Telecom Act Fizzles, Judging by Prices WHAT COMPETITION?

By Laurent Belsie, writer of The Christian Science Monitor | The Christian Science Monitor, February 7, 1997 | Go to article overview

Telecom Act Fizzles, Judging by Prices WHAT COMPETITION?


Laurent Belsie, writer of The Christian Science Monitor, The Christian Science Monitor


A year ago today, the United States enacted a sweeping telecommunications law that was supposed to unleash the forces of competition, reduce prices for consumers in everything from cable television to local telephone service, and take a wrecking ball to the thick walls of industry monopolies.

One year later, consumers are scratching their heads, wondering what happened to that wrecking ball.

Most Americans still have no choice in who provides their local telephone service. Cable TV companies have raised rates, not lowered them, and have backed off plans to enter the telephone business. Telephone companies have also avoided head-on battles. The little competition that has emerged has come in sectors largely ignored by the telecommunications reform bill. Consumer groups are discouraged by the lack of progress. "There is no certainty that competition will come," says Gene Kimmelman of Consumers Union's Washington office. "The more you allow monopolies to consolidate their power ... the less likely that others will be able to enter their business." Telecommunications companies have an answer for all this: Be patient. Although little has happened that's visible to the consumer, much action is taking place behind the scenes, they say. This year will see more market-opening moves, and consumers should be able to take advantage of more choices and lower prices. "We like to think of 1996 as establishing the rules and 1997 as implementing the rules," says Gerry Selemme, vice president of governmental affairs at AT&T. On Tuesday, the long-distance giant called on regulators to cut onerous access fees that it pays to local phone companies to interconnect with their systems. If regulators did that, AT&T pledged it would pass along the savings to consumers and would offer local phone service at or below prevailing prices. Here and there, competitors have managed to bore little holes in monopoly walls. But overall, the initial results of the year-old law are not encouraging: * Prices for telecommunications services have gone up. The average cable TV rate jumped 7.8 percent last year, more than twice the rate of inflation, according to the federal Bureau of Labor Statistics. Prices for long-distance phone calls between states rose 3.7 percent, and toll calls within states rose 6.1 percent. Pay-phone rates, which are to be deregulated this year, are expected to go up 40 percent, says Mr. Kimmelman. These price increases reverse the historical trend of declining real prices. * Consolidation is accelerating. In the telephone industry, four of the seven regional Bell companies are merging: Bell Atlantic with Nynex, and SBC Communications with Pacific Telesis. British Telecommunications wants to buy No. 2 long-distance carrier MCI. The same trends hold true in cable and broadcast television. Cable giant Time Warner has bought Turner Broadcasting. Westinghouse Electric, already a player in local television and radio, bought CBS. In all, sales of television and radio stations nearly doubled in 1996 over the year-earlier figure, according to one market-research firm. * Monopolies, fighting hard to guard their turf, remain virtually intact. …

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