FOR THE FIRST time since the passage of the landmark 1996 telecommunications law, the Federal Communications Commission has approved an application by a local phone company to provide long-distance service in a particular state. The lucky company is Bell Atlantic, which will be able to offer long distance service to its solid base of local phone customers in New York state. The hope is that the decision will mark a new era in which the traditional segregation of the local and long distance markets will evaporate and competition will reign in both spheres. The danger is that by allowing still largely monopolistic local phone companies to enter the competitive long distance market, the commission will reduce their incentive to open up their own markets.
The idea of the 1996 law was to permit the local phone companies to enter the long-distance marketplace only after they had satisfied the commission that their own technological infrastructure was available to would-be competitors. Before they could be unleashed in the long-distance arena, they should be themselves subjected to real competition. Several local companies have argued in the past that they have met the commission's so-called "competitive checklist," but the FCC has always disagreed.
In the face of this, the commission was under considerable pressure from Congress to begin approving long-distance entry by the politically powerful local phone companies. Indeed, the concern--expressed by AT&T and others--that the FCC may have jumped the gun and approved Bell Atlantic's application despite deficiencies in the competitive environment in New York is not a frivolous one. After all, it is far more satisfying to be able to declare, as FCC Chairman William Kennard did last week, that the Berlin Wall between local and long-distance service has fallen than to continue being the regulatory agency that, again and again, says no.
That said, the FCC's determination that Bell Atlantic has satisfied the checklist seems reasonable to us. And even those who believe the FCC acted prematurely concede that Bell Atlantic has made real strides toward opening its infrastructure to competitors. Other companies now serve a little more than 10 percent of that market, according to the commission's data, and the figure is growing quickly. Perfect competition may not yet exist, but New York consumers have real choice in local phone service, a fact that suggests that at least the purpose of the checklist has been satisfied. Moreover, the FCC retains considerable regulatory leverage to prevent Bell Atlantic from backsliding on its commitments.