STOCKTON — As a 12-year-old, John La Rue scavenged wires and parts from a local junkyard to build a crude telephone network connecting his neighborhood buddies through relay switches attached to an abandoned doghouse.
It didn't take long for the telephone police to catch on.
"One afternoon, when I came home from school, there was this man who appeared to me to be about 25 feet tall standing on the front porch," said La Rue, now 54. "He told me that I needed to cease and desist from operating my illegal telephone utility."
Four decades later, the law is on his side. The company he founded, Pac-West Telecomm Inc., is challenging big phone companies with the encouragement of state and federal regulations.
Pac-West's primary business is to route calls by Internet users in California to their service providers, like EarthLink Inc., in a way that makes the calls local, not long-distance. SBC Communications Inc. and Verizon Communications Inc. carry the traffic on their networks to three Pac-West switching centers in California, a strategy that saves Internet providers and their customers a bundle in toll charges.
It's an arrangement made possible by the federal Telecommunications Act of 1996, which was designed to spur competition in local phone service after a century of monopoly.
Since Congress passed the act, dozens of companies like Pac-West have found niches in California, giving customers an array of new services and saving them hundreds of millions of dollars.
Now the law's future is in doubt. A series of court decisions have thrown out key rules written in Washington to carry out the act, and politicians are considering revamping it. Baby Bells are demanding significant increases in state-regulated rates that they are allowed to charge rivals to use Bell lines and gear to deliver service to homes and small businesses.
And new technologies are threatening to upend the phone industry's intricate and intertwined financial structure: voice over Internet protocol, or VOIP, for example, uses data lines to bypass not only the traditional phone network but also state and federal regulations and taxes.
The court rulings and the pressure on regulators have put the "critical mission" of promoting local phone competition in jeopardy, Federal Communications Commissioner Kevin J. Martin recently told Bell rivals.
