SBC Signs Deal to Lease Lines to Sage Telecom

Under pressure to resolve fights over the rates it charges for access to its networks, SBC Communications Inc. has signed the first privately negotiated contract to lease the lines and equipment a rival needs to compete.

The pact with Sage Telecom Inc., based in Allen, Texas, “proves that when two companies are sincere about negotiating terms that are mutually acceptable, it can be done quickly and smoothly,” said SBC Chairman Edward E. Whitacre Jr.

The average monthly rate over the life of the deal, which was signed late Friday night, is expected to be below $25 a line. But neither company would release details, contending that the contract contains proprietary information that, if revealed, would make public Sage’s business strategy.

“Our view is that this is a privately negotiated deal that is not covered by the Telecommunications Act of 1996 and that doesn’t have to be filed with regulators and approved by them,” said Robert McCausland, Sage’s vice president for regulatory affairs.

Sage, which operates in 11 of SBC’s 13 states, including California, expects to reach similar deals with other network owners as it expands, said Sage Chief Executive Dennis M. Houlihan. The company serves 500,000 rural and suburban customers, about 94% of them households. About half of its customers are in Texas, Michigan and Kansas.

Following the guidelines of the Telecommunications Act, which was designed to spur competition in local phone service, California regulators require SBC to lease access to its network for $14.15 a month, a sum based on Federal Communications Commission phone competition rules.

But last month, the U.S. Circuit Court in Washington threw out key parts of the rules, threatening to end lease arrangements that are saving customers more than $10 billion a year. FCC commissioners then issued a rare, unanimous call for the Bells and their rivals to negotiate contracts on their own.

FCC Chairman Michael K. Powell, who has opposed his agency’s competition rules, was heartened by the SBC-Sage deal, one of hundreds that would have to be made in the weeks ahead if private negotiations are to be deemed a success.

“This is an encouraging sign that companies have taken the commission’s call for negotiations to heart,” he said. “I hope this paves the way for further negotiations and contracts.”

SBC reportedly is close to reaching deals with a number of smaller companies. It is unknown, however, whether talks will lead anywhere with major rivals AT&T; Corp., Sprint Corp. and WorldCom Inc.’s MCI unit.

Competition has helped to push down retail rates and spur the development of new services. Newer technologies to get around the last mile to customers’ homes, as well as competition from wireless and some cable companies, also are prompting the Bells to offer better rates to other phone firms.