Ameritech offers to give up monopoly

February 23, 1993|By New York Times News Service

Ameritech, the main provider of telephone service to 12 million customers in the Midwest, made a bold proposal yesterday to end its local telephone monopoly in return for freedom to offer more lucrative long-distance and cable television services.

If approved by state and federal regulators, the Ameritech plan would hasten the day when businesses and consumers in Ameritech's service area could choose the company that provides their local phone service, just as they now can decide which company provides long-distance service.

"Ultimately, it comes down to a trade-off," said Richard Brown, Ameritech vice chairman. "Ameritech is calling for full and unfettered competition in the local telephone business in return for certain basic abilities that we do not now have."

Ultimately at stake is the nation's $90 billion local telephone market and the $19 billion market for cable television. Cable operators are seeking to offer video and other services, including telephone service, in competition with local phone carriers.

"We're not talking mom-and-pop stores here," said William L. Weiss, chairman of Ameritech, whose 1992 revenue totaled $11.2 billion, most of it from local phone service. "We're talking Tele-Communications Inc.and Time Warner and MCI and AT&T," he said, referring to the huge cable and long-distance companies that Ameritech proposes to compete with. "It would be a fair fight."

Whatever the merits of the proposal, the plan seems certain to face protracted scrutiny by U.S. District Harold H. Greene, overseer of the 1984 breakup of the old Bell System, by the Federal Communications Commission and by the public utilities commissions of Illinois, Indiana, Michigan, Ohio and Wisconsin.

AT&T, the nation's largest long-distance carrier, and the National Cable Television Association, an industry trade group, said the plan was a positive step toward increased competition.

But they said they would oppose Ameritech's entry into their businesses until true competition was established in the local telephone business. Their argument, in effect, is that Ameritech should remain under strict regulatory supervision until AT&T and the cable industry had an opportunity to establish their own local businesses.

Ameritech also announced yesterday that it was reorganizing the company into 12 business units to more closely focus on "customer needs."

Ameritech plans to file details of its long-distance proposal next month with the FCC and later with the Justice Department and Judge Greene.

The Ameritech plan is intended to cut the Gordian knot of federal and state regulations that has arisen since the the Bell System was broken up into seven regional Bell companies and American Telephone & Telegraph Co. The plan would dismantle much of the regulatory structure for its five-state service area.

In return for giving up its local monopolies, Ameritech said it should be given the opportunity to make up the lost revenue by competing in the long-distance and cable television markets.

The FCC and state public service commissions, especially in Illinois, where Ameritech is based, have been allowing more competition in high-profit phone services for large corporations. While attempting to compete for corporate customers, the local phone companies remain obliged, as public utilities, to provide low-profit or even money-losing residential service.

Technically, a long-distance call is a call across the old Bell System borders -- more than 160 divisions known as local access and transport areas. Because of the uneven geographic makeup of these divisions, a 51-mile call in one jurisdiction may be "local," while a 50-mile call elsewhere may be "long distance." Sometimes, a local call costs more than a longer, long-distance call whose price is kept low by competition.

Ameritech wants to be freed from what is known as rate-of-return regulation that mandates a ceiling on Ameritech profits. Ameritech wants "price cap" regulations that limit the price of service, but not profits.

Some regulators agree with Ameritech's arguments. "Rate of return is inappropriate to this particular industry," said Terrence L. Barnich, a member of the Illinois Commerce Commission, which regulates Ameritech's Illinois Bell phone company.

The Associated Press contributed to this article.

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