FCC Allows All Bells to Combine Local, LD Operations

Qwest Communications International Inc. no longer is the only BOC one-stop shop. On Aug. 31, the FCC released an order that allows AT&T Inc. and Verizon Communications Inc. to also combine their local and long-distance operations.

Under Section 272 of the 1996 Telecom Act, Bells must provide long-distance service in their own regions through separate corporate affiliates the clause stipulates that the Bells and their affiliates cant jointly own transmission and switching equipment. That translates into duplicate operations.

But the FCC in February granted Qwest relief from that requirement, relief the carrier had sought for two years. That prompted AT&T Inc. and Verizon Communications Inc. to ask for the same treatment¬¬¬¬. The claim is that the companies save money because they are able to integrate redundant processes and job titles. Critics fear the relief gives the incumbents license to raise prices.

FCC commissioners said the old framework is at odds with a market where local and long-distance services increasingly are provided as part of a bundle. The agency further said consumers are protected; it cited a requirement that BOCs offer special rate plans for three years to consumers who make few long-distance calls.

Still, Democratic commissioners Jonathan Adelstein and Michael Copps said they agreed only in part to the order. For example, they said it didnt take into account the full effect of market consolidation on consumers.

Nonetheless, AT&T and Verizon now are free to combine facilities and people, as Qwest did earlier this year. That carrier, the third-largest local phone company in the nation, was able to train employees once, rather than twice; file one set of reports, instead of two, with state and federal regulators; and put business clients services on one contract and bill, as opposed to working with separate documents.

That didnt stop critics from wondering whether the FCC has imposed enough safeguards for competitive providers, however. Earlier this year, Karen Reidy, vice president of regulatory affairs for COMPTEL, told PHONE+ the association hopes Qwest doesnt take unfair advantage of its position. We want to make sure they treat other carriers as they treat themselves, she said.

Qwest did refuse speculation that it might raise rates. Given the rivalry it faces, prices are more likely to go down, one executive said.

Section 272 expired in all states last year, but the Bells had to ask the FCC to deem them nondominant. The FCC presumes a Bell company to be a dominant carrier unless the agency decides otherwise. The FCC strictly regulates dominant providers because they can raise market prices.

Verizon and AT&T have said the deregulation wont hurt the public because of the range of available communications choices. They also have said there is precedent for declaring them nondominant, going back to 1995 when the FCC agreed to classify AT&T as such. That put AT&T on par with rivals MCI and Sprint. Notably, the company then could change its rates within one day of telling the FCC about that adjustment, instead of having to wait 45 days.

AT&T Inc.
Qwest Communications International Inc.
Verizon Communications Inc.

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