Today everyone wants competition. But wanting something and actually having it are two different things, a fact well illustrated in the current debate over telecommunications policy.
In the long-distance service part of that business, the Federal Communications Commission seems intent on pursuing a course that will bring about not the competitive industry everyone wants but an unregulated monopoly, unlike anything we've known in re"cent times.
The critical question in long distance today is not the "objective," but rather the "means." Just how do you bring competition to this unique business?
The FCC suggests deregulation. "Let the marketplace rule," it says. And everyone agrees -- in theory.
In most other industries, rapid deregulation means more competition. But that equation is not true for long-distance telecommunications, and the reasons have to do with the power and the position AT&T enjoys in this marketplace.
There is no company comparable to AT&T in air transport, trucking, financial services or any of the other industries in which deregulation is bringing about greater customer choice.
Over a century ago, the first long- distance telephone call went over AT&T lines. At that time, there were no other options; AT&T was still operating under patent protection. When the patents ran out and intense competition developed for local telephone service, AT&T continued to maintain its long-distance monopoly. And until the 1984 divestiture, that monopoly was more or less sponsored and guaranteed by the U.S. government.
AT&T developed long distance. It devised the theory and the equipment that made modern telecommunications possible. AT&T built the most impressive communications system known to man. No one denies AT&T that singular achievement.
But AT&T accomplished this feat while it had a guaranteed reve nue stream, a guaranteed rate of return and a guaranteed customer base. During most of this century, when the American public wanted to place a long-distance telephone call, its choice was limited to using AT&T facilities or not placing the call. And this near-complete marketplace protection was a product of federal and state governmental actions.
With that kind of business environment, AT&T easily raised the billions of dollars needed to build and rebuild its telecommunications infrastructure: all the miles of cable and the many microwave towers, all the satellites and earth stations, all the computer switching systems.
With its profit margins virtually guaranteed, AT&T easily employed the thousands of scientists and computer programmers needed to develop the complex and expensive software that enables its computers to handle sophisticated offerings such as 800 Service and 900 Service. It was also able to compile and maintain a vast data base of vital marketing and network usage information -- at ratepayers' expense.
With no real competition, AT&T easily achieved name recognition with its customers. And it had more than 100 years to develop long-distance customer loyalty.
Then, AT&T chose to divest its local telephone operations to settle an antitrust lawsuit, and because of that it now seems to claim that its history in long distance is irrelevant. It would have everyone believe that as of the stroke of midnight on Jan. 1, 1984, everything in the long-distance industry started at zero again.
AT&T claims that it derives no unfair marketplace advantage from its billions of dollars of remaining long-distance assets -- all the cable, microwave towers, satellites, switches and software -- put in place when its revenues were guaranteed and that it derives no unfair marketplace advantage from the customer relations it was able to develop during the century or so in which it had the long-distance market to itself.
AT&T claims it has hundreds of competitors. Most of these are, in fact, AT&T's customers: repackagers who buy AT&T circuits wholesale and resell them retail -- all subject to AT&T's pricing.
In 1985 there are three major long-distance contenders with their own network facilities in the estimated $31 billion intercity voice market: AT&T (with over $27 billion in revenue, approximately 90 percent of the market), MCI (with perhaps $2 billion in revenue, about 6 percent of the market) and GTE Sprint (with about $1 billion in revenue, or 3 percent of the market). To suggest that in a deregulated marke tpl ac e th e co m pe tition among these contenders is full and fair is simply unrealistic.
The FCC's current plan for transition to a competitive marketplace is equally unrealistic. It does not take into account the tremendous momentum AT&T has in the contest for customers. It does not recognize that alternative long-distance companies have to raise billions of dollars to invest in new facilities, without the benefit of a guaranteed business environment such as AT&T has enjoyed when it was building its network. It does not recognize the competitive significance and value of the differences between AT&T's connection to the local telephone networks and those provided to the competitors. It does not acknowledge that the competitors have to invest heavily in marketing to attract customers, without the benefit of AT&T's monopoly endowments.
The FCC has a choice. It can continue with its present plan and, in the process, greatly diminish the likelihood of ever developing a competitive long-distance industry. Or it can redraw its timetable and develop a new plan that is fair to both AT&T and the alternative carriers.
This second approach would result in what everyone wants: a truly competitive long-distance marketplace and the success of a laudable national public policy objective.