FCC presenting 1st guidelines of telecommunications law Rules will define costs, controls and competition

August 01, 1996|By Timothy J. Mullaney and Jay Hancock | Timothy J. Mullaney and Jay Hancock,SUN STAFF Bloomberg Business News contributed to this article.

Where Blair Levin works in downtown Washington, it's usually hard to find parking on the street. But he had thought this one time might be a little different.

"I went to work Sunday morning at 6: 30 and couldn't get a parking space in front of the building," said Levin, chief of staff to Federal Communications Commission Chairman Reed O. Hundt. "I left around midday -- I have to confess -- but I left here again in the vicinity of midnight and people were still here."

Levin and colleagues have been working late because they are at the center of the transformation of the telecommunications industry, which reaches an important milestone today. The FCC will put out the first batch of regulations to enforce this year's landmark telecom reform bill, setting the standards for long-distance companies to get into local telephone service and for local phone companies to prowl the long-distance turf of AT&T Corp. and others.

"This is a seminal event," said Andy Lipman, senior vice president and chief lobbyist for MFS Communications Co. Inc., a Nebraska company that provides local phone service for big business and government agencies and is breaking into cable television. "Congress gave the commission only six months to write the rules. It's been an unprecedented flurry of activity."

For months, the coming regulations on "interconnection," or the rules on how Bell Atlantic Corp. and AT&T, and companies like them, have to make their call handling networks work together, have been the talk of the industry.

It boils down to who has to pay whom how much for what -- because Congress and the FCC realize that local companies' networks are so pervasive no one can quickly duplicate them. Instead, the new law decided that the way to make telephone markets competitive is to let all competitors use parts of the Bell operating companies' networks -- at least for a while -- and let the FCC, the states and the parties figure out how much the Baby Bells should get paid.

The FCC's first draft of the rules drew 17,000 pages of comments. According to the Center for Responsive Politics in Washington, telecommunications interests gave congressional candidates at least $8.6 million between 1993 and 1995.

AT&T has 25 people working on the rules alone, with many more involved in negotiating with state officials and with local Bell operating companies, said AT&T government affairs vice president Gerry Salemme.

"It's a very different process than lobbying on Capitol Hill," Salemme said. "There's been much more economic modeling than political arm-twisting."

The differences appear to favor long-distance companies over local phone systems. After a consensus that the Bell operating companies had gotten the better of the deal from Congress, the gathering buzz has been that the operating companies will take it on the chin from a competition-minded FCC.

"There isn't going to be anything in [the new rules] that will make us happy," said Roy Neel, president of the U.S. Telephone Association, which represents the Bell companies. Pointing to a phone-book-sized stack of paper, he said, "this looks like a nightmare."

FCC officials, however, warned that the real changes won't be made on paper but in markets over the next few years.

"It's not going to be like 'Independence Day,' where you see them in the sky and they attack within 24 hours," said Chris Landes, a telecommunications consultant at TeleChoice Inc. in Verona, N.J., alluding to the hit movie.

But Landes said the market's changes will resemble what happened in long distance after AT&T's breakup. Over 12 years, competitors have whittled AT&T's share of the long-distance market to less than 55 percent -- and rates have plummeted.

That's where dozens of Maryland companies, and many more that do business in Maryland, will be directly affected. Some of them look at the rules with trepidation, others with glee.

Bell Atlantic Corp.

Bell Atlantic says it wants what executives call "an appropriate transition" to competition. That means a cautious approach to cutting rates it collects from other companies to complete calls from their customers to Bell Atlantic customers.

Specifically, Bell Atlantic is hoping for a decision that Baby Bells can sell their local service to new competitors, who would resell it to consumers, at wholesale rates less than 10 percent below what local carriers charge now at retail.

AT&T has sought rates up to 41 percent lower, saying Bell Atlantic's request calls for competitors to subsidize Bell Atlantic's advertising and overhead. Published reports indicate the rate is likely to be about 22 percent lower.

"The concern is that the commission might go farther than it needs to, and make those services available [to competitors] at cost," said Ed Young, a Bell Atlantic lobbyist. "If they do that, they take away one of the tools traditionally used to keep local service rates low. The FCC should leave those decisions to the states."

AT&T Corp.

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