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A Giant Leap for Bell-kind

Posted: 6/2003

A Giant Leap for Bell-kind

The
Bell companies nearly have sewn up approvals to provide in-region long-distance
services — down to seven from 13 at the end of 2002.

After receiving approval from New
Mexico, Oregon and South Dakota in mid-April, Qwest Communications International
Inc. is seeking such permission in only two states, Arizona and Minnesota — the
latter may come sometime this month. And, SBC Communications Inc. lacks
authority in five states — the former Ameritech territory — after having
recently secured its second and final approval in Pacific Bell territory with a
win in Nevada.

In
granting the Nevada approval, however, regulators have made a giant leap — pun
intended — in equating competition with the presence of a wireless service
provider and a bankrupt one at that. The FCC said the phone giant has opened its
local network to competitors and there is at least one rival serving Nevada’s
residential local phone market: Cricket, a subsidiary of bankrupt Leap Wireless
International Inc.

The FCC found SBC had met the
so-called Track A requirement in the Telecommunications Act of 1996 that says
before a Bell company can offer long-distance services within a state, at least
one competitor must be providing local phone service to business and residential
customers. In a 1998 order, the FCC decided PCS service could meet the criteria
if a Bell company could show PCS is replacing the landline phone.

In its bid for long-distance
approval in Nevada, SBC cited a survey, in which about one in four Cricket
customers polled said they "do not have a traditional landline phone at
home."

Qwest made the same argument as SBC,
citing Cricket as a rival in its long-distance bid in New Mexico. The FCC
granted Qwest’s request based, in part, on documents Qwest provided that show
customers of wireless provider Cricket are using PCS service as a replacement —
not as a supplement — to their landline phone.

In both cases, FCC commissioners
expressed concern over the justification, but approved the applications anyway
based on precedent (BellSouth Second Louisiana Order) and to avoid penalizing
the applicant.

I understand the commissioners’
dilemma, but it seems not to excuse the fact that they have practically taken
the Bells word at face value. In New Mexico, the public utility commission
questioned outright the validity of the proof Qwest provided, saying "there
is no single exhibit, strand of testimony or other piece of evidence that proves
with any degree of reasonable certainty" that Qwest "has met its
burden of showing there is an actual and significant amount of Cricket
subscribers in Qwest’s New Mexico territory who have substituted broadband PCS
service for Qwest wireline service."

In the Nevada order, FCC
Commissioner Michael J. Copps raises similar concerns: "I question whether
such a far-reaching conclusion properly is based on the very limited survey
evidence presented in this application. When we conclude that wireless service
is a commercial alternative to wireline service in the instant context we may
impact Commission efforts to define competitive markets in other contexts. These
include, but are by no means limited to, merger reviews, unbundling analyses and
determinations of dominant carrier status."

The accelerated pace of the 271
approvals is in itself distressing for competitors that now must face aggressive
bundling/pricing strategies, but even more so given recent blatant evidence of
the rubber stamp.

KHALI HENDERSON

khenderson@vpico.com.
Editor in Chief 


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