Future shock waves Study: LECs lose in the short term >BY SANDRA GUY, News Editor

Incumbent local exchange carriers are losing some of their key business customers to competitors, while federal regulations add insult to injury, a study says.

Nynex has lost 20% of its local exchange business market, including Wall Street companies, over the past several years, said Ron Cowles, manager of research and development for Northern Business Information, New York. The deregulated carriers competing with Nynex-primarily interexchange carriers and competitive access providers-offer special rates for lucrative high-volume traffic and install the pipes to transfer large data. Nynex gets "the overflow traffic, the stuff that the competitors don't find profitable or that is outside the carrier's reach," Cowles said.

Newcomers in Connecticut have grabbed nearly a 20% market share in less than one year in areas where they've chosen to compete, according to the latest annual U.S. Competitive Telecom Markets report, which Cowles authored. The same phenomenon is evident in Chicago, San Francisco and, to a lesser extent, Los Angeles.

The LECs could be further penalized by pending regulatory decisions, Cowles said. If two likely assumptions play out, they will lose substantial market share before they can make a dent in the long-distance market, Cowles said. The study assumes that the Federal Communications Commission will let the marketplace drive down access charges that long-distance companies now pay RHCs (Telephony, Jan. 6, page 8).

The FCC also appears ready to step away from the capital recovery system. This would be especially ironic because the FCC fought efforts to give the LECs flexibility in how they could depreciate the copper and other infrastructure they had installed.