WorldCom Urges PSC to Jumpstart Missouri Local Phone Competition

Third-Party Testing of Computer Systems Is Key Component of Local Competition

JEFFERSON CITY, Mo., August 28, 2000 - WorldCom today asked the Missouri Public Service Commission (PSC) to base its review of Southwestern Bell's application to sell long-distance in Missouri on the status of local phone competition in Missouri - not what Bell is doing in Texas.

Under the Federal Telecommunications Act of 1996, all regional Bell companies are required to prove to state and federal regulators that their local phone markets are open to competition before they can be allowed to offer long distance services in their own monopoly markets. So far, Bell companies in only two states have received long distance authorization -- Verizon (formerly Bell Atlantic) in New York, and Southwestern Bell in Texas.

"It is vital that the Commission focus on the fact that this is Missouri - not Texas," said Neal Larsen, WorldCom regional director of Public Policy. "As much as Southwestern Bell would like the Missouri PSC to rule that local markets have been opened in Missouri just because they have been opened in Texas, it is simply not the case. Unlike Texas, there is no broad-based local phone competition in Missouri."

In a filing, WorldCom urged regulators to require 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. Also, WorldCom asked the PSC to implement detailed measurements and stiff penalties to track Southwestern Bell's service to competitors and provide incentives to maintain high-quality performance as mandated by the Federal Telecommunications Act and the Federal Communications Commission (FCC).

"In Texas, it took pro-competitive policies and strong enforcement by regulators to finally force Southwestern Bell to crack open its monopoly phone market and allow companies like WorldCom to come in and begin providing widespread local phone service," Larsen said. "Clearly, when regulators hold Bell's feet to the fire, markets open, competitors come in and customers and businesses benefit from competition."

A key part of the PSC's review of Bell's long-distance application is to certify that the OSS that Bell uses to serve its customers is fully functional. The FCC has said that intensive OSS testing or actual commercial experience is critical in determining whether it ultimately will approve a Bell company long distance application. Neither has occurred here.

Southwestern Bell claims that its OSS in Missouri is identical to the Texas systems, that the FCC has already blessed the Texas systems and therefore the Missouri PSC must give them a passing grade. But the PSC should not just accept this assertion without question.

"You can't build a business plan on Bell's representations and promises. The law requires that they prove their 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 Missouri. In fact, the processors are located in different states; Texas orders are processed in Dallas and Missouri orders are processed in St. Louis. Because the computer systems for Missouri 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 now claims."

"This is the show-me state: Southwestern Bell can't just claim that the local phone market in Missouri is irreversibly open to competition -- it must show us," Larsen said. "The PSC must order a comprehensive, independent third-party test of the Missouri systems to prove or disprove the validity of Bell's claims."

"The PSC has a rare opportunity to hold the 'carrot' of long distance entry out as an incentive to force Southwestern Bell to relinquish its monopoly hold on the local phone market and bring true customer choice to Missouri," Larsen said.

But WorldCom also told the PSC that just opening Bell's market is not enough to ensure irreversible competition. Southwestern Bell must be required to continue to prove that it is treating competitors the same way it treats its own retail customers -- as mandated by the federal Telecom Act 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. "If the Missouri PSC takes strong steps now to ensure local phone competition to give Missouri businesses and consumers the same benefits that Texans and New Yorkers are enjoying today - lower prices, improved customer service and new innovative 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 Missouri Public Service Commission on Southwestern Bell's pending Section 271 application.