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Guest Opinion

Telephone Industry Still Lacks Significant Competition

25 years after AT&T breakup, competition comes from wireless, VoIP

Janine Migden-Ostrander
Ohio Consumers' Counsel

April 21, 2009
Twenty-five years after the breakup of AT&T, consumers have seen significant changes in how they make telephone calls, what they pay and the services they receive.

The telephone monopoly agreed in a 1982 settlement with the U.S. Department of Justice to break itself into seven companies, called Baby Bells, to provide local telephone services by region. AT&T kept its long-distance service, then its most profitable division. The agreement went into effect in 1984.

Technology and industry structures have since changed and AT&T has reconstructed itself, without many of the regulations that once applied to the original company. Instead of seven companies, there are three — AT&T, which also includes long-distance operations; Verizon, which absorbed former long-distance carrier MCI; and Qwest.

The Office of the Ohio Consumers’ Counsel (OCC) has advocated on behalf of residential telephone consumers over those 25 years, making sure they have a voice when higher rates are proposed and service quality decreases. It’s been a constant struggle.

Are we better off today than we were 25 years ago?

The answer depends on who’s talking. Competition for AT&T service has not come from similar providers as was hoped when the government broke up the monopoly. Instead, it has come from companies offering mobile phone or Voice over Internet Protocol (VoIP) services. But these services are different.

Many consumers are as dependent on mobile phones as they are on traditional land lines. Others still have phone service through a wire line, but that line might be connected to a cable TV system or directly to the Internet.

Cell phones offer mobility, but require a wireless signal that is not available in many rural areas of Ohio. VoIP service requires a broadband Internet signal that also is not available to many. Unlike traditional wire line service that operates even during extended electrical outages, wireless and VoIP services cannot operate after back-up batteries, if any, are depleted.

Less regulation

Moreover, the price and quality of cell phone and VoIP services are generally not regulated by state government compared to the way the Baby Bells’ services were.

Cell phone service with unlimited calling is typically more expensive for consumers than wire line service. VoIP service requires consumers to pay a separate monthly fee for access to the Internet and a charge for VoIP service itself.

Today, 25 years after it was broken up, AT&T and other telephone companies seek fewer regulations and less regulatory oversight. While price has been deregulated, in order to protect consumers, the terms and conditions of service should continue to be regulated.

Similar regulations should be applied to wireless and VoIP services to protect consumers of those services as well. It is fairly typical that services that have been deregulated in terms of price still retain regulation of consumer protections.

Unfortunately, some traditional telephone companies have asked for rate increases even as they argue there is plenty of competition. This claimed competition should result in decreasing prices for consumers.

Not nearly enough competition

The OCC experts worry there is not nearly enough competition to drive down consumer costs and improve quality.

Twenty-first century technology made construction and maintenance of telephone systems less expensive than 25 years ago, but prices are headed upward. We are fighting for consumers so they can benefit from cost savings. At the same time, we are advocating that all companies meet minimum telephone service standards.

The upside of all this is that depending on where you live, you may be able to take advantage of bundled packages of services that include various telephone features as well as cable TV and/or Internet service. Long distance calling has become more affordable over the years as well.

The OCC welcomes the development of new technologies and options for consumers, but believes consumer protections are needed to ensure fairness.

Consumers must remain diligent and selective in their decisions about phone service. When given the opportunity to switch telephone carriers, you should research which company offers the best plan and cost for services. You should carefully read and understand your monthly bill and question charges you do not understand or believe you should not have to pay

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The Office of the Ohio Consumers' Counsel (OCC), the residential utility consumer advocate, represents the interests of 4.5 million households in proceedings before state and federal regulators and in the courts. The state agency also educates consumers about electric, natural gas, telephone and water issues and resolves complaints from individuals.

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