Out of defeat comes healthy diversity. Out of victory comes unhealthy monopoly.
That's a paradoxical lesson of history, from the fate of the Roman Empire in ancient times to the fate of the AT&T empire in modern times. And the practical implications of that lesson will be seen as the returning Congress debates legislation that will determine the future of telecommunications.
Ancient history first: In the third century, the Roman Empire stretched from England to Egypt. The emperor Diocletian, surveying its increasingly unmanageable sprawl, divided it into halves, East and West. The eastern empire, centered in Constantinople, lasted for more than a millennium, until finally conquered by the Turks in 1453. The western empire, still based in Rome, was overrun in 476.
But while the East proved stronger politically, it ultimately paid a bigger price; it stagnated economically and culturally.
The West, by contrast, met a better fate: All those conquering barbarians brought death and destruction, but they also eventually brought new thinking and new ideas, from rough democracy to property rights for women, even to double-entry bookkeeping. So chaos brought forth a new order, and by the year 1000 the West was superior once again, and it has stayed on top ever since.
OK, now to modern history. Just as the Roman Empire was huge in its time, so American Telephone & Telegraph was huge in our time. As late as the 1980s, the "T" empire spanned America with more than one million employees, enjoying near-complete monopolies in both long- distance and local service. But all that changed in 1984, when the Justice Department broke it up, dividing the tele-realm into halves. AT&T kept its long-distance assets, but seven new "Baby Bells" were given sway over local service. After that, just as happened to the Romans in ancient times, the two halves of "T" went on to meet separate fates.
The long distance half can be compared to the western empire. AT&T was soon besieged by MCI, Sprint and others, all barbarously cutting prices and offering new services. And today, its once 90-percent share of the long-distance market has been cut in half, and profits, employment, and market capitalization have crashed even further.
On the other hand, consumers have been big winners amid all the business carnage. Five cents a minute for long distance is cheap, and prices are sure to fall further as new technologies, such as Internet telephony, become available.
By contrast the other half of the empire, the local half, has not suffered as much depredation. The breakup, and subsequent legislation, have protected the local monopolies. And so local-call consumers have not benefited much. The Bells created after the breakup, now merged down to four -- Bell South, Qwest/US West, SBC and Verizon -- tyrannize their respective geographic turf. So in effect, the four Bells are one -- one monopoly. And the stifling of competition has caused the maintaining of high prices and the strangling of innovation, which explains why pay-phone prices keep rising and why it's so hard to get good local service.
So just as the Roman Empire split into the western half, chaotic but dynamic, and the eastern half, controlled and stifled, so the AT&T empire has been divided. One is a desperate but creative wilderness of price-slashing, and the other, a stagnant pool of monopoly profits.
Based on this reading of past and present, the obvious course of action would be to open up the eastern -- oops, local -- empire to more competition. But that's not the way politics works. In Washington, policy follows power. The Baby Bells, engorged by monopoly profits that competition-beset AT&T hasn't seen in decades, have enlisted two congressmen, Reps. Billy Tauzin (R-La.) and John Dingell (D-Mich.), as field marshals in their campaign to conquer the long-distance half. The Tauzin-Dingell legislation would permit the Bells to preserve, even expand, their stodgy empires.
If their bill is enacted, the result would be comparable to what the world would have looked like had the eastern Roman empire recaptured the western: political unity, but also economic decadence. The stakes might not be as high today, as armies of soldiers have been replaced by armies of lobbyists, but the principle that only competition produces healthy diversity is eternal.