Tend Your Own Backyards, Baby Bells

The 1990s should be the decade that the Baby Bells discover the profit opportunities right in their own backyards. The seven regional phone holding companies have ventured far afield with varied success since they were born of the 1984 breakup of American Telephone & Telegraph Co.. Overseas, Baby Bells build cable-television systems in Britain, publish directories in Israel, and operate a cellular-phone network in Moscow.

Those ventures aren't follies, to be sure. By doing business overseas, they are learning things that are useful back in the U.S. Delivering phone calls over the cable-TV systems that they operate in Britain, for example, helps them understand the challenge to their telephone franchises from cable-television operators in the U.S.

Still, the Bells would be wise to redirect more of their profits to where they were generated: back home, in such places as Chicago and Atlanta. Other countries, from France to Japan to Singapore, are way ahead of the U.S. in converting home and small-business phone lines from analog waves to the digital signals of computers. If Americans who have innovative concepts for information services, such as home learning and home banking, are keeping them on hold because the network to deliver them isn't in place, that hurts American competitiveness.

For phone companies, upgrading networks isn't an act of charity. It's a smart business decision, because a high-tech network, properly marketed, could stimulate so much additional traffic that the investment would pay for itself many times over. This is one case where looking homeward is not a retreat but an advance.

Before it's here, it's on the Bloomberg Terminal.