Four States Start BellSouth Inquiries Into Alleged Anticompetitive Practice
By REBECCA BLUMENSTEIN and YOCHI DREAZEN
Staff Reporters of THE WALL STREET JOURNAL
Regulators in three states and Florida's attorney general are conducting inquiries into alleged anticompetitive behavior by BellSouth Corp., amid continuing complaints against the regional Bells by upstart phone companies.
The inquiries by regulators in Florida, Georgia and Alabama focus in part on BellSouth's use of a program to win back customers who have switched their local phone service to a Bell rival. Typically, Atlanta-based BellSouth offers them discounts as deep as 20% if they return and sign a three-year contract.
In Georgia, regulators in late July issued a 90-day order requiring BellSouth to wait seven days after customers have switched service providers before soliciting them. Some competitors that offer local service by leasing equipment and access lines from the Bells' wholesale arms complain that BellSouth's wholesale division leaks information to the retail division about which customers have switched. The competition also accuses the Baby Bells -- the offspring of AT&T Corp.'s breakup -- of disparaging rivals by telling customers that the upstarts are about to go out of business, and suggesting that they offer poor service even though BellSouth is providing the service. Regulators in Georgia and Florida are investigating the matter and plan to hold hearings over the next two months while Alabama just concluded a hearing.
'Like a Poker Game'
"This is like a poker game where BellSouth is both the dealer and a player at the table who knows what cards everyone else is holding," said Jim Falvey, senior vice president of regulatory affairs for eSpire Communications, Herndon, Va. The company is continuing operations though it is in Chapter 11 bankruptcy proceedings.
As a number of competitive upstarts struggle to stay in business, complaints against the Bells' tactics appear to be growing. Indeed, a number of companies are organizing to complain to regulators about similar "win-back" programs offered by SBC Communications Inc., a Bell company based in San Antonio.
The complaints come just as the Bell companies renew efforts to gain permission to offer long-distance services in several states by proving they have opened their networks to competitors. The Bell companies also are battling efforts by AT&T and a number of local upstarts to convince regulators or lawmakers to break the Bells into separate retail and wholesale units as a way of preventing anticompetitive behavior.
BellSouth officials acknowledge there have been some problems with its win-back programs, enough that BellSouth suspended the programs across its nine-state region in May so it could investigate complaints and root out any problems. The programs are still suspended in Florida and Georgia, but BellSouth started reinstating them in the other seven states in the past month. BellSouth says the complaints against the company pale compared with the number of orders for local service the company is successfully processing. BellSouth in part blames a telemarketing firm it hired for the problems and an individual employee for inappropriate comments about competitors. The company declines to name the telemarketing firm.
"We process about 35,000 orders a day and we lose about between 4,000 and 6,500 lines a day," said Margaret Greene, BellSouth's vice president of regulatory and external affairs. She said the more than 300 local phone upstarts have captured 24% of the total business market.
Win-Back Woes
Despite the problems with the win-back programs, Ms. Greene said that BellSouth is committed to them. "We will participate in win-back. In some places, we have lost 40% of our customers. You can't just allow that to happen."
SBC has paid more than $69 million in state and federal penalties since December for failing to provide rivals with adequate service, while Verizon Communications has paid about $1.5 million in state and federal penalties. Georgia regulators, meanwhile, have levied nearly $20 million of penalties on BellSouth.
SBC officials said the company has procedures in place designed to prevent its wholesale arm from improperly releasing information to its retail division. "I would categorically deny that we in any way share information that we shouldn't be sharing," said SBC spokesman John Emra.
BellSouth is facing particular scrutiny in Florida, where state regulators and its attorney general have opened separate formal inquiries into alleged anticompetitive practices on the part of BellSouth. Florida state regulators have opened at least two proceedings, sparked in part by complaints by upstarts including Miami-based IDS Telecom.
"There have been allegations for a long time," said Beth Salak, assistant director of the division of competitive services for the Florida Public Service Commission.
IDS officials say the investigations are long overdue. "When we started to become successful, that is when we started to be attacked by the win-back programs," said Joe Millstone, IDS's chief executive.
Write to Rebecca Blumenstein at rebecca.blumenstein@wsj.com and Yochi Dreazen at yochi.dreazen@wsj.com |
