Bell Atlantic's rich monopoly is shaken by PSC Landmark decision all but opens up market, rivals say

Stand favors competition

Phone company may be left with little but crumbs

January 07, 1996|By Michael Dresser | Michael Dresser,SUN STAFF

A landmark decision by the Maryland Public Service Commission has left Bell Atlantic Corp. licking its wounds and its prospective rivals licking their chops.

In a recent decision that solidified Maryland's position as a leader in fostering telephone industry competition, the commission decisively rejected Bell Atlantic's proposed rates for letting competitors connect to its network. Instead, the decision awarded the Philadelphia-based phone company a fraction of the compensation it sought.

Bell Atlantic's prospective competitors hailed the ruling, saying it clears the way for them to compete effectively in the lucrative local exchange business in Maryland.

For business and residential customers, the decision brought closer the day when they can choose a provider of local phone service as freely as they can choose a long-distance carrier.

The new market entrants did not get the whole loaf they sought in the complicated case, but they clearly got all but a few slices. Furthermore, the language in the order indicated that before the deregulation process is over, Bell Atlantic could be left with little but crumbs of its fading monopoly.

Andrew Lipman, an executive of MFS Intelenet's parent corporation, said Maryland's decision should be a model for other Bell Atlantic states.

"It will clearly be a reason to increase our infrastructure investment in Maryland," said Mr. Lipman, senior vice president of Omaha, Neb.-based MFS Communications Co.

Larry Bugden, general manager of Teleport Communications Group's Baltimore operation, said the decision gives his company the green light to start actively marketing its local exchange services because it now knows its costs will be reasonable.

"The doors are open. We're ready to serve business customers all over Central Maryland," said Mr. Bugden.

"I would put Maryland's commission right up with the best, if not the best," Mr. Bugden said. "Marylanders will see the effects of what the commission's done over the next three to five years. Businesses will be attracted to the state."

Less pleased was Daniel J. Whelan, president of Bell Atlantic-Maryland, who said the company will be forced to sell services to its competitors at below cost.

"I could be sympathetic to the concept of jump-starting competition if it were a case of a large company vs. a very small company," Mr. Whelan said. "It doesn't make much sense when it's Bell Atlantic being compared with AT&T or MCI or Comcast and saying they need a jump start. It's a very odd concept."

MFS, TCG, MCI, AT&T and an alphabet soup of other potential market entrants had been waiting anxiously for the PSC to rule in the case since April 1994, when the commission issued its MFS Phase 1 decision.

That landmark ruling, which granted MFS legal status equal to Bell Atlantic's, in effect decreed the death of the local telephone monopoly.

But while the Phase 1 decision pronounced the sentence, it did not carry it out. The details were left for Phase 2, and Bell Atlantic's prospective rivals worried that the PSC might set interconnection rates so high that the monopoly would get a reprieve.

But on the next-to-last business day of 1995, the PSC flipped the switch. With new Chairman H. Russell Frisby recused, a panel of four commissioners chaired by Susanne M. Brogan largely sustained the tough pro-competition position recommended by their professional staff.

On the most critical issue, that rate for interconnection, the commissioners actually went further.

The staff had urged the commissioners to set interconnection rates of either 0.4 cents or 0.6 cents per minute, depending on how much of another company's network the competitor used, with no monthly charge. By contrast, Bell Atlantic had sought a rate of 2.2 cents per minute, with an average charge of about $19 per month for each customer a competitor took away.

Rejecting Bell Atlantic's contention that competitors should help pay for its "costs of ubiquity" through interconnection fees, the commissioners set the rate at 0.3 cents to 0.5 cents, with no monthly charge.

"It is certainly the best interconnection rate that any commission has set," said Donna Sorgi, regulatory affairs director at MCI Communications Corp., whose MCImetro subsidiary intends to make Baltimore the first market in its nationwide effort to penetrate the local exchange.

Ross Baker, director of Maryland government affairs for AT&T, was no less enthusiastic.

"We think it's pro-competition and we think they've moved in the right direction in several respects," said Mr. Baker, whose company filed an application to enter the Maryland local exchange last month.

The PSC's complicated decision gave the Bell Atlantic rivals more than just a favorable interconnection rate.

Bell Atlantic's competitors also got a break on the rate they now have to pay to have their customers listed in the Bell Atlantic white pages and 411 database. The PSC cut that rate from $1.05 a month to 29 cents.

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