Five Years after Passage, Competitive Promise of Telecom Act Taking Hold

SAN ANTONIO -- The federal Telecommunications Act of 1996 is working to bring competition to the voice telephone business and policymakers should resist attempts to restructure the telecom industry, a move that would place at risk newly won consumer benefits, two executives of the local telephone industry told state legislators today at their annual conference.

Allowing Bell companies like Verizon into long distance has spurred competition and led to consumer savings, but a new Bell breakup could backfire and raise consumer prices, the telephone company representatives said.

''For the first time, long-distance companies like AT&T are getting serious about competing in the local telephone business,'' said Link Hoewing, Verizon assistant vice president - Internet and Technology Policy, at the annual meeting of the National Conference of State Legislators.

''AT&T alone now has close to a million local lines in service in New York state,'' Hoewing said. He cited a report by the State of New York Public Service Commission saying yearend 2000 figures show that, for the first time, competitors serve more residential lines than business lines. AT&T said last week that it has signed up 100,000 residential customers in Massachusetts that it serves entirely over its own cable facilities. ''Competition begets competition, and customers benefit from that competition, saving $700 million per year in New York alone,'' he said.

''On the other hand, with a more broadly focused package of services, Verizon has won more than 20 percent of the residential long-distance market in New York, '' Hoewing said. ''State regulators can speed the spread of such consumer benefits nationwide by quickly reviewing and approving Bell applications to enter the long-distance business.''

In addition to New York, Verizon offers long distance in Massachusetts and has approval to offer long distance to its customers in Connecticut. Verizon has an application pending at the Federal Communications Commission to offer long-distance service in Pennsylvania. SBC has been authorized to provide long-distance in Texas, Oklahoma and Missouri. BellSouth has similar applications pending in all nine of the states in its region.

Also appearing on the panel on the status of telecom competition, BellSouth Vice President Governmental Affairs Herschel Abbott cited research that shows local competition is growing faster than long-distance competition did when it was introduced. ''By traditional measures, which we think are outdated, the competing local phone companies have almost 10 percent of the market share. At the same point in their development, long-distance competitors to AT&T had just about 6 percent market share.''

''The reason we hear that there is no competition is all the anecdotes -- like consumers saying they don't get sales calls from local telcos at dinnertime. But, you can bet that telecom managers at small and medium businesses are getting calls and visits from these competing telcos during business hours,'' Abbott said. ''You can't just listen to the anecdotes, you've got to look at the facts. Those facts are: more than 300 companies offer local service in the BellSouth region. In Atlanta alone, 125 competitors are chasing the business market in competition with BellSouth. Now suppose each of those companies had a business plan calling for just 2 percent market share. That would be 250 percent of the market, excluding whatever BellSouth might keep. It just can't happen.

''Our competitors are smart, they know how to follow the money,'' Abbott said. ''And Wall Street appreciates that. On a per-line basis, the market capitalization -- the total value of all of their shares of stock -- for the publicly traded CLECs is higher than it is for the incumbents.''

Verizon's Hoewing pointed out that local telephone companies face competition from more than just competitive local exchange carriers (called CLECs, pronounced SEE-leks). ''The concept of the phone as the primary communications tool is outdated,'' said Hoewing. ''People now have a portfolio of electronic communications options -- Instant Messaging, e-mail, wireless phones, IP telephony -- they can and do use to fit their needs at any given moment. All of these options mean more choice for consumers and more competition for landline phone providers and indeed traditional long-distance carriers.

Hoewing cited statistics showing that almost a billion instant messages are sent each day in this country; over 160 billion e-mails are sent annually, significantly outpacing traditional postal mail; and almost four times as many wireless customers sign up for service daily as do new landline subscribers. Studies by analyst firms show that IM users are well aware that they are making connections to others using their computers that would have been completed in the past with landline phone calls. Trends indicate that Instant Messaging is growing quickly in major corporations, too. IM adoption by companies on a large scale will introduce even more competition into the marketplace.

''Technology has ended any chance one company could monopolize communications,'' BellSouth's Abbott said.

Refuting the notion that the Bells are responsible for the recent high-profile bankruptcy filings by some of the better known high-speed data competitors, Abbott pointed out that the Bells have no particular control over the high-speed access market -- cable companies, like AT&T, control about 70 percent of the installed high-speed customer lines.

Hoewing urged the legislators to reject suggestions by competitors that Bells be further hamstrung by being forced to breakup into structurally separate wholesale and retail companies. ''That would be a waste of money -- the government's money, the companies' money and the consumer's money. Congress considered that idea and rejected it; any place else at the state level where the proposal has been given serious consideration, it has been rejected,'' Hoewing said. ''We know that the Telecom Act is working in traditional voice markets to encourage competition. Structural separation represents a reversal of the successful tenets of the Telecom Act and would delay, not enhance, the already rapid pace of competition.''

''The lesson we ought to learn from the Telecom Act,'' Abbott said, ''is that less regulation, not more, is the key to boosting competition.''

Verizon Communications (NYSE:VZ) is one of the world's leading providers of communications services. Verizon companies are the largest providers of wireline and wireless communications in the United States, with 125 million access line equivalents and approximately 28 million wireless customers. Verizon is also the largest directory publisher in the world. A Fortune 10 company with approximately $65 billion in annual revenues and about 260,000 employees, Verizon's global presence extends to more than 40 countries in the Americas, Europe, Asia and the Pacific. For more information on Verizon, visit http://www.verizon.com

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BellSouth Corporation (NYSE: BLS) is a Fortune 100 communications services company headquartered in Atlanta, serving nearly 46-million customers in the United States and 16 other countries. Consistently recognized for customer satisfaction, BellSouth provides a full array of broadband data and e-commerce solutions to business customers, including Web hosting and other Internet services. In the residential market, BellSouth offers DSL high-speed Internet access, advanced voice features and other services. BellSouth also provides online and directory advertising services, including BellSouth® Real Pages^SM.com

BellSouth owns 40 percent of Cingular Wireless, the nation's second largest wireless company, which provides innovative wireless data and voice services. More information about BellSouth can be found at http://www.bellsouthcorp.com