Upstart phone firm challenges C&P Company asks state for permission to offer service to Md. businesses

July 27, 1993|By Michael Dresser and Thomas W. Waldron | Michael Dresser and Thomas W. Waldron,Staff Writers

Urging Maryland to emerge from the "Jurassic Period" of local telephone service, an upstart telecommunications company asked state regulators yesterday to end the monopoly of the Chesapeake & Potomac Telephone Co. of Maryland.

MFS Communications Co. Inc. told the Public Service Commission (PSC) that it wants to offer local telephone exchange services to small, medium and large business customers throughout the state.

In the most sweeping challenge ever mounted to C&P's protected role in Maryland, MFS called on the PSC "to abandon the outdated and antiquated concept of the natural monopoly" in local telephone services.

Royce Holland, MFS president and chief operating officer, said his company has no intention of offering residential services. But he added that if the PSC rewrites the rules as it suggests, the floodgates would be open for other companies -- notably cable television providers -- to pour into the home telephone business.

"The local exchange industry's Jurassic Period, characterized by 80 years of monopoly and little change with the landscape ruled by lumbering Bell system dinosaurs, is ending," Mr. Holland said.

He said that if the PSC supports its position, MFS would build a statewide fiber-optic cable network that could serve an estimated 5,000 to 10,000 businesses in Maryland, ranging in size from huge corporations to retail stores.

Frank O. Heintz, chairman of the commission, was out of town and unavailable for comment yesterday. PSC spokesman Frank Fulton said the commission would conduct hearings on the issue and would likely not rule on the case until next year. If trends in other states are any guide, C&P will be hard-pressed to hold on to its exclusive role.

The services MFS, based in Oakbrook Terrace, Ill., is proposing to offer would include what is known in the industry as POTS, for "plain old telephone service," the core of the monopoly carved out for the former Bell operating companies after they were spun off from American Telephone & Telegraph Corp.

That monopoly is coming under increasing fire in many states.

Not only are potential competitors banging at the doors, but many regional Bell operating companies have made it clear they would be happy to give up their monopoly on local telephone service if they are first freed from the fetters put on them by U.S. Judge Harold Greene when he ordered the breakup of AT&T in 1982.

Under Judge Greene's order, the regional Bell companies, including C&P's parent Bell Atlantic Corp., are prohibited from entering such businesses as long-distance telephone service and cable television programming in their assigned domains.

MFS, better known locally by its former name of Metropolitan Fiber Services, is an aggressive company that, until recently, has specialized in providing big companies with a direct fiber-optic link to long-distance carriers, bypassing the local operating companies.

It now serves 14 metropolitan markets, including Baltimore and Washington, recording about $100 million in sales during its most recent fiscal year. The company's stock closed yesterday at $35.50, jumping $2 after the announcement of the PSC filing.

Mr. Holland said Maryland is the third state, after California and Texas, in which MFS has filed a similar petition. State public service agencies have already struck down barriers to entering the local phone business in New York, Michigan, Illinois and Massachusetts, he said.

Linda Killian, a telecommunications analyst with Renaissance Capital Corp. in Greenwich, Conn., said some people in the industry have compared MFS' attempt to invade local telephone companies' turf with MCI Communications Corp.'s challenge to AT&T during the 1980s.

"They've done exactly what MCI did in the beginning of its career, which is to go after the most profitable business, which is the commercial business," she said.

It was that aspect of MFS' plans that brought an objection from C&P President Frederick D. D'Alessio.

"MFS is not offering to provide residential service," Mr. D'Alessio said in a statement. "In fact, under the guise of free and open competition, they want to target just the more lucrative parts of the business market. . . . What happens to the remainder of the customers? MFS would leave them holding the bag of supporting the statewide telephone network without help from the blue-chip business markets."

C&P did not explicitly say it would oppose the MFS petition, but it called on the PSC to consider any changes in its monopoly status as part of a broad review of the ground rules governing who can offer which telecommunications services.

The Office of People's Counsel, which represents the interests of residential phone customers in regulatory cases, asked the PSC last week to study the issue and set rules for the battle between C&P and future competitors at a time when the lines between the telephone and cable TV industries are blurring.

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