How The Lawyers Killed Phone Competition

By Bruce van Voorst/TIME

Reed Hundt had it wired. As chairman of the Federal Communications Commission, he was a prime architect of deregulation, which was going to bring competition to the phone business the likes of which had never been seen. Trouble is, it hasn't been seen, leaving Hundt fuming about telephone-company attorneys. "Shakespeare had it right," says lawyer Hundt. "First thing, kill the lawyers."

The telco legal teams have tied the FCC in many, many knots. Last week a federal court in St. Louis, Mo., once again blocked the FCC's efforts to force former Bell companies to open up their markets. "It's a torpedo under the waterline of efforts toward real competition," Hundt says. "Congress's intent to introduce competition was twisted by the judicial machinations of incumbent monopolists--both local and long-distance telephone companies." Hundt doesn't see the potential GTE-MCI merger as being particularly friendly to consumers. "By our count, GTE has filed 23 federal court actions challenging the pricing decisions of 23 state commissioners," he complains.

He sees some hope in the entrepreneurial, and unregulated, wireless-phone industry, in which falling prices threaten to undermine conventional service. "The young crowd comes in sneakers, and doesn't have a lot of paper; all they really have is a good idea," he says. "When a Bell company shows up, they bring 20 pages of documents, 15 lawyers, hold a press conference and complain about the FCC before the TV cameras."