Rules of the Game

Do you remember when tic-tac-toe ceased being fun? It was when you were about five years old and your opponent - an older sibling most likely - blocked your threein- a-row at every turn. For every two Xs you placed, an O would follow.

That’s a little like what’s going on in the telecom services industry - only on a much grander and complex scale. Obviously, on one side are the incumbent telcos - representing the older sibling, of course - and on the other side are the uninitiated, or basically everyone else.

No offense to this second group, but the ILECs really are in a league by themselves when it comes to maneuvering through - and at times altering - the playing field.

So, coming to the game in the mid-’80s, the Bells were given the local markets as their game board, and for the most part spent the next 10 years watching from the sidelines the scrimmages in the newly competitive long-distance market and trying to prevent the contests from spilling over into their territories. Of course, in 1996, regulators finally decided that the Bell companies needed to play ball in the local markets. The rules were clearly defined. But, the ILECs were successful in bending them or getting the rulemakers to change them altogether. Block.

Fast-forward another seven years and the Bells were authorized to compete for consumer long-distance in nearly every region. There, they are in most instances running the table. Block.

If approved, the proposed megamergers with long-haul providers AT&T Corp. (by SBC Communications Inc.) and MCI Inc. (by Qwest Communications International Inc. or Verizon Communications Inc.) will give them dominance in the business and government long-distance markets. Block.

Meanwhile, the Bells have averted significant challenges to their local market strength by buying up mobile operators. Block. And, they have successfully lobbied against the market-entry strategy using UNE-P. Block.

This move has sent competitors running to Internet-based solutions for not only data but voice services. But, through their megamergers, the Bells also stand to gain control of major Internet backbones. Block.

When the failed Sprint-MCI Worldcom pairing was first proposed back in 2000, one of the chief objections was that it would concentrate too much control - roughly 70 percent at the time - of the national Internet backbone network into one company. While the Bell-IXC combos don’t consolidate the Internet backbones into one company technically, both would be owned by telcos that have a history of working in tandem - not competing in each other’s markets and lobbying jointly for similar regulatory rules.

If the mergers go through, the Bells gamesmanship will have enabled them to build what could, from a certain perspective, be viewed as a better monopoly.

So, it will be interesting to see whether the competitors will, like the losing novice tic-tac-toe player, tire of fruitless play, come up with some new moves, or take a page from the Bell playbook and change the rules of the game.

Group Editor

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