Monday, March 14, 2005

The Copper Rule

Remember the Golden Rule? Oh, you're thinking of the one that says, "Do unto others as you would have them do unto you." That's a good way to live, and I often wish that more people observed it. Today though, I'm thinking of what has become known as the Golden Rule of business, "He who has the gold makes the rules."

The telecommunications industry has a similar but unwritten rule that I call The Copper Rule, "He who owns the copper makes the rules." Copper refers to the phone wires that are strung all across the country, whether above you on poles or buried under your front or back yard. Those wires are owned by your main local phone company. Maybe you live in a major metropolitan area where you are served by one of the former "Baby Bell" companies, such as SBC or BellSouth. Perhaps you live in a more rural area where your phone company may be a regional or even smaller company. No matter where you live, there is one phone company in your area that built the original network and strung all the phone lines. They own the copper, and anyone who wants to use their network has to go through them.

What does that mean to you? Well, whenever you need to order new phone service for your home or business, you have to have it installed by whomever is the local phone company in your community. Since they own the lines, they are the only ones who do installations and repairs to their system. You have to sign up with them.

What about competitors? Well, they can provide your minutes, but they have no control over the copper. That's why they will only transfer your existing account. If they accepted an order for new service, they would just have to arrange installation by your local provider anyway. That just causes delays and confusion in case of quality problems, which is why most competitive carriers just won't get into it at this time.

Once you have active landline service from your local phone company, you are generally free to select any long distance provider you want. Even there though, the competing long distance providers have to pay the local company to tie into their network. If you have ever moved from an area served by a huge local provider to a smaller provider, you may have noticed that your rates are higher in smaller areas. It's all about volume. The competitive providers can negotiate better deals for a lot of minutes with a few major phone companies than the many, smaller deals they have to make with all the smaller providers.

You can also transfer your entire bundle of local and long distance service to a competitive carrier. Again, this option is more available, and the rates are better, in larger markets. There is currently a change in the wind though, regarding competitive local phone service. Until now, the FCC controlled the rates that competitive carriers had to pay to lease part of the network. A new rule just went into effect on March 11, 2005, that allows your phone company, known as the incumbent local exchange carrier, to raise the rates they charge to the competing bundled carriers. Also, the competitive carriers will have to change the way they do business. They will have to build their own facilities or change their method of delivering service within the next year.

What does this mean to you today? Well, if you are currently a customer of a competitive carrier, there is no immediate change. Watch your bill for more information from them as they make this transition. If you are considering switching to a competitor, you may have fewer options now. The incumbent local carriers are raising their rates so much higher that some competitors have withdrawn from much of the market.

Remember that if you are a customer of your main local provider, you can change your long distance carrier at any time. Rates are currently as low as 2.7 cents per minute for interstate calls, and instate rates can be even lower. Unless you use more than 10 to 12 hours per month of just long distance calling, a separate long distance plan will save money over a bundled plan.

Check for bundled local and long distance services or separate long distance calling plans from Long Distance Rate

If you'd like more background on the change in telecommunications deregulation, read "What's Spooking the ILECs" at Telexplainer.

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