MemeStreams | Defending Phone Competition

Local phone rates across the nation may soon soar if the Bush administration fails to come to the defense of FCC rules aimed at promoting competition.

What? Local telcos would be crazy to raise rates, as long as they have a desire to stay afloat. Higher prices would only hasten the departure of their already shrinking customer base.

Of course, if the government continues to allow failed telcos to "reorganize" under Chapter 11, they have every incentive to collapse under their own weight and emerge, debt-free, to continue beating each other senseless in the marketplace. The Savvis purchase of C&W assets, and the MCI restructuring, among others, are reigniting the telecom death spiral. If the NYT is looking for a telecom hobbyhorse, this should be it.

Some 20 million American households no longer rely on the local phone company for local service. The Baby Bells now argue, prematurely, that the current regulatory arrangement is no longer needed because new technologies like wireless and cable telephony offer plenty of competition. They also argue that lease rates set by some state regulators are so low they are being asked to subsidize competitors, a claim belied by their strong financial performance.

Strong financial performance? Citations, please! Any evidence suggesting "strength" should receive the most stringent scrutiny. And it's not meaningful to look at wireline voice in isolation. The dwindling profits in this sector are the only support beam propping up an entire industry at risk of collapse.

Defending Phone Competition