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Empty Victory For The Bells
Posted by Will Collier  ·  11 June 2004

This week probably marked the beginning of the end of an eight-year battle between the old Baby Bell local telephone monopolies and many of their would-be competitors for local telephone service. A federal appeals court recently struck down a set of 1996 Telecom Act rules that had been forcing the Bells to sell wireline access to local service competitiors at government-regulated rates.

The Bells, regarding local services as their proprietary golden goose, successfully sued to gain control over such access and pricing. The story isn't completely over, but the FCC and Bush Administration have both passed on appealing to the Supreme Court. The CLECs (Competitive Local Exchange Carriers), including AT&T and a large number of upstart companies, will undoubtably file an appeal of their own, but the current conventional wisdom holds that their odds of success are slim.

Personally, I've got mixed feelings about this whole affair. On the one hand, as a good conservative, I'm wary of the government artificially setting the price for anything. On the other, as a telephone customer and free-marketeer, I utterly despise the local Bell monopolies, my "own" version, BellSouth, in particular. The Bells' whining about being over-regulated always ignores the fact that their networks and wiring have been subsidized by governments at all levels for over a century. Their claim to "own the lines" rings hollow (pun certainly intended) when you look at all the fees and bogus tack-ons they're allowed to pad their profit margins with at the expense of customers with no alternatives.

Either way, the law is the law, and the Bells now legally have the right to run their competition out of business--or so they may delude themselves. Like many other twentieth-century dinosaurs, the Bells are fighting a battle over territory that becomes less and less desireable with each passing day. So the Bells own traditional local wireline service. How much longer will it be before the reaction to that fact is, "So what?"

Cellular phones, broadband (both wired and wireless) and internet telephony are all poised to make the Bells' monopoly status a moot point. If your home is within range of a cell tower and cable modem service, it's entirely possible to cut the Bells off at the cord, right now (I would add DSL service to that list, but in most places, the Bells control those lines and won't allow you to have "dry-wire" DSL service from any provider without also paying for a Bell wired voice line).

I cut BellSouth off myself, back in January. When my then-fiancee and I merged our cellular service, I added on a third line for $10 a month. Using number portability, I had my home telephone number switched to that new cell account, and with a $40 CellSocket base station, was able to use all my existing home telephones through that account. We can still receive and make calls from any phone in the house, with our old phone number, but BellSouth doesn't see a dime from any of them. My local phone bill went from nearly $30, with no services like call waiting, caller ID, or voice mail, to $10, with every service known to man included for free--plus free long distance.

I like this very much. No doubt BellSouth is somewhat less happy about the situation, as they're losing numbers off their network in droves. Boo-freakin'-hoo for a corporation whose idea of "customer service" has been, "we're the phone company, so you'll take what you get and like it" for decades.

With Vonage and similar VOIP services up and running, and any number of new wireless technologies in the ramp-up stages, there's no reason why thousands, if not millions of others will also be telling the Bells to get bent. Couldn't happen to a nicer bunch of guys, as far as I'm concerned.

Comments

I have a friend who's a lineman. The Bells pay for laying and maintenance of said lines and the competitors don't have to pay for any of that, they pay less to access.

If the Bells pull out, the little guy does not maintain the lines. People don't realize this. They need to make money.

The Bells are subsidizing.

Posted by: Sandy P at June 11, 2004 02:04 PM

Sandy-- This is true, but the Bells monopoly position allows them to charge extra. Fun, really, the choice between subsidizing and overcharging.

In any case, as Stephen says, it's irrelevant. Technology may mean that laying phone wires is just plain inefficient, compared to VOIP and wireless.

Posted by: John Thacker at June 11, 2004 02:36 PM

"I cut BellSouth off myself, back in January. When my then-fiancee and I merged our cellular service, I added on a third line for $10 a month. Using number portability, I had my home telephone number switched to that new cell account, and with a $40 CellSocket base station, was able to use all my existing home telephones through that account."

My one concern about doing this is that the cell network doesn't have the same level of emergency robustness as the wired network. IIRC, Steven Den Beste has indicated that it's not really practical for it to do so-- that having enough call capacity and backup power would be cost-prohibitive at this point, and into the immediately foreseeable future. While I have no love for my local Baby Bell, I also don't want to be without phone service in the event of a significant emergency (whether a natural disaster or a terrorist attack), so thus far I'm still sticking with a wired phone line (and at least one phone that can be powered solely by it) despite not really needing it much day-to-day. (I'm also a little concerned that such a disaster may see a lot of people incommunicado at the worst possible time.)

Posted by: Mike at June 11, 2004 03:09 PM

One of the problems with properly regulating or deregulating the telecoms is that you need to be fair in regulating because there are many different aspects of the business. The local switched are only part of the telecom system and only one area where regulation (or deregulation) plays. The fact is that modern regulations on right of way and public access and all of that make it very difficult for private companies to run cables for new networks. So even though deregulating this part of the telecom system may seem like a good idea it's really an unbalanced deregulation. Because the bells still have huge local monopolies due to other regulations.

It's instructive, I think, to compare this with a very similar industry, cellular phone networks. There nothing like this is an issue, because it's a lot easier to build cell towers and create whole new cellular networks. So competition is allowed to work. And it works infinitely better than in the land-line telecome business even though even in cellular network construction there are many, many regulatory hurdles and roadblocks, but they are not nearly as onerous as those in the land-line business.

Ultimately, I suspect, that, as others have mentioned, the transition to data networking will bring all the various networks into competition with each other for EVERY service and provide the competition that has been lacking in the telephone industry so far.

Posted by: Robin Goodfellow at June 11, 2004 03:16 PM

I am with Stephen on dropping the land line, as we have used cell phones and cable for internet for almost 4 years, and it has been cheaper for us, too. I got to the point where I refused to give another cent to Concord Telephone, and happily have not since then.

Posted by: Crusader at June 11, 2004 05:03 PM

More on the coming demise of the Baby Bells: http://www.pbs.org/cringely/pulpit/pulpit20040527.html

Sorry, I don't have time to summarize properly.

I've been using a cellphone only for years and haven't looked back. No sales calls is a luxury that I take for granted now.

Posted by: Dan at June 11, 2004 05:43 PM

Not much to add other than I ditched Ameritech (now SBC) five years ago. The amount of time and effort it took to get frequent, wrongful charges reversed was greater than actual charges.

Note to all, that was Will's post not Steve's.

Posted by: aaron at June 11, 2004 07:10 PM

Cellular phones, broadband (both wired and wireless) and internet telephony are all poised to make the Bells' monopoly status a moot point. If your home is within range of a cell tower and cable modem service, it's entirely possible to cut the Bells off at the cord, right now

I did exactly that about two months ago- broadband internet via cable, telephone service via cell.

It's pretty damn nice. ;-)

Posted by: rosignol at June 11, 2004 07:47 PM

No, I don't wanna cell phone. Krikes! There are plenty of times I don't want to be reached, or have the answering machine handle it. One solution would be to separate out the lines and have a nonprofit consortium handle that aspect.

When I read this blog entry (blogry?) I heard the voice of Ernistine
"We're the phone company, we don't care, we don't have to."

Posted by: Robert at June 11, 2004 08:11 PM

You don't have to always have your phone on, or with you.

Posted by: aaron at June 11, 2004 08:53 PM

I ditched BellSouth for good two years ago & haven't regretted it yet. I have a cell for telephony & cable for broadband.

Robert, you can leave your cellphone at home or turn it off (or just screen). Believe me, you would be shocked from not getting the telemarketing calls, which alone makes the entire proposition worthwhile.

Posted by: Ron at June 11, 2004 10:52 PM

Looks like this new ruling would allow you to go wireless even if your only internet solution was DSL. They have 30 days to appeal but we'll see what happens.

http://www.nytimes.com/2004/06/12/business/12phone1.html

Posted by: Jason at June 12, 2004 08:39 AM

The Georgia and Florida PSC's made similar rulings last year (see the link in Jason's comment, above) denying BellSouth's "forced bundling" rules on DSL service. BellSouth is fighting both states in court.

I dropped them completely and switched to a cable modem.

Posted by: Will Collier at June 12, 2004 09:19 AM

There's a reason we haven't dropped landline here; it was touched on earlier in the thread. Emergency service, and peak load. The baby bells are required, by federal regulation, to keep a HUGE overcapacity on the network, and a large amount of emergency serivce capability. IT makes little business sense for them to provide this capability, but the government requires it for reasons of social good. One of the reasons the alternate phone providers are trying to avoid regulation is to avoid these requirements (look at the fight the cellphone companies went through over E911 service).

And until the alternative phone systems get to at least 3 9s relaiability (99.999%), I'd be a little anxious about dropping the land line entirely.

Posted by: Ian Argent at June 12, 2004 10:00 AM

Have any of you complaining about telemarketers registered for the Do Not Call List? It really works. The calls dropped off dramatically and all I really get now are the occasional charity or "courtesy" calls from my credit card company. Sign up, it's no gimmick.

Posted by: Mike M at June 12, 2004 11:03 AM

I have dsl but I rarely use my phone line to make an actual phone call.

I bought a SIP adapter which connects into my DSL and I can make long distance VOIP calls for 3 cents a minute (if the endpoint is a PSTN terminal - regular phone) or free if the endpoint is another SIP phone. I also got an xten softphone for my laptop when travelling to call from. Since they are no phone connected to my phone line then no telemarketers ever break through.

That and cell phones are the better way.

Posted by: capt joe at June 12, 2004 02:42 PM

How did you get the CellSocket device for $40? When I follow the link, I only see the Universal CellSocket Base selling for #120

Posted by: Paul Dow at June 12, 2004 09:37 PM

Paul, the one I got was a closeout on a discontinued model. Old version that runs off of Nokia phones (fortunately I had an old 5190 that still works).

Posted by: Will Collier at June 13, 2004 08:59 AM

Actually I really like SBC... we pay $20 per month and have unlimited long distance anywhere in the US. As to using a cell phone I live in the boonies and cell service is totally undependable.

Posted by: Okiebert at June 13, 2004 09:17 PM

I have a completely unlisted number and never get telemarketing calls. For some odd reason, cell service is terrible in my neighborhood, so I won't be using that for my main phone as long as that's the case.

Posted by: shell at June 14, 2004 09:38 AM



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