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SW Bell executives push for long-distance service

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by Paul Flemming

SBJ Staff

As Southwestern Bell's regulatory bid to enter the long-distance market in Missouri got into full swing, the company's executives went on their own swing through the area trumpeting the merits of its case.

Under current schedules, the largest local-telephone-service provider will have a recommendation from state regulators in April or May. Southwestern Bell filed its application Nov. 20, 1998, with Missouri regulators, and testimony is set to begin at the end of this month.

Missouri's Public Service Commission is holding the hearings to determine its recommendation to the Federal Communications Commission, the ultimate arbiter on Bell's entry into the long-distance market. Southwestern Bell in May of last year backed off from a similar application.

Paul G. Lane, general counsel in Missouri for Southwestern Bell Telephone, said he thinks the company will get the go-ahead to enter the long-distance market in 1999.

"Politically, there's a shift occurring" in favor of implementing legislation passed three years ago, Lane said.

Priscilla Hill-Ardoin, president of Southwestern Bell in Missouri, said it is a matter of when, not if, Bell offers long-distance services. She said Bell's entry into the market will benefit consumers, both business and residential.

The company's planned launch of long-distance services will "start at 20 to 25 percent below currently tariffed rates. That means about $33 per annum per household" in savings, Hill-Ardoin said.

The possibility of the local-phone-service provider offering long-distance service is a result of the 1996 Telecommunications Act. Among the myriad provisions of that legislation was opening to competition local phone markets.

The legislation, and subsequent FCC rulings and court decisions, spelled out conditions for incumbent local phone companies to offer long distance. The regional Bell operating systems, of which Southwestern Bell is one, were given specific conditions to meet.

Among those criteria was a requirement for significant local competition.

In Missouri, regulators have approved more than 40 interconnection agreements between Bell and competitive local phone companies. Springfield's Dial US, since sold to McLeod USA, signed the first such agreement and was the first in the state to offer resold competitive service.

Hill-Ardoin said about 17 of those companies are actively providing services to customers. "And that's enough for me," she said.

Between 1 percent and 2 percent of phone lines in Missouri are provided by competitive local phone companies. Lane said there are about 44,000 phone lines in the state from Bell's competitors. There are about 2.7 million phone lines in Missouri.

"Federal law requires them to give up their monopoly on local service before they can get into long distance," said Diane Miller, speaking on behalf of Show Me Competition, an industry group opposing Bell's application. "They have obviously failed to meet this test."

Hill-Ardoin said the number of lines by itself is not the proper measuring stick of competition.

"There is no requirement that we lose any set portion of our business," she said. "It's not my job to push customers to our competitors."

Hill-Ardoin said that Bell is required only to offer the opportunity for competition, an opportunity that exists now but is not being fully pursued by other companies.

Hill-Ardoin said one reason the numbers are not larger is that competitors are targeting business customers, a market with bigger profit margins. Dial US officials, when it first began offering competitive service, said its strategy was to pursue business customers.

Another reason offered by Bell officials for the number of competitive lines is the state of Missouri's telecommunications market. Competitors win a higher percentage of new lines than they get existing lines to switch, according to Bell figures. In markets such as California, Bell officials said, new line growth is much greater.

"Of the expansion that's going on, we're losing a greater share of those overall lines," Hill-Ardoin said. "But Missouri is experiencing a lesser level of competition because we're not experiencing as much growth here."

Southwestern Bell, a subsidiary of SBC Communications, operates in five states and it has previously requested, and been denied, approval for long-distance in Texas, Arkansas, Kansas and Oklahoma.

"We would have expected Southwestern Bell to devote its resources to fixing its problems rather than waste everyone's time identifying the same problems a fifth time," said Steve Weber, a lobbyist for AT&T in Missouri, at the time Bell filed its Missouri application.

Lane said FCC rulings and court findings since those earlier filings have clarified the requirements Bell must meet.

"The FCC is something of a changing target," Lane said. "With its last order, we think we know where the FCC is asking us to be."

Bell must have facilities-based competition, must meet a 14-point checklist to determine if that competition is meaningful, and its entry into long distance must be in the public interest to merit a recommendation of approval from Missouri regulators.

When the Public Service Commission makes its recommendation at the end of March, the FCC will then have 90 days to decide whether to allow Bell into long distance.

If Bell in Missouri is the first Baby Bell to get such approval, or if it is some other Bell system, Lane said the first approval will likely get others moving much more quickly.

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