A GROWING "BABY BELL"

December 22, 1999
		The FCC announced the decision to allow a "Baby Bell" company, Bell Atlantic, to offer long-distance service. Chairman William Kennard discusses what this means for consumers and the telecommunications business.

Oct. 7, 1999: A newsmaker interview with FCC Chairman Oct. 5, 1999: MCI acquires Sprint Aug. 30, 1999: Analysis of the current long distance price wars. Aug. 30, 1999: An examination of the future of tele-communications Aug. 10, 1999: AT&T plans for the future May 6, 1999: AT&T acquires Media One. July 27, 1998: AT&T enters into a joint venture with British Telecom. June 24, 1998: AT&T merges with TCI May 11, 1998: SBC Communications buys Ameritech. Oct. 1, 1997: MCI merges with Worldcom. May 7, 1997: The FCC lowers long distance access rates. Complete NewsHour coverage of Business and Cyberspace and Tele-communications.     Federal Communications Commission Bell Atlantic	JIM LEHRER: We hear about that Baby Bell move to long distance from the man today who allowed it to happen, Federal Communications Commission Chairman William Kennard. Mr. Chairman, welcome. WILLIAM KENNARD: Thank you. JIM LEHRER: What exactly is Bell Atlantic now allowed to do? WILLIAM KENNARD: Bell Atlantic will now be allowed to offer long distance service for the first time. As you know, the Bell companies have been prohibited from going into long distance until they can demonstrate that their local markets are open for competitors. These are historic monopoly markets. Congress decided in 1996, when they revamped the telecommunications laws, that the Bell companies would be allowed in long distance but only if they opened their markets. Now, for the first time today, the FCC has been able to confirm that Bell Atlantic has done the hard work of opening that market, and they'll be allowed into long distance.
	Opening local markets
	JIM LEHRER: How did they open their local market to competitors? WILLIAM KENNARD: Well, it was a lot of hard work. They worked closely with the New York state regulators. They developed systems to ensure that the new competitors would be able to access the lines and wires that we need in order to provide local phone service. You know, Congress recognized when they rewrote the law that it really wouldn't be possible for competitors to string new lines in everybody's homes and businesses, so they mandated that the Bell companies make parts of their network available to competitors so that they could compete. And Bell Atlantic has now demonstrated that they have the systems in place to allow companies like AT&T and MCI, and lots of smaller companies -- JIM LEHRER: Those are long-distance companies now? WILLIAM KENNARD: That's right. But they want to compete in those local markets too. JIM LEHRER: So, they would come in, let's say, AT&T or MCI, or Sprint wanted to come in and compete in Bell Atlantic's territory on a local basis, they would use Bell Atlantic's own system to do so. WILLIAM KENNARD: That's right. Not only do they want to get in, they are already in. In New York state, 1.3 million phone lines are already being used by competitors. And so this is a process that has been underway. We've now determined that the process has matured to the point that this market is open to competitors and that will allow Bell Atlantic to offer long-distance service itself.
	Creating long-distance service
	JIM LEHRER: All right. Now, how does Bell Atlantic now go about creating a long-distance and international telephone service? WILLIAM KENNARD: Well, Bell Atlantic has millions of customers in New York state. They're offering and providing local phone service. With this decision, Bell Atlantic will also be able to provide long-distance service. This is very important because the world is going digital, and most of our phone networks today, most of the traffic now is moving to the data side, and that data traffic is an interstate, indeed an international business. So the Bell companies need to be in this business. Now that Bell Atlantic has authority to do so in New York, it will start offering long-distance service. JIM LEHRER: But there again, they're not going to go out and put up a string of telephone lines all over the United States. How are they physically going to establish a long-distance service? WILLIAM KENNARD: Well, they will enter into agreements with companies that provide long-distance service throughout the country. But the important thing is they will be able to go to their customers and offer their customers both local and now long-distance service for the first time. JIM LEHRER: Now, is the expectation that this is going to result in lower rates to the customers in New York? WILLIAM KENNARD: Certainly that's the vision. You know, when President Clinton and Vice President Gore worked with members of Congress to revamp our laws, they envisioned a day when consumers would have real choice in all sorts of telecommunications services. For the most part, we have choice in long-distance service and in wireless service, but not in local phone service. So the goal here is to bring competition to that segment of the marketplace and that will result in drastically reduced rates for consumers. JIM LEHRER: Now Bell Atlantic can only do this in New York. Why only in New York? They serve millions of other customers up and down the east coast. WILLIAM KENNARD: Well, I expect that they will apply for long-distance authority in their other states. This is the first step. That's why this is a historic decision: Because it creates, in effect, a template for Bell Atlantic and the other Bell companies to follow when they apply in other states. JIM LEHRER: And, in each case they have to first prove that they have established a competitive situation and local service before you all will let them go into the long-distance business? WILLIAM KENNARD: That is correct.
	One state at a time
	JIM LEHRER: And they have to do it each state one at a time? WILLIAM KENNARD: Yes, yes. And, in this case, they worked very closely with the New York state commission there, the state regulators. This is a process that involves a partnership between the state and the federal government to work with the Bell company and the competitors to make sure these systems are in place. It's hard work. But it... in fact, it's been a long time coming. The FCC has rejected five previous applications for long-distance authority, but Bell Atlantic.... JIM LEHRER: From other companies? WILLIAM KENNARD: From other companies. But Bell Atlantic was able to demonstrate it has met the standard. JIM LEHRER: Do you expect others to come in now? WILLIAM KENNARD: Absolutely. We expect in early January to have an application by SBC for authority to offer long-distance service in the state of Texas. JIM LEHRER: Okay. Now, you mentioned template for the future and this is an historic decision, et cetera. Put this in a context for the rest of us to understand. Now there's also wireless out there and there's also cable. Where does all of this come together or does it? WILLIAM KENNARD: Well, it is very exciting really because the vision of our law and policy today is competition. We know that competition in the high-tech industry is driving our economy. That's why we have the longest peacetime expansion in our history. And all of these high-tech companies that we're hearing about use the telephone networks. So it's vitally important that we have an open, competitive phone network so all of these new companies can continue to compete.
	What about wireless?
	JIM LEHRER: All right. Now, put wireless in this. Where does wireless fit? WILLIAM KENNARD: Very exciting. What we're witnessing today is the migration of the Internet out of the PC, and into handheld wireless devices.... JIM LEHRER: Personal computers, right. WILLIAM KENNARD: Palm pilots and whatnot. And it's very exciting because what we're going to see is much more Internet usage from devices other than home personal computers. And that is going to be really an explosion in the use of the Internet as it migrates to lots of little appliances in our lifetimes. You know, if you think of how the average American uses telecommunications now compared to just five years ago, it's really quite amazing. Many Americans have a home computer, some a laptop, wireless phones, pagers. Telecommunications is really driving a lot of the growth in our economy and how we're competitive as a world economy. JIM LEHRER: Now, cable fits in here because too because there is also in addition to a telephone line in most homes and businesses, there's also a cable line. That is also a potential already not just potential but in some cases also a competitor, is it not? WILLIAM KENNARD: Absolutely. And the wonderful thing about cable and the wonder of digital technology is that companies are now discovering that the cable wire can be used for data and in particular high-speed Internet access. The American public is waking up to the Internet today. You know, it's the holiday season and people are shopping on-line. But for most Americans, the Internet moves too slowly at home. Just in my own life, I get up and turn on my computer in the morning and download a Web site and I go brush my teeth because it's so slow. It's the "world wide wait" on the World Wide Web. And what we desperately need in this country is high-speed Internet access into every home. The cable industry is discovering that those wires can be used for high-speed Internet access. That is why AT&T is purchasing companies like TCI, so that they can invest not just in cable television services but in high-speed Internet access. JIM LEHRER: So eventually we're going to have three competing forces: The regular telephone line, the cable and the wireless, all ways to get in and out of your house and to get information in and out of your head and in and out of your ears, right? WILLIAM KENNARD: That's exactly right and it's an exciting future. JIM LEHRER: All right. Mr. Kennard, thank you very much. WILLIAM KENNARD: Thank you.