article

IntraLATA Toll Dialing Parity:

Posted: 11/1998

Soap Box

IntraLATA Toll Dialing Parity:
Last Bastion of the RBOCs

By Ernest B. Kelly III

Return with me now to late fall 1995, in the last days of the epic struggle to fashion
the legislative compromises that eventually would result in the passage of the
Telecommunications Act of 1996. In drafting that bill, one of the most bitterly fought
issues was that of intraLATA (local access and transport area) toll dialing parity, or the
ability for consumers to access a competitive provider of so-called local long distance
service without having to dial extra digits.

At that point in time, dialing parity was commonplace in long distance, where it is
known as "1+." The advent of interLATA dialing parity has been widely referenced
by industry experts as one of the single most important milestones in the development of
competition in long distance markets. Its application to IntraLATA service was widely
anticipated as a natural outcome of any legislation.

Widely anticipated, that is, by everyone except the regional Bell operating companies
(RBOCs). Their legislative idea for intraLATA dialing parity was to roll it back in any
states where it already existed and maintain restrictions on its implementation in the
others. So a big lobbying tussle ensued with each side digging in hard. The RBOCs wanted
it tied to their long distance entry; the competitors wanted it implemented immediately.

Back and forth they grappled, like two heavyweight Greco-Roman wrestlers. Competitors
argued that prices for local long distance were too high, that the RBOCs were grossly
over-earning in these markets and reaping huge monopoly profits. For their part, the RBOCs
argued that the higher rates were essential to their ability to keep local rates at
affordable levels, and if 1+ intraLATA dialing parity was instituted unilaterally then
they would have no choice but to raise local rates.

So in one of its great Solomon-like compromises, Congress essentially cut the baby in
two, thus serving no one very well, particularly the baby. It decided to grandfather those
states that already had, or were in the process of instituting, intraLATA dialing parity
as of a certain date, while prohibiting implementation by other states (with the exception
of single-LATA states for a three-year period of time, ending Feb. 8, 1999). If an RBOC
was granted interLATA authority during that time period, it would have to provide
intraLATA toll dialing parity concurrently.

The Congress fashioned this compromise with specific goals in mind and for specific
purposes. First and foremost, it wanted to encourage, not discourage, intraLATA dialing
parity. It did so through the grandfather clause, the single-LATA state exception, and by
setting a date certain for the end of the time when the other states could not implement
it. Lawmakers knew that enabling the states to move forward after a certain date would
serve to keep the pressure on the RBOCs to open up their local markets to competition in
the interim. In fact, the law specifically says that states may adopt requirements for
intraLATA presubscription before the February 1999 date. They just could not become
effective until that date. If that isn’t an indication of their predisposition on this
issue, I don’t know what is.

So, Congress agreed to further delay nationwide intraLATA dialing parity for a
three-year period of time. It did not want to delay its implementation beyond that point,
no matter what happened in the market. Remember, at that point, as with today, a number of
states already had intraLATA presubscription. Thus, citizens in many states were
benefiting from increased "1+" intraLATA competition while others were not.
Congress did not want to prolong that inequity any longer than necessary. Neither should
the states. Finally, if Congress had wanted to link it directly to the granting of long
distance authority, it would have done so. It did not.

Time flew, and today we find ourselves nearing the end of that three-year prohibition.
Several of the remaining states have begun the processes necessary to allow them to
implement 1+ intraLATA dialing parity by the February 1999 deadline. But guess who’s back
at various state regulatory agencies around the country seeking yet another generous
helping of intraLATA monopoly pie? Our old friends, the RBOCs. Fewer in number to be sure,
but just as greedy as ever. They now want the states to delay the imposition of intraLATA
dialing parity until they get into in-region long distance.

The RBOCs argue that nothing in the act actually requires presubscription, so state
regulators are free to continue to delay intraLATA presubscription. Even though that is
not what the Congress intended or stated, they are, to coin a phrase, "legally
accurate." Sound familiar? These, of course, are the same companies that paraded
their CEOs out one by one when the bill was signed into law, to praise its contents as
equitable and fair and to pledge to make it work.

At the time the act was passed, three years was assumed to be enough time for the RBOCs
to have opened their local markets completely to allow for their entry into in-region
interLATA long distance. For most RBOCs and in most states, that has not happened. It does
appear that Bell Atlantic Corp. is on course to convince the authorities in New York that
it has sufficiently opened its local markets to competition and may achieve in-region
intraLATA entry roughly on schedule. But then the situation in New York is different from
other states. And therein lies the point. If the RBOCs had moved aggressively to fully and
fairly open their local markets this all might be a moot issue. But they have not.

With less than six months to go, it is time for state regulators to initiate intraLATA
presubscription proceedings to bring the blessings of this much-needed competitive thrust
to their constituents. We already have seen some recent progress in Washington, Colorado,
Maryland and Virginia. It’s time for the states that have not yet recognized the urgency
of this matter to move ahead and institute intraLATA dialing parity. That certainly will
do more for the cause of local competition than allowing the RBOCs additional time at the
feeding trough. It seems unthinkable that state regulators would want to further delay the
advent of this critical element of local competition, which is so clearly in the public
interest.

Ernest B.
Kelly III is president of the Telecommunications Resellers Association (TRA), the
Washington-based national organization representing more than 650 resellers of
telecommunications services. He can be reached at +1 202 835 9898.

ROUNDTABLE…
On the proposed SBC Communications Inc. Takeover of Ameritech Corp."

A
merger between SBC and Ameritech would be the best that could be achieved in meeting the
goals of the Telecommunications Act of 1996. Those companies would continue to maintain
carrier-of-last-resort obligations and would continue to serve 90 percent of residential
consumers in their areas."
–Morton Bahr, President, Communications Workers of America

"The planned merger, although driven by the need for national presence in the
landline telecom market, will have significant impact on the U.S. wireless industry [such
as further concentration of market power, with the top six operators controlling 70
percent of subscribers]."
–David Kerr, Director of Mobile Communications Services, Strategy Analytics

"We heard SBC promise increased competition when it bought Pacific Telesis. It
didn’t happen. SBC promised more market opening and competition when it announced its
purchase of Southern New England Telephone. It didn’t happen. … Now, SBC wants to buy
Ameritech–instead of expanding competition, these two companies have found a way to
expand their monopoly reach and control."
–C. Michael Armstrong, Chairman, AT&T Corp.


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