Telecommunications Reform

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June 29 1997 3:30 AM

Telecommunications Reform

(Continued from Page 1)

Competitors have not rushed in. The Baby Bells still monopolize the local-household phone market (although competition for business phone customers is more visible). AT&T--though it is gradually losing market share and lives in fear of Baby Bells entering the market--still dominates long distance. The cable companies are facing some increased competition from direct-broadcast satellite providers, but they have maintained their grip. (Rupert Murdoch recently abandoned plans for a major satellite assault on the cable market.) Ironically, price competition has emerged most robustly among businesses not addressed by the new law, such as DBS, cellular phone, and Internet service providers.


The hoped-for "convergence" of industries and technologies has not come to pass. The big cable companies--balking at the costs of converting one-way cable to two-way voice lines--have shelved plans to get into the local phone business. Likewise the Baby Bells, who, facing economic and technical obstacles, have abandoned plans to branch out into video. And the long-distance companies have made only tentative steps toward invading the local residential-telephone market. Even for a mammoth like AT&T, the economics of going local are close to prohibitive, because the "local loop" is the most expensive part of the entire system to build and operate. AT&T's plan, announced in February, to use wireless systems to offer local phone service has been widely dismissed as unconvincing. It would be much cheaper for the Baby Bells, with local facilities and a built-in customer base, to break into the long-distance market. But that 14-point checklist is a formidable obstacle.

Meanwhile, merger mania has seized the telecom industry. The Justice Department approved a merger between Bell Atlantic and NYNEX in April. Time Warner bought Turner Broadcasting. Westinghouse purchased both CBS and radio rival Infinity Broadcasting. And U.K. giant British Telecom purchased MCI. Now AT&T wants to merge with SBC (which became the nation's largest Baby Bell by swallowing Pacific Telesis), a move strongly opposed by outgoing FCC Chairman Reed Hundt.

David Franklin has written for the New Republic and the East European Constitutional Review. He lives in Chicago.



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