Big local carrier gets link to long distance Bell Atlantic makes phone deal with MFS

July 18, 1996|By Timothy J. Mullaney | Timothy J. Mullaney,SUN STAFF

In a move it said would open the path to entering the long-distance telephone business, Bell Atlantic Corp. yesterday reached a deal with a small carrier offering local phone services to businesses about how the two will work together to switch calls between their networks.

The deal between the giant regional company and MFS Communications Co. of Omaha, Neb., is designed to show that Bell Atlantic has opened the local telephone business to meaningful competition.

Only when it does so may Bell Atlantic petition the Federal Communications Commission for permission to offer most long-distance service within five of the six states (plus Washington, D.C.) where it has essentially monopolized local telephone calling since being created by the 1984 breakup of the old AT&T Corp.

At stake is a running battle between Bell Atlantic and traditional long-distance carriers, each of which wants to get into the other's core business before rivals are allowed on their turf. By moving first, each hopes to gain an advantage in the coming fight for customer loyalty.

MFS and Bell Atlantic hailed yesterday's deals, which represent separate agreements for every state Bell Atlantic serves except West Virginia, as a breakthrough toward deregulation and competition. Rival MCI Communications Corp. reacted cautiously, while AT&T called the deal a marginal agreement with a smaller player designed to retard real competition.

But AT&T said the deal does not go far enough, and insisted that it does not meet a 14-point checklist in the new telecom-

munications law that traditional local service monopoly carriers like Bell Atlantic must meet before they can offer long distance on their own turf.

"Even MFS agrees that the agreement does not meet the 14-point test," said John Langhauser, AT&T's regional vice president for law and government affairs. "Bell Atlantic is rushing to complete agreements with companies that do not represent a major threat to their monopoly, and then trumpeting it as evidence that they are serious about opening their market."

AT&T's complaint is that MFS serves almost exclusively business customers, and relatively few of them, making a deal to open competition with MFS much less significant than a similar deal with AT&T. Talks for a deal between Bell Atlantic and AT&T broke down, with both sides asking the Maryland Public Service Commission and other states' regulators on Monday to arbitrate their differences.

MFS President Royce Holland said the company serves about 40,000 business customers in the United States and Europe. Locally, its biggest customers include the U.S. Social Security Administration headquarters in Woodlawn.

MFS has not yet attacked Bell Atlantic's residential service market, which is a customer base AT&T prizes.

But Holland said the company is beginning a joint venture with a cable television company to market consumer phone service in Boston and New York, a venture he said is expected to expand to Baltimore.

And because MFS has its own network to carry and process local phone calls, it cut a deal favorable to Bell Atlantic on the price of what wholesale service MFS does buy, Langhauser said.

AT&T and other new competitors want initially to buy service wholesale from Bell Atlantic and resell it to their own customers ,, until they can afford to build local networks.

MFS' deal in Maryland calls for a wholesale price equal to 90 percent of Bell Atlantic's usual rates, Bell Atlantic spokesman Paul Miller said.

AT&T has asked Maryland regulators for wholesale rates up to 41 percent below retail, though the PSC granted only a 10 percent discount pending further review. MCI has indicated it wants at least a 30 percent discount.

"It's easy for MFS to agree to a wholesale rate," Langhauser said. "To them, it's an irrelevancy."

Jeff Masoner, Bell Atlantic's director of interconnection services, said AT&T was simply bluffing.

"To a $65 billion a year monopolist, MFS may look small," Masoner said. "But they have networks all throughout our region."

The MFS-Bell Atlantic deals vary somewhat from state to state, but all of them resolve how much each side will pay the other for completing calls between MFS and Bell Atlantic customers, assure that customers can switch carriers without switching phone numbers, and arrange full access for MFS customers to Bell Atlantic services such as directory assistance.

The companies did not resolve what MFS will pay Bell Atlantic for use of what engineers call the "unbundled local loop," or the wire that leads from Bell Atlantic's central facilities to a customer's home or office. Instead, the Maryland deal sets an interim price and commits the parties to asking the PSC to arbitrate talks on a permanent rate.

In most cases, MFS wants to lease that line from Bell Atlantic rather than building its own, because it fears the construction XTC necessary to install its own local loops will discourage customers from choosing MFS.

Pub Date: 7/18/96

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