                             THE VIRGINIAN-PILOT 
              Copyright (c) 1996, Landmark Communications, Inc.

DATE: Saturday, October 5, 1996             TAG: 9610050399
SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 
SOURCE: BY DAVE MAYFIELD, STAFF WRITER 

                                            LENGTH:  117 lines

AT&T, MCI MAY RECEIVE BELL ATLANTIC DISCOUNT

The State Corporation Commission's staff has recommended that Bell Atlantic-Virginia be required to offer steep discounts to carriers that lease the Bell Atlantic network so they can offer competing services to their consumers.

In a report issued this week, the commission staff said Bell Atlantic, the state's largest local phone company, should be required to offer ``wholesale discounts'' of up to 24.2 percent to carriers that resell its network.

In doing so, the commission staff is leaning hard toward the resellers' position on the discounts, which they say are necessary to break up the monopolies now enjoyed by local phone companies like Bell Atlantic and GTE-Virginia.

The three-member commission, which will ultimately decide the matter, generally follows its staff's recommendations. The commission will begin a hearing Thursday in Richmond to hear more evidence.

Reselling is one of many thorny issues facing federal and state regulators, as unprecedented competition is breaking out in every sector of telecommunications in the wake of an industry-reform bill signed into law last February by President Clinton.

For AT&T, the stakes are high. In fulfilling its mission of being an all-purpose telecommunications provider, it needs to re-enter the local phone market. AT&T was forced out of that market in 1984 by the breakup that created the Baby Bells.

AT&T isn't the only would-be competitor in local service that has decided reselling - rather than building its own network - is the best route into the market. MCI Communications Corp. is taking a similar tack.

Meanwhile, Bell Atlantic, the chief defender in the local phone business in Virginia, wants to get into the long-distance phone market - again in hopes of being an all-purpose provider. But under the federal reform law, Bell Atlantic can't offer long-distance services to its current customers in the mid-Atlantic until regulators are satisfied that the company has opened its local-exchange monopoly to competition.

In a filing with the commission, AT&T asked for a discount of as much as 27.5 percent from Bell Atlantic-Virginia, while MCI suggested 21.9 percent. Bell Atlantic contended a discount of no more than 11.9 percent is justified.

The differences are great because each company has its own opinion on how much money Bell Atlantic will save when competitors provide their own customer support and directory assistance to people who switch to their services.

The resellers want to mark up the network-leasing price they get from Bell Atlantic to cover their own costs and make a profit - yet still keep the retail rates they charge consumers below Bell Atlantic's retail rate. Otherwise, they say it will be difficult to introduce true competition in the local-exchange phone business.

Willi McCarey, an AT&T vice president and general attorney, said Friday that the corporation commission's staff had done ``an excellent job'' in compiling its report.

Eventually, she said, AT&T and other phone companies will build their own local networks. In the meantime, she said, ``only with appropriate resale rates can we assure all Virginians can get our service.''

Paul Miller, a Bell Atlantic spokesman, said his company was disappointed by the commission staff's finding. ``We feel certain that after the commission weighs all the testimony, they'll agree with us,'' he said.

The State Corporation Commission's staff has recommended that Bell Atlantic-Virginia be required to offer steep discounts to carriers that plan to lease the Bell Atlantic network to offer competing services to their consumers.

The three-member commission, which will ultimately decide the matter, generally follows its staff's recommendations. The commission will begin a hearing Thursday in Richmond to hear more evidence.

For AT&T Corp., the stakes are high. In fulfilling its mission of being an all-purpose telecommunications provider, it needs to re-enter the local phone market. AT&T was forced out of that market in 1984 by the breakup that created the Baby Bells.

AT&T decided reselling - rather than building its own network - is the best route into the local-exchange market, at least initially. MCI Communications Corp. is taking a similar tack.

Bell Atlantic negotiated with AT&T, MCI and other aspiring local-exchange competitors for several months, but failed to reach resale agreements with the largest of the potential challengers. That put the issue in the laps of the commission and its staff. In a filing with the commission, AT&T asked for a discount of as much as 27.5 percent from Bell Atlantic-Virginia, while MCI suggested 21.9 percent. Bell Atlantic contended a discount of no more than 11.9 percent is justified.

The differences are great because each company has its own opinion on how much money Bell Atlantic will save when resale competitors provide their own customer support and directory assistance to people who switch to their services.

KEYWORDS: SCC BELL-ATLANTIC VIRGINIA by CNB