Think about it:
‐The four Bell operating companies control a $300 billion communications
network with direct contact to more than 100 million homes.
‐They can now provide long-distance service in 42 states–aided by wholesale
leasing of long-distance companies’ networks at steep discounts.
‐As Eduardo Menasce of Verizon admitted to Network World Fusion,
“It’s much easier (for us) to go after long-distance. It’s less capital
intensive to move from local to long-distance than the other way around.”
While it takes only 15 minutes for a Bell to switch another company’s long-distance
customer to its service, its taken days and even months for the Bells to switch
local customers from their switches to a competitors’, the key to facilities-based
‐The SBC, Bell South, and Verizon have wireless stakes that make the bundling
of local, long-distance and wireless services for consumers simple.
The Bells with all these advantages nonetheless continue to lose local customers.
Why? To hear the critics of the Telecommunications Act of 1996 its because “SBC,
Verizon, Bell South, and Qwest have been forced by federal law to allow rivals
to utilize their networks at below cost rates.”
And what is the evidence of this? Well, the Bells say it’s so.
It is nonsense. As the Supreme Court noted in approving the FCC-pricing guidelines,
the Bells’ below-cost argument falls on the facts.
The 1996 act says that the Bells, in return for being allowed into long distance,
have “[t]he duty to provide, to any requesting telecommunications carrier
for the provision of a telecommunications service, nondiscriminatory access
to network elements on an unbundled basis at any technical feasible point on
rates, terms and conditions that are just reasonable and nondiscriminatory.”
That’s what Unbundled
Network Elements Platform provides–reasonable rates. Last year, SBC’s
CEO bragged to financial analysts that the company’s wireline margins were 42.1
percent. The discounts that state utility commissions, following FCC-pricing
guidelines for leasing the unbundled network element platform (UNE-P), amounts
to about 20 percent on average.
Independent studies by University of California-Berkeley economist Yale Braunstein
and economists Randolph Beard, George Ford, and Christopher confirm that the
Bells are making a profit on their UNE-P leases. Brounstein’s study in California
estimated that SBC earns as much as $4 a month in profit on about a $14 wholesale
price, or a margin of nearly 28 percent. Overall, CompTel estimated the annualized
profit for the Bells from UNE-P leases at $600 million.
So there is no “below cost subsidy.”
But UNE-P is vital to getting local competition underway. Competitors that
tried to provide facilities-based competition from the start went bankrupt –
wasted by the Bells adamant refusal despite billions in fines and levies to
provide them the access to individual network elements they were entitled to
The new competitors using UNE-P are winning customers by the millions by providing
tailored services to meet customer needs. As their customer base expands, they
will put in their own switches and lines so they can further differentiate their
service from the Bells. It happened in long distance, and there’s no reason
to believe that it won’t happen with local. With real competition, appropriate
deregulation can ensue.
But kill UNE-P and wholesale leasing now and re-monopolization will result:
All of the millions of customers who have proactively switched to a competitive
provider will be left without a choice. They will be forced to go back to a
provider they actively chose to leave. Protecting monopolies at the expense
of millions of satisfied customers is a recipe for disaster.
Think about it.
–Duane D. Freese, formerly on the editorial board
at USA Today, is a columnist and editorial consultant