BellSouth's Latest Long-Distance Bid Blocked by FCC (Update2)
Bloomberg News
October 13, 1998, 7:20 p.m. ET
BellSouth's Latest Long-Distance Bid Blocked by FCC (Update2)
(Adds details, analyst comments.)
Washington, Oct. 13 (Bloomberg) -- U.S. regulators rejected
BellSouth Corp.'s latest bid to enter the $70 billion-a-year U.S.
long-distance telephone market, saying the company's local phone
markets still aren't open to competition.
The Federal Communications Commission, in turning down the
company's second application to offer long-distance service to
customers in Louisiana, said BellSouth had met only six of the 14
competitive steps required to prove its local phone market is
open to competitors.
The decision marks the fifth time the FCC has nixed a Baby
Bell's bid to sell long-distance service in its own region. The
failure to approve any such application has sparked criticism
from legislators who say the agency keeps moving the bar while
consumers are shortchanged. FCC Chairman William Kennard, for his
part, said today's decision offers the most comprehensive road
map so far and should guide future long-distance applications.
The agency is ''trying to respond to this ongoing criticism
that the FCC is leaving the Bells in the dark,'' and ensure that
future applications ''are more serious in the eyes of the
commission,'' said Paul Glenchur, an telecommunications analyst
with Charles Schwab & Co.'s Washington Research Group.
Yet the FCC's road map may be bumpy for the Bells, said
Scott Cleland, managing director of Legg Mason Inc.'s Precursor
Group. ''It creates more certainty so that the Bells don't feel
the goal posts are being moved on them all the time,'' he said.
''However, the detail can create surprises of new requirements
that people hadn't been aware of.''
Wireless Service Eyed
The sweeping telecommunications law enacted in 1996 allows
Baby Bells to offer long-distance service to customers in their
regions only if they convince the FCC they've fully opened their
local phone markets. The failure to approve any Bell's
application has fueled congressional and company complaints that
the FCC's standards are too rigid.
''Louisiana customers continue to be denied the benefits of
lower prices for long-distance calls,'' Sid Boren, a BellSouth
spokesman, said as the FCC found BellSouth didn't meet all the
market-opening conditions. ''Competition in local phone markets
is alive and well in BellSouth's region.''
Even as the FCC rejected BellSouth's bid, the agency said
next-generation wireless phone service, known as personal
communications service or PCS, could be a viable competitor in
the local phone market.
That's key because the Bells must prove to the FCC that
they're facing real competition for both residential and business
customers before they are allowed to break into the long-distance
business in their regions. Another alternative is to show the FCC
that they've opened their local market, but no one wants to
compete.
The FCC released its decision after the stock market closed.
Shares of Atlanta-based BellSouth rose 2 1/2 to close at 77 7/16.
Checklist
The interpretation of the 14-point checklist the Bells must
meet to show they face competition is a major point of contention
between the companies and federal regulators.
The FCC ruled against BellSouth's first application to offer
long-distance in Louisiana last February. At the time, the FCC
spelled out specific actions the company needed to take to ensure
Louisiana consumers would really benefit, according to Jonathan
Sallet, chief policy counsel for MCI WorldCom Inc., which opposes
BellSouth's entry into the Louisiana long-distance market.
BellSouth reapplied, saying it had taken new steps to
encourage competition in the state. Louisiana regulators agreed.
Yet while FCC must consider state regulators'
recommendations, it also must weigh the findings of the Justice
Department -- and that federal agency said BellSouth's latest
Louisiana proposal fell short in key ways.
The FCC found, among other things, that BellSouth had still
failed to give new competitors access to key computer systems
that process customer service orders. It also said the Baby Bell
hadn't proved that competitors could easily lease pieces of
BellSouth's network, like lines going from a customer's home to
the routing system, on ''reasonable'' terms and conditions, as
required by the telecommunications act.
Court Fight
''For the third time in less than a year, BellSouth has
flunked the local competition test,'' Sallet said. ''In baseball,
fans would have called BellSouth's performance a strikeout.''
BellSouth ''is confident it can obtain FCC approval of the
other checklist items fairly quickly,'' Boren countered.
BellSouth and SBC Communications Corp. are fighting the FCC
in court, challenging provisions of the Telecom Act that keep
them out of the long-distance market.
Legislators in Congress have pressed the FCC to approve a
Baby Bell application to encourage the competition Congress
envisioned when it passed the landmark 1996 telecommunications
law. Senate Commerce Committee Chairman John McCain, an Arizona
Republican, and others say the FCC's standards in reviewing long-
distance applications are too rigid.
Last week, Representative Billy Tauzin, a Louisiana
Republican and chairman of the House telecommunications
subcommittee, introduced a bill that would limit the FCC's
ability to block the Bells' efforts to enter the long-distance
market and give much of that decision-making power to state
regulators. McCain has introduced similar legislation. |
