Anti-Slamming Law Complicates RBOC Mergers

BOSTON (05/23/2000) - Because of an odd quirk in U.S. telecom law, a potentially confusing shuffle of certain users among carriers involved in mergers is about to begin, even though the mergers haven't yet closed.

The Federal Communications Commission has granted regulatory waivers to Qwest Communications International Inc. and GTE Corp. to begin moving certain customers off their networks in advance of the carriers' pending mergers, all without the usual paperwork.

Qwest and GTE are both trying to merge with regional Bell operating companies that lack long-distance authority - Qwest with US West Inc. and GTE with Bell Atlantic Corp. Federal law bars RBOCs from escaping long-distance bans by merging with someone else. So, Qwest has agreed to sell its business in the US West territory to regional carrier Touch America, while GTE is due to sell its long-distance business in Bell Atlantic states to Sprint.

The problem is that another part of federal telecom law practically bars these same carriers from carrying out these very actions. Under the FCC's rules against "slamming," carriers are forbidden from changing anyone's long-distance preferences without explicit user authorization.

Technically, that means these spin-offs - and the mergers riding on them - can't take place until Qwest and GTE gain individual, explicit permission from every one of the affected customers.

After both carriers argued that was impossible, the FCC last week granted Qwest and GTE waivers from the anti-slamming rules to start moving customers without their explicit permission. Instead of being asked whether they want to make the switch, affected Qwest and GTE customers will simply be told that they are moving to Touch America and Sprint Corp., though they will be allowed to speak up and select yet another carrier of their own choice if they want.

In the FCC orders released yesterday, GTE also got permission to abrogate another anti-slamming measure. Because GTE is also a local carrier in a number of states, it offers customers the option of a "preferred carrier freeze" - a technique under which users can tell local carriers to block any long-distance change orders they receive, because they're probably from slammers. The FCC gave GTE permission to lift these freezes and move the affected customers to Sprint.

That particular waiver primarily will affect GTE customers in Pennsylvania and Virginia, the two Bell Atlantic states where GTE has significant local territories.

The whole game of musical chairs is already upsetting users and consultants, who feel the complexities of RBOC mergers are moving the industry further away from one-stop shopping rather than toward it. And the FCC is now going to some lengths to make sure no one takes the slamming waivers to mean the two mergers are a done deal.

The FCC has not yet ruled on the Bell Atlantic/GTE merger, and although it has conditionally approved the Qwest/US West fusion, it is examining the Touch America spin-off to make sure it passes muster before signing off on the final merger.

"Our ruling on this waiver does not prejudge in any way the commission's ultimate determination" on the Qwest/US West merger, wrote Carol Mattey, deputy chief of the FCC's Common Carrier Bureau, in the Qwest slamming waiver.

None of the waivers affects GTE's Genuity Inc. Internet unit, which is slated to undergo a separate spin-off. In any case, as an ISP, Genuity is not subject to regular telecom regulation.

Bell Atlantic and GTE customers in New York state will apparently escape the whole confusion. The FCC last December granted Bell Atlantic long-distance authority for New York. As a result, a merged Bell Atlantic/GTE will be able to offer any service it wants there, and GTE isn't shipping any New York customers over to Sprint.

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