LETTERS

In your excellent article “ Access Line Count Evaporating” (Oct. 14, page 8) there was a comment by SBC that is untrue. The context and quote is as follows:

According to SBC estimates, 750,000 lines will be lost to competitors using UNE-P in the third quarter of 2002. Moreover, the loss rate will accelerate as SBC gains approval to provide in-region long-distance service, said Lori Lee, SBC's managing director of investor services.

“As the Bell companies get closer to 271 relief, that's when you see the long-distance companies and [interexchange carriers] jump to bundled services,” Lee said. “Because the UNE-P rates are so low, they can make that jump easily without having to invest in their own facilities.”

Our research on UNE-P shows that there is very little correlation between states that receive 271 approvals and where AT&T and WorldCom market UNE-P. It's clear to us that IXCs sell local service only when the UNE-P financials make sense on a stand-alone basis. There are actually very few states — Texas being the only one in SBC's territory — where AT&T and the RBOCs go head-to-head on both local and long-distance services.

Wisconsin PSC Commissioner Joseph Mettner is right that SBC has caused its own problems with UNE-P, but he didn't clearly spell out why. The reason UNE-P rates are low is because SBC has low incremental costs. It also has the highest average retail rates of the RBOCs. So it should have outstanding margins and more than enough to offset some losses to competition.

Competitors are always attracted to the most profitable market segments, so it's no wonder SBC has the most popular territory for UNE-P. If UNE-P is causing financial hardships and profits are down, that unfortunately means there is still a huge pool of indirect costs affecting SBC's margins — too many project managers, inefficient marketing costs, high overhead.

The 11,000 layoffs were necessary to address that. The question will be whether SBC lays off the project managers or the guys driving the service trucks. If they hit service again, their problems will be far worse because, relatively speaking, competition will be even stronger and SBC's indirect costs will still be too high.
Philip Jacobson
General Partner, Network Conceptions