WorldCom Asks PSC to Crack Open Arkansas Local Phone Market

Thorough Third-Party Testing of Computer Systems Is Vital to Assure Competition

LITTLE ROCK, Ark. -- October 16, 2000 -- WorldCom today asked the Arkansas Public Service Commission (PSC) to withhold support for Southwestern Bell's long distance bid until the company proves conclusively that it has opened its market to competitors.

"It is crucial that the PSC not get ahead of itself by determining that Southwestern Bell has opened its local phone market when the facts clearly show that Bell has not removed all of the barriers to true competition in Arkansas," said Neal Larsen, WorldCom regional director of Public Policy. "Only one company has the proven capability to provide local phone service on a broad scale in Arkansas today, that is the textbook definition of a monopoly, and that monopoly is Southwestern Bell."

The federal Telecommunications Act of 1996 requires all regional Bell companies to prove to state regulators and the Federal Communications Commission (FCC) that their local phone markets are open to competitors before they can win authority to offer long distance services in those former monopoly markets. Thus far, Bell companies in two states have received permission to sell long distance - Verizon (formerly Bell Atlantic) in New York and Southwestern Bell in Texas.

WorldCom is asking the Commission to mandate intensive third-party testing of Southwestern Bell's Operations Support Systems (OSS) -- the electronic ordering systems and interfaces crucial to establishing a truly competitive local phone market. This type of systems validation and testing was key to opening the residential phone markets in Texas and New York, allowing WorldCom and other competitors to begin offering local residential service on a broad scale in those states.

"The Arkansas PSC has the opportunity and the responsibility to leverage Southwestern Bell's desire to get into the long distance business to force it to release its monopoly control of the local phone market and bring competition and true customer choice to Arkansas," Larsen said.

A crucial element of the PSC's review of Southwestern Bell's long distance application is to certify that the OSS that Bell uses to serve its customers is fully functional. The FCC repeatedly has said that rigorous OSS testing or real-life commercial experience is crucial in deciding whether it will approve a Bell company long distance application. Neither has occurred in Arkansas.

Southwestern Bell argues that its OSS in Arkansas is identical to its Texas systems and so the Commission must give them a passing grade. But the PSC must not accept claims by Southwestern Bell that its OSS is functional without putting them through the same rigorous tests that they were subjected to in Texas and that other Bell companies are now conducting across the country.

"Competitors can't build their business plans on mere promises and assurances. The law clearly requires Bell to prove its case," Larsen said.

"Southwestern Bell has admitted that the computer processors that were tested in Texas are not the same ones that will handle orders in Arkansas. In reality, the processing systems are located in different states; Texas orders are processed in Dallas, and Arkansas orders are processed in St. Louis. Because the computer systems for Arkansas were not included in the Texas OSS test, the PSC needs to conduct a comprehensive, independent third-party test to determine whether these two different systems really are 'identical,' as Southwestern Bell claims," Larsen said.

WorldCom also told the PSC that merely opening Bell's local phone market is not enough to assure irreversible competition and prevent "backsliding'' once Bell gets into the long distance market. WorldCom urged the PSC to apply comprehensive performance measurements and strong penalties to track Southwestern Bell's service to competitors and provide it incentives to maintain high-quality performance as mandated by federal law and the FCC.

"Southwestern Bell needs a strong 'stick' in place as an incentive to treat competitors fairly and suffer meaningful penalties if it backslides,'' Larsen said. "Strong steps by the PSC now will allow local phone competition to take root and grow so that Arkansas businesses and consumers can see the same benefits that Texans and New Yorkers are enjoying today - lower rates, improved customer care and new cutting-edge products."

WorldCom (NASDAQ: WCOM) is a global leader in "all-distance" communications services with operations in more than 65 countries. Revenues in 1999 were $37 billion, with more than $15 billion from high-growth data, Internet and international services. WorldCom provides facilities-based and fully integrated services to facilitate e-business and e-commerce in the digital generation. For more information go to http://www.worldcom.com/.

Download WorldCom's comments to the Arkansas Public Service Commission.