A Verizon worker strings fiber-optic cable in Fairfax County, Va. Th telephone carrier has seen increased competition in Rhode Island from rival providers.
State is deemed most competitive telephone market in the nation
Verizon, the granddaddy of local and long-distance telephone providers in the Ocean State, saw rivals gain on the company during the first half of 2004.
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According to a report issued by the Federal Communications Commission, as of June 30, 2004, 32 percent of all telephone lines in Rhode Island are provided by Verizon’s rivals. That’s up from 25 percent from the same reporting period in 2003 and makes Rhode Island the most competitive telephone market in the country.
Nationally, 17.8 percent of the 180.1 million access lines belong to competitive carriers.
Of 662,640 reported telephone access lines in the state, Verizon’s competitors provided 213,787. Verizon, the “incumbent local exchange carrier,” had 448,863 lines. Just five of Verizon’s – which are not individually named in the report – Ocean State competitors submitted data for the report.
Of the 279 telephone companies registered with the Rhode Island Public Utilities Commission to provide service in the state, Associate Administrator Engineering/Consumer Section James Lanni estimated less than 20 are Rhode Island based.
“Overall, probably very few companies have facilities in even a limited area of Rhode Island,” Lanni said. “Cox is a good example for facilities-based because they can send calls all over the state.”
Even still, Cox Communications, a key competitor with Verizon, is working to make a dent in Rhode Island’s telephone marketplace.
“Verizon has the lion’s share of (subscriber lines),” Lanni said. “Between Cox and Verizon, they pretty much control the market. Almost all the rest are resellers.”
Cox Communications doesn’t release state-by-state subscriber data, said John Wolfe, vice-president of government and public affairs for Cox’s New England division.
“I can tell you that nationwide we have about 1 million telephone customers,” Wolfe said. “And telephone subscriptions grew 40 percent year-over-year.”
Wolfe said one of the reasons Rhode Island is the most competitive telephone market in the nation is that Cox invested $300 million in a statewide broadband network that allows the company to offer competitive telephone service statewide. The network carries Cox subscribers’ video, voice and data communications. Another factor that allows Cox to offer competitive service, Wolfe said, is the regulatory environment in Rhode Island.
In many places around the country, cable is regulated on a local level. In Rhode Island, it’s regulated at the state level, which makes it easier to do business, Wolfe said.
“Instead of negotiating with 39 cities and towns, we negotiate with the state,” Wolfe said. “That allows us to make capital investments based on what the market needs, not some sort of political negotiation.”
But most importantly, Cox can compete because they own their own equipment.
“We control our own destiny – that means we control our own costs,” Wolfe said.
Telephone providers who don’t own their own networks are at a disadvantage. They must lease them from the established provider in the region. Until recently, the cost of leasing the local loop, transport and switching equipment from the established company (in this case, Verizon), was regulated by the government, said Rainer Gawlick, executive vice president of marketing at Bedford, N.H.-based Lightship Telecom, which provides phone service in the state. Lightship has offices in Cumberland.
Thanks to an FCC decision in December, though, Verizon will no longer have to sell or lease its switching equipment to other companies.
“They can refuse to provide those elements, or they can provide them at a really high price,” Gawlick said. The switching equipment, Gawlick said, is a computer that directs calls.
So facilities based providers, like Lightship and Cox, will feel a modest impact from that ruling. But non-facilities based providers who lease their switching equipment will now struggle to be competitive.
And that, say industry watchers, could mean a return to a monopoly circuit situation.
“I think there’s a real danger we could return” to a monopoly, said Russell Frisby, CEO of CompTel/ASCENT, a trade association that represents competitive telephone providers.
The ruling – the TRO Remand Order – gives Verizon the opportunity to increase switching costs, Frisby said. Purchasing a switch can cost several million dollars and take 18 months to get approved and installed, a cost that’s “prohibitive” for smaller enterprises.
The fallout, Frisby said, could be a “retrenchment of competition in the residential market.”
