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A Win for Phone Customers

February 27, 2003

Federal Communications Commission Chairman Michael K. Powell has a simple regulatory philosophy: remove the regulatory shackles from telecommunications to trigger an industry rebound and guarantee a wave of new products, improved service and competitive pricing.

History has not been kind to Powell on that point, so it's fortunate that his side lost a recent FCC vote to eliminate regulation -- and, along with it, the promise of true competition -- in local phone markets.

Powell's vision of regulatory relief would touch every consumer who picks up a telephone to call across town, but not always in a good way.

In Powell's perfect world, quick deregulation is the surest guarantee that telecom companies can thrive while serving customers and rewarding shareholders. But this is not a perfect world.

The Telecommunications Act of 1996 was supposed to encourage real competition that would benefit local phone customers. The act instead sparked never-ending court challenges by local phone companies trying to push regulators out of their business and keep regional monopolies safe. Last week's ruling finally solidifies the right of AT&T and others to compete fairly against the regional companies for customers.

Currently, only 10% of local phone customers can choose from among competitive services, but even this bit of competition is driving down prices. The ruling, by giving state utility regulators the authority to force markets open, should expand the competition.

Industry lobbying is already fierce in Indiana and other states with phone proposals in their legislatures. State regulators and lawmakers will have to resist for consumers to see any benefit.

In California, the Public Utilities Commission was stymied by the courts last year when it tried to force the market open. Now the way is clear, if lobbyists don't block it.

Of course, nothing in telecommunications is simple anymore. Think of trying to compare competing cellular phone offers. Congress still must wrestle with regulating wireless technologies that ultimately could make the whole local phone service issue moot.

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