Saturday, December 13, 2003

Industry brief: US phone industry (Part I) 1984 did not usher in Orwell's vision of dystopia. But it did spell the end of Ma Bell (AT&T), the telephone (virtual) monopoly in the United States. We call it an almost monopoly because local phone service in some, mostly rural, areas was still being provided by some small companies. It was a long and bitter antitrust case. By court order, AT&T was divided up into seven regional Bell Operating Companies (RBOCs), along with a long-distance company (holding the AT&T name). The telephone research laboratory (Bellcore) was a resource shared by all. The court decision was one of the biggest antitrust decisions ever. The most comparable forced breakup was that of Rockefeller's Standard Oil trust 1911. And as the Standard Oil dissolution led to regional "Baby Standards" (Sohio, Socal, Socony, etc.), so the Bell breakup led to "Baby Bells." These RBOCs had local monopolies, but they couldn't directly offer long-distance service companies, They were built out of state and regionally defined BOCs (Bell Operating Companies). Original RBOCs Original RBOC Component Bell Operating Companies Nynex New England Telephone Company, New York Telephone Company Bell Atlantic Bell Telephone Company of Pennsylvania , New Jersey Bell Telephone Company, Diamond State Telephone Company (Delaware), Potomac State Telephone Company of Maryland, Potomac State Telephone Company of Washington, D.C., Chesapeake and Potomac State Telephone Company of Virginia, Potomac State Telephone Company of West Virginia Bell South South Central Bell Telephone Company, Southern Bell Telephone Company Ameritech Ohio Bell Telephone Company, Indiana Bell Telephone Company, Illinois Bell Telephone Company, Michigan Bell Telephone Company, Wisconsin Bell Telephone Company Southwestern Bell Communications (SBC) Southwestern Bell Telephone Company US West Mountain Bell Telephone Company, Northwestern Bell Telephone Company, Pacific Northwest Bell Telephone Company Pacific Telesis Pacific Bell Telephone Company, Nevada Bell Telephone Company There were also designated four Inter-Exchange Carriers (IXCs) in 1984. These were companies that were allowed to sell long-distance service: AT&T, Sprint, MCI, and Qwest. These companies have since evolved greatly, but they remain the four biggest long-distance companies.                          IXC companies Company Corporate Income 2002 (millions) AT&T $37,827 Sprint $26,634 Worldcom/MCI $21,348 (2001) Qwest $15,385 Then there are CLECs (Competitive Local Exchange Carriers). These are companies that are authorized by state utility commissions to offer local telephone service in place of the local RBOC. Most CLECs piggyback, at least for part of the way, on the exiting local phone hookup. They have to rent time on the local system, which they resell to the consumer. Some CLECs that serve business have their own high-speed cable dropped into the building, but for home users that's not an option. CLECs offer local and long-distance phones services as well as data services (ISP, DSL). One of the touted advantages of CLECs is that they tend to bring in new technologies far faster than the stodgy old RBOCs. CLECS generally have one or two areas of specialization, which may be urban, or rural big business, small business, or residential. Some work with Internet service providers, others own optical fiber networks and satellites. Some Major CLECs Company Headquarters 2002 Gross income (millions) ALLTEL Little Rock, AR $7,893 Citzens Communications Stamford, CT $2,669 XO Communications Reston, VA $1,259 Allegiance Telecom Dallas, TX $771 KCM Telecom Bedminster, NJ $500 RCN Communications Princeton, NJ $457 Covad Communications San Jose, CA $383 Focal Communications Chicago, IL $328 Choice One Communications Rochester, NY $290 US LEC Moorcroft, IL $250 CLECs made big strides a few years ago, when the Telecommunications Act of 1996 came into effect. That law mandated that the RBOCs cooperate with CLECs and support their shared use of the local phone network. Overnight, over 200 new companies arose, and given the stock market frenzy of the late 1990s, they had a mini-bubble of their own. The quid-pro-quo was that the RBOCs would get to provide long-distance services in location where there was real local competition. In 1996, thanks to permission from that same Telecommunications Act, the RBOCs started to come together: In that year, Bell Atlantic announced plans to merge with Nynex, while Southwest Bell (SBC) began its merger with Pacific Telesis. In 1998, Bell Atlantic announced that it would merge with GTE. GTE (General Telephone) was the largest independent local telephone company in the US, owning operating companies in 17 states. In 1998 SBC and Ameritech merged. In 2000 Qwest purchased US West. That left four bigger regional companies, no longer nannies. The trust was, at least in part, reunited. Current RBOCs Current RBOC Components Income 2002 (millions) Verizon Bell Atlantic, Nynex, and GTE $67,625 SBC SBC, Ameritech, and Pacific Telesis $43,138 BellSouth original RBOC $22,440 Qwest US West, Qwest Communications $15,385 (to be continued) 5:27:57 PM

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