Telecom Competition Is Strong, Beneficial, Lawmakers Told

Published July 1, 2007

Local telecommunications competition is strong and shows every sign of increasing in both the short and long term, according to industry regulators and executives who spoke to state lawmakers at a recent meeting in Washington, DC.

Speaking on a panel at the National Conference of State Legislatures’ (NCSL) Spring Forum in April, representatives from the Federal Communications Commission and wireline, wireless, cable, and voice over Internet Protocol (VoIP) companies told elected officials most U.S. consumers today are seeing the benefits of intermodal telecom competition, where different platforms deliver the same service.

Companies that once provided only one service are now doing their best to package suites of voice, video, and broadband Internet for a market that makes little distinction among the technology platforms used to deliver them.

In his opening remarks, New Jersey Assemblyman Upendra Chivukula (D-Somerset), chairman of the NCSL Communications, Financial Services, and Interstate Commerce Committee, acknowledged the changing landscape. “We need to look at competition in the real sense,” he said.

Five Providers per Household

The average household has access to up to eight electronic telecom services–wireless, broadband Internet, dial-up Internet, satellite TV, cable TV, VoIP, and local and long-distance wireline service–Link Hoewing, vice president of Internet and Technology Policy at Verizon, told committee members. The average household subscribes to five of those services. (See graph.)

All told, consumers spend an average of 5 hours and 15 minutes a day communicating using some form of telecom technology. Wireline and wireless calls take up about 64 percent of this time. The remainder includes email, text messaging, and instant messaging, Hoewing said. (See graph on page 19.)

Hoewing urged legislators to keep in mind that the latter methods, although new and used more by young people, are as much a communications method as old-fashioned phoning. “Instant messaging and email and texting are communications,” Hoewing emphasized. “And their use affects the marketplace.”

Many Prefer Wireless

Wireless substitution remains the biggest factor in competition. Citing a March 2007 study by the global financial firm UBS, Hoewing said there are 153 million wireless residential users in the United States, and 111 million landline customers.

Moreover, Hoewing noted, in a March survey by the high-tech market research firm IDC, when consumers were asked if, given a free, unlimited, local and long-distance plan, would they prefer a wireline or wireless phone, 44 percent opted for wireless and 24 percent had no preference.

Diverse Option

Competition is intense among wireless companies. About 51 percent of the U.S. population has the choice of five or more cellular companies, said Mike Bennett, executive director of consumer and government affairs for Cingular, the wireless company now being folded into AT&T. Ninety-four percent of consumers have the choice of at least three, and 98 percent have a choice of at least two.

In response to a question about why, despite the crowded market, cellular rates have remained level, Bennett noted today’s plans encompass many more calling minutes for the dollar. Free nights and weekends, family calling groups, and other such marketing concepts have raised use to an average of 750 minutes per month at rates that bought less than half that time just a few years ago, he said.

Cable Adding Voice Customers

The cable industry is projecting it will have 20 million voice customers by 2010, said Joe Waz, vice president of external affairs and public policy at Comcast Corp. He reminded lawmakers that cable companies built a national infrastructure without government subsidies and are contributing to job growth, largely for technical support, in states where they do business.

“In New Jersey, we’ve added 1,250 jobs since last August,” Waz said. “We’ve added 400 more jobs in the Bay Area.”

Waz also noted both the cable and telephone companies are working to make number portability–the ability to keep your phone number when you switch companies–faster and easier.

Universal Service Issues

A portion of the discussion touched on universal service, the federal government program that charges all phone customers a fee to help pay for service in sparsely populated areas. Brian Ford, policy analyst with the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO), defended government payments to rural telephone companies, which often operate in areas where there is no competition and as “carriers of last resort” are obliged to provide local exchange service to anyone who needs it.

Waz and Bennett, by contrast, argued that as wireless, cable, and satellite companies make greater inroads into rural areas, the current universal service scheme, if retained, will force them to subsidize their own competitors.

Steven Titch ([email protected]) is senior fellow for IT and telecom policy at The Heartland Institute and managing editor of IT&T News.