The so-called Tauzin-Dingell Act, slated for a House vote this week, has seemingly spawned more drive-time radio ads than "Hooked on Phonics." The bill would allow the "Baby Bell" phone companies to offer long-distance data services without first abandoning their local monopolies, thus nixing a key regulatory provision of the Telecommunications Act of 1996. Because interstate broadband is worth billions, the four titans of regional telecom -- Verizon, SBC, Qwest, and BellSouth -- have spent months saturating the airwaves with gooey messages about how Tauzin-Dingell will launch, say, North Dakota wheat farmers into the Internet Era.
But the Bells doth advertise too much. Regardless of Tauzin-Dingell's fate, the remnants of 1984's Ma Bell breakup are well en route to becoming telecom's zillion-pound gorillas, thanks to the generous patronage of Michael K. Powell (Colin's son). As chairman of the Federal Communications Commission, Powell's hands-off approach virtually assures that the Bells will soon cannibalize such long-distance rivals as AT&T and WorldCom. And that means telecom competition is about to join the Betamax and whalebone corsets in history's dustbin.
The Bells' looming triumph traces back to 1996, when Congress overhauled telecom law for the first time since the New Deal. Despite the 1984 breakup, local phone service was still dominated by Ma Bell's offspring, which own the guts of telecom networks -- wires, poles, and such. To spur competition, legislators offered the Bells a tasty carrot: Open up your local markets to competition and we'll let you enter the long-distance game.
Fortunately for the Bells, the FCC was charged with monitoring the details of that bargain. And the FCC is now led by the Bell-friendly Powell, a onetime corporate attorney whose clients included GTE (now Verizon). Powell also owes his job to none other than Rep. W.J. "Billy" Tauzin (R-La.), head of the powerful House Commerce Committee. The Cajun congressman is a notorious Bell lackey who was feted with a $400,000 Mardi Gras-themed gala at the 2000 GOP convention, courtesy of SBC and BellSouth; his son, Billy III, lobbies for the latter company. It was Tauzin who cajoled Bush into elevating Powell to the chairman's post.
Powell has rewarded Tauzin's faith by treating the Bells with kid gloves. The FCC's competition checklist is laughably lax; the Bells need not offer any real proof that competition exists, and they often put the kibosh on potential rivals by charging exorbitant rental fees for their equipment. Yet Powell is dishing out long-distance approvals like doctor's office lollipops. According to the Precursor Group, the Bells could be cleared to offer long-distance services in 30 states this year. That means almost certain death for long-distance outfits like AT&T and Sprint. Already gutted by ferocious price wars (yes, those pesky 10-10-220 commercials take a toll), these companies stand to lose 40 percent of their business to the Bells, which can offer bundled local and long-distance service.
The Bells, in turn, are eager to carve up AT&T, Sprint, and their ilk. Legg Mason, an equity research firm, believes that at least one such merger will take place before mid-summer. And the Bush Administration's antitrust watchdogs can't be expected to do much to block a Verizon-AT&T or SBC-WorldCom behemoth. This is, after all, a Justice Department that walked away from the Microsoft case, and a Federal Trade Commission headed by a Reagan-era retread, Timothy J. Muris, who gushes about the efficiency of conglomerates.
The last potential barrier to the Bells' conquest, then, is the FCC, which has the power to block telecom mergers that violate the public interest. But the laissez-faire Powell has derided the FCC's public-interest standard as something that "invites mischief by regulators and special interests." He prefers post-merger enforcement, and has asked Congress to raise the maximum fine he can assess from $1.2 million to $10 million. That's still nothing but a gnat-sized nuisance to the Bells, which average nearly $40 billion in annual revenue.
So as the Tauzin-Dingell debate churns, take the Bells' thunderous rhetoric with a grain of salt. With Powell at the FCC's helm, a defeat this week will only stave off the inevitable. Like the T-1000 cyborg from Terminator 2, which recoalesced after being blasted into a zillion liquefied bits, Ma Bell is back, bigger and badder. Makes you wonder why the courts even bothered in the first place.
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