TCS Daily


Focus on What Matters: Economy, National Security - Not Tauzin-Dingell

By Nick Schulz - December 11, 2001 12:00 AM

Ready for remonopolization of telecommunications? That's what Verizon co-CEO Ivan Seidenberg is pushing these days, in the process contradicting the promises of the key sponsor to legislation for removing restrictions on his company and other local Bell phone monopolies.

In a speech to the National Press Club last week, Seidenberg declared that the legislation - the so-called Tauzin-Dingell Bill - would pass this month in the House. A vote on it now is expected this coming Wednesday. He referred to it as a "deregulation" because it would free his monopoly to enter data long distance service without first opening up his local lines to competitors, as his predecessor promised during the negotiations of the Telecommunications Act of 1996. But it really amounts to this - the free monopolists' act.

And Seidenberg left no doubt in his comments this week that he expects the Bells to extend their monopolies. He said he expected more mergers within the "fragmented" telecommunications industry, in particular among his own company and the remaining three Bells. There were seven when the 1996 Telecom Act passed. But one area left out of Seidenberg's merger plans was in the long distance arena. Forbes reported this week: "As for Verizon, Seidenberg said he was not interested in acquiring a long-distance firm: 'For the plain, old, garden-variety long-distance business, we have no real need for that.'"

No need for plain, old, garden-variety long-distance? That isn't what House Chairman Billy Tauzin was saying a few months ago when he was selling House members and the public on Tauzin Dingell Act, named for himself and the ranking Commerce Democrat, John Dingell of Michigan.

At a packed February forum sponsored by Techissues.net and COMDEX, though, Tauzin heatedly defended his bill: "We must do everything we can to insist remonopolization not happen."

Tech Central Station Host James Glassman, who was on the panel with Tauzin, told the group that Tauzin's bill was a step towards remonopolization, as it gutted the 1996 Telecom Act incentive for opening local lines by letting the Bells into data long distance, the most lucrative area. Under questioning by Glassman, Tauzin insisted his bill would not undermine the 1996 Telecom Act because the act dealt with voice, while his bill dealt only with data, and voice - that "plain, old, garden variety long distance" -- was still a huge incentive for the Bells to open their loops. Giving the phone companies data relief wouldn't inhibit competition, he said.

Now, Seidenberg, the head of the biggest Bell, foresees more mergers among the local monopolists but no need to acquire long distance capacity. That spells less competition for local service and suggests "plain, old, garden variety (voice) long distance" will provide little incentive for the Bells to open their lines to newcomers if they get a free pass from Congress to enter glitzy data long distance without having done so.

Verizon and the second-largest Bell, SBC, promised regulators to open their lines in getting permission for their mergers. They've done so grudgingly, as mounting fines for performance failures demonstrate. Overall, the Bells have been hit with $500 million in fines for service failures since 1999. But with valuations for Verizon and SBC of over $120 billion, the fines are piddling to their bottom lines, as long as they maintain their monopolies - and by merger extend them.

Seidenberg's vision of the future is just the opposite of goal set by Congress in the 1996 Telecom Act, which was to get all of the telecom providers scratching into each other's businesses. New entrants plus the existing long distance phone and cable companies would move into local service in the Bell's bailiwicks, while the Bells got into video and long distance provisioning outside their territories. The Bells, as I can attest from their visits to editorial boards at USA Today when I was a member, were among the biggest promisers that they would readily open their own local lines if they were given the chance to compete. Instead, they've simply consolidated their local monopolies.

Yet, Tauzin and the Bells continue to press for enactment of the Tauzin Dingell bill in the House before Christmas. The Bells believe that instead of lumps of coal for deceiving Congress and the public/ back in 1996, they deserve a basketful of presents.

Sen. Ernest Hollings, whose own legislation would break up each Bell into a wholesale and retail company in order to foster fair competition throughout the telecom industry, has pointed out that the Bells are "tricky." And he's asked the right question, why do these favors for monopolists?

No good reason, not for lawmakers hoping to invigorate competition in telecommunications. As, Seidenberg's comments last week demonstrated - if the Bells have their way, they'll just continue to merge, and competition will be dead.
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