U.S. backs Ameritech long-distance bid

April 04, 1995|By New York Times News Service

The Justice Department announced yesterday the details of a proposal that would allow a regional Bell company to offer long-distance telephone service to customers in parts of Illinois and Michigan.

But the other six Baby Bells immediately criticized the plan, saying that it would impede -- rather than accelerate -- the entry of local phone companies into the $66 billion long-distance business.

According to the plan, which was announced by Attorney General Janet Reno and must be approved by a federal judge, Ameritech Corp. would be permitted to offer long-distance service on a trial basis in the Chicago and Grand Rapids, Mich., areas.

In return, Ameritech would open its local markets to competition from AT&T and other long-distance providers.

"We are taking the first big step to ensure that competition, which has always been the hallmark of long-distance service, is introduced in local telephone service," Ms. Reno said.

Richard Notebaert, the chairman and chief executive of Ameritech, said the company, which is based in Chicago, could begin offering long-distance service early in 1996 if the federal judge, Harold H. Greene, approves the plan.

Under the plan, Ameritech, which has 12 million customers in five Midwestern states, could offer long-distance service to four million of them. Rather than constructing a nationwide long-distance network similar to AT&T's, Mr. Notebaert said Ameritech would lease capacity outside its region on networks owned by long-distance or local phone companies.

In turn, Ameritech would agree to allow AT&T and other long-distance providers into its local phone markets. AT&T endorsed yesterday's proposal, as did MCI Communications and Sprint Corp.

AT&T said it would compete for local customers in Ameritech's markets, though probably not before the end of 1996.

All seven of the regional Bells want to expand into the long-distance business.

But Ameritech's sister companies oppose this plan because it stipulates that the Justice Department establish there is "actual competition" in the local phone market before allowing Ameritech into long distance.

"This agreement adds another layer of regulation at a time when a bipartisan coalition is backing a bill which would reduce regulatory drag on the industry," said James Young, the vice-president and general counsel of Bell Atlantic Corp.

The nub of their concern is that the Justice Department proposal does not define what constitutes "actual competition." As a result, said several Bell executives, Ameritech could find itself at loggerheads with the government on the question of whether its markets were competitive.

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