At my plumbing business, we’re on call 24 hours a day, seven days a week. That’s because our clients won’t accept slow service during an emergency. If we are not there, they will pick up a phone and call another plumber. That’s just how the free market works.
Unfortunately, the telephone market in Providence may not work that way much longer – with the result being higher prices for me and every other small business owner in the area.
Right now in Washington, D.C., the Federal Communications Commission is considering a petition from Verizon that would release the telephone giant from its obligations to share portions of its phone network to local competitors at regulated rates. In other words, Providence-area businesses may soon see fewer choices and higher rates for the phone service we need.
When I was growing up, families and businesses had no choice in phone service – either you paid Ma Bell or you didn’t have a phone. Fortunately, that monopoly structure was broken up years ago. Then in 1996, as the Internet was becoming an essential for most businesses, Congress passed legislation that required “baby” Bell telephone companies such as Verizon to allow competition into their markets. Soon hundreds of independent phone companies began offering customized services, personalized attention and competitive rates to businesses and organizations as an alternative to the Bell companies, using the legacy telephone lines owned by the Bells.
That legislation created a more competitive telephone market in Providence. Each year, when my telephone service contract is up, I pick a new provider by requesting multiple bids from local companies. My plumbing business relies on local competition to get the best rate. Today, approximately 15 percent of small businesses and organizations receive services from a company other than a baby Bell provider.
However, under an obscure provision of current telecommunications law, the Bell companies can apply to the FCC for “forbearance” – that is, an exemption from regulations.
Last fall, Verizon filed forbearance petitions with FCC that sought exemption from all pro-competitive network sharing and dominant carrier requirements in six major metropolitan areas, including Providence. Verizon claimed such massive deregulation was justified because of alleged “extensive” competition it faces from cable companies and others here as well as in Boston, New York, Philadelphia, Pittsburgh, and Virginia Beach.
Unless the FCC acts to deny the request, Verizon will no longer provide access to the public phone network to competitors offering cost-effective and innovative services to consumers including small and mid-sized businesses in here in Providence.
Verizon already controls of more than 75 percent of the business market in its service areas, so offering concrete “evidence” of competition should be impossible. Here in Rhode Island, many would say that cable offers a strong challenge to the Bell monopoly. However, cable infrastructure is predominantly built to residential areas, because it was originally designed to deliver video, not telephone service. Cox Communications, the dominant cable provider in the area, serves only a little more than 150,000 business customers in the entire country, not just Rhode Island. Compared to Verizon’s market share, both in-state and throughout the East Coast, this is a small number.
Verizon will try to skew the facts and argue that future, hypothetical competition from cable companies, which don’t currently serve business customers in any meaningful way, justifies its deregulation.
Even though it may sound far-fetched, such arguments have succeeded in the past. Another Bell company argued and won a similar decision in 2005 in Omaha, Neb. The largest non-cable competitor there, McLeod Communications, immediately began experiencing losses and has since been bought out. Telephone rates in the area skyrocketed, with some experiencing a 360-percent increase.
A new economic impact study by market research group QSI Consulting reveals that Verizon likely will burden Providence with almost $85 million annually in additional monthly charges if federal regulators approve the pending deregulation bid. According to a recent FCC report, average monthly costs for telephone service last year already rose 2.5 percent in residential markets and 3.5 percent for businesses, a significant one-year increase.
If Verizon is successful in squeezing out Providence competitors, they also will drive out product innovation, competitive rates and personalized services, not to mention local jobs. Competitive phone companies hire customer service representatives, sales professionals and telecom technicians in the local community they serve.
Unfortunately, Providence small business owners like me may soon find out what life was like 30 years ago, before competition and innovation revolutionized the industry. Only this time around, we’ll pay Verizon instead of Ma Bell. •
David Lund is the president of Providence-based F.G. Lee & Son Plumbers.
