Bells are failing to compete as they promised

Call it the "quid" without the "pro quo."

In a grand bargain over the past few years, the government has allowed the eight dominant local carriers - the seven original Bells plus GTE Corp. - to shrink to four in exchange for written promises to begin competing with one another.

Nearly halfway into the three-year period the government defined for SBC Communications Inc. to compete locally with the three other Bells, users and independent competitive local exchange carriers (CLEC) call SBC's effort virtually invisible.

For its part, Verizon Communications Inc. has actually pulled back competitive offers against SBC's Pacific Bell unit, while BellSouth Corp. readily concedes a lack of CLEC efforts. Qwest Communications International Inc.'s plans are just beginning to take shape.

But SBC's promises were the flashiest - a plan to enter 30 new markets in exchange for buying Ameritech in 1999. And because SBC has since been fined millions of dollars by state and federal regulators for declining performance in the Ameritech region, users are looking hardest at SBC to provide a silver lining. They'd like to see the carrier offer services that challenge other dominant carriers.

So far, they're not finding such competition. In New York and Long Island, where SBC says it turned up CLEC service against Verizon late last year, large companies with sister offices in SBC's native territories - exactly the type of businesses the carrier said it would go after - remain unaware of SBC's market entry.

"Gee, they haven't made that very well-known," says George Sullivan, senior network architect for Logicon, the IT services subsidiary of Northrop Grumman in Bethpage, N.Y. "I have a very keen ear for the Long Island market, and I haven't heard squat."

In Boston, which SBC says it entered in October, competitors are likewise mystified. AT&T Sales Vice President Rick Freidel says he's seen SBC in only one bid for local service, and that was for a customer spending less than US$5,000 per month.

Users and carriers are even more perplexed in Baltimore and Washington, D.C., where SBC announced it would begin service last November, then delayed switch turn-up several times. Now the carrier lists both cities on its Web site under a grab-bag category of 19 markets due "before June 2002" - four months before the SBC/Ameritech merger conditions expire. Meanwhile, SBC's sales center is telling callers that service begins this summer.

Yet SBC deployed a salesforce last fall in Maryland and Virginia, causing consternation when representatives had to pull back installation dates.

Baltimore Gas & Electric got pitched by SBC on a competitive bid for several Primary Rate Interface circuits, says BGE telecom official Jim Kane. But he dropped SBC from consideration after switch turn-up was put off.

SBC spokeswoman Wendy Flanagan says the delays relate to a strategy shift revealed in a Dec. 19, 2000 alert from SBC's investor relations group. The alert notes that within some of SBC's native states, government approval for long- distance authority is coming slower than expected. SBC decided to pull back some new markets by an average of six months "to better synchronize timing with [in-region] long-distance approvals."

Yet SBC appears to have skimped on key opportunities even where it went ahead on schedule. In some of SBC's new target markets, the federal government is awarding CLEC contracts under its Metropolitan Area Acquisition (MAA) program. SBC won a share of the Boston MAA contract, but according to federal officials, did not bid for the MAA awards in Philadelphia and Atlanta - two other cities where SBC has begun operations.

Even in Boston, SBC has not actually begun service to any federal building, says one federal contract administrator. "We have a little issue going on with them right now," says the federal official, declining to elaborate.

Other users may be cold to SBC's offer even if they do get pitched. Larry Sanderson, vice president of telecommunications for Computer Services, Inc. (CSI), a bank processing firm in Paducah, Ky., spends about $500,000 per year with Ameritech, mostly for 56K bit/sec and T-1 circuits into bank clients. Yet SBC hasn't contacted Sanderson for service at CSI's locations in Denver and other recently turned-up SBC markets.

Sanderson likes the idea of a regional Bell operating company going out of region, but says, "I would be interested in doing that with some other RBOCs, not SBC." Especially in Ameritech states, where he says, "they have a very hard time meeting their installation dates. They don't even tell you until the last minute, and then they can't tell you what date they can meet."

Despite concern about SBC's CLEC rollout, the company is not in danger of missing federal merger requirements. Next month SBC reaches the halfway point of the three-year merger-conditions period, but by then the carrier is only required to have placed a switch and installed three customers in each of its 15 markets, under its deal with the Federal Communications Commission.

Some analysts defend SBC's market-timing pullback, noting a general retrenchment among CLECs. That also appears to be the case with Verizon, which is obligated to spend $500 million on CLEC operations under its Bell Atlantic/GTE merger deal.

In December, Verizon told 670,000 customers, including many of whom had switched local service from Pacific Bell, that it was ending a bundled local/long-distance service originated by GTE. Verizon spokesman Jim Smith says Verizon executives soured on plain old telephone service bundles and decided to start fresh with a CLEC strategy centered around in-building DSL installations and acquisitions.

But Qwest, the successor to US West, says it has begun business DSL service as a CLEC in major California and Texas markets, plus Baltimore, Washington, D.C., and, starting last week, Boston.

Augie Cruciotti, Qwest's executive vice president for local networks, says Qwest is best-positioned to become a CLEC because it started as a national carrier and already has points of presence in its targeted markets.

In a dig at SBC and Verizon, Cruciotti adds: "This isn't a shell game. This isn't a merger requirement that somebody made us do and we're going to do as little as possible."

BellSouth, which hasn't merged with anybody and has no merger conditions, isn't bothering to claim any big plans. Spokesman Bill McCloskey says BellSouth has CLEC licenses for some adjacent territories, but "in most cases we're not doing anything with them."

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