Payphones: the deregulation factor

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The disappearance of pay phones is linked in part to a decision by the George W. Bush administration to redefine what the word competition means.

In 2001, when the Republicans took control of the White House, Michael Powell, son of then–secretary of state Colin Powell, ascended to the top job at the Federal Communications Commission. Almost immediately, the FCC reinterpreted the 1996 Telecommunications Act. The act had sought to encourage competition among different pre-existing technological platforms — landline, wireless, cable, and Internet-based phones. It also encouraged the "emergence of competition within a platform or technology by providing competing providers with wholesale access to essential facilities" — mandating, for example, the sharing of wires — "and encouraging resale of services," Harold Feld, senior vice president of the Media Access Project in Washington, D.C., told the Guardian.

Under Powell, the FCC abandoned the strategy of encouraging such intramodal competition, which required continuing, close oversight, and — with the support of some Democrats — pushed for complete deregulation. The key: redefining competition.

Instead of trying to ensure that, for example, the market for landline phones was competitive, the regulators decided that as long as there was more than one player in the entire communications market, everything was just fine. So if Comcast and AT&T compete for broadband customers, it doesn't matter if one has a monopoly (or an effective monopoly) on landlines.

"Intermodal versus intramodal was a radical reinterpretation of the '96 act by Republicans," Feld said. The GOP paved the way for accelerated industry aggregation, into what is now widely recognized as a duopoly (AT&T versus Comcast).

And now those big carriers are more interested in more-lucrative technologies and large business accounts than in providing less-profitable neighborhood pay phone service. According to its public telecommunications repair office, AT&T plans to end its pay phone operations nationwide by the end of this year. As of November 2006, it was removing a total of 1,000 pay phones per week across 13 states, with 70,000 gone and 830,000 targeted.

And many of the remaining phones are broken. A New York Times survey of phones in the New York City subway system a decade ago showed that one-third were inoperable.

Basic phone rates can now rise, while the big exchange-operating phone companies are pulling out pay phones, shrinking the "platform" of which they still retain market control.

Increases in line charges and long-distance connection fees levied by the big phone companies make it harder for independent service providers to remain competitive, since they don't control these fees and can't charge more for service than less-affluent pay phone users can afford. And while proprietors of single sites that host pay phones once shared profits, many now have to pay high fees to retain the service. (Scott)

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