LCI to start local phone service Company will resell service packages it buys from Bell

February 08, 1997|By Timothy J. Mullaney | Timothy J. Mullaney,SUN STAFF

LCI International Inc. will begin to offer local phone service in Maryland in March, as the nation's seventh-largest long-distance company prepares to resell phone-service packages it will buy wholesale from Bell Atlantic Corp.

The arrangements between Maryland's phone monopoly and the McLean, Va.-based upstart are rooted in the federal telecommunications reform law that President Clinton signed a year ago today. The act requires traditional local exchange carriers like Bell Atlantic to sell newcomers the right to use all or part of their call-handling networks, hoping that such limited competition will let newcomers earn profits they can invest in new, more modern systems.

Anne K. Bingaman, president of LCI's local-service division, said LCI will initially target business customers rather than retail consumers. Its local service will be packaged with LCI's long-distance services. She said LCI's local-service packages will be about 10 percent cheaper than the same service purchased directly from Bell Atlantic.

LCI can undercut its supplier because Maryland requires Bell Atlantic to sell its service to other long-distance carriers at a wholesale price 19.87 percent below its retail rates, said Steve Molnar, director of telecommunications for the staff of the state Public Service Commission.

LCI and Bell Atlantic could arrange a different price, but Bingaman said LCI is not likely to get a significantly better rate.

The new competitors must pay for sales, billing and other expenses -- and take their own profit -- out of the wholesale discount. Bingaman said that's not a great business, so LCI plans to start building at least parts of its own local service networks as soon as it can.

"There's not really any profit in resale," said Bingaman, who headed the Justice Department's antitrust division before joining LCI last month. "It's the second stage that's really critical to changing the market."

Pub Date: 2/08/97

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