- The Washington Times - Thursday, February 8, 2001

One of the most pro-consumer pieces of legislation enacted has done little to help consumers in the five years since it took effect.

The Telecommunications Act of 1996 was intended to reduce local calling rates in much the same way rates for long-distance service plummeted after the 1984 breakup of AT&T; Corp.

But as of the bill's fifth anniversary today, the legislation has done almost nothing to reduce local calling rates because it hasn't significantly increased competition for the service.

The average rate for local calling service in urban areas in 1999 was 8 cents a month lower than it was in 1996, according to a Federal Communications Commission (FCC) report issued in December.

"Any fair judge of the Telecommunications Act of 1996 would have to conclude that it has been a total and unmitigated disaster," said Robert Rosenberg, president of Insight Research Corp., a Parsippany, N.J.-based telecommunications market research firm.

In Maryland, Verizon Communications Inc. still has 97 percent of the market for local calling service.

In the areas of Virginia where it provides service, Verizon has 96 percent of the local calling market.

The company has a 92.3 percent share of the District of Columbia's market.

That dominance five years after President Clinton signed the Telecommunications Act is not what supporters had in mind when they pushed for the bill.

"The intent of the bill was good to provide a blueprint for telecommunications reform. Unfortunately, little has changed," said Maureen O'Connor, executive director of the Maryland Coalition for Local Telephone Competition.

Michael Powell, a Republican and incoming chairman of the FCC, said Tuesday that less regulation convinces new companies to enter the market, increasing consumer choices.

"I do not believe deregulation is like the dessert that you serve after people have fed on their vegetables," Mr. Powell said. "I believe deregulation is instead a critical ingredient for facilitating competition."

Just why little has changed is open to debate.

Consumer groups place most blame on the regional Bell operating companies, or "Baby Bells."

"The biggest players have refused to open their markets, refused to negotiate in good faith, litigated every nook and cranny of the law and avoided head-to-head competition like the plague," said Mark Cooper, research director of the Consumer Federation of America.

The Baby Bells also have avoided competing with each other for local customers. That was unexpected. In fact, the opposite has happened they have consolidated. In 1996, there were seven Baby Bells. Now there are four: Verizon, which was created in June when Bell Atlantic Corp. bought GTE Corp.; SBC Communications Inc.; US West; and BellSouth Corp.

The Baby Bells don't have many competitors, either.

The law to end their monopoly has led to an increase in companies offering local calling service. The number of new companies, called competitive local-exchange carriers, or CLECs, has grown to about 150 nationwide.

But the CLECs had just 12.7 million of the approximately 192 million U.S. consumers subscribing to local telephone service at the end of 2000, according to the FCC. That was up from the 8.3 million local calling customers the CLECs had in 1999.

Some CLECs, like Herndon, Va.-based E.Spire Communications Inc., are struggling while the Baby Bells delay opening their networks to companies that must rely on the Baby Bell network to offer local-calling service.

E.Spire lost $215.4 million through the first nine months of 2000.

"I think we expected too much from the CLECs. We expected them to build their networks, do it at lower cost and get customers," Mr. Rosenberg said.

Despite the slow opening of local markets and expensive investment required to offer the calling service, the competing companies said yesterday they are mostly pleased with the Telecommunications Act.

"The long-distance market is open. Competition is about making sure the local markets also are open," said H. Russell Frisby Jr., president of CompTel, an industry group representing CLECs.

Rather than replace the much-maligned Telecommunications Act, the CLECs support bolstering the law by giving regulatory agencies like the FCC and state public utilities commissions more power to levy fines against the Baby Bells that don't quickly open networks for competitors. They also want to prevent Baby Bells from what they call "remonopolizing," or getting legislation that would allow them to enter the market for long-distance calling service before they allow competition for local calling.

Last year, Rep. W.J. "Billy" Tauzin, Louisiana Republican, sponsored a measure that would allow Baby Bells to immediately enter the long-distance market without having to fulfill their obligation to open local service to competition first.

The bill was blocked, but a new version is expected to be reintroduced.

The Baby Bells also are hoping legislators make changes to the Telecommunications Act so they can better compete in the market for cable service and broad-band Internet access over cable lines.

Just as the CLECs complain that the Baby Bells have delayed opening their networks, the Baby Bells complain the cable companies are freezing them out.

So far, the only phone company to offer cable service SBC Communications, through its purchase of Ameritech has left the business.

That lack of competition has caused cable rates to increase two to three times the rate of inflation since 1996, the Consumers Union said.

Meanwhile, consumer groups are miffed that local phone rates remain high and that little has been done to give consumers relief.

"We need a renewed commitment to competition, and we know we don't have that. We would like to see the kind of competition in local calling that we see in the wireless industry," said Teresa T. Gregson, executive director of Virginians For Local Telephone Competition.

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