Ruling Backs SBC’s California Service Plan
SBC Communications Inc. won preliminary approval Thursday to offer long-distance phone service to California residents and businesses, pending final approval from the state Public Utilities Commission.
The ruling by an administrative law judge sets up several safeguards to ensure that SBC California, formerly known as Pacific Bell, doesn’t use its monopoly power as the state’s main local-service carrier to lock out competition.
The 31-page ruling by Judge Jacqueline A. Reed is aimed at resolving issues raised by the PUC in mid-September. At that time, the agency gave SBC lukewarm endorsement to sell long-distance service in California, which at $10.5 billion is the nation’s biggest telecommunications market.
The agency said it was still concerned about SBC’s ability to leverage its power over competitors and keep consumer prices artificially high.
SBC covers about 78% of the state, including Los Angeles, and controls 90% of the access lines in that area.
“We’re very encouraged by the judge’s ruling,” said SBC spokesman John Britton. The company is awaiting final U.S. approval, expected Dec. 19, from the Federal Communications Commission.
Competitors such as AT&T; Corp. and WorldCom Inc. will have until Dec. 24 to file comments, and the commission is expected to rule shortly after that, said H. Gordon Diamond, an AT&T; spokesman. But he wouldn’t comment on the ruling because it was released late in the day and executives had not had a chance to review it.
Independent analyst Jeff Kagan in Atlanta hailed the preliminary decision as a “home run for SBC” and good for competition in the state.
MCI and AT&T; are winning millions of customers away from the Baby Bells nationwide. “It’s a real battle for the customer,” he said. “So it’s important to take the shackles off and let market conditions take over.”
The PUC’s September decision created a confusing situation in which SBC might have been allowed to offer state-to-state long-distance service but not intrastate.
So in theory customers might have had to use two long-distance carriers: one to call between, say, Los Angeles and New York and another to call between Los Angeles and San Francisco.
The reason: Carriers must satisfy regulatory checklists at both the state and the federal level. The PUC held in September that SBC had met the federal requirements but not the state rules.
SBC countered that all it needed was the blessing of the FCC, setting the stage for a protracted fight all parties wanted to avoid.
Reed rejected continuing delays in approving SBC’s application, saying, “The better approach is to erect competitive protective measures so that illegal conduct is prevented, revealed and punished.”
Such safeguards as PUC staff reviews of SBC marketing efforts will help ensure that SBC’s local service operations aren’t illegally subsidizing its long-distance efforts or vice versa, she said.
