IT’S PRETTY CLEAR what the government’s role should be in dealing with businesses in a competitive environment and what its role should be in dealing with a monopoly that provides essential services.

When the marketplace is competitive, the state should take a hands-off role, imposing only those regulations that are necessary to serve larger societal goals, such as prohibiting discrimination and setting a wage floor. In the case of a monopoly that provides essential services, strict regulations are needed, because that’s the only way the public has any recourse if the monopoly overcharges or provides an inferior service.

What’s difficult to determine is what the government should do during a transition from regulated monopoly to free market, as we are experiencing now in the local telephone industry. Leave the regulations in place too long, and you give fledgling competitors an unfair advantage over the long-time monopoly. Remove them too soon, and you destroy any chance of a free market developing, because the monopoly still has enough resources to undercut competitors just long enough to run them out of business.

South Carolina’s primary local telephone monopoly, BellSouth, believes that our state is in danger of committing the first sin, of leaving regulations in place so long that it is irreparably damaged by smaller competitors. Specifically, it argues that state regulation of so-called bundled services makes it impossible for the company to compete with the unregulated companies trying to win market share. And it says that with current regulations in place, it has little incentive to roll out new products it can’t afford to offer now.

So BellSouth has asked the Legislature to let it change rates on bundled services without state approval and to prevent state regulators from responding to customer complaints. That doesn’t sound like such a huge deal until you realize that a service is “bundled” when you add long distance or call waiting or caller ID or anything else to basic local phone service.

These will be a reasonable package of requests once the phone market throughout South Carolina has matured enough to provide real competition for BellSouth and other “incumbent” phone companies. But it hasn’t.

While competitors are starting to gain a foothold with business customers, BellSouth still controls at least 90 percent of the residential market in the areas where it offers service. And customers who use other companies pay into a state fund that subsidizes BellSouth’s business. Remove state regulations as much as the company wants, and it would be able to underprice its largely under-capitalized competitors long enough to drive them out of business.

Another part of the bill may be worse: It deregulates local monopoly phone companies in smaller markets if they have two cellular competitors. We can foresee a day when land-lines might become relics, but we are nowhere near that time now. We’re probably even farther away in smaller communities than in larger ones.

Perhaps it is, indeed, time to give the incumbent phone companies more freedom to set some rates. But such a change must not be accompanied by the removal of customers’ right to have the state intervene when they have problems with this essential service.