For the first time since the 1984 breakup of AT&T, one of the regional Bell telephone companies has won permission to offer long-distance service in its territory, a long-anticipated development that could be repeated in Maryland next year.
The Federal Communications Commission said yesterday that its five commissioners had voted unanimously to allow Bell Atlantic Corp. to sell long-distance service in New York state.
Bell Atlantic's New York application is seen as a bellwether for the company's entry into the long-distance markets of the other 12 states it serves, including Maryland.
"Today is truly a historic moment for American consumers," said FCC Chairman William E. Kennard.
Ivan G. Seidenberg, Bell Atlantic's chairman and chief executive officer, said, "We're gratified by the FCC's action today. We're ready to go and we can't wait to roll out Bell Atlantic long distance not only in New York but throughout the Bell Atlantic region."
Seidenberg said his company would next seek permission to offer long-distance service in Massachusetts, Pennsylvania and New Jersey, with filings in those states expected early in the second half of next year.
Maryland is not as far along in the process. But Sherry F. Bellamy, the president and chief executive officer of Bell Atlantic-Maryland Inc., anticipated getting FCC approval "sometime in the year 2000."
Maryland Public Service Commission Chairman Glenn F. Ivey, whose agency will play a crucial role in determining whether and when Bell Atlantic will be eligible to offer long-distance service here, called the FCC's New York decision "useful" as a road map for other states.
AT&T, which could lose millions of customers to Bell Atlantic in New York alone, objected fiercely to the FCC's action and said it plans to launch a legal challenge to the decision.
James Cicconi, AT&T's general counsel, said in a statement, "Today's decision shortchanges the people of New York because it does not ensure that Bell Atlantic's local phone markets are truly open to competition."
When Bell Atlantic begins selling long-distance connections in New York, it will mark a return of sorts to an older way of selling phone service.
Until the 1984 consent decree breaking up AT&T, Americans made all calls -- both local and long-distance -- through Ma Bell. After the decree broke up the company, AT&T was left with long-distance service, leaving local calls mainly in the hands of seven regional Bell companies.
The Bell companies were barred from offering long-distance in their service areas. The watershed Telecommunications Act of 1996 sought to change this.
The act was intended to free up competition throughout the communications industry, and it offered the Bell companies a way to become full players in the $80 billion long-distance market.
But to sell long-distance in any of the states in its region, a Bell company would have to file an application with the FCC showing that the state's local-service market was sufficiently open to competition.
Before approving Bell Atlantic's New York application, the FCC had rejected five such bids in other states.
But New York was a unique case: The state had attracted numerous local competitors hoping to challenge Bell Atlantic, especially in the lucrative New York City market.
In addition, New York state regulators put Bell Atlantic's application through a battery of tests, including a spate of third-party evaluations by the accounting firm KPMG Peat Marwick LLP.
Many experts believed the FCC had to grant long-distance permission somewhere to quell objections that it was foiling the purposes of the Telecommunications Act.
"The FCC has been under enormous pressure to show it can approve an application," said Jack Nadler, a telecommunications and technology lawyer at Squire, Sanders & Dempsey LLP in Washington.
Kennard, the FCC chairman, indicated that a major factor in the panel's approval of Bell Atlantic's bid was an agreement by the phone company to take steps to ensure that Internet providers are granted equal access to its networks.
Analysts said yesterday's decision was important not only for its impact on the telephone industry, but for its implications in the Internet realm.
The former restrictions on Bell Atlantic's activities in long-distance phone communications also constituted a formidable legal barrier to the company's entry into the increasingly important Internet access market.
Consumer groups generally approved of the FCC's move.
Mark Cooper of Silver Spring, the research director for the Consumer Federation of America, said:
"The New York commission did a lot of hard work. They listened to AT&T whine and Bell Atlantic drag its feet for two years, but we got there. The [Maryland] PSC and Bell Atlantic have to explain why they haven't offered all of that here."
Bell Atlantic will be eligible to sell long-distance in New York on Jan. 3, and will launch the service two days later.