MCI Begins Offering Local Phone Service in California

Long-distance giant MCI Communications on Monday became the biggest company to offer local phone service to California’s residential and business customers already served by Pacific Bell and GTE--a direct result of the landmark telecommunications reform law signed by President Clinton in February.

Washington-based MCI turned on its local networks in Los Angeles, San Diego and parts of Orange and San Bernardino counties, making it the first of the major long-distance carriers to compete for a share of the state’s multibillion-dollar local phone market.

Rival AT&T; also received approval Monday from the state Public Utilities Commission to begin selling dial tones in Pacific Bell’s California territories.

The Southland communities are the first markets MCI is targeting in the Golden State, although the company now offers dial tones to customers in 14 other cities nationwide from New York to Seattle. Service in San Francisco is planned for early next year.

About 100 firms have signed up to offer local service in California, but few are actually delivering it. For the most part, they are planning to target the lucrative market for business customers.

MCI said business customers will pay at least 10% less than Pacific Bell’s current prices, and residences will pay $24.95 a month for a phone line and unlimited local calls, including toll calls. MCI began pre-selling the service in September, said Lynn Coker, MCI’s director of local services.

AT&T; will soon follow MCI--which last month announced its plans to merge with British Telecommunications of London--into the historically monopolistic market. The nation’s largest phone company will begin selling service to residents of Sacramento immediately, with customers coming online in about 10 business days, said AT&T; spokeswoman Diane Schwilling. Plans for businesses and residences in other parts of the state will be announced soon, she said.

Sprint is testing local phone service in San Diego and Santa Barbara in the hope it will expand service soon.

Both MCI and AT&T; will buy local phone service from Pacific Bell at wholesale prices and resell it to customers. MCI is also serving some business customers with its own local loops and switching facilities, which the company began building three years ago in anticipation of telecommunications reform. Although Congress hoped the new laws would spur spending in the telecommunications infrastructure, few companies have made significant investments in new equipment.

MCI’s entry into the market is welcome news to San Francisco-based Pacific Bell, which must prove that the market for local phone services is truly competitive before it can begin selling long-distance service, another provision of the Telecommunications Act of 1996.

“This is a clear answer to the question of when will there be competition here in California,” said Lee Bauman, PacBell’s vice president for local competition. PacBell parent Pacific Telesis Group hopes to enter the long-distance market in early 1997, although state and federal regulators are likely to make the Baby Bell wait longer.

Consumer activists are far less certain that MCI’s entry into the market will automatically lead to the vigorous competition that legislators had in mind when they voted to overhaul the nation’s telecommunications laws.

“I don’t think it’s a foregone conclusion that just because an MCI or an AT&T; is now providing service that we now have healthy local competition,” said Regina Costa, telecommunications research director for Toward Utility Rate Normalization, a watchdog group in San Francisco.

After all, it took years for MCI and others to make a dent in the AT&T-dominated; long-distance market. In the early part of the century, before Pacific Bell earned its monopoly status, local phone service providers preferred to compete for customers by giving away free phones rather than lowering calling rates, she said.

Shares in MCI rose 25 cents to close at $31.75 in Nasdaq trading; and AT&T; rose 62.5 cents to $39.25 on the New York Stock Exchange.