In law's aftermath, don't expect rash of new telecom bidders

When waiting for my car at the service station, I often peruse outdated issues of
People and other magazines. Then I start eyeing the familiar posters on the walls.

One shows a car with a foreign name plate. The poster says that many of the parts came
from domestic suppliers and that the car was assembled at a U.S. factory by American
workers. The poster asks, Is this an import or a domestic car?

The message on that poster serves as an analogy for telecommunications services, now
that the president has signed the long-awaited bill freeing the telecom industry from

The new law lets local and long-distance companies reach out and touch each other's
markets, though for the time being the regional Bell companies can't provide long-distance
services until some local competition develops.

Barely had the Library of Congress posted the Telecommunications Act of 1996 on its
World Wide Web site before local exchange carriers GTE Corp., Ameritech Corp. and Bell
Atlantic Corp. said they would enter the long-haul business, and interexchange carriers
AT&T Corp. and MCI Communications Corp. talked of burying the hatchet and building
local networks together.

I wouldn't dare predict how all this is going to shake out. But in the near
term--putting aside the possibility of megamergers--I bet we won't see the seven regional
Bell companies or GTE become viable long-distance providers. Nor are the interexchange
carriers going to become local exchange companies overnight.

What the carriers will do, at least until they build networks in each other's
markets, is resell each other's services. The question, "Is it foreign or
domestic?" becomes "Is it local or interexchange?" An AT&T or MCI
suddenly marketing local services to Washington agencies will only be selling Bell
Atlantic services under their names.

Warren H. Suss, a Jenkintown, Pa., consultant who watches the federal telecom market,
is right on the money when he says that, at least for the next two or three years, you
won't see more vendors bidding for federal contracts. "The scale of the government's
acquisitions will preclude resellers," Suss said.

We could both be wrong, but my hunch is that when the post-FTS 2000 and the Defense
Information Systems Network procurements come up for bids in a few years, there'll be no
serious offers from local exchange carriers. Perhaps at most they'll make a practice run
at vying for federal long-distance services.

Nor will MCI or Sprint Corp. become serious contenders in the follow-ons to such local
services procurements as the Washington Interagency Telecommunications System or the
Defense Department's Telecommunications Modernization Project.

On the other hand, if the government's near-term telecom requirements are not set out
in a bite-sized fashion that separates local from long-distance services, then the telecom
reform legislation could produce a healthy mix of bidders--and lower prices, too. Might
look like a poster with a nice fresh fruit salad on it.

Sam Masud is GCN's senior editor for communications.

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