Ma Bells Vie for One-Stop Local and Long-Distance
CHICAGO — THE telecommunications industry is poised to break through the walls of its last monopoly: the local phone company.
In a few years - perhaps sooner - many consumers will be able to choose who handles their local calls just as they choose among long-distance companies today.
The benefits include more services and, possibly, lower prices. The most surprising benefit, however, may be the simplicity of it all.
Before its court-mandated breakup, AT&T handled everything: One bill covered local and long-distance service. Customers did not have to figure out who to contact for a service problem. They called Ma Bell.
The new era will be similar, except there will be several Ma Bells.
``That's what we are headed back to,'' says Larry Strickling, vice president of public policy for Ameritech Corporation in Chicago. The company is vying to become a one-stop local- and long-distance provider.
``There will be several strong competitors out there, if given the chance,'' says Daniel Spulber, a management professor at Northwestern University's Kellogg School of Management in Evanston, Ill. Although many hurdles remain, competition is coming to local phone service, he adds. ``It's absolutely inevitable.''
Illinois may become the test-bed for local competition. In the past year, two telephone companies have filed plans that would open the door to more players. AT&T last week released its own vision of a competitive market test for Illinois. State regulators have been working on their proposals to open up the local market.
``The time has come to look at it,'' says Charlotte TerKeurst, director of telecommunications policy at the Illinois Commerce Commission.
Ameritech's bold plan
Of all the plans on the table, Ameritech's is the boldest. The company, which handles local phone service in Illinois and four other states, says it will give up its Illinois monopoly if, in return, it can offer long-distance services. Of the six other regional Bell operating companies, only Pacific Bell has offered anything close to such a plan.
``Ameritech is going in the right direction,'' says William Baumol, director of the Starr Center for Applied Economics at New York University.
The potential stumbling block is timing. AT&T argues that Ameritech should open up its local phone service before it moves into long-distance service. Otherwise, the company warns, Ameritech will bowl over competitors by offering its huge base of customers great deals on long-distance calls.
``That's a rock-solid, entrenched monopoly,'' says Paul Karoff, an AT&T spokesman. ``If we get this wrong ... we're going to completely eliminate any opportunity to extend competition to the last part of the business.''
Competition for customers
Ameritech worries about the reverse. If it loses its monopoly before moving into long-distance service, its competitors could steal away a huge chunk of customers by offering to handle their long-distance and local services together. That is what happened in toll-free services, Ameritech argues.
The company already faces some competition. From his office window in downtown Chicago, Mr. Strickling of Ameritech points out the inroads of his competitors. ``See the building with the statue on top? That's the Board of Trade. They get MFS. I'm sure MFS is in the Sears Tower.''
In fact, MFS Intelenet Inc., based in Parsippany, N. J., has hooked up several Chicago-area companies to its local network. Large corporations with their own PBX system (private branch exchange) also cut into Ameritech's business because, like MFS, they can bypass Ameritech's network when handling a long-distance or other toll call. MFS is now petitioning to provide local service to businesses on an equal footing with Ameritech.
At the moment, these competitors are small potatoes. AT&T estimates that competitive access providers, such as MFS and Teleport Communications Group, based in Staten Island, N.Y., have only wired up about 3,400 buildings nationwide. And, while it is certain that someone will grow into a large competitor of Ameritech, it is not at all clear who that will be.
At the moment, the competitive access providers are aiming for the lucrative business market in large metropolitan areas. Competitive residential service likely will be longer in coming, especially in rural areas. Nontraditional carriers, such as cable-television or even wireless companies, may find a cost-effective way to hook up American homes.
``The technology's in flux so you can't pick winners right now,'' Professor Spulber says.
One thing seems clear. By 1998, Strickling predicts, ``there will be providers of competing dial-tone in areas of Illinois.''