Could this bid be the one?: Bell Atlantic long-distance application still faces regulatory hurdles

Bell Atlantic is readying what could be the first successful bid by a Bell regional holding company to sell long-distance in its territory. If approved, the RHC would be a major player in New York state's $7 billion long-distance market, the nation's second-largest.

The RHCs so far have failed to enter the $80 billion long-distance market. The FCC has rejected four proposals by Ameritech, SBC Communications and BellSouth in the past year because none met the requirements of the Telecom Act of 1996.

Some observers give New York-based Bell Atlantic a better chance because New York, especially Manhattan, is one of the most competitive local markets. Bell Atlantic also is cooperating closely with state and federal regulators-in contrast to the hostile legal approach that typified previous applications.

But the path to long-distance riches is not entirely smooth. Critics charge that Bell Atlantic doesn't meet legal requirements to treat local competitors as equals.

"A lot of it boils down to lousy retail service quality," said Paul Kouroupas, Eastern region vice president of regulatory affairs for Teleport Communications Group, Bell Atlantic's oldest and largest rival in New York.

If its application is approved, Bell Atlantic would enter a huge long-distance market, 90% of it now dominated by AT&T, MCI and Sprint. The RHC could match other carriers in bundling local, long-distance, cellular and Internet access services at competitive prices, said William Allan, the company's vice president of regulatory affairs.

But plenty of hurdles remain. The carrier needs a recommendation from the New York Public Service Commission before it can file with the FCC. Allan expects to submit a bid to the FCC "very shortly." The FCC then has 90 days to vote yes or no. To sell long-distance in its region, Bell Atlantic must show that it faces facilities-based competition for both residential and business customers, and that it satisfies a 14-point checklist allowing local rivals to compete fairly.

The carrier now meets all but a few concerns, Allan said, but consumers and competitors claim that New York's markets aren't open enough and that Bell Atlantic hasn't met the checklist, especially when it comes to operations support systems (OSSs).

Although the carrier has 34 interconnection agreements with telcos, critics say that most consumers don't have a choice of local telcos. Among 58 state-certified local exchange carriers, few are operational, and most of them are resellers, said Doug Elsner, an aide at the New York State Consumer Protection Board.

Bell Atlantic controlled 90% of 11.5 million access lines in New York in 1996, according to FCC reports. In the local residential market, competitors serve 0.2% of the state's access lines. In the business market they serve 5.5%, Elsner said, citing New York PSC statistics. Most of the competition that exists is for business customers in Manhattan and a few other cities, he added.

Bell Atlantic's biggest obstacle could be meeting the checklist, especially the OSS requirements. Opponents complain that the OSS is faulty and that plenty of technical glitches and delays occur.

The result is that their local service is not comparable with Bell Atlantic's, as the law requires, rivals say. "The overall picture is they've made improvements, but they're still not there," said Elsner. More than 70% of orders submitted to Bell Atlantic by competitors in September required manual processing, and 25% of AT&T's orders were processed with errors, he said.

How state and federal regulators rule, and whether Bell Atlantic makes telecom history, remains to be seen. "While Bell Atlantic's New York application may be the first approved, the question is still when. We don't think that time is at hand," Elsner said.

ACCESS CHARGE CONTROVERSY As of Jan. 1, IXCs must pay the incumbent LEC a fixed monthly pre-subscribed IXC charge for customers served by the LEC. Because per-minute charges have been reduced, the Telecommunications Resellers Association wants the FCC to require IXCs to pass access charge savings on to their reseller customers.

PHONE HOME Most U.S. households-93.8% to be exact-have telephone service, according to the FCC's latest subscribership report. Penetration rates are highest among higher-income households and those headed by whites and senior citizens, the report found. By state, subscribership ranged from a low of 87.2% in New Mexico to a high of 97.7% in Pennsylvania.

Bell Atlantic in New York state

* Total presubscribed lines* 11,562,379

* Presubscribed lines controlled by Bell Atlantic* 10,373,195

* State-certified local carriers 58; 12 are facilities-based

* Total intrastate revenues* $9.5 billion

* Total interstate revenues* $7.4 billion

*1996

Sources: FCC, New York PSC