The regional Bells vs. everybody else

Powerful: Having won the right to offer long-distance service, the regional Bell companies are pressing Congress for a leg up in the race to offer high-speed Internet access.


January 20, 2002|By Andrew Ratner | Andrew Ratner,SUN STAFF

If one big change in telecommunications does come to Maryland in 2002, Darth Vader will likely let you know.

His voice anyway.

Verizon Corp. plans to file with the Maryland Public Service Commission this spring to win permission to offer long-distance phone service in the state.

It has already won the right to do so in New York, Connecticut, Massachusetts and Pennsylvania and awaits federal approval for Rhode Island and New Jersey.

If it wins approval in Maryland, the company will launch a heavy marketing campaign with its pitchman, the deep-voiced actor James Earl Jones.

It's a big "if." The company is bound to come under fire from competitors before state regulators, as it did at unrelated hearings last month. Its long-distance application must also pass muster with the Federal Communications Commission.

Verizon, too, will be the focus of some state legislators, who believe much higher fines are warranted when the company is found to have engaged in illegal practices to squash competition.

But William R. Roberts, president of Verizon's Maryland operations, believes that the company's success, and the increase in competition, in markets where it has added long-distance service, will provide an example for Maryland officials to follow.

"We get painted as this big behemoth that's out to crush the little guys," Roberts said. "That's not us. We're good guys. We're committed to this state."

Verizon's proposed expansion in Maryland - and the political wrangling likely to accompany it - is a microcosm of the turbulence in telecommunications nationally.

Verizon and the other companies that spun off from the original Bell System control 95 percent of the nation's residential phone business.

Now they're seeking federal legislation for permission to take a quantum leap in their ability to offer broadband or high-speed Internet lines, now restricted to areas where they operate.

Industry in slump

In the late 1990s, hundreds of companies sprang up to provide high-speed service. But many grew too fast, failed to find capital to sustain their growth and collapsed. Among them were PSINet Inc., the now bankrupt Internet company whose name is expected to disappear from Baltimore's professional football stadium.

In less than two years, the telecommunications industry, including broadband, had gone from a geyser of growth and expectations to a pit of bankruptcies, layoffs, under-used networks and anxious investors.

Company stock that once fetched $60 a share is worth 60 cents. The sector's slump continues to batter its equipment makers, notably New Jersey-based Lucent Technologies Inc. and Ciena Corp. of Linthicum.

Layoffs in the sector surpassed 317,000 in 2001 - nine times greater than those of 2000, according to Challenger, Gray & Christmas Inc., the international outplacement company. It said that was the highest one-year total by any one industry since it began tracking layoffs in 1993.

The industry was among the first to shows signs of weakness in the recession that began last spring, and many expect it to be among the last to rebound.

About 60 percent of roughly 300 telecommunications executives recently surveyed expected an increase in sales through the first quarter of 2002, down from about 85 percent in a survey last spring. The surveys were done by Strategis Group Inc., a Washington-based research firm.

But many also believe that the sector has great potential that will be realized eventually, if not this year. Technological advances have greatly changed the way people communicate and do business.

While online purchases still make up a tiny fraction of retailing, for example, surveys suggest nearly half of shoppers gather information from the Internet before making a purchase. That's expected to increase as high-speed access to the Internet becomes more available and affordable.

The fraction of households that have broadband (high-speed) connections to the Internet is probably the industry's greatest disappointment - and opportunity.

Broadband access will be much discussed this winter on Capitol Hill, especially if Congress takes up a House bill that would treat broadband service differently from traditional voice telephone service.

The change would allow regional Bells, such as Verizon and SBC Communications, to offer high-speed Internet services in any market in the country.

Formally titled the "Internet Freedom and Broadband Deployment Act of 2001," it is more commonly known as the Tauzin-Dingell bill, for its sponsors, Reps. Billy Tauzin, a Louisiana Republican, and John D. Dingell, a Michigan Democrat.

Critics contend that the legislation would only let the strong get stronger. Supporters say it would allow freer market competition in broadband and spur investment.

The bill has generated intense lobbying, print and TV commercials and millions of dollars in political contributions.

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