But don’t expect the Bells to abandon their turf easily. In fact, MCI’s move may backfire. Lobbyists for the seven regional phone companies–created by the 1984 breakup of AT&T–have mounted a fierce counterattack. They want Congress to let them invade the long-distance business, and there’s legislation that would allow just that. “We think it’s dandy that MCI wants to compete with us,” says Ameritech CEO Dick Notebaert. “Just as long as we have the pleasure of doing the same to them.”
The telecommunications industry has grown so complicated since the courts broke up the phone company 10 years ago that the average customer may need a scorecard to keep track. Since 1984, when AT&T was given the long-distance business and Baby Bells were created to handle local traffic, the industry has been reshaped by the rise of long-distance competitors like Sprint and MCI and busted wide open by such new technologies as cable, satellite and wireless. The MCI announcement brings a certain continuity to the game; long-distance providers want to offer local service again and the Baby Bells are itching to offer long distance.
Unlike MCI, which faces no legal barriers in its bid to enter the local loop (only AT&T is barred by the breakup ruling), the Baby Bells need regulatory dispensation to get into the long-distance racket. Even MCI acknowledges that that day is coming, but the timing is uncertain. The most promising bill, sponsored by Rep. John Dingell, would allow the Bells into long distance on a five-year staggered schedule. But the long-distance companies complain that is too soon. They insist the Bells still have an unfair advantage because, despite all the talk of competition from cable and wireless, the phone companies still control 99 percent of all local calls.
The Bells worry that five years is too long. By then, they say, alternative technologies will have left them in the dust. They argue that to be competitive, they have to offer long-distance packages. The Bells’ case may be warmly received by lawmakers, partly because the long-distance carriers aren’t keeping prices down. AT&T, MCI and Sprint’s prices have edged up 7 percent since July, despite falling costs. Since mid-1990, rates have jumped 15 percent. “So much for competition,” says BellSouth CEO John Clendenin.
MCI vows that its move into local service will drive rates down. The trouble is, business customers may get all of the benefit. The company plans to cut prices by using its new network to circumvent access charges–about $5 billion a year–paid to the Baby Bells. But much of those fees subsiize “universal service”–the cheap basic rate for consumers. If MCI stops paying, how will NYNEX afford to bring budget phone service to Aunt Martha in Elmira? One idea that is popular in Congress: force all the players–from the Bells to wireless firms–to help pay to keep residential rates low.
That’s the future. For now, the Clinton administration supports further deregulation to accelerate the Information Highway. So MCI may well become your neighborhood telephone provider by the turn of the century. And the likes of Southwestern Bell could carry your call to Mexico.
