CTC settles dispute with Bell Atlantic: Agent-to-CLEC legalities clarified

While many competitive local exchange carriers are new companies and others are former competitive access providers, CTC Communications Corp., a Waltham, Mass.-based CLEC, began its life as a Nynex agent.

The transition from agent to CLEC status was fraught with legal battles, but a recent ruling could pave the way for other companies to use the same approach. The ruling, which followed a prolonged dispute, said CLECs could target companies they formerly served as agents.

For years, CTC was one of the heaviest-hitting agents for Nynex, which was later acquired by Bell Atlantic. David Mahan, vice president of marketing and strategic planning for CTC, said his company provided voice, data and other services to business users. "We dominated the agent program," he said.

As a Bell Atlantic agent, CTC received what amounted to a signing bonus for new customers and a bit more for customer management. But it received no recurring revenues.

The company had 8000 customers on-line, and Mahan said the money wasn't as good as it should have been, sometimes as little as $1300 per customer. CTC also found Bell Atlantic unresponsive to its requests to modify the agent program to better serve customers.

"We knew what our customers wanted: consolidated packaging and pricing, which includes billing and good care," said Mahan.

Those issues, coupled with a perusal of the Telecommunications Act of 1996, got company officials to ponder becoming a CLEC-and on Jan. 1, the company did just that. CTC signed up $2 million worth of billed customers within the first few days. The carrier opted to resell Bell Atlantic's services initially but plans to build its own packet-based network.

As an agent CTC acted as a liaison between Bell Atlantic and customers, and the telco sent them a bill. Now customers receive a bundled bill from CTC that includes long-distance and other services not provided by Bell Atlantic.

On Jan. 6, CTC said it would sue Bell Atlantic for anti-competitive behavior-such as withholding rights to resell voice mail-and wanted to force the telco to pay $14 million in overdue commissions.

To protect its turf, Bell Atlantic would not allow CTC agency customers to switch their service to the new CLEC without paying a hefty termination fee, and many of the contracts the business customers had signed were for five to seven years. That meant few chose to follow CTC.

Bell Atlantic also obtained a restraining order that halted CTC solicitation of old customers, which stood until late July when a higher court struck it down, a Bell Atlantic spokesman said. CTC was required to return all agent-related records to Bell Atlantic, which Mahan said has happened.

CTC targets business customers that spend between $12,000 and $250,000 a year for local services and has resold 14,000 lines so far this year, said Mahan. He estimates that revenues could reach $50 million in 1998, with much more expected in 1999 when CTC's own facilities should be operational.

A recent survey of Telecommunications Resellers Association members shows other CLECs are making similar projections. The TRA found that, compared with companies using a resale approach, companies using a facilities-based approach were projecting a higher increase in revenues for 1998 compared with 1997 (see figure).

Mahan believes his company is the first to branch out from agency to CLEC.

That migration path is common in the long-distance market, but the economics of the local loop make CTC an isolated phenomenon in the local market for now, said Andrew Isar, director of industrial relations for the TRA.

Bell Atlantic has approximately 125 agents.

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