Telecom Act Leading To Digital Divide

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February 08, 1999 (4:43 PM EST)

By Mary Mosquera,

WASHINGTON, D.C. -- The United States faces a digital divide unless the government eases its regulation of the regional Bells, said the president of a telecom industry group on Monday.

It has been three years since passage of the law designed to open up the local phone-service market to competition.

"The Telecommunications Act of 1996 is sound, it's the FCC interpretation that is not," said Roy Neel, president and CEO of the United States Telephone Association, which represents the regional Bells.

Local phone markets have been open to competition, he said. "But the new entrants -- primarily the long distance providers -- have effectively ignored most residential customers," Neel said.

U.S. House Commerce Committee Chairman Thomas Bliley (R-Va) said that competition was opening up in local services. "All across America we are seeing competition develop. Slowly but surely the tide is turning," Bliley said. He said Congress will address some of the obstacles remaining.

Others see competition opening up as well -- just not the way it was expected. Telecom players are still slugging it out in court, but the industry has been transformed, said Jeffrey Kagan, telecom analyst for Kagan Telecom Associates in Marietta, Ga.

Under terms of the landmark telecom act, local Bell companies must fulfill a 14-point checklist to gain FCC approval to enter the long distance market. No Bell has succeeded yet.

Last week, FCC senior staff said they anticipate local competition very soon.

The local Bell companies say major long distance companies, like AT&T and MCI WorldCom, don't want the competition in the long distance market, so they have not sought to enter the residential local service market. But No. 2 long distance provider MCI WorldCom announced last week that it will start local service in New York, leasing access from dominant regional carrier Bell Atlantic.

Most new entrants in the local market go after the high-volume business market, Neel said. The Bell companies, on the other hand, are mandated to serve all customers in their region. Competition for only select customers will limit the expansion of advanced telecommunications, such as high-speed Internet, he said.

The FCC should open long distance to full competition, Neel said, which will speed investment in advanced services and encourage competition in local phone services. And the Bells should not have to create separate subsidiaries to deliver high-speed Internet access -- as the FCC has proposed, he said.

Deregulation has transformed the telecom industry, Kagan said. "There's a host of new companies and new technologies competing in the local and long distance marketplace, changing the rules and lowering prices," the analyst said.