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Consumers will suffer if FCC changes rules for phone
Copyright 2003, Star-Gazette, Elmira. All Rights Reserved.
" Local call charges would remain low by ensuring
If the only bridge in and out of town was owned by the
monopoly local bus company, which let only its buses cross the
bridge, most of us would scream for competition.
The Federal Communications Commission is perilously close
to giving the Baby Bell telephone companies that same type of
control over the nation's phone system. The end result will be
higher telephone and Internet access charges and slower growth
Congress passed the Tele-communications Act of 1996 to
extend competition across the entire telecom marketplace and
to give consumers and small business new choices and better
The Telecom Act created competition in the "last mile" of
the telephone by forcing the Baby Bell phone monopolies, such
as Verizon, SBC and BellSouth, to lease their networks to
It was a proven strategy that successfully opened
AT&T's longdistance network to competitors and sharply
reduced the price consumers pay for long-distance.
Until very recently the local market remained monopolized
because, in most instances, the prices the Bells charged to
lease use of their network remained prohibitively high.
But public utility commissions in many states have
intervened to cut these prices sharply in the past two years
and the lower rates fired competition. In the third quarter of
2002 alone, SBC said 751,000 of its local customers switched
And prices are down. For example, in New York,
Telecommunications Research and Action Center estimates that
consumers will average $99 in annual savings on their local
Similar rate reductions from nationwide competition could
save Americans more than $9 billion a year, according to one
Now, just as consumers start to reap these benefits, the
FCC is considering eliminating, or at a minimum, seriously
limiting, the leasing of the last mile.
Advocates such as FCC Chairman Michael Powell say that
these limitations will force new entrants to build their own
networks. But this is a false hope.
The Bells' local networks are too expensive to replicate.
Cut access to these networks, and there will be practically no
entry in "the last mile" and we will soon be back to the old
Consider the bridge we began with. In 1996, Congress orders
the monopolist to allow buses of other companies to cross the
bridge. But in 2003, the federal regulator says that it is OK
for the monopolist to keep competitors' buses from crossing
The regulator says the competing bus companies will now
build their own parallel bridges.
By this logic, it matters little how expensive it is to
build a second or a third bridge; that it would take years to
build the new bridges; or that, in the meantime, anyone who
wants to cross the water is at the mercy of the bridge
monopolist, who will be free to raise prices with little
A better choice is to let markets play their creative roles
- giving consumers choices and saving them money.
The FCC must not sacrifice the competitive vision of the
Telecommunications Act of 1996 in the false belief that
competitors will build an expensive second bridge.
Nicholas Economides is a professor of economics at
New York University's Stern School of Business and an adviser
to AT&T on economic issues. Guest View offers an
opportunity to comment in-depth about an interest or to
address specific issues.
Today's Guest View by New York University professor
Nicholas Economides runs counter to that of Corning
Inc. executives, who believe the Federal Communications
Commission proposal would help the company jump-start its
struggling telecommunications divisions.
Corning Inc. hopes the FCC will rescind regulations that
require major telecommunications companies, such as Verizon,
to provide smaller competitors with low-cost access to their
Last week, Corning Inc. Chairman James R. Houghton said in
an interview with the Star-Gazette that an FCC change in
regulations could touch off a surge in network-building, thus
increasing orders for Corning's optical fiber and cable. The
FCC decision is slated to be made today.