Would-Be Rival Plans Challenge to Phone Firms : Telecom: Teleport wants to offer local service to companies providing access to computer resources such as the Internet.

It’s illegal for anybody but the local telephone monopoly--presumably Pacific Bell or GTE--to offer local telephone service in California, right?

Maybe.

Teleport Communications Group, a would-be rival of those two giants that is backed by the cable TV industry, has asked the state Public Utilities Commission for permission to introduce local phone service on a limited basis to companies seeking to provide access to the Internet and other computer-based information resources.

If the PUC grants Teleport’s request, which was presented to the commission Friday, it will simply be making kosher an activity in which Teleport is already engaged, more or less.

By an interesting quirk--one perhaps technically in violation of telecommunications regulations--Teleport is providing local exchange service on a very small, experimental scale to a San Francisco start-up company that plugs its 100 customers into the Internet, the expansive network of electronic networks.

The fledgling Internet “gateway” company, called Hooked, sought out Teleport’s services after a Centrex system installed by Pacific Bell in mid-March failed to meet its needs.

By not charging Hooked for the connections, Teleport maintains that it is not reselling local phone service and therefore not acting illegally. But company officials acknowledge that Pacific Bell might view things differently.

“We’re seeking to provide this service in response to consumers who have had so much trouble with their monopoly phone company that they are literally in danger of being put out of business,” said Jim Washington, Teleport’s western region vice president, based in San Francisco. “Our customers are desperate for service.”

In December, California regulators disclosed their intention to deregulate the state’s telecommunications industry, basically opening long-distance and local markets to unbridled competition by 1997.

Like a camel insinuating its nose under the tent, fast-growing Teleport--a 10-year-old firm based in Staten Island, N.Y.--hopes to position itself to take advantage of deregulation through the fiber-optic networks and switching capabilities it has in place.

Teleport already has a robust business linking corporate customers to long-distance carriers in more than 150 major markets, including Los Angeles, San Francisco and San Diego. Local phone service would be a natural extension, and Teleport officials said they expect the company will have as many as five customers like Hooked within a year if the PUC grants its request.

Teleport is owned by a bevy of telecommunications and media powerhouses, including Cox Enterprises Inc., Tele-Communications Inc., Comcast Corp. and Continental Cablevision Inc. Time Warner Inc. has also agreed to buy a stake.

David Holub, a founder of Hooked, testified about his experience Friday at a hearing in Sunnyvale before state regulators and representatives of the National Telecommunications and Information Administration, which is wrestling with deregulation, access and other issues.

To be fair, he said in a telephone interview later, Pacific Bell has offered to supply the connections he needs and has apologized “for all the confusion.” However, he added, he would prefer to stick with Teleport’s service, which he said is technically superior.

“I feel like a bit of an Internet poster child,” he said ruefully, “a small company trying to get off the ground.” Competition, he said, would benefit customers like Hooked.

Pacific Bell has maintained that it favors competition but wants to ensure that all contenders operate under the same rules.

“It would appear that Teleport is trying to prematurely offer (these) services,” said Michael Runzler, a spokesman for Pacific Telesis, the parent of Pacific Bell. He said the company will oppose Teleport’s application.

The cable industry, meanwhile, says Pacific Bell itself is trying to sneak into new business lines ahead of regulatory approval. Last week, the California Cable Television Assn. asked the Federal Communications Commission to look into whether Pacific Bell has begun building a statewide video network before receiving the necessary federal approvals.

The phone company acknowledges that it will begin laying new cable this month with video in mind, but it insists it will not offer video services until the FCC gives its OK.