Countdown: Bells Gain Ground inLong-Distance War

Posted: 2/2003

Countdown: Bells Gain Ground in
Long-Distance War

By Josh Long

THE
LONG-STANDING WAR TO CONQUER long-distance customers is about to climax. The
Bells are ready to invade the turf dominated by AT&T Corp., WorldCom Inc.
and Sprint Corp.

The four Bell operators have been
granted federal authorization to provide voice and data long-distance services
to consumers and businesses within most of their local regions (see table).
Heading into the New Year, the companies still were restricted from providing
long-distance services in a total of 13 states.

In those states where the Federal
Communications Commission has granted the Bells long-distance relief, the phone
giants have created a major migraine for AT&T and its peers.

SBC Communications Inc., the No. 2
local phone company, disclosed in a 2002 first-quarter earnings release that it
achieved consumer line penetration of about 30 percent in five states within its
13-state territory where it had been granted long-distance relief. SBC served
5.9 million long-distance lines in Arkansas, Connecticut, Kansas, Missouri,
Oklahoma and Texas as of the third quarter, up 28 percent from a year earlier.
In December, the company received long-distance approval in California. Going
into the New Year, SBC needed long- distance approval in six states before
receiving full relief within its region: Illinois, Indiana, Michigan, Nevada,
Ohio and Wisconsin.

Verizon Communications Inc., the No.
1 local phone company, has achieved similar milestones and is the nation’s
fourth largest long-distance company. The company serves about 9.8 million
long-distance customers. In December 2002, Verizon filed an application with the
FCC to offer long-distance services in Maryland, West Virginia and Washington,
D.C., marking its final long-distance applications.

BellSouth Corp. was granted
long-distance relief within its entire nine-state region stretching across the
Southeast. As of Oct. 31, BellSouth provided long-distance services to 659,000
customers in seven states within its territory.

In December Qwest Communications
International Inc., the Denver-based Bell, received authorization to provide
long-distance services in nine states within its 14-state region: Colorado,
Idaho, Iowa, Montana, Nebraska, North Dakota, Utah, Washington and Wyoming.
Qwest was set to apply for long-distance relief in Oregon, New Mexico and South
Dakota in January, and to file applications for its final two states, Arizona
and Minnesota, early this year.

All these applications spell trouble
for AT&T, WorldCom and Sprint. In retaliation, the long-distance giants are
aiming to invade the local consumer phone market, where the Bells continue to
reign. Though AT&T and WorldCom have compensated for long-distance churn by
bundling resold local phone service, that strategy may not be available for much
longer if the FCC changes the regulations which now require the Bells to lease
their networks to competitors at rates based on forward-looking costs (click
here).

Telephone companies have moved
swiftly over the last year to bundle local and long-distance services.
"This is not just about long distance or about voice services. It’s about
data and the bundle," independent analyst Jeff Kagan noted last year,
commenting on BellSouth’s long-distance approval in its nine-state region.
"Many people wonder why the Bells still want to get into long distance so
badly since it’s not a great growth business anymore. The reason is simple. It’s
to remain competitive."

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FCC State-byState 271 Application Status

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