Moody’s Investors Service Inc is also worried about the rush to diversify in the telephone business. On a sector report on the US telephone industry, it says that over the next three to five years the average credit rating of the industry will probably drop to A1 from the current Aa3 as new legislation and regulatory decisions transform a regulated, monopolistic market into a more open, competitive one. It cited expected competition in the local telephone companies’ long-distance carrier and business markets, the high cost to maintain dominance in these markets, and the capital investment resulting from entry into two major new markets – long-distance toll service and video entertainment. According to Moody’s, the new markets should be opened to full-scale telephoneindustry participation within three years by either federal legislation, judicial decision or regulatory initiative. But it sees the most important competitive challenge coming a little further in the future, when the residential telephone market is finally opened to competition, and cable television companies develop the technology to compete in that market.
