Narrow path to nuptials, Bell Atlantic/Nynex courtship nears conclusion

Competition for local telephone services will develop faster on the East Coast than in other parts of the United States because of conditions regulators imposed on the merger of Bell Atlantic and Nynex, analysts said last week.

To speed their $23 billion merger, the two Bell regional holding companies agreed to several conditions imposed by the Federal Communications Commission. When the FCC approves the merger - possibly as soon as this week - the nation's second-largest phone company, to be called Bell Atlantic, will serve 13 Northeastern and Mid-Atlantic states and the District of Columbia.

Three of the four commissioners have already indicated support, said Don Evans, Nynex's vice president of federal regulatory affairs. "I don't think there's going to be any opposition," he said.

Unlike SBC Communications and Pacific Telesis, whose merger sailed through federal regulatory and antitrust reviews earlier this year, Bell Atlantic and Nynex agreed to several reporting and performance measures to ensure that long-distance carriers and other rivals can compete more easily against them.

A key difference between the two mergers is that Bell Atlantic and Nynex territories are adjacent, while SBC's and Pacific Bell's are not. Because the two East Coast RHCs won't compete with each other, the FCC wants to make sure competition evolves in the four years before the agreement ends.

"The conditions are no more onerous on Bell Atlantic/Nynex than on any other [RHC]," said Bryan Van Dussen, an analyst at The Yankee Group, Boston. "It's a public expression of commitment.

Still, the agreement paves the way for competition to develop more quickly on the East Coast, analysts agreed. "This should provide the lubrication to get [competition] going faster," said Frank J. Governali, an analyst with Credit Suisse First Boston. Barriers to entry will fall, and fewer regulatory filings and appeals should mean fewer delays, he said.

The agreement is a big win for the FCC because the agency can claim it helped create local competition in the Bell Atlantic/Nynex region, said Robert H. Mayer, a senior manager at Deloitte & Touche, Washington.

That should satisfy politicians who have complained that local phone competition hasn't developed fast enough under the Telecommunications Act of 1996.

Executives at Bell Atlantic and Nynex said they would have preferred no conditions but agreed to the FCC's measures to seal the merger. It had been 15 months since the merger was announced in April 1996, according to Evans. "The FCC was the last hurdle, and we wanted to get on with it.

The companies also agreed to the terms because "this will give us a clear path to long-distance relief," said Edward D. Young III, Bell Atlantic vice president and associate general counsel.

The new Bell Atlantic plans to apply to the FCC in the fourth quarter to sell long-distance service, executives said. The first targets will be New York, West Virginia and one other state, "probably Pennsylvania," said Young.