SBC Pacific Bell's dream of entering the state's $11.5 billion long-distance market came closer to reality Tuesday, four years after the telecommunications giant began its tumultuous quest.
In a critical step in the process, the state's Public Utilities Commission tentatively signed off on SBC Pacific Bell's application to enter California's $11.5 billion long-distance market, helping to clear the way for an eventual showdown vote by federal regulators and for the company to start selling long-distance before the end of the year.
Following a 20-day comment period, the PUC is expected to formally approve the 302-page draft decision it issued Tuesday, setting the stage for a vote by the Federal Communications Commission by Nov. 20. If the FCC authorizes SBC Pacific Bell's application, using the same set of criteria as the PUC, the company can start competing with long-distance giants like AT&T and Sprint.
"We're very excited about the endorsement we got from the commission," said Lora Watts, SBC Pacific Bell's president for external affairs.
"They set high standards, and we've met them, and we're anxious to get a final vote and move forward. It's a victory not only for SBC Pacific Bell but for consumers as well."
Entry into California's long-distance market, one of the most lucrative in the nation, would be a boon for SBC Communications, the Texas-based parent company of SBC Pacific Bell. SBC plans to offer "bundled" services, combining local, long-distance and high-speed Internet service on one bill, to the millions of customers it already has in California.
The company maintains consumers will benefit from its entry into the long-distance markets as well. In the six states where it now offers long-distance, SBC Pacific Bell says prices have declined, and long-distance providers now offer more calling plans and options.
Incumbent local-phone providers in 15 states now sell long-distance service to their customers, and California would be the largest yet.
Opponents concede that SBC Pacific Bell has taken steps to improve service and may very well be in technical compliance with the standards set by the Telecommunications Act of 1996, which allowed companies like SBC Pacific Bell to offer long-distance after they opened up competition in the local telephone market. But they say evidence is mounting that the company cannot compete fairly, citing a recent fine for the way the company handled DSL Internet access, as well as other anticompetitive practices spelled out in Tuesday's draft decision.
In the decision, the commission says the company "erected unreasonable barriers to entry in California's DSL market" and that the commission has collected sufficient evidence to worry that it has "engaged in anticompetitive behavior" and has improperly subsidized money-losing divisions. But it also notes that those violations are not sufficient under the Telecommunications Act to hold up SBC Pacific Bell's application.
"This is not a good company," said Regina Costa, research director for the Utility Reform Network, a consumer group in San Francisco. "SBC has been fined tens of millions of dollars, and that is a slap in the wrist to them, because they can earn that money back in a matter of hours. This is a company that admitted it lied to the commission about tens of thousands of DSL complaints."
Most competitors need to purchase access to SBC Pacific Bell's network in order to offer their service and say they worry that once SBC Pacific Bell has been granted the holy grail of long-distance, it won't hesitate to turn around and hurt them. During the late 1990s, companies such as AT&T and MCI started to offer local service, only to pull back because of snafus with the system.
"Pac Bell could crush us at the drop of a hat," said John Sumpter, vice president of regulatory affairs for Pac-West Telecomm Inc. "They have held back because they don't want to crush us until they get into the long-distance market _ Small companies fear that once Pac Bell gets into the market, they will feel the restraints removed and feel free to attack."
SBC Pacific Bell maintains that it has satisfied all the state's multi-pronged requirements _ and more _ and that Tuesday's draft decision is long overdue.
"We expect there will be more competitors jumping in the business and offering local service," Watts said. "We take our customers' rights seriously and their concerns seriously and the integrity of our business very seriously."
The PUC's ruling includes two provisions meant to protect consumers. If the company tries to pitch long-distance service to customers who call SBC Pacific Bell customer service, it must also offer ways to transfer those callers to competing long-distance providers, if necessary, or it must set up a special, separate phone number for marketing long-distance services. Also, the company must create an automatic system to prevent customers from being temporarily disconnected from the telephone network when they switch from SBC Pacific Bell to a competitor.
Commissioner Geoffrey Brown, who released the draft decision, said that while the company has not behaved perfectly, its overall record in allowing competitors open access to its network is encouraging.
Caption: Geoffrey Brown of the California Public Utilities Commission
said SBC Pacific Bell's overall record in allowing competitors access
to its network supports its right to enter the long-distance market.
(Karl Mondon/Times)
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