Copyright 1999 Globe Newspaper Company
The Boston
Globe
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February 7, 1999, Sunday ,City Edition
SECTION: ECONOMY; Pg. G1
LENGTH: 1532 words
HEADLINE:
It's no time to dial 9-1-1;
Bell Atlantic: We're ready for onslaught from
rivals
BYLINE: By Ronald Rosenberg, Globe Staff
BODY:
It's open season on Bell
Atlantic Corp.
For years after the Baby Bells were spun off from
AT&T Corp. in 1984, Bell Atlantic lumbered along, wielding its monopoly
power over local phone service. A whiff of competition began after passage of
the Telecommunications Act of 1996, which called for the Bell
companies to open their local markets to rivals. Now, New York-based Bell
Atlantic is under assault on seemingly all fronts - ranging from local calling
and long-distance service to wireless communications and Internet access.
In Massachusetts alone, Bell Atlantic faces 87 rivals. Four years ago,
Nynex Corp., the former New England phone company that Bell Atlantic acquired in
1997, had just four competitors. "This is a real transition year for Bell
Atlantic," said Fred Voit, an analyst at The Yankee Group, the Boston market
research and consulting firm. "They're losing business customers to competitors,
face some significant rivals for the first time in the residential market, and
they need to get into long-distance services."
Bell Atlantic's chief
executive, 52-year-old Ivan G. Seidenberg, who joined the company in New York
out of high school and rose from a cable splicer's assistant, maintains that the
nation's largest regional phone carrier is prepared for the competitive assault
arising from regulatory and technological changes sweeping the industry.
"We are seeing the telecommunications industry transition itself away
from large regional players to a handful of stronger global players, and we want
to be one of them," said Seidenberg, in a recent interview with The Boston
Globe.
Indeed, the company is taking significant steps to transform
itself beyond a humdrum provider of local phone service in 13 East Coast states.
Its immediate goal is to expand into long-distance service, initially in New
York State. Like other Baby Bells, it is barred by the 1996 telecom act from
entering the long-distance market until it proves to regulators it has opened up
its local market. Meanwhile, Bell Atlantic also faces hurdles in gaining
regulatory approval for its $52.9 billion proposed acquisition
of GTE Corp., which would help give it a nationwide presence in local,
long-distance, and wireless communications plus a wholesale Internet business.
Still, rivals are closing in from many directions. Long-distance
providers, most notably AT&T, are pressing to get into local calling. Cable
television service providers, which have started to offer phone service over
cable wires, represent a huge new threat to the Baby Bells. Increasing numbers
of wireless carriers, both national and regional, are going after Bell
Atlantic's customers. New independent carriers are offering high-speed Internet
access. Just last week, several competitors announced initiatives that turned up
the heat on Bell Atlantic.
Suddenly Bell Atlantic's customers have more
choices than ever before, which promises to bring lower prices and improved
service. With all-out competition materializing this year, Bell Atlantic finds
itself slugging it out on numerous battlefields:
Starting April 20, some
residential Bell Atlantic customers in Massachusetts will begin to see
competition for toll calls. Callers who dial 1+ any of the four Greater Boston
area codes (617, 508, 978, and 781) will be able to choose an alternative - such
as AT&T and MCI WorldCom - the way they pick a long-distance provider now.
In some Boston suburbs, Bell Atlantic already faces another competitor:
MediaOne Group, the state's largest cable TV service provider, whose coaxial
cables can provide digital local phone service. Targeting consumers who make
many local calls, MediaOne offers a flat-rate service in 27 Mass. communities
for $26.95 per month.
Just last week MediaOne obtained
Time Warner's Bay State cable system in a swap that will give MediaOne over one
million customers - 59 percent of the state's cable TV market - who are all
potential local telephone customers.
MediaOne is not alone. Also last
week, AT&T, in a bold effort to challenge the Baby Bells in providing local
residential phone service, cut a deal to offer phone service over Time Warner's
cable lines in much of the country. That venture came on top of ATT's pending
purchase of Tele-Communications Inc., the nation's number two cable television
provider. AT&T already provides large businesses in New York and Boston with
local telephone service through its subsidiary, Teleport Communications Group.
Other Bell companies are looking to lock horns with Bell Atlantic on
local service. SBC Communications, San Antonio-based Bell company, said last
week it plans to enter the Boston market late this year or early next, initially
for business customers. It would mark the first time a Baby Bell is invading the
territory of another Bell company for local or long-distance services.
In yet another assault on Bell Atlantic's local calling market, MCI
WorldCom last week began offering residential service in New York State, at a 5
percent discount to Bell Atlantic rates or in flat-rate monthly packages. MCI
WorldCom, the nation's second-largest long distance company, is leasing lines
from Bell Atlantic.
With long distance considered the brass ring for
nearly all regional Bell companies, Bell Atlantic's primary objective this year
is to offer long-distance service in New York State - the single largest source
in the United States for domestic and international calls.
But it faces
high hurdles in proving to federal and state regulators that it can meet the
telecom act's requirement of freeing up local markets before being allowed to
enter long distance. Bell Atlantic expects to complete federal and state
requirements by the end of this month and clear all hurdles by the summer or
early fall, according to Seidenberg.
Already several other regional
Bells, such as Ameritech, have tried and failed to gain regulatory approval to
offer long-distance service. But many analysts maintain Bell Atlantic could
become the first long-distance Bell company.
"I still have a rosy
expectation of how it will all come out," said Seidenberg.
He bristles
at the more than 600 pages of requirements needed to prove that Bell Atlantic
has the technology to switch customers who may want an alternative local phone
carrier. "In the last few years, we have not been permitted to have the kind of
growth strategies that our competitors have because of government policies," he
added, calling the requirements an "anachronism."
Massachusetts and
Pennsylvania would follow New York as the next states where Bell Atlantic plans
to offer long distance. The company says it seeks to apply in both states by
year-end.
Although Bell Atlantic's overall revenue last year grew only 3
percent to $31.6 billion, its wireless business soared 25
percent. That success came despite competition from five wireless competitors in
Greater Boston alone.
Still, Bell Atlantic saw customer erosion as
AT&T and Sprint PCS offered single-rate calling plans to business and
residential customers that eliminated separate long-distance and roaming
charges. Bell Atlantic responded with a similar plan last year.
And
while the pending merger with GTE will significantly expand its wireless
operations to as far as California, Bell Atlantic was unsuccessful in its bid to
acquire AirTouch Communications Corp., the nation's largest independent cellular
telephone company. Bell Atlantic was outbid by Vodaphone Group PLC of Great
Britain.
The combination of GTE and AirTouch would have given Bell
Atlantic wireless coverage in 44 states and enabled it to better compete against
AT&T Wireless and Sprint PCS, which have coast-to-coast networks.
Seidenberg said the loss of AirTouch was a "missed opportunity, but not
a critical loss," adding that the Bell Atlantic-GTE combination creates a large
national wireless company nonetheless.
Later this month, Bell Atlantic
plans to begin competing against MediaOne, RCN Corp., and other area cable TV
service providers with Infospeed, a high-speed Internet service that uses the
ubiquitous telephone wire. The new service, which will cost up to
$99.95 per month compared to $50 per month or
less for cable modem service, is expected to appeal to residential customers in
Boston and communities not served by MediaOne or RCN.
Some small- and
medium-sized businesses are turning to other companies that offer the same
high-speed Internet service over phone lines. These Internet service providers,
such as Northpoint Communications Inc., say they can undercut Bell Atlantic's
prices for high-speed telephone lines leased by businesses for Internet access.
But some analysts believe it's the cable companies that have the upper
hand in assembling a bundle of services that include Internet access, TV, and
local dialing.
But don't count the Baby Bells out.
William P.
Bane, a telecommunications analyst at Mercer Management Consulting, said Bell
Atlantic is better positioned than the other Bells for the competitive new era.
"For Bell Atlantic this is the Olympics, where the best of the best are
in the stadium," Bane said.
GRAPHIC: ,PHOTO/AP/Bell
Atlantic chairman Ivan Seldenberg
LOAD-DATE: February
09, 1999 
