Given the controversy over the court-ordered breakup of Microsoft, a split that its backers assure everyone would be the end of that antitrust matter, the recent Federal Communications Commission flap with AT&T over phone fees is instructive.
It is instructive because at its heart is an issue that has never been resolved in the 16 years since the breakup of the telephone company: How much in access fees should long distance providers have to pay local telephone companies for the use of their wires?
It illustrates just how messy the aftermath of a breakup can be. One reason government regulators are still trying to micromanage this issue after all these years is that the breakup attempted to freeze the telephone landscape at a moment in time; that landscape has been utterly and irrevocably altered by technology.
The negotiated settlement of that historic antitrust case split Ma Bell into a long-distance provider and seven local telephone companies. That’s pretty much how the regulators still treat them, even though the distinctions between “local” and “long distance” are increasingly blurred. If you want to see what future telephone service is going to look like, look at wireless, where prices and services have been completely deregulated and there is no longer any artificial distinction.
But for the wired world, the distinction still matters. Which brings us back to the FCC-AT&T flap. The FCC and most of the big phone companies negotiated a $3.2 billion reduction in the access charges long distance providers have to pay local phone companies. As part of this deal, AT&T and Sprint also agreed to get rid of that $3 minimum they charge even if a customer doesn’t make $3 worth of long distance calls a month.
The FCC promised, with much fanfare, that the long distance companies would pass the savings along to consumers. As it turns out, that may have been technically true but didn’t tell the whole story. AT&T had previously filed with the FCC a rate restructuring plan that drastically hiked some rates–80 percent increases in evening rates Monday through Saturday–and cut others–a 40 percent reduction in Sunday rates.
The point of the plan–which an embarrassed AT&T hastily withdrew but will likely implement in the future when this flap recedes–is to drive more customers into discount package long-distance plans, which makes sense both for AT&T and its customers.
So the access fees will be reduced, AT&T will reconfigure its rates–something WorldCom/MCI did in May, incidentally–and the FCC will go on trying to parse out what every segment of this brave new world of telecommunications should charge every other segment 16 years after the historic breakup. Instructive indeed.
