DATE: Wednesday, July 16, 1997              TAG: 9707160483

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY LON WAGNER, STAFF WRITER 

                                            LENGTH:   98 lines

LONG-DISTANCE CHARGES FLY MA BELL AND THE BABIES FEUDED THEMSELVES INTO A STALEMATE OVER A RATE AGREEMENT, WHICH THEY MUST HAVE BEFORE THEY COMPETE.

Thirteen years after the federal government broke up AT&T, Ma Bell and her Baby Bell offspring are behaving like members of a dysfunctional family.

Last year's telecommunication act laid the foundation for AT&T and the six Regional Bell Operating Companies to plow into each other's phone markets. But head-to-head competition is still rare, because Congress mandated that the companies first negotiate interconnection and rate agreements with each other.

Those negotiations have turned nasty, with both sides refusing to budge.

The six Baby Bells, now teen-agers, are sniping at Ma Bell. She's a brute, a monopolist scared to compete, they say.

Ma Bell, for now, has a ready retort aimed at consumers: When's the last time you got to choose your local phone service provider?

Federal Communications Commission Chairman Reed Hundt on Tuesday said he will put together a panel to look at whether the Baby Bells are stalling to keep rivals such as AT&T, MCI and Sprint from entering the local phone markets.

The FCC will look at whether it should take more aggressive steps to open up the $100 billion-a-year local phone market.

The stalling, regardless of which side is responsible, is denying consumers the choices and price competition promised by the 1996 telecommunications act.

Tuesday's news was just one volley in a string of recent skirmishes between the Bells and long-distance companies.

A June 30 AT&T announcement that it was reducing its basic residential rate by an average of 7.6 percent is a good example of the public relations war.

The background: The FCC required Bell Atlantic and other local service providers to reduce the fees they charge long-distance companies to complete calls on local phone networks.

AT&T's press release about its rate cut arrived at 11:56 a.m.:

``We are taking this action as a result of a recent FCC order calling for reductions in the access fees long-distance companies must pay the monopoly local telephone companies,'' the company said.

Two minutes later, Bell Atlantic's response arrived. The No. 1 local service company in Hampton Roads and the state said it had filed a protest with the FCC. Bell Atlantic alleged that AT&T was not passing on all the access-charge reductions, and instead would ``put hundreds of millions in access savings in its own pocket.''

``Not everybody sees the reduction,'' said Paul Miller, Bell Atlantic of Virginia spokesman. ``They end up passing the savings onto their best customers: the fat cats and business customers.''

The access-charge scuffle is a side show compared to the main issue: ``interconnection agreements.''

The 1996 telecommunications act granted the Bells' wish to enter the long distance business, from which they were barred in the 1984 AT&T breakup. But there's a catch: They first have to show they face competition in their local phone monopolies.

The Bells can help open up their local markets by signing interconnection agreements with would-be competitors. Those agreements state that, for instance, when a Cox Fibernet customer calls a Bell Atlantic customer, Bell Atlantic will complete the call - and vise versa.

The Bells can then present those interconnection deals to the FCC as evidence of competition. Bell Atlantic of Virginia has signed interconnection agreements with 14 companies, including offshoots of two of Virginia's largest cable TV providers: Cox Fibernet and Jones Telecommunications.

But AT&T is still the big boy in the telephone industry. It brings in about $24 billion a year in revenues selling long-distance service to consumers. If Bell Atlantic were to sign an interconnection deal with Ma Bell, it would look mighty good to the FCC.

So far, the FCC has not given any of the regional Bells permission to sell long-distance service to their own local customers. As far as it's concerned, the Baby Bells are not yet in a competitive environment.

Both sides say it is the other party holding things up.

``AT&T is far more interested in keeping us out of their huge long-distance empire than they are in selling local service,'' Miller says.

AT&T denies it is stalling. Spokesman Ritch Blasi says the company could easily use its base of 80 million customers nationwide to snatch 25 percent to 30 percent of the Bells' local service market in five years.

``It's not a matter of us dragging our feet, we're not,'' Blasi says. ``We want to make sure people can switch local service as easily as they can long-distance service.''

The fight isn't so much over local or long-distance service, but which company can sell heavy phone users on a package of services: call waiting, caller ID, long-distance, international and Internet, says Fred Voit, senior communications analyst at The Yankee Group in Boston.

``The more hooks you have in a customer, the better,'' Voit says.

From that end, Bell Atlantic is winning points in its home region. Two years ago, The Yankee Group asked consumers in Bell Atlantic's region which company they would most trust to provide local and long-distance service. More than 48 percent picked AT&T; just under 30 percent chose Bell Atlantic.

Last year, the communications consultancy asked the same question: 40.9 percent picked AT&T, while 36.5 percent chose Bell Atlantic.

Bell Atlantic says it hopes to be offering long-distance service in Virginia by early next year. By then, AT&T will be offering local services.

That's when the battle will really get hot. ILLUSTRATION: [Color illustration]

JOHN CORBITT

The Virginian-Pilot

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