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Jax Daily Record Friday, Sep. 14, 200112:00 PM EST

BellSouth eying long distance market

by: Bill Johnson

The public relations war between BellSouth and other phone service providers is shifting into high gear as the telephone giant prepares, once again, to ask the state’s Public Service Commission for permission to offer its own long distance service.

While BellSouth doesn’t come before the PSC until Oct. 11, company spokesmen contend that the PR battle leading up to the commission’s hearings and subsequent decision will count for a lot.

“Resistance to our filing from entrenched long distance providers is certainly no surprise,” said BellSouth-Florida president Joe Lacher in a press release. “ Everyone should be wary of the onslaught of misinformation and half-truths that are likely to be unleashed by those trying to restrain the competition.”

To combat this “misinformation” campaign, BellSouth has launched its own public relations blitz, calling in media representatives to explain that the company’s entrance into the long distance market would save Florida customers up to $1.2 billion, lowering prices by 20 percent to 32 percent. Furthermore, the company cites the inequities of long distance companies being able to compete in local telephone markets, while BellSouth is prevented by law of competing in the long distance market.

Of course, its competitors have a slightly different take on the situation.

They contend BellSouth has not allowed competing local service phone companies equal access to its lines. They this unfair competition on local service should not be rewarded with long distance approval.

“Philosophically, we are not opposed to them providing long distance,” said Susanne Hite, NewSouth’s director of corporate communications. NewSouth deals in local as well as long distance service. In the local service, they compete with BellSouth already. “What we want them to do is to follow the points of the Telecommunications Act, so that there is viable competition and the new kids on the block have a fair chance to play.”

As of now, Hite said, “We don’t feel they’re following some of those other rules, the biggest of which is: we need access to elements of their network for us to do this.”

“The majority of the customers we get come from them. To transfer a customer’s service from BellSouth to us, we have to have access to their network to do that. That cut, what we call a cut, they have to do things that make it possible for us to cut that customer over to NewSouth. And, sometimes they make that process pretty tough.”

Hite said it can take BellSouth 60 to 70 days to make that cut.

“To a lot of businesses, that’s just not acceptable,” she said. Then the potential customer starts to question NewSouth’s service, when in reality, Hite said, it’s BellSouth that causing the delay. She added that although BellSouth has been getting better lately, she thinks that improvement could just be for the purpose of getting PSC approval for long distance and that the telephone giant could easily fall back into noncompetitive practices after it obtains approval.

BellSouth spokesmen Spero Canton and Rande LeFevre call this criticism “disinformation.”

“There’s charges about anticompetitive behavior, which we’ve basically got an internal audit and review and found nothing like that,” said Canton. “With 6.8 million access lines, and $5.2 billion that is the long distance market here in Florida, it gives you an idea of why the long distance companies are leading almost a disinformation campaign about BellSouth service to the PSC and regulators, because they want to keep up their ties into that revenue and market share as much as they can. They really don’t want a competitor like BellSouth getting in there, and, as we’ve seen in other areas, go ahead and take 10, 15, 20 percent of the market share.”

In fact, said LeFevre, if anyone is being treated unfairly, it’s BellSouth, who is unable to offer its customers a complete package of telephone services, such as the NewSouths and AT&Ts.

“They’ve got 360 degrees,” he said. “And we’ve only got about 180.”

In addition, BellSouth is losing about 30 percent to 40 percent of its business customers to other local carriers, Canton said, because it can’t offer long distance in a package and because it has to provide unprofitable residential service, whereas the other carriers can just concentrate on the more-profitable business customer. Residential prices are regulated to about half of what it costs to provide the service, Canton said. Because it’s unprofitable, the other carriers don’t pursue that market. They pursue the business customers, whose lines do represent a profit. And, because they don’t have to take a financial hit on the residential lines, they can offer more competitive pricing for the business lines, he said.

With the economy on a downturn, Canton said the stakes are even higher.

“A lot of these businesses are going this way (down),” he said. “Well, when you go that way it’s easier to put the blame on somebody other than the one running your business or your business practices. Put the blame on the competitor, us, not providing them parity of service for their customers. It’s just one of many — and I’m sure I could list many of them — different ways that they’re creatively trying to disparage us and basically say we don’t provide them the equal service that we give to our customers, which is totally false.”

Canton holds New York and Texas up as examples of former baby Bells coming into the long distance markets and driving consumer prices down — up to 50 percent reduction, Canton said.

“In Texas, AT&T reduced its long distance rates from 15 to 7 cents. That’s when SBC started offering long distance,” he said. “The best thing we can do for competition in the state of Florida is to give BellSouth long distance approval. Because that way you really jump start competition in the local market as well as the long distance market. The good thing that comes out of all that is the fact that consumers benefit.”

NewSouth’s Hite said the issue is “multifaceted,” and that BellSouth “has some good points.” But she added, many of the companies BellSouth is pointing to, claiming that there is ample competition for it to join the long distance battle, could likely not withstand it entering the market with uncompetitive practices.

“The issue that we run into is, really, time,” she said. NewSouth could challenge possible uncompetitive practices by BellSouth, but the resolution might not be available until after her company or other smaller companies are forced to close their doors.

“It’s a very capital-intensive business,” Hite said. “We’re not profitable yet. If we can’t get a customer cut because of Bell, they’re costing us money. There are measures in place to go after Bell, but we can’t get it fixed the next week.” And that, she contends, could be too late.

As for the big boys, like AT&T, they’re not too thrilled with BellSouth’s move either.

AT&T spokesman Gus Alfonso said testing to ensure BellSouth is not discriminating against competitors for local service is “far from complete.

“Until BellSouth proves that its systems work in the real world in a nondiscriminatory way, and that it no longer gouges competitors with exorbitant wholesale rates, an open market for local service competition will remain virtually nonexistent,” he wrote in a statement. “Long-distance customers can choose among hundreds of competitors and they can make the switch quickly and easily with no interruption of service. Switching local carriers — where it’s possible at all — remains a long, difficult process.

“One more long-distance competitor won’t help consumers nearly as much as many new competitors for their local telephone business.”

Alfonso also said that the PSC is unlikely to grant BellSouth’s request until it completes its investigation of anticompetitive practices alleged by the small South Florida phone company IDS. That investigation, he said, only began a couple of weeks ago.

Alfonso said the third-party testing is currently underway to determine if BellSouth has truly opened its local service facilities to all competitors.

He noted none of the other Southeastern states BellSouth serves have seen fit to give it long distance, either.

AT&T and other long distance carriers have offered one solution to BellSouth, and that is the structural separation of the company into a wholesale division and retail division. The retail would have to buy service from the wholesale just like any other local service phone company. So far, the company is resisting such a drastic change.

“That monopoly power is just too overwhelming for them to let go of it,” said Alfonso. “They want to have their cake and eat it too.”

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