Free to choose

The Telecommunications Reform Act of 1996 is taking a beating. In the wake of the talk of a merger between AT&T and SBC Communications - not to mention speculation about further consolidation of large but diverse service providers that might follow the GTE/BBN Planet and WorldCom/MFS/UUNet acquisitions - pundits and media from all sides of the political spectrum are demanding a thorough revision of the law.

Suddenly, I find myself, usually the very model of reckless impatience - I'll eat shredded wheat dry rather than take the time to open a new carton of milk - counseling patience.

The FCC, shouldered with the difficult and politically unpalatable task of interpreting the law, made some bad decisions in what we hope is just a first-time effort. What the act needs is better parameters, not a redraft.

One of the problems was that formulation of the telecom act bridged two administrations.

The goal of Bush economics was to create a situation where competitive market forces could unleash economic growth. Much of the telecom act was drafted in this philosophical climate. No matter how you felt about the ideology, there was a specific vision behind the effort.

The Clinton administration shifted the act's emphasis from market economics to one of social policy. The goals of economic growth fell second to engineering Internet access for schools and libraries and ensuring universal service.

Hence, we have a law that, on a basic level, was written for one set of reasons but implemented for another. And from there follows much of the confusion about its effectiveness. The more conservative economist would argue that clauses about universal service and inexpensive access need not be written in: a competitive market would drive this. More liberal economists would distrust the market forces and seek to build in safeguards that, while not allowing competition, would manage it.

But here's where both sides miss the point. The goal of deregulation was not about creating competition; it was about creating choice. The effectiveness of the law must be measured by how much more choice consumers have in service providers.

In this respect, one has to say that the telecom act is proving successful. If we count wireless and Internet service providers, the total today is higher than a year ago. By all estimates, this number will continue to grow, domestically and especially internationally.

Today, I have a choice of long-distance providers. I have a choice of ISPs and I have a choice of wireless providers. My condominium's board of directors has a choice of cable TV providers.

What I don't have yet is a choice of local, narrowband voice service providers. However, when I look at my monthly telecom budget, the amount I pay to the incumbent LEC for this service is about 15% to 20% of the whole.

Yet the act's critics seem incredibly hung up on that 15% to 20% and tend to ignore that it is already remarkably inexpensive. Those who worry about access charge changes affecting the cost of local service also fail to realize that low-end pricing schemes from PCS companies will keep serious downward pressure on wireline costs.

In recent weeks, the notion of carrier consolidation has raised fears that competition will be reduced and that the Bell System is being reconstructed. In 1984, MCI and Sprint were nowhere as powerful as they are now. There was no commercial Internet, wireless was in its infancy, and an overwhelming amount of telecom manufacturing, distribution and service was concentrated in the hands of one company. The idea that an AT&T/SBC tie-up will result in a return to those days is downright laughable.

It is likely that many of the more liberal proponents of the act envisioned a multiplicity of service providers, especially in the narrowband 64 kb/s voice business. In this regard they were mistaken. Building networks is capital-intensive, and that requires size. There may indeed be a handful of large national network operators, divided into regional subsidiaries that compete with each other for any combination of services.

The important part is that a choice remains. That is what the telecom act was designed for - and that is how its effectiveness should be judged.