The big three

Here is where and how the three largest interexchange carriers are selling local telephone service. Figuring out which markets to enter and which entry path to use - resale, facilities or unbundled elements - may determine who comes out on top.

MCI is taking the boldest steps in building local facilities. The No. 2 player in the long-distance market says it will spend $700 million this year - in addition to $1 billion spent during the past two years - to build a fiber optic digital network covering more than 2600 route-miles.

MCI first sold switched local service to businesses in Baltimore and Detroit last year. MCI now sells service to businesses over its own Sonet ring-based fiber optic digital networks in 21 cities - including Atlanta, Chicago, Los Angeles, New York and Seattle - with a total of 31 cities planned by the end of 1997. It resells service to residences and businesses in California and New York, with Illinois slated next. MCI also resells to businesses in Connecticut.

"We struggled for a long time with what's the fastest way to get into the market," says Lynn Coker, director of local service for MCI's Pacific Southwest territory. Although resale is the quickest path to entry, building networks in selected cities leverages MCI's experience with long-distance facilities.

But MCI, which is being bought by BT (Telephony, Nov. 11, 1996, page 8), doesn't aim to build local networks nationwide because it's too expensive, Coker says. Ultimately, it will use a combination of strategies, choosing a certain mode of entry in each market depending on the regulatory environment and customer demand.

Unlike MCI, AT&T for now is relying strictly on resale to get into local markets. "Our strategy is to start with total services resale and then use the unbundled network platform as quickly as we can," says an AT&T spokesman. "It's the quickest and most economical way to enter the market." The No. 1 long-distance carrier resells service to residences in Sacramento; Libertyville and Waukegan, Ill.; and Grand Rapids and Kent County, Mich. It resells to businesses throughout California. In addition, both business and residential customers are served via resale in Connecticut, and Georgia is next on the list. The goal is to sell in 15 states by the end of the year.

Facilities-based competition is part of the picture, too. Like MCI, AT&T has no grand plan to build nationwide. It's spending an undisclosed sum on its first network, a 350-mile digital fiber optic facility under construction in the Chicago area. The network, which is expected to be operational late this year, will also support the company's wireless local loop trial. Other locations are planned but have not been announced.

The strategies of these two industry giants reflect the pros and cons of the various approaches. While resale provides quick entry, the downside is that it makes the company dependent on its major competitor, the AT&T spokesman says.

Facilities construction provides independence and avoids access charges but requires a major capital outlay. In the end, both companies say they'll use a mixture of resale, facilities and unbundled elements to provide coast-to-coast local service.

Sprint, on the other hand, is already a hybrid. The No. 3 long-distance carrier is also an incumbent local carrier with about 7 million customers in 19 states, mostly in rural and suburban markets. Beyond that, it hopes to expand its local service offerings significantly through a mix of technologies, says a spokesman. "As we expand - and we do intend to be a national telephone company - we'll weigh our options.

In its role as CLEC, Sprint resells service to residences and businesses in San Diego and Santa Barbara, Calif. It is approved to serve residences and businesses in 36 states and the District of Columbia through a combination of resale and facilities-based service, and Sprint has filed for permission to sell in 13 additional states.

The IXCs are coy about just how many customers and how much market share they hope to capture from incumbents. But it's clear that all three - especially AT&T - can make an impact with their familiar brand names."We're starting from a broad customer base. We can piggyback on our marketing costs now," the AT&T spokesman says. "It's not like starting from scratch. Plus we have a brand name that people know and trust.