Phone Industry Wants U.S. to Clarify Goals
As the nation’s telecommunications industry moves from regulated monopoly to competitive marketplace, its diverse members are beseeching the federal government for increased freedom to operate in the new environment.
So far, however, a welter of government entities is making that goal difficult.
“We have multiple policies--some at the national level from the Federal Communications Commission, some from the court, some from Congress and state regulators,” said Donald E. Guinn, chairman of Pacific Telesis. “We need uniform direction.”
Number of Players Grows
Pacific Telesis, one of the seven regional phone companies carved out from the 1984 divestiture of American Telephone & Telegraph that was ordered by the Justice Department, owns Pacific Bell and Nevada Bell as well as new companies that deal in cellular car telephones to real estate.
AT&T;, the former giant telephone monopoly, retained its place in the long-distance business, where it competes with a host of newcomers. In addition, myriad domestic and foreign firms are vying to provide computer voice and data services via telephone lines and satellites.
As the number of players grows, their interests are clashing:
- Pacific Telesis and the six other regional phone companies, which provide basic local telephone service for 80% of the U.S population, want to operate without some of today’s restrictions. Left to compete on their own terms, they would branch out in a variety of ways, from manufacturing telephone equipment to offering telephone service in areas outside their present exchange areas.
- AT&T; wants to be freed from rules under which its rates--but not those of its long-distance competitors--are regulated by the FCC. It also wants to undo a structural requirement that only an arm’s-length subsidiary may market telephone equipment and enhanced telephone services such as call forwarding.
- Some of AT&T;'s long-distance competitors, such as GTE Sprint and Allnet, are asking the FCC to slow deregulation so that they can gain a greater foothold against AT&T.; Among their requests, they want to offer prepaid long-distance service for incoming calls, as AT&T; does with its “800" numbers.
For all their conflicting ambitions, the telecommunications competitors appear to have one goal in common: a desire to play under a consistent, stable set of federal and state rules.
“We’ve got to go back and refocus our public policy and decide what makes sense in the marketplace and what’s good for the consumer,” Guinn said in an interview.
That sentiment is shared by GTE Sprint, one of the newcomers to the long-distance business, which complained in recent formal comments to the Commerce Department that “fragmentation of decision-making continues in the post-divestiture era.”
Adding to the urgency is the breakneck pace of technological change. “Technology is emerging from every source,” Guinn said.
Guinn and other telecommunications executives complain that, in the absence of a coherent national telecommunications policy, crucial decisions are being made by Justice Department lawyers and U.S. District Court Judge Harold H. Greene, who earned the title of “telephone czar” when he presided over the AT&T; divestiture judgment.
“I don’t think that’s the right way to make national policy,” said Guinn, who believes that Congress may be the appropriate institution to set national policy.
“I would want someone who understands the issues and has some influence over the general direction of telecommunications policy,” said Donald Prigmore, president of GTE Sprint.
The Commerce Department’s National Telecommunications and Information Agency is already reviewing the structure and regulation of the U.S. telecommunications industry and expects to issue recommendations soon.
The regional telephone holding companies told the agency that they are hamstrung by Judge Greene’s order, which urged them to concentrate on providing basic local telephone service and hampered their freedom to branch out into unregulated services, where potential profits are greater.
Guinn, speaking of the seven regional phone companies, said: “If we’re permitted to be all we can be so we can enhance our technology to the fullest, then you’ll find seven very large players in the information age business in the United States who will be providing state-of-the-art, leading-edge technology. If we’re not permitted to do these things, then we’ll have to begin to retract in certain areas.”
Pacific Telesis argues that it is prevented from offering new products such as call forwarding and message storage, home security systems and the ability to split a single phone line into two voice and five data channels that could be used simultaneously.
Pacific Telesis and other regional companies insist that, unless they can meet the increasingly sophisticated needs of large businesses, these companies will desert the public telephone network to build private networks, thus leaving smaller businesses and residential users to absorb greater costs for their telephone service.
And if they are to serve business, the regional companies say, policy makers must understand that the line between telecommunications and computers is quickly disappearing and that telephone companies must be allowed to provide such services as local networks that connect home computers to offices.
“If traditional telephone companies cannot provide the interconnection services necessary to the efficient functioning of computer networks, they will have failed from a technological as well as a customer perspective,” H. Laird Walker, vice president of federal affairs for US West Inc., a regional telephone company serving several Western states, told the National Telecommunications and Information Agency.
Walker pointed to the growth of “intelligent” office buildings, in which tenants are offered telephone services geared to meet their needs. No such buildings existed before 1982, he said, but there are expected to be 6,000 by 1994.
William G. Burns, vice chairman and chief financial officer of Nynex, the regional company in New York and New England, said current restraints “delay new services to the public, create uncertainty in the investment community, raise artificial entry barriers for innovative companies and inhibit economic growth.”
Shooshan & Jackson, a Washington consulting firm, says the regional companies are laboring under restrictions that bar them from manufacturing terminal equipment, offering a full range of information services and marketing voice and data services jointly. These prohibitions place the regional companies at a disadvantage against large corporations such as AT&T;, ITT and GTE in the competition for corporate customers in search of advanced telecommunications services.
“It is ironic that the U.S. is fighting so hard for trade concessions from Japan while it inflicts worse damage on its economy with these needless regulations,” the consulting firm said.
To date, Judge Greene has granted more than 20 waivers to allow these companies to pursue ventures from real estate to office furniture to computer sales. But the companies do not want to undertake lengthy proceedings to seek permission for each new venture.
Like the regional phone companies, AT&T; is appealing for relief from what it regards as unfair regulations governing its long-distance rates and calling options and its ability to branch out beyond long-distance service.
“Society won’t realize the benefits as promptly or efficiently as long as government continues to make decisions about the industry, its structure, prices and service offerings which are better made by the marketplace,” said Charles Marshall, AT&T;'s executive vice president.
Some of AT&T;'s chief competitors in the long-distance market warn that, if the government yields to AT&T;'s pleas for deregulation, their own financial health will be jeopardized. “Compared to AT&T;, we’re ants waiting to be squashed by the elephant,” said Prigmore of GTE Sprint.
Some Competitors Might Fold
Prigmore said one or two of AT&T;'s long-distance competitors might fold in the next year unless the FCC slows its deregulatory efforts. But the FCC, in a recent report that it issued to answer some of the claims of AT&T;'s competitors, accused the alternative long-distance companies of threatening collapse to “make it more likely that government officials will succumb to protectionist demands.”
AT&T;'s long-distance competitors also are looking for some breaks of their own. GTE Sprint; Allnet Communications; U.S. Transmission Systems, a unit of ITT Corp., and US Telecom, a part of United Telecommunications, formally asked the FCC last week to modify current policies.
The companies asked the FCC to require the regional Bell companies to convert larger pieces of their service areas at a time to “equal access” so that competitors can market their services more efficiently. With equal access, customers may choose which long-distance company in their area will carry calls dialed with the simple prefix “1.”
The alternative long-distance companies also seek authority to operate “800" services, and they want AT&T; to provide them with detailed customer data on telephone usage, including unpublished telephone numbers.
In all the jockeying for position by the corporate players, some state regulators fear that the federal policy makers will overlook the needs of consumers. Gwen Moore, head of the California Assembly’s Utilities and Commerce Committee, urged that the states retain a clear role in setting public policy.
“If transportation policy makers had been as obsessed with the competition issue as are telecommunications policy-makers,” she said, “we would still be using canal boats and covered wagons for our commerce and travel.”