Bell Tolls for Whom

As part of 1996's Telecom Deregulation Act, Congress required local phone companies such as Verizon and SBC to open its telephone networks to competitors. The act set the rates, which were far below market value according to the local phone companies.

A judge ruled last week that the FCC lacked the authority to enforce the rate structure. Local phone companies could determine the price that AT&T, Sprint, MCI, and smaller telephone companies would pay to run local phone calls over the networks. In the past few days, there has been a rash of articles detailing how phone companies are responding.

In this Wall Street Journal story, many of the companies are raising fees. MCI, for example, increased fees on 18 plans. Why does MCI have 18 plans? Actually, the company formerly known as WorldCom offers more calling plans. This represents a gross inefficiency and suggests that MCI managers are not stewarding the company's resources to the best of its ability.

AT&T has announced it will no longer seek residential customers. Qwest, a local telephone service provider in the Midwest, will execute a print campaign to poach current AT&T residential service customers according to this New York Times story.

As we will discuss later in customer relations management, there are occassions when we do not want a customer or a group of customers. Rivals to Verizon, Qwest, Bell South, and SBC may have a pricing point when they no longer want local residential customers.

Of course, local phone service may become moot. Despite AT&T's waffeling over its Voice Over Internet Protocol, or VOIP, cable companies are quickly adding the service to its customers. This New York Times article questions AT&T's decision because VOIP could provide a better competitive advantage against local telephone providers.

When the 1996 Telecom Deregulatin Act became law, its framers, industry lobbyist one and all, could not have foreseen the techonological changes. In less than 5 years, the local telephone service providers will not be Verizon, Bell South, SBC, and Qwest; rather, they will be Comcast, Time-Warner, and Cox.

That prediction assumes that a form of KaZaa will not destroy the pricing structure of the market. In this Wall Street Journal article, Skype relies on similar software that powers KaZaa to emulate a telephone network. As of this writing, the difference between Skype's service and those offered by Verizon, AT&T, and Vonage looks like price.