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 (The names in the following account have been changed so as not to embarrass the guilty.)

Here’s a short account of how the lack of competition- the absence of those all-powerful “free market forces” we are incessantly being told to worship- leaves even an institutional consumer at the mercy of the telecommunication duopoly of the cable TV and traditional telephone companies. Instead of an open marketplace replete with multiple providers for the customer to choose from, in most areas of the U.S., the customer usually gets to pick from two. You will readily conclude that the incentives for the two do not lie in out-doing each other in terms of price and service. The situation is analogous to organized crime families dividing up territories. In the language of economists, the principal activity of the telecomm carriers is “rent seeking.”

In our story, a private boarding school for middle and high school students- I’ll call it Bushwood- is located on a hillside overlooking a small harbor on the North Shore of Long Island. The area can be characterized as upper middle class, with large houses built on wooded plots. Crucial to this tale is the fact that Bushwood is about three-and-a-half miles from a major highway, which is where all the main trunk cables of the primary telephone carrier (let’s call the company GrayTel) are located. Feeder cables from those major arterial cables are carried into Bushwood’s neighborhood on poles. Most of it is older, copper wire technology.

For what I assume are cost reasons, Bushwood purchases its telephone and Internet services from the local cable TV company, a company we can call Kable Town. Kable Town delivers both cable television and Internet services on its own coaxial cables, strung on the same poles as the telephone wire. However, to provide telephone services, it leases copper lines from GrayTel. So, while Bushwood pays Kable Town for its telephone service, Kable Town actually pays GrayTel to deliver it.

Technical note: The type of telephone service we are discussing here is a digital circuit called an ISDN-PRI (for “Integrated Services Digital Network- Primary Rate Interface”). Your ordinary home telephone line, or POTS (for “Plain Old Telephone Service”) line has historically been an analog circuit delivered to your home on a pair of copper wires. Digital circuits, such as T-1 and PRI, use two pairs of copper wire and, because of multiplexing, deliver the equivalent of 24 analog circuits. In the case of a PRI, it breaks out to 23 telephone lines, with the twenty-fourth used to communicate information about the activity on the other twenty-three. A PRI requires special terminal equipment at the customer end in order to be usable. In the case of a customer such as Bushwood, that terminal equipment is part of its in-house telephone system, or “PBX.”

One additional note: In recent years, carriers have switched from delivering PRI’s on copper wires and, whenever possible, are sending phone lines over fiberoptic cables using the same data protocol as is used for Internet services. Telephone service is delivered as digital data which is converted back to digital voice by a special terminal adapter. The PRI is then connected to the PBX as if it came in on copper. Fiberoptic cable offers huge advantages over copper: It has a much greater capacity, for one, and is relatively immune to interference from lightning.

The importance of this technological information will become apparent shortly.

Over recent years, Bushwood has suffered from innumerable instances of interruption of telephone service. Most can be traced to the aging copper wires running back 3.5 miles to the main cables. In a heavily wooded area, weather- wind and rain- is always a potential threat. Since Kable Town is their provider, Bushwood must request repair and restoration of service  from them. In turn, since the telephone service is delivered on GrayTel’s wire, Kable Town must turn around and request that GrayTel handle the repair. The potential for bureaucratic finger-pointing is obvious.

This came to head recently when Bushwood opened a summer camp for 600 children on a Monday morning. Telephone service was lost on Sunday night. Several days passed before full service was restored. It was impossible for anyone to reach Bushwood by dialing its main number. Dialing out was possible because Bushwood pays Kable Town to deliver several POTS lines over its coax along with its Internet service.

There is one more small fly in this ointment: While coaxial cable has a greater capacity (“bandwidth”) than older copper cable, it is not nearly as great as that of fibreoptic cable. Bushwood feels this impact on its Internet service: During peak usuage hours (late afternoon-early evening) with the residents of the surrounding neighborhood arriving home from work and school and going online, bandwidth gets shared by an increasing number of users and Internet speeds slow.

The solution to Bushwood’s telephone and Internet problems appear to be simple: Request that the carriers install a fiberoptic feeder cable over the 3.5 mile run from the main trunk lines. Kable Town is not about to spend the money to replace its coax, which the company deems more than adequate. And GrayTel will not replace its aging copper cable… Unless Bushwood pays for it.

Of course, there are no viable, inexpensive alternatives. Satellite services are problematic in an area which may experience cloudy conditions up to 45% of the days of a typical year. Microwave services- if they are even available- depend on line of sight between transmitter and receiver- and would also be iffy in the hilly terrain overlooking Long Island Sound. This is not the circumstance Congress and Bill Clinton probably envisioned when he signed the Federal Communications Act of 1996, a law which, among other stated purposes, was explicitly intended to promote competition in telecommunication markets.

I am left with the picture of the heads of companies such as Kable Town and GrayTel sitting in the backroom of what could be a social club in Little Italy, dividing up the territory.