Verizon files to provide Md. long distance

Increased competition might mean lower rates for customers of all firms

April 13, 2002|By Andrew Ratner | Andrew Ratner,SUN STAFF

Marylanders haven't made a long-distance phone call on Verizon Communications Inc., or its predecessor, since the nationwide breakup of the Bell monopoly in 1984, but that may change soon.

The company filed with state regulators yesterday to add long-distance service to its local phone business - an action that could have a profound impact on the state's turbulent telecommunications industry.

If Verizon wins approval from state and federal officials, it could likely begin offering long-distance service next year. That would give consumers another choice and perhaps lower prices if a rate war follows among the large companies such as AT&T Corp., WorldCom Inc. and Sprint Corp., as has occurred in some states.

Don Laub, director of telecommunications for the Maryland Public Service Commission, said its review could take until October.

Ultimately, the matter is subject to federal approval.

The Federal Communications Commission would have three months to decide after it gets Verizon's application, likely after Maryland's investigation. The U.S. Justice Department might also review the proposal.

"We hope to be in by the end of the year," said William R. Roberts, president of Verizon in Maryland. The process, he said, will show that "competition is here in Maryland and robust."

Competitors struggling to stay in business argue otherwise. They said they intend to make that case to the government panels.

"The industry is in chaos, and the [competitors] are going bankrupt right and left. If this system is so good, why are they going bankrupt?" asked Marty Clift, an executive with Cavalier Telephone, a Virginia-based carrier whose TV ads in the Baltimore market ridicule Verizon's monopoly and its pitchman, actor James Earl Jones.

The government review that will consume the phone industry in Maryland in the coming year - a "271 hearing" - is part of a process that Congress laid out six years ago. The 1996 Telecommunications Reform Act brought the biggest change in the industry in a decade, since U.S. District Judge Harold H. Greene ordered a breakup of the telephone monopoly - an outcome federal officials had pursued off and on since the 1920s.

Dissatisfied with the pace of competition, legislators sought in 1996 to stimulate it by requiring the large companies that spun off from the Bell System, such as Verizon, to lease parts of their extensive networks to others at wholesale prices.

Once Verizon and the other former regional Bells proved they had opened their markets to local-phone competition, state by state, they could win permission to offer long-distance service.

That was the deal struck in Washington.

But the 271 hearings - named after Section 271 of the telecommunications law - have become a font of complaints from competitors in the dozens of states where they have been held.

Competitors contend that the regional Bells have made it onerous for them to lease their systems, allegedly gouging them on price or intimidating customers from switching to them.

In Pennsylvania last year, some legislators called for the breakup of Verizon, which blanketed radio and TV with commercials about the potential threat to the state's economy.

There and elsewhere, the regional Bells have argued that the accusations are without merit - and have typically won the long-distance applications.

Since December 1999, Verizon has received federal approval to offer long distance in New York, Massachusetts, Connecticut, Pennsylvania and Rhode Island. The company has applications pending before the FCC for Vermont, New Jersey and Maine.

It already offers long-distance service in 41 states. With 8 million long-distance customers to date, Verizon has quickly become the fourth-largest long-distance phone provider. The $67 billion, publicly held company, recently ranked 11th largest by Fortune magazine, is also a major provider of wireless phones and the largest directory publisher in the world.

"They have more money and more lawyers than companies like us will ever have. They have great influence in Maryland. They always have," said Tom Mazerski, a former executive with Verizon's predecessor, Bell Atlantic Corp. He heads a small phone company on Kent Island called Close Call America.

"It'll get a green light all the way through because competition is good and everyone understands that," said Mazerski, who also favors Verizon's entry into long distance to increase competition and lower prices.

"We already compete with them and with the likes of AT&T, MCI and Sprint. We're already faced with three giant billion-dollar companies."

However, Mazerski does plan to revisit with the commission his allegation that Verizon tells customers who want to switch to his company that they can't keep voice mail or broadband Internet service with Verizon if they do, often preventing Close Call from getting the customer.

Verizon's Roberts said that is untrue: "If a customer wants to switch, they would be able to switch to any other carrier of their choice."

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