Verizon's rivals say it hampers competition

Hearings begin on entry in long-distance market

PSC chief voices frustration

Phone giant must show it provides local access

October 29, 2002|By Andrew Ratner | Andrew Ratner,SUN STAFF

The state opened hearings yesterday that could, perhaps as early as spring, lead to the biggest change in phone service in Maryland since the breakup of the Bell System.

Verizon Communications Inc. is seeking permission from the Maryland Public Service Commission to offer long-distance service in the state. The company, which was created in the federal government's breakup of the Bell phone monopoly 18 years ago, is the nation's leading provider of local and wireless phone service.

The company must prove that it has opened the local phone market to competitors to win state and federal approval to re-enter the long-distance market. That was the trade-off Congress struck six years ago when it approved the 1996 Telecommunications Act.

Competitors, from giant AT&T Corp. to smaller Maryland-based companies, contend that Verizon has hampered their entry into local phone service and point as proof to Verizon's hold on 96 percent of the market.

The five commissioners who will decide the case didn't tip their hand yesterday, but the group's chairman expressed frustration that competitors have had limited success in creating choice for consumers in local phone service.

"We have spent the past year and a half doing telecom issues and then we find out that Maryland isn't progressing, it is regressing," said Chairman Catherine I. Riley, referring to Verizon's dominance. "If you see a declining number [of competitors], you wonder if all this stuff is worth pursuing."

Maryland is not breaking new ground here. In fact, Verizon has already won approval and begun offering long-distance service in most of the Northeast.

The company expects to learn tomorrow whether it has won approval from the Federal Communications Commission to begin long-distance service in Virginia.

Verizon is already the fourth-largest long-distance carrier in the United States. It did not need permission to offer long distance in much of the nation where other former Bell offshoots provide most local phone service. Because of its strong base in local service, Verizon has gained with long-distance service even as fierce competition has forced others into bankruptcy. The New York-based company reported last week a third-quarter profit of $4.4 billion - more than twice that in the comparable period last year.

Yesterday's testimony on the 16th floor of the copper-clad William Donald Schaefer Tower downtown - arcane legal arguments about phone "metrics" - didn't reveal much about the state of phone competition or whether Verizon was indeed opening the market to competitors. But the size-36 crowd in a size-32 conference room was a good indication of the importance of the proceeding to the executives, lawyers and public relations people who make their living for a phone company.

The hearings are scheduled through Thursday and drew about 100 people yesterday.

If Verizon wins permission from Maryland, and later the FCC, it would hope to launch marketing for its service by the second quarter of next year, spokesman Harry J. Mitchell said. The company said that its internal surveys have shown that customers want to receive one bill for all their phone services.

However, competitors argued yesterday that Verizon hasn't met its end of the bargain outlined in the 1996 law, the first major overhaul of a policy that was crafted in 1934 as the telephone became a household commodity. Various executives are scheduled to testify that Verizon has failed to meet at least a third of a 14-point checklist that measures whether it has opened the Maryland market to local phone competition.

One point of contention that arose yesterday is Verizon's increased response to competitors that it has no facilities available to lease to them. The 1996 act required the former Bells to lease their networks wholesale to competitors. Policy-makers theorized that competitors wouldn't be able to afford to replicate the system that the Bell companies constructed in a monopoly environment over decades.

Harold E. West, Verizon's director of regulatory support, told the commissioners that Verizon does not give preference to itself over competitors in use of its network. He added, though, that it isn't obliged to build facilities if it has nothing available to lease to others.

Battles at the state level may be overshadowed if Congress or the FCC reworks the Telecommunications Act to allow the Bells easier entry into new markets, such as high-speed Internet connections nationwide. Legislation that would aid Verizon and the other regional telephone companies, named for sponsoring representatives Republican Billy Tauzin of Louisiana and Democrat John D. Dingell of Michigan, has been bottled up in the Senate.

A change in party control of the Senate could lead to changes that greatly affect the balance of power in the phone industry. Riley wondered yesterday whether the deliberations of state boards like hers will be made moot.

"The FCC is moving the deck chairs all around," she said. "To try and understand these issues and 30 days later they pull the rug out from under you, you're seeing a little frustration on our part."

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