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Bell Atlantic OK seen near
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September 29, 1999: 4:02 p.m. ET
FCC expected to clear long-distance bid; others may not follow so soon
By Staff Writer Jamey Keaten
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NEW YORK (CNNfn) - Bell Atlantic Corp. on Wednesday applied with U.S. regulators to offer long-distance within New York state, and industry experts say the company has the best chance yet for a regional Bell to win the necessary OKs.
The application to the Federal Communications Commission comes in the wake of much hand-holding by Bell Atlantic (BEL) with regulators in New York, openness to the needs of customers and new competition in local service. The FCC has 90 days to make its decision.
The application is hardly the first from a regional Bell, but has drawn attention because Bell Atlantic is seen by many industry experts as well-positioned to win approval from the FCC.
"This the best shot we have seen in 3-1/2 years," said Jeffrey Kagan, a telecom industry analyst in Atlanta.
The Telecommunications Act of 1996 allowed regional Bells to offer long-distance when they met a 14-point checklist showing that they opened their local-service markets to competitors. Since the breakup of AT&T in 1984, which spawned them, the regional Bells have had a monopoly, or close to it, in their home bases.
Local phone companies, like many big players in the telecommunications industry, have found their customers are looking for one-stop shopping as the Digital Age dawns.
That is one major reason Bell Atlantic, which is about to buy GTE Corp. (GTE) and has inked a joint venture for nationwide cellular service with the UK mobile phone operator Vodafone AirTouch (VOD), is so adamant about landing long-distance as well.
Quick to open local markets
Analysts said Bell Atlantic has been particularly quick to open up the local market it dominates to competition. Competitive local exchange carriers -- known as CLECs -- receive about one-fifth of their total nationwide business within New York State.
But callers in New York account for only about 8 percent of the nation's long-distance traffic, Scott Cleland, a telecom analyst at Legg Mason, told CNNfn. He said Bell Atlantic has about a 75-percent chance of winning FCC approval.
Approval of Bell Atlantic's application won't necessarily give the green light to other regional Bells to offer long-distance, experts said. Rather, it should establish a model for them. It still could be several years before all the Bells get in.
Eric Melloul, a telecom analyst at Argus Research, said Bell Atlantic set a road map for others to follow -- particularly in its willingness to work with state officials.
"It has been an ongoing process between Bell Atlantic and New York state regulators," he said. "It is a process that's likely to be imitated elsewhere."
Melloul predicted that Southwest regional Bell SBC Communications (SBC), which is awaiting approval of its merger with Midwest Bell Ameritech (AIT), is likely to win approval to offer long-distance inside Texas early next year. BellSouth (BLS) and U S West (USW) are the other Baby Bells.
Shares of Bell Atlantic, one of the most widely held stocks in the nation, fell 3/16 to 66-15/16 late Wednesday.
But will consumers benefit?
The FCC application already has opened the floodgates of criticism from rivals that stand to lose the most if Bell Atlantic wins the long-distance OK.
Long-distance leader AT&T Corp. (T) warned that Bell Atlantic customers who switch to another local carrier run a 13 percent chance of losing service temporarily.
In a statement, AT&T General Counsel Jim Cicconi said: "Bell Atlantic has decided that despite some serious remaining problems processing customer orders, it will try to leapfrog compliance and muscle its long-distance application through the federal review process."
But, he added, "We are not unmindful of the progress Bell Atlantic has made over the past months."
Among the key questions has been whether operators like Bell Atlantic can switch customers without hurting service, muddling phone directories or 411 and 911 service. A study by consulting firm KPMG recently indicated that Bell Atlantic is avoiding such problems, Kagan said.
"Will it be flawless? No. Will there be some customers that slip through the cracks? Yes," Kagan said. "But for the majority of orders, they will be ready. The only way to get to 100 percent is on the fly."
But Bell Atlantic may be fighting for a piece of a shrinking pie. Long-distance rates have been in a free-fall in recent years, hurting profit margins. The key question, Kagan said, is whether it can bundle other services with long-distance profitably.
In fact, for customers, savings will be most apparent only when they agree to buy a service bundle, such as call waiting or caller ID, along with their long-distance service. The savings on long-distance alone won't be much better than the pennies a minute top carriers now charge.
-- with additional reporting by correspondent Steve Young
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