A Telecommunications & Technology Research Group
2400 Virginia Avenue, NW, Suite 1023C
Washington, DC 20037
Phone (202) 333-6517
E-mail: Judith@jhellerstein.com

Date: January 1, 1998
Contact: Judith Hellerstein

(202) 333-6517 E-mail: Judithh@tmn.com

Aggressive Competition in Local Phone Markets

Washington, DC
‹The new Competitive Telecommunications Market report from Northern Business Information calls for a rethinking of the conventional methods of analyzing the telecom marketplace. No longer will a national analysis of the marketplace suffice. The analysis instead must be on a state and local level since that is where competition is evolving.
The U.S. Competitive Telecommunications Market report, prepared jointly by Hellerstein & Associates, the Washington-based telecommunications and technology research firm, and Northern Business Information, analyzed the local competitive environment of Atlanta, Dallas, Seattle, and Connecticut, four diverse metropolitan areas in the United States. The report profiles the level of growth of competing companies for market share in Local Service, Switched Access, and Interstate Toll Services. The report found that in the areas targeted by the Competitive Local Exchange Carriers (CLECs), Local Exchange Carriers (LECs) have lost substantial market share in the switched access and intra-LATA toll markets. The report estimates current and future local exchange and long distance revenue, reviews competitive strategies and analyzes the potential impact of state and federal regulations and other trends affecting the marketplace.
"The fight is no longer over who controls the $80 billion long distance marketplace, but who will control the $100 billion local exchange market and who will be able to offer true one-stop shopping to consumers", stated Judith Hellerstein, one of the study's authors.

The report concludes that:
Local Exchange revenues will continue to rise, while prices will be kept relatively constant due to: continued residential demand for online and data services; additional line growth to meet the needs of telecommuting and home businesses.
Switched Access revenues will decline briskly once full competition enters the market because the FCC will allow the market to transition interstate access charges to cost, but will not make long-term provisions for cost recovery of the subsidies currently in the rates.
Intrastate Long Distance revenues will begin declining nationally in 1998 due to price competition from new entrants. This will take place sooner in the more competitive markets and in urban areas.
Interstate toll revenues will rise significantly with a rolling compound average growth rate from 1997-2000 of over 10% in Seattle and close to 10% in Atlanta and Dallas.
"The foremost conclusion drawn from the report is that the incumbent LECs are under heavy revenue pressures as a result of Access Reform and aggressive competitors anxious to get a share of the combined revenue in excess of $9 billion dollars" stated Judith Hellerstein. "The incumbents stand to lose substantial market share in regions targeted by competitors such as, AT&T, MCI/Worldcom, and Sprint." Consequently, as competitors indulge in marketing and regulatory strategies to defend their markets, arguing about proper levels of interconnection charges and whether or not there is competition, the ILECs continue to hemorrhage their more profitable revenue streams to competitive bypass and the aspiring competitive LECs continue to lose their entree to become full service providers.

Report Availability
The U.S. Competitive Telecommunications Market report can be obtained from Northern Business Information, a Gartner group subsidiary by calling Direct Products at (800) 419-3282. Additional information concerning the report can be obtained directly from Judith Hellerstein of Hellerstein & Associates at (202) 333-6517 or at Judithh@tmn.com.

Hellerstein & Associates was founded in 1996 and specializes in regulatory, industry and market analysis, and economic issues critical to ensuring competition in the communications marketplace.