Ask a local government telecommunications official whats been the biggest issue in the past few years and he or she would probably say managing public rights of way. The frenzy on Wall Street over upstart dot-com firms also included the equally intense telecommunications market. Firms with names like Teligent, Covad, NorthPoint Communications and RCN were raising lots of money and laying down fiber-optic cable in anticipation of huge demands for data, voice and video services.

The demand to bury cable through cities of all sizes has been extreme, according to Ron Mallard, president of the National Association of Telecommunications Officers and Advisors (NATOA) and director of telecommunications for Fairfax County, Va. "We dont want to hinder the deployment of these new technologies, but we also dont want our streets torn up every six months," he said.

But that problem may begin to slow down, now that the financial markets have cooled, cutting off the easy money that led so many firms to grow fast and to lay more fiber than was necessary in some urban areas. For communities eager to have some competition for local phone service, cable TV and high-speed access to the Internet, the wait continues. "Competition, which looked so promising before the NASDAQ collapse, has since fizzled," said Mallard.

Even in technologys hotbed, Silicon Valley, telecommunications competition has slowed, according to Brian Moura, assistant city manager for San Carlos, Calif., and chairman of the San Mateo County Telecommunications Authority. "Some cities here have competing cable service from AT&T and RCN, but RCN has pulled back, especially in the Santa Clara area," he said.

Moura pointed out that telecom firms, such as Qwest and Linx Communications, are focusing on business-oriented, long-haul connectivity from city to city or region to region, versus short-haul networks, which wire metropolitan areas. "That concerns us, because it means letting them use our right of way without providing the community any real value in return," he said.

The Mighty Bells

Nationwide, approximately 500,000 customers have lost their dial tones and Internet hookups, according to the Association for Local Telecommunications Services (ALTS). More disconnections are likely to occur as more firms close shop. And its not individuals and small businesses that are being inconvenienced. In May, a bank in Maryland lost its online banking Web site when a Web-hosting company called Pilot Network Services Inc. shut down, according to the Washington Post.

Since the Telecommunications Reform Act of 1996, competition in a few local telecommunications markets has slowly taken place. Smaller firms are offering competing services in markets where once only a monopoly existed. These upstarts have spent billions of dollars and today claim over 16 million access lines in service, or about 8 percent of the local telecommunications market, according to ALTS.

But ALTS President John Windhausen has complained the challenges faced by the associations members are severe. In a statement about the health of the telecommunications market, he pointed out that the incumbent telephone companies continue to make it extremely difficult for competitors to interconnect with their networks, despite numerous federal and state orders calling on the regional Bell companies to open their networks to competition. Windhausen also pointed out that, rather than compete against each other outside their home territories, the regional Bell operating companies (RBOCs) have merged into even larger companies. He also chastised local governments for imposing "enormous franchise fees and onerous regulations that are unnecessary and anti-competitive."

Service, Regulatory Concerns

As the RBOCs tighten their grip on the local telecom market, local officials worry about reduced competition, sloppy customer service and the relaxed attitude toward regulation by the Federal Communications Commission. While minimum standards are in place to ensure a certain level of service, Mallard pointed out that the rapid pace of mergers and acquisitions can

Tod Newcombe  |  Features Editor