In 1982 AT&T, also known as “Ma Bell,” agreed to a break-up that led to the creation of a series of Baby Bells, including Bell Atlantic, which ultimately merged with other carriers and became Verizon.  The agreement divided the United States into local access and transport areas (LATAs) inside which Baby Bells would be allowed to operate and across which only long distance providers would be allowed to operate.

The goal of the U.S. Department of Justice in entering into this agreement was to promote telecommunications competition in a post-breakup world.  Competition was fostered on the long distance (LATA-crossing) side, but was less successful on the local provider side.  At the local level, it is much more difficult to ensure effective competition among telecommunications providers, primarily because they often have monopoly control over telecommunications circuits.

The State of West Virginia has two available mechanisms to ensure that reasonable telecommunications rates are charged and competition fostered.  The first and most frequently discussed, the West Virginia Public Service Commission, can control costs by regulating certain rates and business practices.  To represent the interests of consumers in such proceedings, the PSC employs a Consumer Advocate.  For many years, Verizon and other providers had a fierce foe in Consumer Advocate Billy Jack Gregg, who fought telecommunications providers tooth and nail on behalf of consumers like you and me.

After 30 years of tireless service as West Virginia’s first and only Consumer Advocate, Mr. Gregg retired from the public sector and founded Billy Jack Gregg Universal Consulting. Still widely regarded as one of West Virginia’s foremost authorities on telecommunications issues, Mr. Gregg continues to provide his expertise to clients on both the consumer and business side. But these days, you’re highly unlikely to hear Mr. Gregg weigh in on any issue concerning Verizon. Rumor has it that Verizon now pays Mr. Gregg a substantial retainer just to keep him from commenting publicly on its maneuvers.

A second and less frequently discussed group – public sector telecommunications purchasers, including K-12, higher education, and state government agencies – also can control costs and foster competition with their procurement practices.  Why?  The public sector – first K-12, then higher education, and then the rest of state government and the courts – are Verizon’s largest customers.

Given this fact, I will pose a counterintuitive proposition: The last thing the State of West Virginia, including education, wants to do is bid out mega-telecommunications contracts to be awarded to a single vendor.  Rather, the State wants to bid out multiple smaller contracts to multiple vendors.

But doesn’t the State want to get the best bang for its buck on telecommunications costs, you ask? And doesn’t an entity like the State get the lowest vendor cost and have the lowest contract management expenses if it bids out mega-contracts?  Yes and no.

In the short run, you possibly could attain these benefits if you assume that the bidders are on a level playing field, which they are not, and that political considerations would play no role in the award.  Verizon, with control of so much infrastructure, particularly middle mile infrastructure referred to in a previous post, has a leg up on everyone else and is the entity most likely to win the mega-contract.

But even if the first round of bidding were truly open and competitive, future rounds would not be as the entity that got the initial contract could quickly exploit its monopoly status and drive current and future competition out of the market, resulting in higher long-term costs for the State of West Virginia and its citizens.

Tying these thoughts back into a discussion of WVNET, the State is not like any other single private sector vendor, which almost always would benefit from collective bidding of telecommunications services.  As an entity large enough to promote harmful monopoly, the State should be strategic in its thinking about contracting and should not automatically bring K-12, higher education and state and local government together for purposes of telecommunications contracting or bid all parts of its infrastructure at once.

Technological advances are changing the calculus I have described, but we will have an 800 lbs. telecommunications “baby” into the foreseeable future.  And that is an important consideration in these proceedings.

PS: If this blog mysteriously ceases publication, one of two things happened.  My own personal Verizon account was shut down … or I received a VERY LUCRATIVE consulting contract and am honoring the terms of that contract.  (Others have posited a third scenario, but I remain optimistic, even as I lock my doors.)