Competition: Gone Today, Here Tomorrow

Competition: Gone Today, Here Tomorrow
September 1, 2004

Steven Titch

Steven Titch is a policy analyst at Reason Foundation focusing on telecommunications, Internet and... (read full bio)

In what might have been the shortest market exit and re-entry on record, AT&T issued a news release June 23 saying a D.C. Circuit Court ruling forced it to "stop competing" in seven states. Since June 30, however, AT&T has issued three releases describing its stepped-up entry into local markets with its CallVantage Internet Telephony service using Voice over Internet Protocol (VoIP).

The latest was reiterated in AT&T's earnings release July 22. The company declared the change in regulations was forcing it to abandon "traditional" local exchange markets, but later in the statement detailed its extensive plans to compete with VoIP. Ironically, AT&T is demonstrating just the type of competition among technologies the court claimed existed and AT&T claimed did not.

Did the court ruling really force AT&T to stop competing and end consumer choice for telecom services? "We foresee a future with less choice for customers," said David Dorman, chairman and CEO of AT&T, on June 23. "Competitive choices are simply not available today for most Americans." Yet on July 12, AT&T announced a "key milestone" in its deployment of residential VoIP, introducing CallVantage local service in 28 new markets in seven more states, bringing the total number of CallVantage markets to more than 100.

On June 23, AT&T spokespersons said, "Without these [UNE-P] rules, AT&T has been forced to reassess its ability to serve residential customers in the other 39 states in which it provides local and long-distance service." But on July 12, they said, "AT&T CallVantage Service marks the beginning of an exciting new era in voice communications that gives customers a compelling new choice. ... AT&T CallVantage ... [offers] households a high-tech alternative for their personal communications needs."

AT&T stands to lose discounted access to the facilities of BellSouth, Qwest, SBC, and Verizon--the so-called Baby Bells--that a D.C. Circuit Court struck down. The discount program, called the Unbundled Network Elements Platform (UNE-P) rate structure, forced the Baby Bells to lease equipment and lines to AT&T and other competitors at artificially low prices established by the Federal Communications Commission (FCC). AT&T vociferously protested that the loss of these price controls was the end of local competition and consumer choice for local phone service.

Using IP, AT&T is targeting consumers with a new local service platform it believes is superior to what the Bells currently have. This is exactly the kind of platform-based competition advocates of competition and consumer choice predicted would emerge once the subsidies and artificial competition stopped.

What is troublesome is that even while embracing new competitive opportunities, AT&T is telling regulators and consumer advocates that the loss of these regulations is forcing it to abandon markets. AT&T's words and actions belie this.

Far from ceding markets to one-time Bell monopolies, AT&T is promising to attack them using an innovative new platform that stands to make service choices more diverse and competitive than ever. It is a shame the company finds it necessary to politicize what in every way is a rational and sound policy decision by the courts.


Steven Titch (titch@heartland.org) is managing editor of IT Update.

Steven Titch

Steven Titch is a policy analyst at Reason Foundation focusing on telecommunications, Internet and... (read full bio)