AT&T: Bell long-distance revenues outweigh local losses

AT&T today released a study that indicates long-distance revenues generated by the Bell companies once they receive approval from the FCC to provide interLATA service throughout their regions under Section 271 of the Telecom Act would outweigh the revenues they lose when they provide unbundled network facilities to competitors in their local markets.

According to AT&T, the Bell companies potentially lose $4.96 per line leased to CLECs via the unbundled network element platform (UNE-P), based on the average cost of provisioning the line and the average revenue generated by each line. AT&T further estimated that competitors would control about 12.7 million UNE-P lines nationwide (a 15% penetration rate), which means the Bells collectively would lose about $755 million in potential revenue locally each year.

However, the AT&T study also indicated that the Bells make $6.78 per long-distance line in service. AT&T estimated that the Bells would have about 12.7 million long-distance lines in service – a 30% penetration rate – once all of their 271 approvals are in hand. This would generate long-distance revenues of about $2 billion annually for the Bells. Consequently the Bells would make $1.3 billion more each year on long-distance than they would lose on UNE-P, said AT&T.

AT&T called the estimates “conservative,” and said its analysis of most other penetration scenarios came to the same general conclusion.

Jim Cicconi, AT&T general counsel, accused the Bells and the U.S. Telecom Association of systematically misrepresenting their cost data to Congress, federal and state regulators, and the media, to no avail.

“Anytime they have looked behind the curtain and asked the Bells for data to support their position, they have reached the opposite conclusion," Cicconi said. “The Supreme Court knocked down any argument that the Bells lose money on UNE-P. In fact, they make money.”

Predictably, the Bells launched a counter-attack this afternoon. SBC President William Daley said in a prepared statement that AT&T’s rhetoric has reached a new low.

“No matter how hard they misrepresent the facts in closed-door sessions with analysts, the basic fact is that companies like SBC are required to give AT&T service at rates that are below cost.”

The USTA estimates that SBC’s average cost per line is $49.83, while the average price it can charge competitors for that line under the TELRIC (total element long range incremental cost) pricing formula is $17.50.

Daley said that providing unbundled network elements at below cost prices would affect its ability to invest in its network and fulfill its obligations as a carrier of last resort. SBC invested about $12 billion in its network in 2000, but will invest less than $8 billion this year.

Herschel Abbott, BellSouth’s vice president of governmental affairs, agreed.

“No company will invest billions of dollars to become a facilities-based broadband services provider if competitors who have not invested a penny of capital, nor taken an ounce of risk, can come along and get a free ride on the investments and risks of others,” Abbott said in a statement.