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Bell Atlantic goes long
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December 22, 1999: 2:50 p.m. ET
Regional Bell is first to get FCC nod to provide long-distance phone service
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NEW YORK (CNNfn) - Bell Atlantic Corp. will become the first of the "Baby Bell” local telephone companies allowed into the long-distance market, after the Federal Communications Commission unanimously approved the move Wednesday.
The decision allows Bell Atlantic (BEL), already the nation’s No. 2 local phone company, to sell long-distance services to the more than 6 million households it serves in New York state. It also marks a breakthrough for other local carriers vying to enter the long-distance market.
Since the 1984 breakup of AT&T Corp. (T), local Bell carriers have been banned from offering long-distance service. Although the Telecommunications Act of 1996 made such a move possible, the FCC previously rejected five applications from local providers before approving Bell Atlantic’s bid.
Bell Atlantic shares rose 5/16 to 65-7/8 in afternoon trading.
Bell seeks 25-percent share
Beginning Jan. 5, when the FCC’s order takes effect, Bell Atlantic will offer long-distance calling plans with low per-minute rates and without monthly fees.
Ivan Seidenberg, Bell Atlantic chairman and chief executive officer, said the company initially will target consumers and will offer business packages 30 to 45 days thereafter.
"We’re targeting 1 million customers in 2000 and a 25-percent market share at the end of five years,” Seidenberg said.
Bell Atlantic does not plan to limit its focus to New York. James Cullen, Bell Atlantic president and chief operating officer, said the company will seek long-distance authority in Massachusetts, Pennsylvania and New Jersey in the second half of 2000.
Other Baby Bells that have applied to offer long-distance service in their home markets have been unsuccessful so far. Under the Telecommunications Act of 1996, local carriers that wish to expand into long-distance service must open up access to their networks to competitors.
"The real story here is local phone competition,” said William Kennard, FCC chairman. "Bell Atlantic has taken the steps required by the act to let competitors into the New York market. The Berlin Wall of local phone monopoly in New York state has finally been demolished and hauled away.”
The decision also could have ramifications for Bell Atlantic’s proposed merger with GTE (GTE). The companies have been subject to intense regulatory scrutiny since agreeing to merge in July 1998.
Bob Wilkes, an analyst at Brown Brothers Harriman, said federal regulators could impose even more stringent requirements on the companies to gain approval of the deal.
"One of the concessions that’s pretty likely is limiting the ability of the combined company initially to utilize the GTE broadband network until Bell Atlantic is qualified to offer long-distance service in other states,” Harriman said. "That’s an issue that the FCC and the companies will negotiating on over the next several months.”
Carriers speak out
AT&T, the No. 1 long-distance carrier, blasted the FCC decision and said it expects to file a lawsuit to prevent Bell Atlantic from offering long-distance.
"Although we obviously need to study today's decision in detail, we expect to seek prompt review by the Court of Appeals to protect consumers in New York and to preserve the
fundamental requirements of the Telecom Act," said Jim Cicconi, AT&T general counsel.
"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. Limiting consumer choice and increasing competitors' costs is not what Congress intended.”
Earlier this month, AT&T began offering local residential service in New York.
Long-distance provider Sprint Corp. (FON) said the FCC’s ruling underscores its decision to agree to merge with MCI WorldCom (WCOM).
"Sprint will compete aggressively against Bell Atlantic as a full service provider in New York while the merger is in regulatory review,” said J. Richard Devlin, Sprint's executive vice president and general counsel. "But today's decision is the first crest of a wave of new competition in telecommunications, and Sprint believes a merger ultimately is the best way to preserve competition and choice for consumers.”
MCI WorldCom agreed in October to acquire Sprint for $129 billion, the largest corporate takeover in U.S. history.
Atlanta-based BellSouth Corp. (BLS), which plans to apply for long-distance authority, applauded the FCC’s decision and urged the commission to grant quick approval to other Baby Bells seeking to provide long-distance service.
"Our markets are wide open in Georgia and have been for some time," said Jere Drummond, BellSouth's vice chairman. "Competitors are entering, competing for customers and winning them. That's the standard the FCC should use when it evaluates BellSouth's upcoming request to offer competitive long-distance service to Georgia consumers.”
The FCC decision had little immediate impact on other Baby Bell stocks. BellSouth rose 1/4 to 47-13/16, while SBC Communications (SBC) was unchanged at 50-1/2. 
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