Hearth and home: Most RHCs decide to stick to their territories when offering long-distance

Don't look for most Bell regional holding companies to chase long-distance business outside their territories anytime soon. The high cost of building brand identity in new areas will keep them close to home for now.

A few RHCs, notably SBC Communications, have tiptoed outside their regions with some success. But most want to break into the long-distance market in their own territories-a strategy that, while requiring a regulatory gauntlet, could pay off handsomely in the long run.

"Not all opportunities are created equal," said a spokesman for Ameritech. "Why go someplace where they don't know you and you have to establish brand identity?"

The RHC recently announced a plan to venture "outside" for the first time by selling both local and long-distance service to residents in St. Louis and Cape Girardeau, Mo., early next year (Telephony, Nov. 10, page 7). Local service would be resold through Southwestern Bell.

The Telecommunications Act of 1996 lets the RHCs sell long-distance service for the first time. Outside their territories, all they need are state certification as a competitive local exchange carrier (CLEC) and approved interconnection agreements. But to go inside their territories requires much more-state and federal OKs, antitrust review, proof of local competition and satisfaction of a 14-point checklist of technical requirements.

The idea is that the RHCs enjoy a natural advantage on their home turf and should meet stiff standards before selling long-distance in their local monopolies. Ameritech, SBC and BellSouth have all mounted as-yet unsuccessful efforts to break in.

In the meantime, the wide-open, out-of-region markets have wallowed. Although the RHCs have gotten the green light to sell long-distance in most outside states, few have done so.

"It's not cheap," said Robert H. Mayer, senior manager at KPMG Peat Marwick, Washington. An RHC must market itself to customers who don't know its name. It must deal with interconnection problems like any other CLEC. And it must buy local access from the incumbent telco.

"They have to buy resources out of region that they own in region," said Larry F. Darby, a Washington telecom consultant.

The RHCs that sell or plan to sell out-of-region long-distance service aren't total foreigners. Ameritech hopes to capitalize on its wireless customer base in St. Louis. It also has more than 500,000 local service customers in the metro area, across the Mississippi River in its home state of Illinois.

Similarly, SBC Communications tapped into an existing market when it offered landline long-distance to cellular customers in three states and Washington, D.C., which it had served since 1987 under the familiar Cellular One brand name. The carrier wouldn't reveal how many customers it has out of region.

Bell Atlantic snagged an undisclosed number of outside customers after it ran a 12-week advertising campaign in Michigan, Texas and North Carolina last year.

If and when the other RHCs do sell long-distance out of their territories, they're likely to target states adjacent to their regions to take advantage of the "spillover" effect of regional advertising. For example, BellSouth might enter Virginia or Texas, while U S West could go after California.

"The decision to enter a market is driven by expected earnings," Darby said. RHCs will go where costs are low and rates are high.

HAIL TO THE CHIEF Richard Metzger has been named chief of the FCC's Common Carrier Bureau. Acting as chief since September, when predecessor Regina Keeney moved to the agency's International Bureau, Metzger had served as the bureau's deputy chief, overseeing the competitive pricing and policy/program planning divisions. John Muleta is now the deputy chief after serving as acting deputy chief and chief of the bureau's enforcement division. Christopher J. Wright replaces new FCC Chairman Bill Kennard as general counsel. Sheryl J. Wilkerson is director of the Office of Legislative and Intergovernmental Affairs.