viable position. The company controls about 75 percent of the 10 million telephone lines in Texas. Their next biggest competitor is GTE Southwest, which has about 1.4 million customers. The rest of the lines are divided among 59 smaller companies. Southwestern Bell is just one of the Baby Bells facing deregulation. In Florida, Georgia, Missouri, Tennessee and Virginia, lawmakers are considering ways to deregulate the phone business. But in each case, the Baby Bells have the upper hand. The local phone service providers like Southwestern Bell no longer have a monopoly, but they are being freed from restrictions on the prices they can charge customers. In addition, they own all the phone lines that consumers paid them to build over the past six or reach the market or force their own lines. Gary can force competitors to come through them to those competitors to build Samuels of Forbes magaseven decades. Thus, they zine summed up the situation in an article last month, saying the new situation gives the old monopolies “most of the freedom of unregulated, competitive enterprises, but little of the competition. Meanwhile, the Bells have the best of both worlds.” Daniel Jones knows all about Southwestern Bell’s power to stifle competitors. In 1985, Jones and two partners started a company called Metro-Link Telecom, which offers expanded local calling services between Galveston and Houston. Because the cities are in different area pay Southwestern Bell a long distance fee former marketing man for Southwestern Bell, saw a niche. He began offering callers the ability to call between the two cities for a flat fee, with no per-minute charges. For 18 months, Jones’ business rocked along. Then Southwestern Bell informed him that the lines it was leasing him would cost him not the $12,000 per month that he was paying, but $85,000 per month. The company also informed Jones it would not list his customers in their Houston area phone directories. Jones appealed his case to the PUC and sued Southwestern Bell for unfair business practices, breach of contract and deceptive trade practices. The PUC sat on the case but Jones won his civil case in district court and was awarded $5.7 million in July 1993. He hasn’t collected a penny nor does he expect to. “I’m not counting on getting that $5.7 million,” Jones said. “They’ll litigate this forever. It’s a game for them. It’s life support for me.” Jones said his legal fees are now close to $2.3 million. Jones is not a big player. He currently has 250 business customers and 300 residential customers. Metro-Link employs nual revenues are about $500,000 per year. During the trial, Jones said company documents showed that Southwestern Bell makes a 1,300-percent profit on calls like those made between Houston and Galveston. To add insult to injury, Jones said Southwestern Bell is now planning to offer the same expanded calling service that he started at Metro-Link. “They will stop at nothing to stop competition,” he said. “They have done everything they can to t It drive us out of business.” While Southwestern Bell wants to limit competition at the state level, it is furiously lobbying Congress for laws that would allow the company to jump into the longdistance business. Bills currently pending at the federal level could go further than HB 2128 and allow cable companies, long distance companies and local phone companies to invade each others’ territory. Whatever happens, the Baby Bells want to get into the long distance business, and they want to do it immediately. On March 3, Gary McBee, the chairman of the Alliance for Competitive Communications, told a group of legislators in Washington, “In my mind the answer is clearfull, free and fair competition, not the heavy hand of regulation, brings progress…. Our fundamental goal is to open all telecommunications marketsincluding our ownto full competition as quickly as possible.” But that’s not what Seidlits’ bill will do. Instead, it will require companies wanting to compete with Southwestern Bell in the local phone business to build their own facilities. That’s not what happens in the long-distance business. In 1984, when AT&T was broken up into the regional Bell companies, a court required the company to allow competitors to use its networks. That allowed anyone to get into the long-distance business. Today, anyone can rent line capacity from AT&T, MCI, WilTel or any of the other big long distance carriers. You rent their line space, resell it to a customer and pocket the differ ence. Under Seidlits’ bill, Southwestern Bell owns the infrastructure. If you want to compete with them, you build your own. An analysis by Texas Citizen Action says that requirement will cost competitors up to half a billion dollars in the state’s five largest metro areas. “We don’t think any company is gong to come in and compete with them,” says TCA director Tim Curtis. HB 2128 came out of months of negotia tions. After the last session failed to pro duce a workable bill on phone deregulation, legisla tors and lobbyists met for months in a group called the Joint Interim Study Com mittee on Telecommunica LItions. The group was cochaired by Seidlits and David Sibley, a Republican Senator from Waco. But the negotiations went nowhere. SWBT and TTA lobbyists i say AT&T was never seri ous about the negotiations and kept sending different 1 people to the meetings. Even I I . A AT&T reps say the company was disorganized. That hasn’t prevented AT&T from attacking the measure. The company pooled forces with MCI and ran attack ads on TV, claiming the current phone deal was done for special interests. Curtis says that his group and other consumer groups collaborated, shared information and, are cooperating however they can with the companies. While Southwestern Bell meant to keep AT&T and other players out of the local phone business, HB 2128 could hurt niche players like Internet access providers. The Internauts are worried the bill will classify them as resellers, which would put them under the auspices of the PUC. If that happens, Internet providers could be forced to pay three times as much for their phone lines. “The problem is ambiguous terms,” says Scott McCollough, an Austin attorney and former assistant attorney general who deals with electronic access issues. He says the bill doesn’t clearly spell out who will be considered a reseller of phone services. Before the House voted on the bill, Seidlits promised that the Internet problem would be solved. “That’s not the intent of the bill,” he said and he promised to fix the bill when it came to House floor for a vote. When the bill came to the floor, an amend I ILLUSTRATION BY MICHAEL ALEXANDER THE TEXAS OBSERVER 7
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