Posted 05/01/2001
Push Continues for Structural Separation
By Kim Sunderland
Competitive carriers want state and federal regulators to force incumbent carriers to split up their local exchange service operations into retail and wholesale affiliates. If not, the onslaught of cross-subsidization and discriminatory access can be expected to increase, the companies say.
Illinois, Maryland, New Jersey and Pennsylvania, are considering or have asked a BOC to structurally separate to prohibit anti-competitive behavior and encourage greater local competition.
Policymakers "must consider whether the Telecommunications Act's market-opening provisions and the rules to implement them are, by themselves, sufficient to open up markets quickly, and whether they can prevent the stalling that hurts competitors both operationally and financially," says H. Russell Frisby Jr., president of the Competitive Telecommunications Association (CompTel, www.comptel.org).
Frisby says the difficulty in enforcing the market-opening provisions of the Telecom Act is that it's virtually impossible to get a monopolist to relinquish its monopoly.
"The alternative is structural separation," he says.
Structural separation is not new. The concept has been employed successfully in the long-distance, Internet and equipment markets.
Frisby says structural separation also has been shown to work in the local market, having been instituted successfully in Rochester, N.Y.
But the BOCs, and have no plans to go peacefully.
"Policy experts [also] are weighing in on the wacky notion of structural separation," says Eric Rabe, vice president of media relations for Verizon Communications Inc. (www.verizon.com), citing support from experts at organizations throughout the country who "all agree this is one of the worst ideas to come along in years."
Members of the conservative Progress & Freedom Foundation (www.pff.org), the Cato Institute (www.cato.org), the Competitive Enterprise Institute (www. cei.org), the Commonwealth Foundation (www.commonwealthfoundation.org), Citizens for a Sound Economy (www. cse.org), the Independent Institute (www.independent.org), and the Mercatus Center at George Mason University (www.mercatus.org) recently sent a letter to congressional leaders slamming structural separation.
The public policy experts called the break-up proposal--a "setback to the clear vision" of the Telecom Act.
"The fact that some firms are performing poorly in the marketplace--despite numerous regulatory advantages--is hardly cause for returning to the failed model of regulated monopoly," the policy pundits noted in their letter.
