bill,'' says Bill McCloskey, spokesman for a coalition of the regional Bell telephone companies. With Congress nearing the end of the legislative session, still trying to pass health care and crime bills, the Senate leadership is not likely to try to pass other controversial measures, he adds.
``I don't think Sen. [George] Mitchell will allow a train wreck to come to the floor.''
Local phone companies are unhappy because the Senate bill puts far more restrictions on them than the House version. Partly, this is a debate about timing; partly, about balance.
As it stands, the Senate measure allows cable-TV companies to enter the local phone business after one year. But local phone companies cannot enter the cable-TV business before they can show the Federal Communications Commission and the US attorney general that they have opened up their own phone networks to competitors. They claim the process will take three to five years. Even then, local phone companies claim they'll be forced to maintain a more onerous corporate structure than their cable-TV rivals.
Local phone companies also dislike provisions that could force them to charge lower rates to certain institutions, such as schools and museums, that offer free service to the public. The bill would also make telecommunications companies set aside up to 5 percent of their network for public purposes, ensuring that the poor and disadvantaged have a minimum level of access to the emerging information networks.
``This Hollings bill is tremendously regulatory,'' complains Mr. McCloskey, ``and that is not the way government is going.'' It's not clear how much clout the seven regional Bell companies will have in changing the legislation. In recent weeks, their own coalition has shown signs of strain, and they are meeting to iron out their own differences on the plan.