Competition has many faces

The Yankee Group's report that incumbent local exchange carriers still serve some 99% of the residential market fueled some tut-tutting that the Telecom Reform Act of 1996 is not working and that competition in the local exchange will remain a myth without further government action.

Let's not rush to judgment.

In this week's issue, coinciding with Supercomm '97, Telephony seeks to bring some basic information and some context to the debate. In the special report that begins on page 38, our staff gets behind the rhetoric to determine the true state of local exchange competition in the U.S.

As Sandra Guy reports, competitors have captured about 20% of Nynex's New York City business customers, according to Northern Business Information. Across the country, there were some 20 competitive LECs offering high-speed service in 100 metropolitan areas last year.

Admittedly, the average residential consumer has seen only indirect benefits, and the power to choose service providers may still be a few years away. But regulators and others in the media should be skeptical of any claims, especially from the interexchange carrier and CLEC interests, that significant competition does not exist. Yet, while their monopolies crumble, the LECs could be acting smarter.

What is just as clear as the growing market power of CLECs and IXCs is the amount of stonewalling some LECs, particularly SBC Communications and U S West, are doing to prevent challengers from grabbing too large a foothold too soon.

It's not that we need more laws or regulation. We need more open-minded regulators. Choices businesses have, as well as the activity of wireless companies and Internet service providers, must be considered. Regulators must be extremely careful about putting LECs in a class by themselves. If other service providers prove successful at providing the same service utility, but with packet data networks or digital microwave as opposed to circuit switching over copper, then the monopoly power of an incumbent LEC automatically comes into question.

It is worth recalling that there was considerable competition in long-distance before MCI and Sprint started marketing to consumers. In the local exchange, it may be some time before a real choice of 64 kb/s dial tone service provider appears. But by then, the other options might be endless.