Don't hang up just yet on real phone competition

April 17, 2002|By JAY HANCOCK

WHO WILL bust up Verizon Communications' local-telephone monopoly in Maryland?

Not Congress. Its 1996 Telecommunications Act, which was supposed to let people choose local-phone vendors like breakfast cereal, has left Verizon's grip almost as tight as ever.

Not Cavalier Telephone. Its TV ads mocking Verizon pitchman James Earl Jones have persuaded few Maryland households to switch to its service.

Not the state Public Service Commission, which has allowed Verizon to charge Cavalier and other rivals leasing its lines high enough prices that they have a hard time making a go of it.

This is a job for a power higher than mere legislators, regulators and entrepreneurs. This is a job for ... another monopoly.

Comcast Corp., which charges about $50 per month for Animal Planet, the Golf Channel and the other ingredients of its most popular cable TV package, is thinking hard about getting into the telephone trade.

The Philadelphia company, which has no cable competition in much of its Maryland territory, owns the "last mile" connection into homes and businesses that is so crucial for telecommunications prosperity. It has the size and access to capital to go up against Verizon.

And now Comcast seems to be clearing technical and economic barriers that once kept it from offering widespread telephone service.

"This stuff is starting to look a lot more promising," says Steven Craddock, Comcast's senior vice president for new media development. "The technology has come so far in the last 15 months, it's like night and day. This, all of the sudden, is something we can do."

Verizon, descendant of the old Bell Atlantic and C&P Telephone, denies it is a local-phone monopoly.

In a regulatory filing last week, Verizon said Cavalier and other local land-line rivals serve 11 percent of the customers in its Maryland territory. But that still gives Verizon 89 percent of the non-wireless local business, a market share of Microsoftian dimension.

And most of the customers who switched are businesses; less than 4 percent of the homes on Verizon's Maryland turf subscribe to alternative local-phone vendors using land lines, according to a Verizon spokesman.

Comcast executives once openly dismissed "cable telephony" - or at least the way some companies approached it.

AT&T, for example, offers cable-based local-phone service in some cities using traditional switching. Comcast, by contrast, has backed an Internet-based approach to telephony, in which calls are directed over multiple wires in multiple "packets." The packets, after roaming the continent, are supposed to reconvene in your receiver to make the vinyl-siding salesman come through just as loud and clear as on a Verizon call.

Internet telephone calls have been possible for years, but the technology wasn't ready for mass use. Now it appears to be. And, just as important, companies are starting to manufacture packet-based voice switches at prices that Comcast seems to think will let it swipe business from Verizon. Comcast's pending purchase of AT&T Broadband, which is already in the cable-telephone business, is another factor spurring it into phones.

Comcast has a pilot cable-telephone business in Detroit but has made no announcements about widespread telephone service. It still must work out mind-numbing technical and regulatory details, such as making sure the FBI can tap its phone lines if the agency gets a judge's order.

And parts of its network - Baltimore City, for example - are not Internet-capable and would require substantial investment.

Still, it looks like local-phone choice will grow. Does it matter? It's true that wireless phones are the future. But communications platforms often continue to thrive after they're eclipsed by something newer. You, a paid-up subscriber of The Sun reading these words on genuine newsprint, are proof of that, God bless you. (If you're reading on the Web or stole the paper, disregard.)

Maryland People's Counsel Michael J. Travieso thinks local-calling prices could remain high even if Comcast challenges Verizon. That's probably true, in a vacuum. Other forces, however, are also working to expand local-phone choice and lower prices, at least a bit.

Last week, Verizon applied to sell long-distance service to Marylanders. In other states where it has gained such approval, Verizon seems to have gotten more cooperative in leasing local lines to rivals. At the same time, long-distance providers are becoming more aggressive about getting into local service, as demonstrated by this week's reports on a big local-phone push by WorldCom Inc.

Also, Maryland's Public Service Commission is due to rule soon on whether to lower the fees that WorldCom, Cavalier and other competitors must pay Verizon for using its lines.

The abundant local-phone choice envisioned in 1996 isn't here yet and may never arrive. But it is getting closer.

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