Phone Giant Wrestles for Market Toehold

D.C. proposes legislation to dissolve Bell Atlantic-Washington's telephone monopoly and promote more competition in the market

Mirroring the landmark breakup of the Bell system, a battle has broken out over the Washington, D.C., telephone market.

D.C. residents now have only one choice when it comes to local service: Bell Atlantic-Washington. To dissolve that monopoly, the D.C. Council has proposed legislation that would open the market to competition.

Businesses vying for the long distance market have lowered cost, spurred technological advances and improved service, noted bill co-sponsor John Ray, D-At Large, in a letter to council members. This legislation, he said, would give consumers the choice they now have for long distance service.

On the other side, Bell Atlantic claims the bill is unfair to the company and would put it out of business because competitors would first go after the city's lucrative business market, which now generates 70 percent of Bell Atlantic-Washington's overall revenues. Baby Bells have called competition in this market "cream-skimming," because competitors can attack business markets without having to provide services to less profitable residential customers.

"It would take us out of the game," said William Freeman, chief executive of Bell Atlantic-Washington. Particularly objectionable, he said, is a provision that would impose tougher rules on Bell Atlantic than all other carriers, such as clearing rate increases with regulators.

And, as the dominant provider, Bell Atlantic would have to sell services to competitors at cost and let them use Bell networks for free, he said. "It sets up two classes of providers -- Bell Atlantic and everybody else," Freeman said. Freeman did say that Bell Atlantic would support a bill that would foster competition while not treating Bell so harshly.

The arguments for and against the legislation sound eerily familiar to most in the industry. "Bell Atlantic is saying the same thing AT&T said before divestiture," said Donna Roberts, a senior attorney with MCI, which is trying to enter the D.C. market. "AT&T claimed it would go out of business. They said you'd pick up your phone and get dead silence," she said.

Sprint, Teleport Communications Group Inc., MFS Communications Inc. and AT&T have joined MCI in supporting the bill.

Companies serving the local D.C. market would work on a bartering system for services and network access, claimed Roberts. Bell Atlantic is misconstruing language in the bill when they talk about no-cost access, she said. "The traffic is going to be in balance," Roberts said.

As for Bell Atlantic's complaints that it would be more regulated than its competitors, Roberts points to the stricter regulations AT&T has to follow. AT&T remained regulated after the breakup, she said, because its competitors didn't have enough market share to hurt consumers.

Bell Atlantic's Freeman says the bill would cause residential prices to rise as its competitors focus on businesses. Conversely, Roberts says MCI and other alternative carriers would offer D.C. customers new products, such as faxes and modems that would never be available in a monopoly.

The telecommunications legislation is expected to be voted on in October or November.

Freeman and Roberts may have one thing in common. Legislation pending in Congress that would nationally deregulate the market could preempt state law, making both of their points moot.

Who ya gonna call?

Where states stand on legislation opening local telephone markets to competition


Colorado, Florida, Georgia, Hawaii, Iowa, Minnesota, New Hampshire, North Carolina, Tennessee, Texas, Utah, Virginia, Wyoming, Oregon, Pennsylvania, Massachusetts, Michigan, Illinois, Nebraska

Considering Legislation:

D.C., Oklahoma, Arkanasa, Indiana

Source: The National Cable Television Assn.

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