Further & More

BYPASS BURGEONING

More and more people are abandoning their local telephone monopolies. The byword is bypass, and REASON, as far as we know, was the first national magazine to cover the phenomenon (see "Hanging Up on Your Phone Company," Oct. 1983). A recent Fortune article says that all told, $100 million in revenues will be bypassing local phone companies in 1984 alone.

Some of the largest-scale and most innovative bypassing is being done by the heaviest users of telephone. Fortune reports that Citicorp connects four of its Manhattan buildings with a fiber-optic network underneath city streets, and it handles interoffice calls with microwave transmitters. The National Journal reports that in Irving, Texas, 35,000 employees working in an office park complex will soon have access to a communications network that will let them exchange computer data, video, and voice conversations with other tenants in the complex. They will also be served by a computer that automatically chooses the cheapest carrier for long-distance communications and will enjoy connection to satellite dishes and microwave towers nearby.

"What we're creating, in essence, is a local telephone company—an office park-based phone company," the system's developer, David Leininger, told the Journal. "Any real estate developer who doesn't do it in the future is simply not going to be competitive with other developers."

Will bypass be a fatal drain on local telephone monopolies? Telecommunications consultant Walter Bolter advises that local monopolies "have just got to focus on being competitive in offering service to the high-volume users." In fact, one of the spinoffs of the old AT&T monopoly, Ameritech, seems headed in that direction. In March, the Wall Street Journal noted that Ameritech and Satellite Business Systems will be marketing and operating telecommunications services to 60 buildings around the country to the tune of $130 million in sales and equipment, maintenance, and other services. This may be a harbinger of the "coming competition between AT&T and its former operating companies," consultant Willard Thomas told the Journal.

And it looks more and more as though bypass will be the leading edge of the kind of telephone competition the regulators have shied away from—alternative services at the local level.

PRIVATE EYES IN THE SKIES

The privatization of Landsat is edging ever nearer. In early April the House of Representatives unanimously passed a bill setting the ground rules for transferring the government's land remote-sensing satellite system to the private sector. A similar bill is making its way through the Senate.

(To the free-market-minded, Congress's privatization plan is not all that it could be. For instance, it has the federal government subsidizing the eventual Landsat operator for six years after taking over the system, to give the market a chance to develop. And the operator will be prohibited from selling data on an exclusive basis—that is, all comers may buy any and all data.)

Since the Commerce Department called for bids on the landsat system in January, seven firms are in the contest (and this was before Congress had hammered out any ground rules, including the subsidization clause). The eagerness of entrepreneurs to get into the business further corroborates what Patrick Cox had pointed out in his REASON article "Fair Weather" (June 1983): there already exists a robust and growing market for pictures of the Earth and its atmosphere taken by satellites. Geologists looking for ore and oil deposits, for example, rely heavily on such data.

And because the satellite photos are useful in accurately forecasting crop yields, farmers and others interested in such predictions (commodities dealers, for instance) constitute another considerable market segment.

The spirited interest in the remote-sensing business also shows the shortsightedness of Congress's earlier decision not to privatize the federal government's weather-satellite system. That decision was primarily based on the premise that there would be no market to sustain the profitable provision of what Congress considers a vital service. But if the prospect of private remote-sensing can so quickly conjure up a storm of activity, certainly the sky's the limit for private weather satellites.

AND MORE

• Defense testing fails again. The General Accounting Office, Congress's independent investigator, recently released a report highly critical of the military's weapons-testing procedures. The operational testing of weapons in unrealistic settings—thus making favorable performances more likely—and the discounting of unfavorable results were among the report's major criticisms. In an April 1982 REASON article ("Fighting with Failures") that sparked increased scrutiny of the weapons-testing system, weapons analyst Dina Rasor had pointed out many of the inadequacies cited in the GAO report.

• Environmental economizing. Colleagues of Zach Willey, who was featured in REASON's March Spotlight, recently proposed that the electricity generated by the government's Hoover Dam be sold at market prices instead of allocated to users on a noncompetitive cost-recovery basis. Writing in the Wall Street Journal, Thomas Graff and David Marcus of the Environmental Defense Fund argued that congressional renewal of a 1930 bureaucratic allocation agreement would have environmentally destructive consequences. The proposal, while not so "radical" as to suggest privatization of the dam, is one more instance of environmentalists' growing recognition that economically unsound government policies tend to be environmentally harmful, as well (see "The Environment's Worst Enemy," Trends, April).