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State Gives SBC Right to Offer Long-Distance

Times Staff Writer

SBC Communications Inc. will realize a long-awaited goal today when it begins providing long-distance telephone service in California after the state Public Utilities Commission gave the company its final stamp of approval Monday.

Formerly known as Pacific Bell, SBC will compete against AT&T; Corp., WorldCom Inc.'s MCI unit and other long-distance carriers in addition to dominating the market for local calling in California. SBC’s network covers 78% of the state, and the San Antonio company controls 90% of California’s residential access lines and 80% of its business lines.

SBC has been fighting for the right to offer long-distance service in California’s $15-billion market since Congress passed sweeping deregulation laws designed to spur competition in the telecom industry in 1996. Those laws set out 14 requirements that incumbent local phone companies such as SBC had to meet to get permission from the Federal Communications Commission to sell long-distance, including opening their networks to competitors.

SBC rivals had urged state and federal regulators to deny SBC’s requests to enter the California long-distance market on the grounds that the company still held a monopoly in local service. But the PUC’s final approval was considered a foregone conclusion after the FCC’s ruling this month that the company had met the legal criteria to offer the service.

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Minutes after the PUC vote, SBC announced rate packages that bundle long- distance with other services, including local calling and high-speed Internet access. The firm also will offer domestic long-distance as a stand - alone service for 10 cents a minute.

The new SBC packages generally do not provide considerable savings over plans offered by major competitors, according to Rich Sayers, who runs a price-comparison Web site called 10-10PhoneRates.com.

But SBC, headed by Edward E. Whitacre Jr., is expected to become a formidable competitor almost instantly. “Historically, when a Baby Bell like SBC enters the consumer long-distance market, it can take up to 20% of the market in the first 12 months,” said analyst Cory Jackson of US Bancorp Piper Jaffray.

Even so, that wouldn’t mean a huge boost for SBC’s overall finances. “It will be an incremental positive,” said Jackson, who holds no stock in the major telephone service providers. “We are talking about a company that already has billions in revenue.”

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One possible downside for SBC, Jackson added, is that the company will find itself under increased scrutiny from regulators to make sure it does not use its vast network of wires to engage in anti-competitive behavior.

SBC shares fell 1 cent to close at $27.27 in New York Stock Exchange trading Monday.

SBC officials described their entry into long-distance in California as a major step forward.

“This is a great way to start the new year,” said Christie Gillison, executive director of voice services. The company will promote the new packages heavily in an advertising and telemarketing campaign to its 10 million Golden State customers.

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SBC’s rivals criticized the PUC vote. AT&T; President Ken McNeely called it “puzzling and disappointing.”

“After fooling regulators into believing they would play by the rules,” he said, “SBC is now trying to change the rules to crush competitors.”

State regulators initially agreed with such concerns. But this month a PUC administrative law judge proposed safeguards to make sure that others could vie fairly with SBC, including requiring the state to monitor whether the company gives competitors equal access to its local phone lines. With those measures in place, the judge said, SBC should be allowed into the state market if it won FCC approval.

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Times wire services were used in compiling this report.


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