Verizon closes in on second approval

Massachusetts regulators recommend company's long-distance application Investors may have soured on long-distance, but RBOCs continue to invest time and effort to enter the market. Leading the pack is Verizon Communications, which Massachusetts regulators last week recommended that the FCC approve as a long-distance provider in the state.

The Massachusetts Department of Telecommunications and Energy made the recommendation unanimously, despite opposition from the state attorney general and existing long-distance carriers, most notably WorldCom and AT&T. After receiving a recommendation from the Department of Justice, the FCC is scheduled to rule on the matter in December.

If the commission concurs with the DTE's recommendation, Verizon will become the first RBOC to gain long-distance approval in two states under Section 271 of the 1996 Telecommunications Act. Verizon currently offers long-distance service in New York.

"If you want to be a national player, you need to offer long-distance nationwide," said Ed Young, Verizon's senior vice president of federal government relations. "The [profit] margins are shrinking, but we still seem to do pretty well."

Verizon plans to secure long-distance approval in the four remaining New England states - Maine, New Hampshire, Rhode Island and Vermont - during the first half of next year.

Verizon faced strong opposition at the state level; it can expect the same when the matter goes to the FCC. In a comment to the DTE, WorldCom argued that rates charged by Verizon to use its Massachusetts network make it virtually impossible for potential competitors to offer local service in the state profitably.

Echoing this concern was Massachusetts Attorney General Tom Reilly, who issued a statement saying he believes Verizon has not met the FCC's 14-point criteria necessary to be granted long-distance status, most of which calls for the applying RBOC to open its local networks to competition.

"Based on the record the company provided to the FCC, Verizon has made little progress in supporting their position since my office raised similar concerns on competition in the local phone market earlier this year," Reilly said.

It is a refrain often heard during Section 271 deliberations. In fact, the same argument about line-sharing rates was made against Verizon predecessor Bell Atlantic in New York, said a Verizon spokesman.

"WorldCom is looking for a free ride," the spokesman said."The bottom line is, you can change the name of the state, you can change the name of the [long-distance] company, but it's never going to be low enough."

AT&T and WorldCom quickly began offering local service in New York after the RBOC received long-distance approval, Verizon's spokesman said.

Still, when WorldCom's complaint was made public, Verizon immediately announced it would lower its line-sharing rates in Massachusetts to the same levels it charges in New York. The DTE made its recommendation to the FCC the following business day.

With long-distance profits diminishing rapidly, many industry observers question whether being able to offer long-distance is enough incentive for RBOCs to open their local networks. In fact, SBC Communications' approval in Texas is only the second granted. "I think that long-distance is still attractive to the RBOCs, and the proof is that Verizon celebrated its millionth customer in New York just a few months after offering service there," said Jeff Moore, senior analyst for network services for Current Analysis.

One reason Verizon is more aggressive than other incumbents in pursuing Section 271 permission may be the FCC's stipulation that the company can regain ownership of Genuity - formerly GTE Internetworking - if it is eligible to offer long-distance service in 12 of the 13 Bell Atlantic states.

"Clearly, we have an interest in regaining that asset," Young said, noting that Verizon plans to have long-distance approval in all the Bell Atlantic states by July 2002.

General Communication signed an asset purchase agreement with G.C. Cablevision of Fairbanks, Alaska. G.C. Cablevision would receive $2.3 million in cash and GCI Class "A" common stock valued at $10 per share. Currently, GCI has 118,000 CATV subscribers and would serve more than 79% of the state's households if the deal is approved.

Birch Telecom now serves more than 200,000 access lines. This more than doubles the Kansas City, Mo.-based CLEC's number of access lines during the last year. Birch targets small and medium-sized businesses in Kansas, Missouri, Oklahoma and Texas.

Edge Connections is on schedule with its aggressive nationwide rollout, having lit 120 buildings with DSL service; an additional 180 buildings are slated to be in service by the end of this year.