Copyright 2000 The New York Times Company
The New
York Times
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June 26, 2000, Monday, Late Edition - Final
SECTION: Section C; Page 4; Column
5; Business/Financial Desk
LENGTH: 981 words
HEADLINE: New Economy;
Bell Atlantic takes
advantage of an F.C.C. rule change to pursue long-distance customers.
BYLINE: By Seth Schiesel
BODY:
IT is not often in the telecommunications
industry that a big company hits an immediate, unmitigated home run with
consumers. AT&T's Digital One Rate wireless phone offering a couple of years
ago, which eliminated roaming and long-distance fees, was one example. The 10-10
"dial-around" long-distance plans from MCI (now WorldCom) came close.
Now, Bell Atlantic, the local phone giant, is in the middle of a
positively Ruthian blast into the long-distance market in New York. By the end
of next month, Bell Atlantic will almost surely announce that it has signed up a
million long-distance customers in New York just since the beginning of this
year. That is something like a quarter-billion dollars in annual revenue swiped
from the likes of AT&T, WorldCom and Sprint in seven months. And you wonder
why AT&T's consumer long-distance business is shrinking.
But here is
the strange part: This trend is just getting started. Today, New York is the
only state where consumers can buy long-distance service from their incumbent
Bell company. By the end of the year, that is likely to be the case in at least
four states: Connecticut, Georgia, New York and Texas. By the end of next year,
that figure could be a dozen, or more, with California, Florida, Kansas,
Massachusetts, New Jersey, Oklahoma and Pennsylvania fairly likely to join the
list.
For this, the Bells have to thank the Federal Communications
Commission, the Justice Department and their own new-found sobriety about just
what it will take to win approval from those agencies to offer long-distance
service. After years of yammering and breast-beating, the Bells have finally
quieted down on this issue, mostly, and come to grips with the fact that the
F.C.C. and the Justice Department are not going to be buffaloed. By slogging
through the hard, unglamorous work necessary to win over the regulators rather
than wailing to all and sundry about how unfairly they have been treated, the
Bells have put themselves on the brink of getting all they really wanted from
the Telecommunications Act of 1996: a chance to jump into the
pot of gold they see in the long-distance market.
It also didn't hurt
that John Nakahata, a highly respected former chief of staff at the commission,
was recently able to win approval for a deal he brokered that will reduce the
per-minute access charges that long-distance companies pay to local carriers for
connecting calls.
That's a bit of a mouthful, and it gets even a little
more complicated. But here is why it matters for the Bells' long-distance
aspirations.
For years, one of the biggest revenue streams for the Bell
companies, and other local carriers like GTE, has been the billions of dollars
they collect from the long-distance carriers for beginning and ending
long-distance calls. Those per-minute fees have inflated long-distance rates for
consumers.
Now, as part of Mr. Nakahata's deal, the Bells may increase
one of the fixed monthly fees they charge consumers, so from an overall revenue
standpoint, the deal is supposed to be a wash for the Bells. (Of course, the
long-distance companies like it because they can pay less to the local
incumbents.)
But shifting from the per-minute fees to the monthly
charges helps open the road to the long-distance arena because it helps assuage
fears both at the commission and at the long-distance companies that the Bells
could "double dip" were they allowed into long-distance under the old regime.
The fear was that the Bells would, with one hand, continue to collect
the big per-minute fees while, with the other, enjoy unfair success in
long-distance because the rates charged by the competition would be inflated by
those very same fees.
So by reducing the per-minute fees, the Nakahata
deal levels the playing field to a certain extent.
But the primary issue
for the Bells remains the fact that before they are allowed to sell
long-distance services in a given state, they must first convince the F.C.C.
that they have opened their local networks in that state to competitors. In that
regard, Bell Atlantic and the tough New York State regulators, who reviewed the
Bell Atlantic case, have set the standard for the rest of the nation.
In
New York, Bell Atlantic had to pass a detailed and rigorous battery of tests
devised by KPMG, the consulting firm, which tested whether Bell Atlantic's
systems were capable of supplying competitive local phone companies with access
to parts of Bell Atlantic's networks.
The commission is not likely to
accept anything less for any other state, and in the short run that has made
life a bit tougher for the other Bells. A year ago, top executives from SBC
Communications, which does business as Pacific Bell and Southwestern Bell,
thought they could actually beat Bell Atlantic into long-distance by breaking
into the Texas market. After they saw what Bell Atlantic went through in New
York, however, they had to go back and come up with piles of additional
documents to satisfy the regulators.
But that additional work will pay
off, because now SBC knows just what it has to do in other states. It appears
that SBC is now a shoo-in to win long-distance approval in Texas, and the
company is hoping to file applications for California and probably Kansas and
Oklahoma in the next six months.
In the Southeast, BellSouth is working
hard in Georgia and is hoping to win long-distance approval for that state by
Thanksgiving, though New Year's Eve is probably a more realistic target.
BellSouth had not gone through serious testing in Georgia before seeing what
Bell Atlantic did in New York, but has now gone back to conduct such tests.
Bell Atlantic is trying to replicate its New York experience in
Massachusetts, New Jersey and Pennsylvania while the laggard still appears to be
U S West, which has agreed to be acquired by Qwest Communications International
Inc.
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GRAPHIC: Drawing
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LOAD-DATE: June 26, 2000 
