Jul 6, 1998 12:00 PM,

FCC suspends Ameritech/Qwest deal

Susan Biagi

Last week the FCC ruled that Ameritech must suspend its efforts to market long-distance services from Qwest Communications. The FCC will review the legality of the arrangement and render a decision after a 90-day suspension period. The action follows a petition filing last month by AT&T and MCI, which argued that the teaming of Ameritech and Qwest violates the Telecommunications Act of 1996.

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For now, Ameritech is prohibited from marketing or adding customers to its Complete Access service. In a statement, Ameritech suggested that AT&T and MCI want to kill competition from upstart carriers such as Qwest, citing a study by the Telecommunications Research and Action Center, an independent consumer research group. The study found that Qwest's long-distance service costs 50% less than AT&T's standard price (and 42% less than its One Rate plan), 44% less than MCI and 53% less than Sprint.

The FCC's action overrules a June 9 ruling by a Midwestern federal judge in favor of the agreement. The FCC did not mention U S West's similar agreement with Qwest. However, on June 5, a Seattle district court barred U S West from offering customers the Qwest long-distance service.

The two largest long-distance carriers want to clobber Qwest, not compete with it, said a U S West spokesman. "AT&T and MCI collectively control about 85% of the long-distance market," he said. "They are saying, 'Protect us from the big, bad bully Qwest. We can't compete with them, so let's shut them down.' [AT&T and MCI] are the ones standing in the way of competition."

Boyd Peterson, an analyst with The Yankee Group, takes the opposite view. Ameritech and Qwest "say they are finally giving customers the benefit of the telecom act," Peterson said. "But the telecom act has nothing to do with long-distance. It was not devised to increase competition in long-distance [markets]."

In 90 days, when the FCC rules on the legitimacy of the teaming agreement, the public will learn whether consumer benefit or competition is more important to the FCC, he said.