When the telecommunications deregulation bill was signed into law 18 months ago, business analysts expected competition to break out in local phone markets. But that hasn't happened and some are asking why.

Some analysts are suggesting the problem might be the law itself.

• It kept in place a complex web of subsidies and service requirements that may be hampering competition among long-distance and local phone companies, as well as cable TV and wireless firms.
• Also, a key part of the Federal Communications Commission's implementation plan -- giving the agency authority to set rules for new competitors hooking into local phone networks -- was overturned by a federal court last week.
• Among the continuing subsidies, the largest is about $20 billion a year in access fees local companies charge long-distance firms -- having the effect of making long-distance fees more expensive and local ones cheaper, analysts say.
• Some industry observers blame the confusion which still exists for the delays -- pointing out that competition will probably grow over time, once the legalities are ironed out.

A recent study by Tarifica, a British consulting firm, predicted long-distance firms will lose more and more traffic to the Internet. First to go might be highly-profitable overseas voice calls. As technological understanding grows, the firm predicts, both the quality of the connection and ease of use will improve.

Source: Laura M. Litvan and Jeff A. Taylor, "Where's the Tele-Competition?" Investor's Business Daily, July 24, 1997.