Article 2 of 36
Opinion; A
Consumers will suffer if FCC changes rules for phone service
Nicholas Economides
Star-Gazette, Elmira
Page 11A
(c) Copyright 2003, Star-Gazette, Elmira. All Rights Reserved.

" Local call charges would remain low by ensuring competition.

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 in broadband.

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 prices.

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 potential competitors.

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 to competitors.

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 telephone bill.

Similar rate reductions from nationwide competition could save Americans more than $9 billion a year, according to one recent study.

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 monopoly.

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 bridge.

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 limit.

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.

Another view

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 networks.

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.



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