Phone Companies Fight For Right to Woo Locals
AMERICAN telephone companies are preparing for a corporate free-for-all that will make today's battle of long-distance services look like a mere skirmish.
Regulators are breaching the last barriers to competition. And in a deregulated world, phone companies doubt that most Americans will patronize two firms: one for long-distance and one for local calls. They'll want just one.
Thus, the push to win the phone customer is becoming a no-holds-barred battle for corporate survival. And the rhetoric is turning tough. Long-distance firms accuse local companies of hard-ball tactics to keep competitors at bay. The local Bells argue their rivals aren't negotiating fairly.
"It's pretty messy," says Bernie Tylor, spokesman for MCI Communications Corp. in Washington, D.C. "Right now we are facing a monopoly that is fighting competition every step of the way." State utility regulators urge the sides to negotiate, he adds, but "it's like throwing us into a pack of wolves."
"It's a very one-sided process," counters Michael Brand, spokesman for Ameritech Corp. in Chicago. AT&T, in particular, is not budging from what he calls unreasonable demands in its negotiations to set up local service in Chicago.
Last week, AT&T made official what its competitors have long believed. The long-distance giant aims to offer local phone service in markets nationwide. "We will fight for the right to give our customers a choice for local service through every option open to us," AT&T chairman Robert Allen said in a statement.
It joins the other major long-distance companies, which also plan to provide local service. MCI expects to begin offering local service in the top 20 markets by year-end. Sprint hopes to be offering local service by the end of 1996 by building an alternate network that carries phone signals through the cable-TV wires of its three cable partners and eight cable affiliates. "We want to be the nation's preeminent, full-service local telecommunications company," says Mark Bonavia, spokesman for Sprint Corp.
The regional Bell operating companies, which today provide local service, are equally anxious to begin offering long-distance service. Both sides are jousting to influence Congress, which is trying to decide how soon to let each type of company into the other's business. The House and Senate have not yet reconciled versions of a telecommunications bill that President Clinton has vowed to veto if major changes aren't made.
Even as they wait for federal legislation, the companies are fighting for the upper-hand at the state level. Connecticut is an early battleground. State regulators have ruled on a series of seemingly trivial but significant technical issues. Customers will be able to use their choice of local phone company without dialing extra codes. They can switch providers without giving up their phone numbers. In three weeks, state regulators will make a preliminary ruling on the final issue: the wholesale price of local phone lines.
It's a crucial ruling. Long-distance companies as yet have not built their own local phone networks. So they'll have to lease the lines from the local phone company. How much should they pay? In Connecticut, AT&T says it needs to make a profit off the service, so the wholesale price should be lower than what Southern New England Telephone (SNET) charges its customers. "We need a 35 to 45 percent discount in order to really be able to make some headway," says David Jefferson, AT&T vice president for the northeastern United States.
But in its filing to regulators, SNET proposed charging wholesale rates that were 25 percent to 170 percent higher than what it charged its own customers. "All of our residential rates are subsidized to some extent," argues company spokeswoman Beverly Levy. Like others, it claims it loses money on basic local service and recoups it by selling custom add-on features and in-state long-distance calls.
In sparsely populated rural areas, SNET says it costs $25 a month to service consumers who only pay $10 a month. So by using AT&T's recommended prices, she adds, "we would be, in effect, subsidizing AT&T."
The wholesale price of local lines is just one flash point. Long-distance providers charge that local companies are using a whole raft of procedures to frustrate their entry. These include charging exorbitant rates for directory listings, phone lines, and related equipment; refusing to lease the number of local lines requested; and using bureaucratic delays.
For example, AT&T is one of the companies experimenting with local phone service in Rochester, N.Y. But every time it signs up a new customer, AT&T is forced to conduct a lengthy interview to fill out an eight-page questionnaire. The questionnaire is then faxed to the local phone company and AT&T has to wait for the company to key in the data and switch the customer. "The legislators can legislate competition and the regulators can regulate competition, but at the end of the day, we'll always be within the power of the incumbent monopoly to either facilitate or stymie competition," says AT&T spokesman Paul Karoff.
Within a year, customers will have the option of choosing a local phone company other than Ameritech, promises Mr. Brand. On Friday, the company plans to release the rates it proposes to charge other companies to lease its lines.