Let’s start with a few basic facts. When you make a call, you pick up a phone and dial, without caring if you’re dealing with a local phone company, a wireless company, a long-distance company, an Internet company or a cable-TV company. A call is a call is a call. But each kind of call is regulated differently. (What do you expect? You’ve got Washington and 50 different state utilities regulators at work.)
The problem is that the evolving technologies get a better deal than regular old phone and long-distance service. These advantages provide incentives to customers to switch, further undermining the existing system, which depends on a crazy quilt of subsidies. Long-distance companies are supposed to subsidize local phone companies and the so-called universal-service fund. That’s how the old AT&T did business, because its long-distance monopoly was lush, low monthly fees built political support and having everyone in the phone system made it more valuable to users. Regulators have tried to replicate this in a competitive world, but it’s not working. We’ve got more wireless customers, many at 30 bucks and up a month, than regular wire-line phone customers. So why worry about keeping rural phone rates down? Phone-via-Internet is an economically elitist technology, given that you need a fast Internet connection to play. But these elite customers have the lowest burdens of subsidizing other users. Go figure.
Long distance is now a cutthroat, el cheapo business, in large part because wireless companies began offering all-you-can-eat local and long-distance packages for a flat monthly fee. Companies fight endlessly over whether calls they hand off or get from each other should be subject to “reciprocal compensation” of a tenth of a cent a minute, or fat, subsidy-laden “access charges,” which can range from half a cent to eight cents a minute. Wireless and Internet is mostly recip comp. Regular long distance is access fees. When AT&T dealt with itself because it owned long distance and most local phones, this nutso system didn’t matter. Now it matters a lot.
“The world has changed but the rules haven’t,” says Tom Tauke, Verizon’s senior vice president for public policy. “The system needs to be completely revamped so everyone in the industry will compete on a level playing field,” says Jim Cicconi, AT&T’s general counsel. The FCC, which took two seconds to go after Janet Jackson’s classless, brazen Super Bowl scheme, has spent years tiptoeing around the real problem of dealing with the telecom biz. It’s now scheduled hearings and moving into high gear–by regulatory standards. “We’re trying to come up with new rules for a new technology,” an FCC spokesman says. But it could take a zillion years for the FCC to issue a ruling, and another zillion for the appeals.
Meanwhile, in its own way, the Internet is quietly taking over, even if you don’t have a fast broadband connection. AT&T, the quintessential symbol of the old order, claims to be an Internet company for regulatory purposes and wants to be treated the same way Vonage, a pure Internet company, is. Why? Because AT&T uses its Internet backbone to carry calls. Verizon, the nation’s biggest local company and majority owner of the nation’s biggest wireless company, is signing up thousands of Internet customers outside its local service area and says it’s going to upgrade its systems so that local customers can go Internet.
Logic suggests regular long distance should be on the same footing as wireless and Internet when it comes to dealing with local phone companies, many of which have big stakes in long distance and wireless. And if we’re going to have a universal-service subsidy, a dubious proposition in today’s world, let’s charge a flat buck per phone number per month. Flat rate is the wave of the future, so let’s get there now. The old Ma Bell subsidy system has lingered for 20 years. But it’s so over. With luck, it will soon be like Liza and David, Bennifer and Britney: yesterday’s news.
