Bell Atlantic wins over FCC

As proved by Bell Atlantic's recent coup, the RBOCs stand a stronger chance than ever of gaining approval to sell long-distance telephone service in their territories. This stems from an evolving marketplace and a willingness to follow, not fight, the legal requirements, analysts and executives said.

The FCC has upheld the law's stringent requirements for in-region, long-distance entry since Congress passed the Telecom Act of 1996. Until now, it has rejected five applications from three RBOCs.

Now Bell Atlantic-New York has won regulatory approval to tap the nation's $104 billion long-distance market, package long-distance with other offerings and sell high-speed data services without restriction.

"It's clearly the Holy Grail of all carriers to provide end-to-end solutions," said Daniel Ernst, an analyst at Ferris, Baker Watts in Baltimore.

"There's no question long-distance ties together lots of services and makes the offering complete," said a spokesman for SBC Communications, whose Texas application could be the next successful one.

Bell Atlantic apparently has met the 14-point checklist, opened its market to competitors and convinced regulators that it promotes fair competition. Still, competitive local exchange carriers (CLECs) complain that the RBOCs haven't done enough. Earlier Section 271 bids were premature and, until Bell Atlantic, operations support systems (OSSs) were nowhere near adequate, CLECs say.

"No one invested the time and resources...It was a crapshoot." said Jonathan Askin, vice president of law with the Association for Local Telecommunications Services. As the FCC rejected each application, RBOCs and some lawmakers criticized the agency for slowing competition, and political pressure to approve an application mounted.

But the FCC never wavered, analysts said. It rejected the applications because they did not meet legal requirements. Ameritech - the first Section 271 test case - had an inadequate OSS, more blocked calls for rivals' customers than its own and accuracy problems with 911 services.

Along the way, the FCC fine-tuned definitions and requirements that had been unclear. This, along with a new FCC approach to work with RBOCs before their applications were filed, helped advance the Section 271 process. So did an evolving marketplace that introduced more local competition. The FCC does not require RBOCs to show a specific loss of market share.

The RBOCs have learned that the Section 271 process is "much more complex and time-consuming than anyone thought," said an SBC spokesman.

The incumbents became more willing to work with the law. After the FCC rejected SBC's Oklahoma petition in June 1997, the carrier filed suit, challenging the constitutionality of the Telecom Act's Section 271 as an illegal "bill of attainder." U S West and Bell Atlantic joined in, and BellSouth filed a similar suit after its South Carolina application was denied.

Joe Kendall, a federal district judge in Texas, surprised the industry when he sided with SBC in December 1997. But, appeals courts in New Orleans and the District of Columbia later found Section 271 constitutional. The Supreme Court refused to hear SBC's appeal in January 1999, ending the litigation.

Now RBOCs seem more intent on satisfying the checklist. They are fixing their OSSs. Acting as a dummy CLEC, KPMG Peat Marwick ran months of OSS testing with Bell Atlantic in New York, which observers say was the most thorough so far.

The testing gave "a hard-and-fast record of performance," said Don Evans, Bell Atlantic vice president of federal regulatory affairs.

"That model would not be a bad model for other states to pick up," although it did not test for the provisioning of DSL loops, Askin said.

SBC and BellSouth may learn from previous applicants' mistakes the way Bell Atlantic did. SBC said it will apply to the FCC this month to sell long-distance in Texas.In December, the Texas Public Utility Commission made a positive recommendation. Meanwhile, BellSouth is finishing OSS testing in Georgia and plans to apply to the FCC early this year.