Deregulation's Big Lie
Monty Solomon
more telecom mergers. So who ends up losing? We all do, explains one
industry expert.
By Katharine Mieszkowski
July 16, 2002 | If the latest multibillion-dollar accounting scandal
shuts down WorldCom, a worst-case scenario could see some 20 million
customers losing their dial tone. To prevent this data-death fallout,
Federal Communications Commission chairman Michael Powell suggested,
in an interview in Monday's Wall Street Journal, that a Baby Bell
might be allowed to buy the nation's second-largest long-distance
carrier to keep the phone and data lines open.
Wait. A large regional phone carrier eating up a major long-distance
provider? "Hello, this is Ma Bell calling!"
This isn't how things were supposed to happen. The breakup of the AT&T
monopoly in 1984 was designed to end monopoly control of phone
services. The further deregulation of the telecom industry after the
Telecom Reform Act of 1996 also promised that increased competition
would bring lower prices and better service to consumers.
But Robert McChesney, a professor at the Institute of Communications
Research at the University of Illinois at Urbana-Champaign, argues
that it's precisely the deregulation of the telecommunications
industry that has led to the current industry crisis. And according to
McChesney, Powell is little more than a tool of free-market
absolutists, accelerating the reconcentration of control in the
industry -- only this time, without any government oversight to make
sure that customers don't get taken to the cleaners.
The author of "Telecommunications, Mass Media, and Democracy: The
Battle for the Control of U.S. Broadcasting, 1928-1935" and "Rich
Media, Poor Democracy: Communication Politics in Dubious Times,"
McChesney explained his views in a phone interview with Salon.
http://www.salon.com/tech/feature/2002/07/16/telecom_crisis/index.html
[TELECOM Digest Editor's Note: At the time of one of the decisions by
the Supremes regarding the old 'Bell System' back in the 1950's, AT&T
was forbidden by the court to ever acquire any more telephone operating
companies. It seems the court at that period in time -- 1950's --
already felt AT&T/Bell was getting way too big for its britches, and
in fact AT&T back then had just come through a period of buying up
whatever it could in the post-depression era. All the old rural
telecoms (once they had *finally* gotten their depression-era
mortgages paid off; AT&T didn't want any of that grief) found that
although they no longer had their REA-backed mortgages to deal with,
they no longer could find farmer's wives and daughters to man the
switchboards, or anyone to go out and repair the lines, etc, so when
Mother Company came along and offered to take the telephone exchange
off their hands for a bargain price, they quickly gave in and sold for
a small loss in most cases.
The government found all that most distasteful to say the least: AT&T
cried 'poor boy' in the 1920-30's when it came to the business of
installing telephone lines and instruments in rural America (so the
Rural Electrification Administration had do it with taxpayer's money);
AT&T likewise was in deepest grief when it came to building the
telephone exchanges for said farmers or giving them a decent break on
separations and settlements when it came time to hook the wires into
the Bell System network, (so the REA had to guarentee the mortgages
with everything else) but for some reason, when the farmers managed to
pay off the mortgage or debt service on the telephone cooperative
society and would have been in pretty good condition if they had been
able to modernize and get employees/operators, etc suddenly luck
turned better for Ma Bell also. In her greed, she looked at the
hundreds of telephone cooperative societies all over America and was
going to start her 1900's Ted Vail routine all over again: Sell to us
or we will run you out of business anyway. So many of the telephone
cooperatives considered that, and like the bachelor moving out of his
life-long apartment into a new dwelling place realized it would be
much easier to move with a check in his pocket for several hundred
thousand dollars rather than taking all those stacks of boxes, dishes,
books, etc to his new place. So they said "sold to the highest (only)
bidder" and handed it over to Bell, which set about installing new
dial systems, etc.
The Supremes said to Bell, "You are greedy", and as part of a decision
involving computers (which Bell wanted to get into) agreed to a trade
off. Bell could 'have' the computer business, which is where the money
was soon to be, but in turn they were forbidden to buy up any more
telephone operating companies the way they had just gotten through
raping all the rural telephone cooperative exchanges/societies. But
the Supremes added one other twist to the thing: *if a telephone
company is either grossly mismanaged or in imminent danger of bank-
rupty or in fact has suspended operations, then AT&T *must* purchase
the picked-over remains, turn over the proceeds of the sale to the
government to pay back all the trouble the REA and President Roosevelt
had with Mother Company during the depression, and proceed to run the
newly acquired company with the proper dilgence, etc.*
I dunno if that rule is still in effect or not. The Baby Bells are the
the overgrown children of the late Ma Bell, and thus subject to any
impositions still in effect on Ma. MCI is certainly a good candidate
for 'grossly mismanaged and ready for bankrupty category. PAT]
Dave Mausner
Pat, BUT I opine that dereg's big lie is that competitive telcos are
better than one regulated monopoly. All the intrigues of old-ATT's
gobbling notwithstanding, the chaotic situation today is that
consumers are perpetually confused about tariffs, inundated by offers
from garage operations, subjected to poor customer service, confounded
by a plethora of mutually-inconsistent billing practices, and harassed
by seemingly minor things, such as (just one example) the total lack
of industry standards affecting hands-free microphone and power plugs
on cell-phones. How's this an improvement?
Here's how I see it: for all practical purposes, home-owners pay only
one natural gas company and one electric company all their lives. so
from this POV, what was wrong with having one telco? Compared to the
crappy scene today? hmm?
Dave Mausner / v.+1-708-848-2775 / f.+1-708-848-2569 / c.+1-312-wake-my-i
c.d.t lurker since 1990.
Monty Solomon <mo...@roscom.com> wrote in message
news:telecom...@telecom-digest.org:
> FCC chairman Michael Powell says the WorldCom debacle may result in
> more telecom mergers. So who ends up losing? We all do, explains one
> industry expert.
[TELECOM Digest Editor's Note: Actually, the gas works people and the
electric power people have taken a clue from telco and started that
'competion' business also. Even water is in on it. You no longer are
stuck with water from the tap in your kitchen or bathroom, but you can
now (for several years, actually) been able to by-pass tap water
entirely for Culligan or Hinkley-Schmitt. Electric of course you can
now use sunlight or wind and store it in batteries, or use some other
kind of generator on your own. And if you can cause the meter to 'run
backwards' as a result, the existing power supplier is required to
purchase it from you, and send it to the grid for use elsewhere. In
the case of gas however, its a bit different. There still is only one
gas pipe coming to your house, through a meter, etc. But if you, the
consumer are approached by a 'competitive supplier' of gas and you
wish to use the competitor, then you notify them; they in turn notify
the 'regular' supplier, and whatever you consume in a billing period
is refreshed to the piping system by the 'competitor' who then handles
the billing and customer service. So the competitor 'supplies' the gas
(by refreshing the mains of the established company) and you pay the
'competitor' at his rates, which are often times discounted, like all
those outfits. PAT]
Marcus Didius Falco
wrote about Deregulation's Big Lie
> FCC chairman Michael Powell says the WorldCom debacle may result in
> more telecom mergers. So who ends up losing? We all do, explains one
> industry expert.
> By Katharine Mieszkowski
>http://www.salon.com/tech/feature/2002/07/16/telecom_crisis/index.html
> [TELECOM Digest Editor's Note: At the time of one of the decisions by
> the Supremes regarding the old 'Bell System' back in the 1950's, AT&T
> was forbidden by the court to ever acquire any more telephone operating
> companies. It seems the court at that period in time
<<snip>>
> The government found all that most distasteful to say the least: AT&T
> cried 'poor boy' in the 1920-30's when it came to the business of
> installing telephone lines and instruments in rural America
<<snip>>
> I dunno if that rule is still in effect or not. The Baby Bells are the
> the overgrown children of the late Ma Bell, and thus subject to any
> impositions still in effect on Ma. MCI is certainly a good candidate
> for 'grossly mismanaged and ready for bankrupty category. PAT]
You are thinking of the "Kingsbury Committment" (which see in any
serious history of the telephone industry). This was a pre-WW I
agreement (1913) between N.C. Kingsbury, vice-president of AT&T, and
the Attorney General, in response to an antitrust suit, that, in
exchange for being permitted to acquire Western Electric, AT&T would
give up its part ownership of Western Union, permit independents to
connect to its (then monopoly) long-distance network) and also would
not acquire any more independent telephone companies unless there was
financial distress and no other available buyer.
The acquisition was provision was somewhat modified in 1917: AT&T
could acquire independents but had to sell an equal number of lines to
a competing independent. In 1921 the Willis-Graham Act permitted
telephone companies to merge and this terminated the committment. AT&T
plicy was then was codified in the Hall Memoranda of 1921 and 1922
(E.K. Hall being a VP of AT&T, particularly the 1922 memorandum
addressed to USITA. Even so, AT&T did acquire a few more small
telephone companies, usually, but not always when they were in
distress, and often, but not always selling some lines elsewhere, in
the slow build up to US v Western Electric, that gave us the 1982
Consent Decree.
In recent years US West, in particular, has been disposing of rural
exchanges in many western states, usually by selling them to
independents.
Direct replies are unlikely to be read.
To reply use the address below:
falco_marcus_didius <at> yahoo.co.uk
[TELECOM Digest Editor's Note: But Marcus, what legal thing happened
to AT&T in 1955-56? There was a Supreme Court decision regards AT&T
around then which involved the company's wish to get into computers.
Maybe the court reviewed/renewed the Kingsbury commitment? PAT]
Marcus Didius Falco
> wrote about Deregulation's Big Lie
>> FCC chairman Michael Powell says the WorldCom debacle may result in
>> more telecom mergers. So who ends up losing? We all do, explains one
>> industry expert.
>> By Katharine Mieszkowski
>> http://www.salon.com/tech/feature/2002/07/16/telecom_crisis/index.html
>> [TELECOM Digest Editor's Note: At the time of one of the decisions by
>> the Supremes regarding the old 'Bell System' back in the 1950's, AT&T
>> was forbidden by the court to ever acquire any more telephone operating
>> companies. It seems the court at that period in time
> You are thinking of the "Kingsbury Committment" (which see in any
> serious history of the telephone industry). This was a pre-WW I
> agreement (1913) between N.C. Kingsbury, vice-president of AT&T, and
> the Attorney General,
> The acquisition was provision was somewhat modified in 1917:
> 1921 the Willis-Graham Act permitted
> telephone companies to merge and this terminated the committment. AT&T
> policy was then was codified in the Hall Memoranda of 1921 and 1922
> (E.K. Hall being a VP of AT&T, particularly the 1922 memorandum
> addressed to USITA.
> [TELECOM Digest Editor's Note: But Marcus, what legal thing happened
> to AT&T in 1955-56? There was a Supreme Court decision regards AT&T
> around then which involved the company's wish to get into computers.
> Maybe the court reviewed/renewed the Kingsbury commitment? PAT]
That was the 1956 Consent Decree (and the reason that some call the
1982 Consent Decree "The Modification of Final Judgment"). This
accused AT&T of misusing patents to keep other firms out of the
telephone industry. The AT&T theory from the 20s through the 40s was
that they would never be able to be kept out of anything in
telecommunications because someone else had a basic patent. By the
time the case, begun in 1948, was terminated, AT&T had modified its
patent policy, and was using cross-licensing to ensure that it could
not be kept out of any aspect of the telecommunications industry.
Thus, AT&T agreed to license all its patents at a reasonable fee to
all applicants, and for WECo not to sell anything other than telephone
equipment actually sold to Bell telephone companies (plus the
Artificial Larynx). (You may remember that in the 1930s Western
Electric had some basic patents on motion picture sound, and gets a
screen credit in most films of that era. In the 20s AT&T tried to use
some patents to control the radio industry.) This effectively forced
AT&T out of the computer business (and caused a big frou-fra about the
teletypes that were used as input/output machines for many computers
of that era -- And a bigger frou-fra about the Model 40 CRT "smart"
terminal).
Anyhow, that's why the 1956 Consent Decree had to be modified in 1982
-- for AT&T to get into the computer business it had to get
restrictions of the 1956 decree revoked. Indeed, the FCC had just
ruled in 1982 that station equipment be deregulated, so theoretically
WECo would have been forced out of that market (including PBXs),
because it would no longer be sold to Bell companies after 1983.
If you need more information I probably have it. The above is off the top
of my head. And I have to admit I haven't really worked on these matters in
close to 20 years! :-)
Michael D. Sullivan
> [TELECOM Digest Editor's Note: But Marcus, what legal thing happened
> to AT&T in 1955-56? There was a Supreme Court decision regards AT&T
> around then which involved the company's wish to get into computers.
> Maybe the court reviewed/renewed the Kingsbury commitment? PAT]
There was a consent decree entered into in 1956 between AT&T (mainly
Western Electric) and the Justice Department that settled pending
antitrust litigation. No Supreme Court decision. The 1956 decree
imposed line-of-business restrictions on AT&T: The only services it
could provide were tariffed common carrier services and the only
equipment it could manufacture was that used in providing such
services. There was also mandatory patent licensing and a bunch of
other stuff, as well as some relatively narrow exceptions, but the
foregoing was the core of the agreement. This got AT&T out of the
business of making motion picture sound equipment and police radios,
among other things, and allowed companies such as RCA and Motorola to
use AT&T's patents to step into the void.
I don't think computers were directly involved -- AT&T wasn't in the
computer or data processing biz at that point and hadn't planned to
be. But wait -- there turned out to be a whole lot of relevance to
computers.
AT&T/WE made the terminal equipment ("coupling device") that was
necessary to connect stuff such as radio broadcasting consoles and
computers to phone lines. For computers, the coupling device was a
"modulator-demodulators" (later shortened to "modems") that translated
ones and zeroes into tones that were Bell-certified to be safe for the
phone lines and also provided electrical isolation between the
external device and the phone line. (Don't want 117 VAC leaking into
the phone lines, no.) The modems were big clunky boxes made by WE
that you would have the phone company install for a monthly fee
pursuant to tariff. (They were part of the regulated common
carrier service, so WE could make them and the BOC could charge the
monthly fee.) You couldn't supply your own, because that would be a
"foreign attachment" to the phone line, forbidden by tariff.
The foreign attachment ban was incredibly broad -- it even barred
putting plastic covers on phone books, supposedly. More to the point,
it also barred putting a little black metal or plastic box with
internal baffles over the transmitter (microphone) on your handset. A
small company that made such boxes, which were supposed to make it
possible to talk on the phone more privately (harder for other
people in the room to overhear because of the baffles) ran afoul of
this tariff restriction and the FCC barred its use. The resulting
court case, Hush-a-Phone v. FCC, found that the application of the
tariff to uses that were "privately beneficial while not publicly
injurious" was unjust and unreasonable. The year was, I believe,
1959.
That case was the springboard for further litigation involving foreign
attachments. A gentleman named Stephen F. Carter created an acoustic
coupler for use as a phone patch in radio dispatch systems. The
dispatcher could use the "Carterfone" device to allow a policeman
radio car to speak to someone over a telephone line by putting the
handset of a phone in the coupler, which was in turn connected to the
radio system. "Foreign attachment!" screamed the telcos. After
Carter brought an antitrust case that was referred to the FCC, the FCC
issued its 1968 Carterfone decision, which followed the Hush-a-Phone
decision and found the foreign attachment ban unjust and unreasonable
and ordered telephone companies to change their tariffs to get rid of
such improper restrictions.
Meanwhile, other companies were chafing under the restrictions on
connecting non-Bell terminal equipment to phone lines. Bell made
terminal equipment other than modems and phones -- teletypes, for
example. Want a teletype that you could connect to a phone line?
Rent it under tariff. Want to connect someone else's terminal
equipment? Only if you rent a coupling device under tariff. Needless
to say, this was a damper on the terminal equipment biz. The
Carterfone and Hush-a-Phone cases called into question an increasingly
important part of AT&T's business.
This was especially true with respect to computer terminals. For
example, there was a dispute involving AT&T's smart terminal (a
teletype that had some minimal data processing capability, known as
the Dataspeed 40/4), which was terminal equipment that you rented
under tariff, and IBM's smart terminal, which connected via a modem
that was rented from AT&T under tariff. AT&T claimed that since the
IBM terminal was functionally identical to the Dataspeed 40/4, which
was telephone terminal equipment subject to FCC tariffs, IBM's device
should have to be classified likewise. IBM, on the other hand, argued
that its device was a data processing device -- and that because the
Dataspeed 40/4 was functionally identical, as AT&T claimed, the
Dataspeed 40/4 should also be deemed a data processing device, not
properly a part of a tariffed common carrier service. AT&T's position
would have kicked IBM out of the terminal business; IBM's would have
kicked AT&T out, because AT&T couldn't manufacture equipment other
than that used as part of a tariffed common carrier service, due to
the 1956 consent decree. The FCC started its first "Computer Inquiry"
in 1966 to resolve such issues, as well as whether data processing
services could be provided by common carriers (read: AT&T). It issued
its decision in 1971. With respect to terminals, it split the baby.
It found that devices with both communications and data processing
functions could be offered by common carriers under tariff and by non-
common-carriers without a tariff. With respect to data processing, it
permitted common carriers to provide such services only through a
separate subsidiary, but not under tariff.
The combination of Carterfone and the opening of the Computer Inquiry
stimulated the development of terminal equipment by companies other
than AT&T -- including equipment designed to connect directly to phone
lines, without an AT&T-supplied coupling device. Phones, for example.
And modems. Meanwhile, AT&T did not remove its foreign attachment ban
from its tariffs, forcing manufacturers to prove that their devices
wouldn't harm the network over and over. The FCC asked AT&T to submit
the network protection criteria that its own devices were designed to
and then incorporated them into its rules as Part 68, in 1975. As a
result, any equipment certified by the FCC as complying with the Part
68 rules could be directly connected to phone lines. The late 1970s
saw a flood of independently manufactured phones and more advanced
terminal devices, such as modems and PBXs.
Meanwhile, the FCC had opened its Second Computer Inquiry (CI-II),
because the lines it drew in the First Computer Inquiry were too
blurry. In 1980, it issued its decision in CI-II, which divided
services involving telecommunications into basic service, which was
subject to FCC common carrier regulation, and enhanced service, which
was exempted from common carrier regulation. It also ruled that
virtually all terminal equipment, which had come to be known as
customer premises equipment (CPE), was no longer to be considered part
of a communications service and ordered it detariffed. If AT&T wanted
to provide enhanced services (i.e., services going beyond mere
communication, including those involving protocol processing or other
data processing), it would have to do so through a separate
subsidiary. AT&T's phones and other CPE had to be taken out of
tariffs and either sold to the consumer, transferred to a separate
subsidiary for rental, or removed.
Meanwhile, the Justice Department had another big antitrust case
against AT&T/WE under way. In 1982, it was settled by the consent
decree ultimately known as the Modified Final Judgment (MFJ). This
broke up AT&T, with the BOCs being spun off, subject to their own new
line-of-business restrictions. AT&T kept the long-distance business
and Western Electric. The big plus that AT&T bargained for was that
the new decree replaced the 1956 decree. As a result, the line-of-
business restrictions that kept it from manufacturing anything but
tariffed equipment and providing services other than tariffed common
carrier services went away. In the Carterfone/CI-II environment, AT&T
was sorely hampered by restrictions that effectively kept it out of
the now-competitive CPE and enhanced services business, as well as out
of computers and data processing. Once the MFJ was implemented on
1/1/84, AT&T was free to try to dominate those fields. (heh, heh...)
Michael D. Sullivan
Bethesda, MD, USA
(delete NOSPAM from address to mail me)
Scott Dorsey
> AT&T/WE made the terminal equipment ("coupling device") that was
> necessary to connect stuff such as radio broadcasting consoles and
> computers to phone lines. For computers, the coupling device was a
> "modulator-demodulators" (later shortened to "modems") that translated
> ones and zeroes into tones that were Bell-certified to be safe for the
> phone lines and also provided electrical isolation between the
> external device and the phone line. (Don't want 117 VAC leaking into
> the phone lines, no.) The modems were big clunky boxes made by WE
> that you would have the phone company install for a monthly fee
> pursuant to tariff. (They were part of the regulated common
> carrier service, so WE could make them and the BOC could charge the
> monthly fee.) You couldn't supply your own, because that would be a
> "foreign attachment" to the phone line, forbidden by tariff.
While you could rent a Bell modem, you could also rent a Data Access
Arrangement from Bell which connected up to the line and gave you a
four-wire interface to your own modem. IBM used their own proprietary
dialup modem systems, which had to be connected via DAA to the telco.
Likewise I think Vadic was selling some modems in the Bell 202 days
which were faster than the Bell 202 but required a DAA at the phone.
It was usually no cheaper to go the DAA route than to rent a
comparable Bell modem, although the Bell autodialer was a pain.
scott
"C'est un Nagra. C'est suisse, et tres, tres precis."
Jim Haynes
actual text of the 1956 consent decree, here is where you find it.
United States v. Western Electric Co., Inc., and American Telephone
and Telegraph Co. Cited 1956 Trade Cases, Commerce Clearing House,
par. 68,246.
The other big one that same year was:
United States v. International Business Machines Corp. Cited 1956 Trade
Cases, Commerce Clearing House, par. 68,245.
Paul Erickson
First Energy is the incumbent local supplier. Evidently they now have
a subsidiary, First Energy Solutions that is their "competition".
They offer about a 5% commercial discount. Went I looked at our
electric bill to analyze the potential savings, I discovered roughly
that out of an average $450 monthly bill:
$150 is the "generation" charge - the actual electricity
$150 is the "delivery" charge
$150 is the "transition" charge, whatever that is.
So the most I could expect is 5% off that first $150 generation charge.
Hardly worth it, not to mention they want a one year contract, IIRC.
Paul
John Stahl <al...@stny.rr.com> wrote in message
news:telecom...@telecom-digest.org:
> I don't agree with Dave M. assessment of Monty and the others as I
> can remember not too many years ago, I was spending over
> $0.25/minute for long distance (LD) calls while today, due to
> competition, AT&T is selling a pre-paid LD service through one of
> the members-only chains (Sam's Club) for $0.0375/minute.Do you
> really think that AT&T would be selling per-minute LD for such a low
> price if there were no competition?
> As for the electric rates and the water rates Dave mentions: yes,
> the competition (what little there is) has not been able to drive
> the costs lower as much in those states with deregulation as was
> expected. There is no federal regulatory agency for those other
> utilities; the individual states control that aspect of our lives.
> Primarily in the supply of electric power, the consumer is limited
> to a very small fraction which can be potentially saved on their
> bill. The power companies (I believe) saw the fiasco which turned
> the telecom industry into a real competitive nightmare (especially
> in LD) and got the state's Public Service Commission's in each with
> electric deregulation as the law to believe that their costs of
> "transmission" were higher than reality. So the amount of each
> electric bill assigned to the actual cost of the electrical energy,
> for the most part, is quite a bit less than one-half of the total
> bill. Here in mid-state NY, for example, the local power
> transmission supplier is asking for another 11% raise for the
> transmission cost bring it up to over $0.10/ kilowatt (have never
> figured why their costs keep on increasing with my usage?) When you
> are told you can "save" maybe 10% of $0.04 or $0.05 per kilowatt,
> does this drive you to spend time to do so?
Jack
<dmau...@ameritech.net.invalid> wrote:
> I appreciate John S.'s reply. Surely un-competitive ATT might not
> offer LD @ 0.0375 today, but not all costs are in the LD activity. My
> gripe is more about the poor off-line performance of the competitive
> telco's; the inability to schedule timely repairs; the poor line
> quality; the poor billing practices; the finger-pointing over
> integrated voice/ADSL circuit failures. Downtime has a cost!
I'm guessing you're going to get several replies to this, but in most
cases these problems are not the fault of the competitive telephone
companies (and they are as upset about these things as you are). They
have to depend on the incumbent telephone companies to make repairs,
fix line quality problems, etc. And if they are a reseller of the
incumbent's service, they also must depend on the incumbent for
accurate billing information. Naturally, certain incumbents act as
though it's not in their best interest to offer excellent service to
competitors.
Unfortunately, this problem will likely continue as long as the same
company is allowed to own and operate both the central office
facilities and the "outside plant" (the wires and cables that connect
to your home). One reason that wireless services are becoming an
attractive alternative for many is precisely because this is one
situation where the competitor owns and controls all the facilities,
and therefore can directly control their own level of service (also,
people have lower expectations of quality for wireless service,
apparently).
I grant that in an ideal world, all the competitors would be able to
string their own wires and cables to reach their customers. But there
are a couple of practical problems there. Even if the cost of wire
were not an issue, would you really want five or ten different phone
cables hung on the poles out in front of your home? Or five or ten
competitors all burying their wire, and chopping up other competitors'
wires and cable (not to mention cable TV, water and gas lines)
whenever they made a mistake in digging?
Now I know some folks think that the incumbent phone companies strung
the wires and therefore ought to have the exclusive right to use them.
They point at the Constitution and cry "no taking of private
property!" but they forget a couple of things. First of all, in most
cases their wires and cables aren't on the incumbent telco's property,
but rather are along public rights-of-way. If they'd had to buy ever
square inch of land that their cables run over or beneath, nobody
would have phone service, so they in effect got a giant concession
from "we the people" by being able to use public property for all
these years at little or no cost.
Therefore, if the government (acting as the representatives of "we the
people") decides that competition for landline telephone service is
desirable, they ought to be able to say to the incumbents, "your
cables are on OUR property, therefore we have some say in what you do
with them!"
But the other thing is that up until now, customers have had virtually
no choice of telephone companies. Those wires and cables were strung,
not using money earned as a result of customers making a free will
choice of who would provide their phone service, but because all
customers in a given service are were forced to subsidize the
construction of those cables or do without phone service (it's also
worth noting that in many "high cost" areas, the companies ran those
cables using funds received from the government, or perhaps as a
subsidy from those living in other, lower cost areas).
My point is that both captive customers of the monopoly telephone
company, and in some cases the government, have been the ones who
bought and paid for those wires and cables, and I personally think it
a bit arrogant of those companies to now assert that those wires are
all theirs and that they shouldn't have to share with anyone (the same
argument could be made for most cable TV company lines, by the way).
Now, again, this IS different from taking the property of any other
company or individual for three reasons: First, the property in
question is located on public rights-of way. Second, it was paid for
by customer of a monopoly company, the monopoly status having been
conferred by the government (and as the government giveth, the
government taketh away). And third, it's still not really a taking,
since the incumbent company (or a separate company if we go the
structural separation route) would still be getting paid for the use
of their lines -- they simply would not be able to restrict who can use
them.
And while I'm on the point, many people don't seem to realize that
even structural separation would not be a "taking" in the strictest
sense. With very few exceptions (very small telcos in rural areas
that would likely be exempted anyway), we are talking about publicly
owned companies here. So if these companies are split into two, the
real owners -- the stockholders -- can be given one-half share in the
company that provides dial tone, and one-half share in the company
that owns the wires and cables, for each share they now own in the
combined company. So they would still own everything they now own.
The only real losers might be the corporate bigwigs who would not
control the same empire they once controlled, but we should not forget
that they never owned the company in the first place (except to the
extent that they were also stockholders).
> My point is that we are getting what we pay for, whether at home or
> biz. competition on commodity services demands a price-point
> response, which kills profits. the telcos over-built their nets and
> then deep-sixed customer service to stay alive; plus they cooked the
> books.
Well, I'm sure the same thing happens in other lines of business, but
we don't have the same expectations there. We've been conditioned by
nearly a century of monopoly service to think that phone companies
should somehow be immune to the normal forces of competition that
drive every other business. Yet as Benjamin Franklin is reported to
have said, 'Those who seek security over liberty deserve neither.'
Perhaps you prefer the security of always dealing with the same
company, but many of your fellow consumers would prefer the liberty to
shop around and look for the best deal, as we do with almost other
products and services we buy.
> We may not pay at cost for electricity or gas, but why should we? Do
> we buy new cars or gasoline at cost? Or anything else?
Who said anything about selling at cost? But some companies have
built huge, successful business by selling at very close to cost
(Wal-Mart comes to mind, and while you may or may not have reasons for
not liking Wal-Mart, the fact remains that a large number of people
freely choose to shop there, and few would seriously assert that
people should not have that choice -- and the ones who don't want
customers to be able to shop at Wal-Mart are often trying to protect
their own financial interests).
> How about >hospital services -- when it's life or death? Do you
> worry about the cost of aspirin, or do you pay $6.40 per tablet, in
> order to survive?
That's whole other issue (and don't get me started on that) but let me
point out that in this situation the hospital is a defacto monopoly
provider -- once they have you in their doors (and remember, in many
emergency situations you don't really have a choice as to which
hospital you're taken to, especially in smaller towns or if you're
unconscious), they can charge pretty much whatever they please.
However, the reason they do things like this is because it helps cover
their costs in treating people who can't pay at all, and most of the
people who pay those rates have insurance of one form or another.
The folks who really get taken on that deal are those who can't afford
health insurance, but aren't poor enough to qualify for government
assistance (or who don't know that, in some cases, a hospital is
required to write off a bill if a patient is unable to pay). It's
always been my opinion that medical care is the one area where we
should emulate the rest of the industrialized world, and provide some
level of basic health care to all citizens, but ever time that is
suggested the con$ervative$ in Congress start screaming about
"socialized medicine" and quoting dire statistics from countries that
have had a bad experience with it. Anyway, this is probably off topic
here, and after a while the topic of health care almost turns into a
religious debate.
> The margin always funds the human interface, with competitive prices
> so low, telcos have no room to indulge niceties like getting the order
> correct. Refer to the irate postings about MCI-Worldcom.
And here you point to what some would argue is the worst example of
competition. For every MCI, there is probably another company with
mostly extremely happy customers. For example, I've yet to hear any
complaints about TDS Metrocom, which operates as a facilities-based
CLEC in Wisconsin and Michigan. Well, I take that back, I have heard
complaints about TDS -- that they aren't yet available in a location
where a potential customer wants service!
> If we had (approximately) one regulated telco, we would have the
> service we want and we would probably pay more for it. but we would
> use it more wisely and receive more competent service.
What do you mean by, "use it more wisely?" That we would schedule our
calls on Sundays and talk for no more than three minutes, so that we
still have money left to buy food and shelter? That we tell our kids
that they can't call Grandma except for ten minutes at Christmas?
Those things really used to happen, back when AT&T had a monopoly on
everything telephonic. Thanks, but no thanks -- even with the hassles
involved in making a choice, I still think that having a choice is a
lot better for almost everyone concerned.
And if we really want competent service, structural separation would
likely accomplish that (not to say it's the perfect solution, but it's
a better option than letting the incumbent phone companies play games
with their competitors' service, IMHO). So would strict enforcement
of laws that forbid anticompetitive actions, but only if coupled with
really HUGE fines -- amounts that cannot be written off as simply
another cost of doing business, in other words. Unfortunately, I
don't see either of these happening in the near future. What I do see
is customers "voting with their feet" and turning to wireless as their
primary phone service, and in the end that may be the only thing that
scares the incumbent wireline companies enough to change their ways,
but unfortunately that does not give them any incentive to treat the
competitive companies more fairly.
Jack
Resources for Michigan Telephone Users page:
http://michigantelephone.workbench.net/
[TELECOM Digest Editor's Note: Jack, a couple things you said in your
message were very familiar for me. Here in Independence we have a
Walmart store. At the Walmart store there is an Alltel 'kiosk' or a
little shop inside a bigger store where George, the Alltel agent sells
prepaid cellular and regular Alltel service as well. I do not
personally use Alltel; I instead have Cingular Wireless. Where the
kiosk at Walmart is a 'corporate' shop for Alltel, the Radio Shack
store in Independence is an 'agency location' for Alltel. Forget for a
minute the fact that the Walmart store -- which opened in the summer
of 2000 -- nearly put the business places downtown in bankruptcy. We
will talk about that in a minute. I see George at the Alltel kiosk to
pay on some prepaid cellular phones for people, including my mother's
cell phone. Their prepaid service is HORRIBLE. There is tremendous
congestion in the cellular switch, which is located near here in
Liberty, Kansas. I tell George my problems with it; he whines and says
'well the trouble is really Southwestern Bell. We cannot get them to
install enough lines as fast as we need. I tell him, 'George, I am not
paying SBC for service; I am paying you, and you are not providing
very good service.' Then he repeats the argument about how they are
so dependent on Southwestern Bell to keep them going, etc. "We cannot
get them to go any faster; how should we do that?" I tell him I
always get my way with SBC; I just appeal to the Chairman's Office on
a regular basis. George gives me sort of a funny look. SBC employees
are afraid of the Chairman, apparently, and don't want to cross him;
they also are frightened of customers who *know about appeals to the
chairman's office* I've found. I use that method to get what I want
out of them as needed. I really think many of the independent carriers
who get into trouble over switching and wiring, etc should get *a lot*
more agressive about their complaints and see if that improves thing
any. Maybe appeals to a regulatory agency would help them also.
Regards whether or not people like Walmart, the business people in
town do not care for them much. At the start of 2000, when Walmart had
announced plans to open a new 'mega-center store' west of town, the
local business places were fit to be tied. They knew in a short time
Walmart would drive them out of business. Sure enough, now in the
summer of 2002, when I walk around downtown I see the stores are all
mostly empty of customers, and the clerks are happy to see anyone at
all. Walmart in the meantime has dumped tons of money as favors on
the schools, all the churches, the hospital, etc. They say, 'well, as
members of the community we want to be responsible, etc.' In this
rural community of 8000 people, I would not expect the stores to be
all that busy, but it has gotten ridiculously slow. Then the grocery
stores all started going out of business one by one. Safeway, Dillons
Foodtown, and Country Mart all closed up. Our town did not have a
single grocery store any longer -- except of course, the Walmart mega-
center. Now it was more crowded out there than ever. Walmart kept on
dumping money around town 'we want to be responsible citizens, etc'
and *finally* after six months of no other grocery stores in town, an
Oklahoma chain of stores called 'Marvins' opened in the old Country
Mart location about two weeks ago. Some of the Walmart-haters started
going to Marvin's but most people still go out to Walmart for
groceries along with everything else. That was the idea, I guess. I
have very mixed feelings about Walmart. The Sears and J.C. Penny
stores downtown are still there, but doing very poorly in the past
year and a half. Marvins ran ads in the {Independence Reporter} for
several days prior to their 'grand opening' saying that "in all prob-
ability, we will not be able to provide the prices you have come to
expect from one of our competitors, but we hope you will try us out
and see if we are more convenient for many of you". Some of the
Walmart-haters came back from the grocery store on opening day and
were angry: 'It turns out Marvins IGA is no more expensive than Walmart
in groceries at least, and cheaper in some aspects'. Big grin. PAT]
AES
Jack <unspamma...@workbench.net> wrote:
> Therefore, if the government (acting as the representatives of "we the
> people") decides that competition for landline telephone service is
> desirable, they ought to be able to say to the incumbents, "your
> cables are on OUR property, therefore we have some say in what you do
> with them!"
Yes!! This is the absolutely core point for telco wires, cable TV
cables, and even wireless services that connect to private premises of
any kind.
And it has to do with a lot more than just whether or not competition is
desirable, or whether these cables do or do not pass over public
property.
In a wired word these facilities really are "information highways", as
essential to the carrying on of normal daily life as are real physical
highways.
Perhaps the most effective way to provide these information highways is
to to have private companies construct them, own them, and charge a
reasonable fee for their use.
But as with any other kind of tangible or intangible highway, there is
*no* way that these private companies should have any say, or have any
control over, or be able to impose any limitations on, what people at
either end of these highways chose to transmit, or send, or sell, or
buy, over these highways. Within reasonable constraints imposed only
by technical considerations and capacity, the owners of these highways
should be required to make both ends of the links available on a
totally neutral basis for any private or business communications that
people at either end want to carry on.
This should be, it seems to me, a core component of public policy. To
get some feeling for why, imagine some large residential development in
which even the streets are publically owned by the developer; situations
like this do exist. One can imagine the developer or maybe a
homeowners' association then charging a reasonable monthly fee to
maintain the streets; in fact that happens with many HOAs.
But can you imagine the developer or HOA saying that these streets can
only be driven on by autos purchased from a certain set of dealers
associated with the developer? Or only used to deliver products
you've ordered from certain web sites or vendors approved by the HOA?
Or to deliver only certain newspapers allowed by the owners of the
development? Or only used to drive your children to certain schools
approved by the HOA?
Even if there were some bizarre development where the HOA members
approved these kinds of restrictions, they should still be barred, as a
matter of public policy.
Wes Leatherock
wrote:
> Now I know some folks think that the incumbent phone companies strung
> the wires and therefore ought to have the exclusive right to use them.
> They point at the Constitution and cry "no taking of private
> property!" but they forget a couple of things. First of all, in most
> cases their wires and cables aren't on the incumbent telco's property,
> but rather are along public rights-of-way. If they'd had to buy ever
> square inch of land that their cables run over or beneath, nobody
> would have phone service, so they in effect got a giant concession
> from "we the people" by being able to use public property for all
> these years at little or no cost.
The gross receipts tax and other fees they pay to cities (often
as "inspection fees" or something similar) are by no means "little or
no cost" and are justified specifically on the basis they are using
public rights of way.
However, many of the facilities are on easements granted
originally by the developers specifically so telephone, electric,
water, sewer service, etc., can reach the homeowners who will
ultimately buy their houses and will be have the benefit of these
services.
> Therefore, if the government (acting as the representatives of "we the
> people") decides that competition for landline telephone service is
> desirable, they ought to be able to say to the incumbents, "your
> cables are on OUR property, therefore we have some say in what you do
> with them!"
The government did exactly that in deciding it was in the public
interest to promote cable television. The government required
electric and telephone companies to permit cable companies to make
attachments to those poles at a ridiculously low, and non-compensatory
rate.
[ ... ]
> The folks who really get taken on that deal are those who can't afford
> health insurance, but aren't poor enough to qualify for government
> assistance (or who don't know that, in some cases, a hospital is
> required to write off a bill if a patient is unable to pay).
Others who are taken are those who can afford health insurance
but choose to pay for their medical care on a pay-as-you go basis.
[ ... ]
> I've yet to hear any
> complaints about TDS Metrocom, which operates as a facilities-based
> CLEC in Wisconsin and Michigan. Well, I take that back, I have heard
> complaints about TDS -- that they aren't yet available in a location
> where a potential customer wants service!
Is this the same TDS that is the monopoly telephone company in
many places, and also provides the cable television service in many
such places?
Wes Leatherock
wes...@aol.com
wlea...@yahoo.com