SBC Loses Bid to Sell Long-Distance
SBC Communications lost its bid to become the first Baby Bell to begin selling long-distance phone service in its own territory Thursday when the Federal Communications Commission turned down its request to enter the market in Oklahoma.
The Telecommunications Act of 1996 promised to let local phone companies such as SBC--the parent company of Pacific Bell and Southwestern Bell--expand into the lucrative long-distance market once their own local markets were open to competition.
SBC argued it had met a 14-point checklist of conditions that ensure Oklahoma is open to competition after spending $1.2 billion and devoting 4,000 employees to the effort. As evidence, the company touted the fact that rival Brooks Fiber Properties of St. Louis was providing local service to four Oklahoma-based Brooks employees as part of a test program.
But the five-member regulatory panel disagreed. FCC Chairman Reed Hundt said the company “plainly failed to meet the standards” set forth in the telecom law.
The decision marks the first time the FCC has ruled on a Baby Bell’s request to offer long-distance service in a state where it already sells dial tones. Although local phone companies are free to enter the $70-billion long-distance business outside their home territories, they must get federal permission before opening up shop in their own states to ensure that they don’t abuse their position as historical monopolies.
The FCC’s rejection was widely expected among telecom watchers, especially since the Justice Department recommended last month that SBC’s application be denied.
“There was very little likelihood that SBC’s application was going to be approved, especially once it was opposed by the Justice Department,” said attorney Scott Harris of Gibson, Dunn & Crutcher.
Still, David Lopez, president of Southwestern Bell of Oklahoma, called the FCC’s decision “a defeat for Oklahoma’s consumers, for long-distance and local competition in the state, and for the Telecommunications Act of 1996 that was meant to foster such competition.”
Lopez emphasized that the Oklahoma Corporation Commission decided that Southwestern Bell had “fully opened its network for competition.”
SBC shares rose $1.3125 to close at $60.125 in New York Stock Exchange trading.
SBC’s competitors were buoyed by the decision.
There must be a “legitimate potential” of real competition in a market before the Bell companies can start selling long-distance, said Dick Metzger of the Assn. of Local Telecommunications Services, which represents a group of non-Bell local phone companies that opposed SBC’s application.
AT&T;, the nation’s largest long-distance carrier, heaped praise on the FCC’s decision.
“SBC fell far short of the standard a Bell company should meet before even filing an application” to provide long-distance service in its own territory, said Mark Rosenblum, the company’s vice president of law and federal government affairs.
AT&T; and SBC are said to be discussing a possible merger. Such a deal between potential rivals “would frustrate the pro-competitive purposes” of telecom reform, Hundt said Thursday.
