Southwestern Bell Corp., in the first challenge by one regional telephone company to another's traditional monopoly on local service, asked the state for permission yesterday to compete with Bell Atlantic Corp. for residential customers in Montgomery County.
Southwestern Bell's application to the Maryland Public Service Commission appears to have a good chance for approval, because the PSC has previously signaled that it wants to jump-start competition in the local telephone market. Last month, the PSC became the third state regulatory body in the country to allow direct competition in the local business market as it approved a petition from MFS Communications. Co. of Omaha, Neb.
Mike Gilliam, president of Southwestern's SBC Media Ventures subsidiary, said competitive service could start as early as autumn of 1995 if there are no regulatory delays.
The San Antonio, Tex.-based phone company already owns the cable television franchise in Montgomery County and would use its existing network as the platform from which to launch its phone system.
If Bell Atlantic was disturbed by Southwestern Bell's entry, it wasn't saying so. "Whether or not cable companies, or other telephone companies, try to enter our markets, we're ready to compete with them by offering competitively priced choices for our customers," said Frederick D. D'Alessio, chief executive of Bell Atlantic-Maryland.
But Southwestern Bell's incursion is likely to have statewide ramifications that could put Bell Atlantic in a legal, political and public relations dilemma over pricing.
If Southwestern Bell enters the Montgomery County market with rates lower than Bell Atlantic's, as is expected, current rules would prevent the Philadelphia-based incumbent phone company from matching those rates there without offering the same rollback to customers in Baltimore and the rest of Maryland.
Frank Fulton, a spokesman for the PSC, said the question of whether the rules should be changed to let Bell Atlantic vary its rates to respond to competition would be one of the issues in the case.
But Teresa Czarski, assistant people's counsel, said the state's Public Service Commission law forbids any discriminatory pricing region. Any change would require action by the General Assembly, she said.
There, Bell Atlantic would be in the position of trying to explain to non-Montgomery senators and delegates why it should be allowed to charge their constituents more than Montgomery County customers. "It probably would be a hard sell," said Ms. Czarski. She added that the Office of the People's Counsel had no official position on the question.
Mr. Gilliam, saying his company favored competition, said Southwestern Bell would not oppose a rule change to free Bell Atlantic from price regulation.
Bell Atlantic, which has publicly supported the notion of competition in the local phone market, is unlikely to oppose the Southwestern Bell petition directly, but will likely ask the PSC to impose tough conditions that would create a "level playing field."
Mr. Gilliam noted that Southwestern has considerable experience providing combined cable and phone service in Great Britain, adding that his company has been able to steal away one in four customers from British Telecom in its markets there.
Southwestern Bell's entry into the Montgomery County phone market is largely a defensive reaction to Bell Atlantic's plans to begin offering cable television and video-on-demand service there early next year.