|
|
Local
Telephone Competition Still on Hold
Monopoly Phone Companies and High Cost Pre-Paid Service Dominate Residential
Market Five Years After Launch of Competition
Southwest
Regional Office
January 2001
Consumers Union
Study
The objective of this study is to examine the market for residential phone service
in Texas. To accomplish this, Consumers Union surveyed 46 local residential
telephone companies in six major Texas markets (Dallas, Fort Worth, Austin,
San Antonio, Houston and El Paso).
CU surveyed companies listed as "local service alternatives" in area
phonebooks and companies that advertise in local newspapers and classified papers
("Greensheet" from Greensheet, Inc.).
CU called companies as any normal consumer would, and asked questions related
to price and service that any informed consumer might ask. CU asked for basic
local rates, installation fees, optional services, credit requirements, and
charges for changing address. We compared this information to SWBT prices and
services in each region.
Overall Findings
Very few companies in Texas compete for residential customers nearly five years
after telephone deregulation. Consumers Union found that the much-anticipated
competitive market for local telephone service still has not emerged despite
SWBT's entry into the long distance market.
Of the 46 companies surveyed from local phonebooks and classifieds in the six
markets studied, 22 percent or 10 companies tell us they serve business customers
only.
Nearly half (45 percent or 21 companies surveyed) of companies that have emerged
to provide local residential service target low-income customers or people with
a poor credit history and provide pre-paid basic service at a price substantially
above the capped local SWBT rate.
Of the handful of companies in our major cities that do provide basic residential
service at prices competitive with SWBT (5 companies), two do not offer basic
service to all consumers. For example, En Touch Systems only markets service
to new housing developments or apartment complexes. If you don't live in selected
developments you cannot subscribe. Westel, only offers service in the Austin
area and requires bundled services. This company competes primarily for the
higher income households that spend more for additional services.
A Faltering Market
In April 2000, the PUC reported that, "several large carriers, including
Sprint, AT&T and MCIWorldcom, have begun to ramp up their statewide efforts
to service all customers in the Texas market. These developments are dramatic
evidence that competition is here and it is here to stay." (3)
Indeed, this month in its biennial report to the Legislature the
PUC concludes business customers have a variety of competitive alternatives,
and their options are growing. However, for residential customers, the forecast
is cloudy, "Whether residential and rural customers will have sustainable
competitive choice in the near future is less certain." (4)
In November 2000, the Sprint Communications Company announced that it was ceasing
to offer residential phone service to new customers in Texas.(5)
AT&T and MCI Worldcom initiated marketing campaigns to reach
consumers last year. Yet they too have pulled back on their marketing to residential
customers.(6) AT&T has been the subject of
a growing number of service complaints filed with state regulators. Most typical
are billing problems, which are not only frustrating, but have resulted in consumers
paying more for service than they bargained for.(7)
Further, ChoiceCom and Westel, two new competitive local providers that entered
the Texas local telephone market in the summer of 1998 have discontinued operations
and restricted operations to Austin respectively.(8)
Of the 46 companies surveyed, fully nine were no longer in business by the time
we called them. They had either been bought out by another company (2 companies)
or the line was disconnected and they could no longer be found at all (7 companies).
Notes:
3 The Evaluation of the Public Utility Commission of Texas,
CC Docket No. 00-65, In re Application of SBC Communications, Inc. Pursuant
to Section 271 of the Telecommunications Act of 1996, April 26, 2000, p. 5.
4 PUC Report, pg. ix.
5 PUC Report. p. 61.
6 PUC Report. p. 58-59.
7 Dallas Morning News. Problems mount with AT&T's service. January 18, 2000.
8 Telephone interviews with companies November 2000.
