Rivals Slam SBC/Ameritech Proposals

New local carriers say they've found a giant devil in the details in a proposed set of conditions for the pending merger of SBC and Ameritech.

Rivals of the two Bell giants on Monday are expected to protest to the Federal Communications Commission that the merger conditions -- announced three weeks ago -- are riddled with loopholes and are unlikely to give users many new local service options.

On June 29, the FCC's staff announced that SBC had agreed to pay heavy fines if it does not enter 30 new out-of-region markets as a competitive local exchange carrier (CLEC) after it buys Ameritech. But it wasn't until two days later -- July 1 -- that SBC actually filed the text of the merger conditions at the FCC.

The 118-page text reveals that SBC is considered to have entered a new market as soon as it has installed equipment in one central office and has sold service to one customer.

Angry SBC rivals, including longdistance carriers and independent CLECs, say that the way the merger conditions are written, they doubt any of the potential fines -- for out-of-region entry and numerous other issues -- are enforceable.

"It's clear that [the merger conditions text] was written by SBC, and it's clear that it was written in such a way for SBC to avoid a lot of its obligations," charges Emily Williams, a senior attorney with the Association for Local Telecommunications Services (ALTS), a CLEC trade group.

The FCC is expected to get an earful of these complaints today when written comments are due at the commission.

For example, critics are pointing to provisions requiring SBC to set up a uniform system for competitors to place customer-change orders electronically throughout its 13-state region. SBC and the FCC had announced that the RBOC will owe fines if it fails to put in place such a uniform platform for what carriers call an operations support system (OSS).

But under the text of the merger conditions, SBC first gets six months to draft a plan for a uniform OSS. Then it gets one month to review the plan with a group of CLECs. Finally, it gets another two years to implement and test the uniform OSS.

To avoid fines, SBC need only file a statement of compliance with the FCC. If rivals want to contest SBC's claims, they must agree to arbitration. And according to the merger conditions, the arbitration will be conducted "in consultation with subject matter experts selected from a list of three firms selected by SBC/Ameritech."

Not all SBC competitors are upset by the merger conditions. Northpoint, a digital subscriber line specialist, praises a commitment by SBC to create a separate subsidiary for broadband services, and an offer to temporarily discount 50 percent of the wholesale price of DSL loops to competitors.

In addition, SBC will offer 25 percent off the regular wholesale rate for competitors to buy non-DSL loops. But that promotion is limited to residential lines and only lasts until SBC has wholesaled a certain number of loops in each state.

Some observers fear that once the merger is approved, SBC may seek shortcuts. For example, SBC may purchase non-Bell carriers rather than build its own networks out of its region.

"There is nothing that would stop it from just gobbling up CLECs," says one long-distance industry official.

Even at that, for the first year after the merger closes, SBC has only committed to entering local markets in Boston, Miami and Seattle -- with a minimal buildout.

"It looks like it's very easy for the company to go in and get a single rack in a single central office and be done with it," says ALTS Vice President Jonathan Askin.

Not all of the FCC's five commissioners have agreed to vote for the merger with the negotiated conditions.

"The parties to [the merger] should not delude themselves into thinking that the staff-negotiated conditions are the final ones," FCC Commissioner Harold Furchtgott-Roth warned in a statement.

But analysts note that SBC is making one commitment of key interest to FCC Chairman William Kennard -- to roll out new services to poorer neighborhoods.

"The telecom act for the residential market is Code Blue," says Scott Cleland, managing director of the Legg Mason Precursor Group in Washington, D.C.

Under the merger conditions, Kennard finally gets a commitment for some residential telephony competition, "and SBC gets approval of its merger and controls its own destiny," Cleland says.

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