The Longest Mexican Standoff

By Khali Henderson

I don’t know how long the lengthiest Mexican standoff lasted, but the Bell companies must be giving the recordholder a run for his money. It is now 20 years since divestiture and eight years since the Telecom Act of 1996, and the RBOCs have not encroached on each other’s territories, opting instead to merge with each other and attempt to maintain de facto regional monopolies.

Don’t get me wrong. I don’t like monopolies, in concept or practice, and I don’t blame management of these organizations for the competitorsmashing tactics they employ via their market positions. The job of any management team is to capture as much market share, revenue and profit as possible. Of course this doesn’t change the reality that companies with disproportionate market power often become the common enemy of competitors and, ultimately, consumers. Being labeled the “evil empire” comes with the territory.

The interesting aspect of the RBOCs’ situation, at this point, is that by all accounts, they have exhausted their ability to merge with each other. Whether or not regulators were asleep at the wheel during the initial Bell-on-Bell mergers is irrelevant.

There may be some long-distance deals on the horizon, such as BellSouth’s recent flirting with AT&T (which is as much an equalizing move as anything else, given this particular Bell was left out of the telco shuffle), but it is highly unlikely we’ll see more RBOC mergers.

So, while the long-distance industry represents a growth vehicle for the Bells, simple business logic suggests that they should be building out their core business offerings by expanding their service territories. Could it be that the Bells are maintaining their respective markets in a coordinated effort to protect their market positions as industry conspiracy theorists suggest? It’s possible, but management teams in publicly traded companies are slaves to the “grow or die” mentality that plagues companies of all shapes and sizes.

Another explanation that I heard from ITC^DeltaCom’s Drew Walker at the recent CompTel/ASCENT Alliance Conference & Expo is the Bells are pinned by their own arguments against UNE-P and network sharing. Therefore, he says, they cannot, from a practical standpoint, use the mechanism that is the most obvious choice for local market entry to enter each other’s territories without validating the concept - something they are loath to do.

So, the question about the RBOCs duking it out is probably more a matter of  “if ” than “when.” This means, of course, the standoff is just as likely, if not more, to be broken by outside forces as it is by the participants themselves.

One of those forces, the federal court of appeals, has moved the question closer to resolution. It ruled the FCC was wrong in its 2003 Triennial Review Order when it declared competitors “impaired” without access to Bell switches on a nationwide basis and delegated review of this finding to individual states.

KHALI HENDERSON

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