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Call Baby Bells to Account

November 13, 2003

Oh to be a fly on the wall last month when executives at regional telephone companies, three of them Baby Bells, invited telecommunications and high-tech executives to an exclusive dinner at the St. Regis hotel in Washington, D.C. Before the tech and telecom guests could even get to the appetizer, the folks from Verizon, BellSouth and SBC were prodding them to help fund a $40-million lobbying campaign to push federal regulators out of the local phone business.

According to portions of an agenda obtained by The Times' James S. Granelli, the Baby Bell executives want their counterparts to help build a massive war chest to lobby the Bush administration, Congress and the Federal Communications Commission to "substitute market-based competition for government-managed competition." That's lobbyist-speak for booting the regulators and forcing consumers to rely upon the Baby Bells' good intentions to safeguard their interests when it comes to pricing, service levels and industry competition.

Verizon, SBC and BellSouth (Qwest, the fourth Baby Bell, wasn't at the dinner) enjoy near-monopolies in the traditional local phone business. They face increased competition from cable operators, cellular telephone companies and future technologies. But the main target of the Bells' massive lobbying effort are federal regulations that require the Bells to lease space to such competitors as AT&T and MCI. The Baby Bells are preaching a self-serving gospel. A Republican strategist who is advising AT&T as it tries to break into the local phone business described Baby Bell executives as "monopolists who don't know how to behave in a competitive world." Coming from a lobbyist for AT&T, the former monopoly whose breakup led to the Baby Bells, the comment is ironic but no less true. The Baby Bells argue that ridding the local phone industry of federal regulations would lead to a free and unfettered market that would magically shower consumers with attractive pricing and better products and service.

Blanket deregulation, though, isn't the answer because, despite increased competition from cellphone carriers and cable operators, the Baby Bells enjoy near-monopolies in their service territories. Absent an authority figure (the California Public Utilities Commission or the FCC) with a big stick and an attractive carrot, where are consumers going to turn when the service is lousy and pricing skyrockets? As for a deregulated market sparking more choice, no one expects the Baby Bells to voluntarily open their markets to real competition.

The Baby Bells and their trade association maintain that they have a constitutional right to meet and discuss public policy issues and that pricing never was discussed during the dinner meeting. Local phone service is too important to take their word that nothing inappropriate occurred. Congress should settle the matter by holding hearings to determine if the dinner meeting broke antitrust law.

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