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Competition Here

by Randolph J. May
Legal Times, October 10, 2002

In the August 31 Daily Record, Christopher Summers argues that Verizon’s request to the Public Service Commission for permission to provide Marylanders long distance service should be denied. Summers, president of the Maryland Public Policy Institute, claims that little local competition has emerged, asserting that most Marylanders “have no choice but to accept Verizon as our local carrier.”

Apart from misconstruing what is required by law before Verizon is allowed to compete in the long distance marketplace, Summers’ assertion concerning the competitive situation in Maryland is surprising---especially to me. Let me explain.

In May 2002, I co-authored a report entitled “Local Exchange Competition: Progress in Maryland.” Based on a review of the available data, the report concluded: Competition presently exists in Maryland on a geographically dispersed basis and there appear to be no barriers to entry; technology continues to drive new generations of services that will compete with Verizon’s traditional wireline services; and competition will intensify over time, providing consumers with lower prices, better service, and more innovative products and services.

Summers reviewed this report before it was publicly released and commented favorably on it. What’s more, in the news release accompanying the publication of the report, Summers is quoted—again with his approval-- as stating, “The Telecommunications Act has allowed the market to work, and consumers are the beneficiaries.”

I have no idea what caused Summers’ turnabout. But I do know that his opposition to Verizon’s request for long distance authority is misplaced. While it is true, as Summers’ claims, that Verizon presently has approximately 95% of the residential wireline telephone market, the test for whether long distance authority should be granted is not some static measurement of market share, but rather whether Verizon has met the market-opening requirements of the 1996 Telecommunications Act. In this regard, Verizon has made a strong compliance showing.

In any event, it is not true that Marylanders “have no choice but to accept Verizon as our local carrier.” In its most recent Local Telephone Competition report, issued on July 23, 2002, the Federal Communications Commission found that 98% of Maryland’s zip codes are served by at least one Verizon local phone competitor.

And, importantly, Summers completely ignores the competitive threat to Verizon’s local business posed by companies that are not traditional wireline companies. For instance, the same recent FCC competition report found that, as of the end of last year, Maryland had 2.3 million wireless telephone subscribers, a year-to-year increase of 16%. Most of these “anywhere, anytime” ”wireless subscribers would be baffled by regulatory distinctions based on “local” and “long distance”, and an increasing number of them are discontinuing their wireline local phone service altogether.

Wireless is not the only threat, of course, to Verizon’s local telephone position. Just last week, the Wall Street Journal ran a story headlined: “More Consumers Answer Call of Cable for Phone Service.” The cable industry has spent $65 billion over the past six years to upgrade its facilities to carry not only digital television, but also local telephone and high-speed Internet access services. Bottom line: Looking at recent data from AT&T, Cox, and others, the Journal concludes that the cable companies “are beginning to chalk up impressive results in signing up telephone subscribers.”

So, Verizon faces competition not only from those resale competitors that lease its local facilities at regulatorily-controlled prices, but from facilities-based competitors providing service on other technology platforms. It is this competition that will bring the most long-lasting consumer benefits to Marylanders. (Note: I haven’t even mentioned Internet messaging and Internet telephony services that are increasing cannibalizing the revenues of traditional local wireline carriers.)

All of this new competitive activity has meant that Verizon actually lost more than 100,000 residential and business lines in Maryland over the past year.

Finally, FCC data clearly shows that the greatest amount of competitive activity takes place in the local market after the incumbent local carrier is allowed to provide long distance service. Then the long distance carriers like AT&T no longer have a reason to spend all their time and resources trying to convince regulators to keep out the incumbent. They must jump into the market themselves and offer a consumer-friendly bundle of local and long distance services.

Verizon has already been granted permission to provide competitive long distance service in New York, Massachusetts, Connecticut, Pennsylvania, Rhode Island, Vermont, Maine, and New Jersey, with Virginia poised to follow shortly. It’s time that regulators removed the barriers that prevent Maryland consumers from enjoying the benefits that will flow from increased competitive activity.

Randolph J. May is a senior fellow and director of communications policy studies at the Progress & Freedom Foundation in Washington, D.C. The views expressed are his own and do not necessarily reflect the views of the foundation. He may be reached at rmay@pff.org.

© 2003 Baltimore Daily Record. All rights reserved. This article is reprinted with permission from the Baltimore Daily Record.



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