Deregulation Issues

AT&T and TCG

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These stories were published in U.S. 1 Newspaper on November 4, 1998. All rights reserved.

Telecommunications & NJ

More than just perfect together, the state is a host for innovative landline and wireless technology

New Jersey is where telecommunications was born, says Brett Hall, a spokesperson for the Board of Public Utilities (BPU). "It is an advanced sophisticated state with people who know how to use the new products introduced here. Many times products roll out in New Jersey." That's the justification for why the BPU has stepped out of its regulatory role (usually limited to official hearings and depositions) and into an event-staging role.

The BPU will hold a conference entitled "Telecommunications and New Jersey -- Perfect Together" on Friday, November 6, at the Woodbridge Sheraton in Iselin with Governor Christine Todd Whitman scheduled to speak at lunchtime. The conference will consider the strategic outlook of opportunities and technological advances -- including areas not regulated by the BPU -- in the state's telecommunications industry. Call 973-648-6135 for $195 reservations.

"As a regulatory agency," says Hall, "the challenge on our part is to follow the technology and make sure the regulatory responsibility keeps up with the technology. Technology is coming on the market so fast, and the market is changing so quickly, that it is time for us as regulators, and also for the business sector, to take one day and focus on this: What does it mean to New Jersey? What kind of state will it be to live in? These are the types of issues we will address at the conference, to see where technology is going, and what we can anticipate in the near time."

Deregulating local (landline) calls to match long distance deregulation is one sensitive spot. Wireless calls are another controversial area where technology has outpaced regulation.

"We are noticing that wireless communications, an FCC domain, is growing much faster than the landline business. And the competition in wireless is much fiercer. Prices are declining at a rapid rate," says Hall, "and that may have strong implications for the landline business." Instead of the 900,000 wireless phones once predicted for 2000, there are now 54 million wireless or cellular phones. "Some states have noted a trend toward residential lines being wireless, as much as 20 percent in some states."

The BPU has no jurisdiction over wireless communication, so it has booked FCC Commissioner Michael Powell to speak. A 1985 graduate of William and Mary with a law degree from Georgetown, he was a U.S. Army officer who retired from active service after a serious training accident injury. He was appointed an FCC commissioner last year.

Powell wants policy leaders to understand the perspective of business leaders -- how they see the market, why a firm is or is not willing to invest more dollars in a given market, and what barriers exist to entering new markets. "If we do not," he said in a speech last May, "we will find it difficult when the concerns of interested parties are substantial and genuine and when these firms are acting like Chicken Little -- crying unnecessarily that the sky is falling."

So it is appropriate that the conference will start out at 9 a.m. with a panel of business leaders: Brian W. Clymer of Prudential, Thomas Bracken of First Union Bank, Saul Fenster, president of New Jersey Institute of Technology, Al Koeppe of PSE&G, Bill Marino, president and CEO of Horizon Blue Cross Blue Shield of NJ, and Randall E. Macomas of IBM. They will tell what corporate customers are looking for and how deregulation might affect them.

Telecommunications industry leaders will square off that morning. They include Jack McMaster, president of AT&T Atlantic States and William Freeman, president of Bell Atlantic-NJ. McMaster went to Manhattan and has an MBA and an MA in international politics from New York University. McMaster is also vice president for AT&T's Consumer Growth Markets, with 2,850 employees and revenues of more than $13.3 billion. He is responsible for 13 million high-value long distance customers, long distance customer acquisition, card product marketing, and all telemarketing sales activity.

Freeman majored in economics at Drew University, Class of 1974, and has an MBA from Rutgers. In 1987 he was appointed director of external affairs at Bell Atlantic Network Services. In 1989 as a Presidential Exchange Fellow he worked in the federal General Accounting Office in the trade, energy, and finance group. He was president and CEO of Bell Atlantic-Washington D.C. from 1994 until April of this year.

Also speaking are Karen Varnas, vice president of Enterprise Multimedia Solutions at Lucent Technologies; and Howard Cosgrove, chairman and CEO of Conectiv. Conectiv is a utility company in South Jersey, Philadelphia, and Delaware that is diversifying into the telephone business.

Another panel consists of Bruce Branyan, president of Sprint's Business Markets Local Telco Division; Steve Burke, president of the cable division of Comcast; Bob Hartnett, president of Business Sales and Services of the just-forming MCI WorldCom; and James Courter, CEO of IDT Corporation, a Hackensack-based firm that offers Internet services and Internet telephony for both residential and commercial use.

In the afternoon, New Jersey-based Internet service providers are expected to ask regulators to resist pleas from regional phone companies to dramatically raise rates for data transmission and Internet phone calls -- or to tax Internet-based telephone calls on the same level as standard calls. Closing remarks will be by Herbert H. Tate, president of the Board of Public Utilities.

"Businesses are advertising out of region to fill telecommunications jobs and more and more companies are being created," says Hall. There has been a huge increase in demand for lines to send data. Internet and residential fax machine business is increasing at 300 percent a year, according to the FCC, whereas voice communication lines are increasing at only 20 percent. "We're watching this industry to see how we as regulators should anticipate the market and keep regulations more current."

The FCC's Powell will probably urge policymakers to courageously abandon the current highly regulatory paradigm to "navigate the swift current of change in communications that is being unleashed by market forces and deregulation. While lawyers will debate the details of regulations, economists the most efficient terms and conditions, and technologists the most advanced solutions for this new area, communications policy leaders must concern themselves with the most profound change -- the change in culture and focus required of regulators, industry players, politicians, and consumers."

It won't happen easily, he warned in May. "Revolutions rarely take place overnight. Policymakers' efforts to open long-distance markets began over a decade ago. Yet notwithstanding the procompetitive benefits of this deregulation, AT&T still serves at least half of all long-distance customers."

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Deregulation Issues

Deregulation of local telephone company landlines, long the domain of Bell Atlantic, promises to be one of the one more hotly debated issues at the Telecommunications and Technology Conference.

"The biggest catalyst recently is the 1996 Federal Telecommunications Act, where Congress told the Baby Bells, the monopolies of the local telephone exchanges, that if they wanted to get into the long distance business, they had to have competition in the local exchange market, to be demonstrated on a state by state business," says BPU's Brett Hall. "We issued a report on the state of local telephone competition in July (1998), with an action plan. Our action plan set forth milestones for deregulating."

Regarding the implementation of the action plan, the BPU functions as a facilitator between Bell Atlantic and their competitors. "In our office, we put together a technical facilities support team that meets with Bell Atlantic and its competitors on a regular basis to move this process forward and to untangle these arguments, questions, and highly technical details on how to enable competitors to use Bell's physical network," says Hall. "We have had a constructive relationship with all parties and are as close to meeting the deadlines as possible. We have put a 12-month deadline, to have it wrapped up in July, 1999."

But as that deadline approaches there are some ominous clouds on the horizon. "We are hearing a recommendation that the Board of Public Utilities has the authority to make this physical network, the Bell platform, available to the competitors." Bell Atlantic claims its network is already open to competitors, but, says Hall, access to that network was identified as a major impediment. "We have 90 days to negotiate an agreement. If no agreement, 30 days later the board will make a decision," says Hall.

AT&T -- which fought its own deregulation battles over the long distance market -- uses military terms to describe the quest for access to Bell Atlantic's local landlines, "One of the things companies are trying to do is battle for the last mile, for that piece of wire that goes from your home to the local telephone company," says Blasi. The New Jersey Coalition for Local Telephone Competition (www.competitionnow.org) represents some of the other aggressive advocates of local carrier choice.

"Right now Bell Atlantic controls 99.7 percent of that in the state. They were supposed to try to open their markets to competition similar to what AT&T did in the early '80s and they haven't done that yet. One of the things the BPU has already found is that local competition is not alive in New Jersey and I think the conference will reinforce that point," says Ritch Blasi, AT&T spokesperson.

John D. Zeglis, president of AT&T, will speak at 2:15 p.m. An alumnus of the University of Illinois, he is a 1972 graduate of Harvard Law School. He joined AT&T in 1984 and was named president last year; he will become chairman and CEO of the recently-announced AT&T Consumer Service Company. Zeglis is expected to focus on the need to be proactive in opening up the local telephone markets to competition.

"AT&T's strategy is to keep us out of its market," counters John Bonomo, spokesperson for Bell Atlantic. "The more AT&T and MCI claim that the market in New Jersey is not open, the longer it keeps Bell Atlantic from competing in their long distance markets. The fact is that there are 35 Competitive Local Exchange Carriers (CLECs) certified to provide telephone service in New Jersey, and we have 90 interconnection agreements, one of them with AT&T."

"We have been opening up parts of our network since the late 1980s," says Bonomo. "We have been offering colocation to carriers since the mid 1980s." (Colocation means carriers can place their equipment inside a Bell Atlantic facility.) "These are the signs that competition is real in New Jersey."

-- Jeff Lippincott

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AT&T and TCG

Even with 56K modems, Internet users now have to sit in front of their computer and watch the computer paint the screen of something, says Ritch Blasi, a spokesperson for AT&T: "It's like trying to stuff a potato through a straw."

AT&T aims to use new technologies to speed up Internet service and enter the local telephone markets. It has merged with Teleport Communications Group (TCG), which provides fiber optic-based local and long distance services to businesses, and it is in the process of acquiring Telecommunications, Inc. (TCI), a cable company. "TCI hits the other part of the local telephone market which hasn't opened up, the consumer market," says Blasi.

Each merger offers a innovative way to do an end run around Bell Atlantic, offering not only local telephone, but also bundling in long distance telephone, faster Internet service, and (in the case of TCI) cable television.

TCG was headquartered in Dayton and has about 400 people in New Jersey. It provides most of its services over fibre but had acquired a broadband fixed wireless method, based on 38 GigaHertz microwave transmission technology, and with this it can leverage the facilities-based networks. If your building does not have fiber running into it, TCG could put you on its network by installing two-way point-to-point line-of-site transmission using microwave dishes. These dishes must be within about a two-mile range of a fiber-equipped facility. This service can include local and long distance telephone and Internet transmission. Other applications for 38 Gigahertz are for disaster recovery, redundancy, and to connect many buildings in campus environments.

(AT&T does not have the field clear for using wireless technology to bundle integrated services to business customers at high speeds. In fact, former AT&T president and heir apparent Alex J. Mandl left AT&T in 1996 to found Teligent Inc. and took it public last fall. Touting its 12-inch antenna's ability to give 100-times faster access than a dial-up connection, Teligent has begun marketing to business customers in 10 cities, including New York.)

By next year AT&T hopes to be able to offer local telephone service through another kind of broadband technology, now in the testing stage. This technology would provide high speed data and telephony hookups using existing coaxial (cable television type) cable.

"Cable companies are using it for high speed Internet which is one way delivery," says Blasi. "We are saying we want to take that pipe and make it two ways and drop it down at very high speeds. You could have four telephone lines, high speed Internet, and your entertainment, all from the same place. This is 10 times faster than ISDN at a minimum." (ISDN, Integrated Service Digital Network, is a Bell Atlantic service.) "It would deliver data at the same speed as cable modems."

"But all it is right now is a technology test," says Blasi, referring to AT&T employees testing the method in California. The method is too new to talk about, says Blasi, "too new to have a name."


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