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The Justice Department’s recent decision to support SBC Communications Inc.’s entrance into the long-distance market in Texas has prompted worries among other operators that the growth of giant multi-state local telephone companies could stifle competition in the telecommunications industry. Last week, the DOJ formally asked the Federal Communications Commission to allow SBC to offer long-distance service in Texas, a $6 billion market. Following the announcement, competitive local exchange carriers, or CLECs, as well as the country’s long-distance leader AT&T Corp., voiced concerns about SBC’s commitment to providing the industry’s many new service providers with access to local telephone lines — the final connection into a home or business. “Everyone is generally concerned that the greater market share you have will disadvantage competition,” said Russell Merbeth, a regulatory lawyer with Winstar Communications Inc., a New York CLEC. Although Winstar did not oppose SBC’s entry into Texas’ long-distance market, Merbeth said CLECs are closely watching whether regional Bell operating companies, or RBOCs, such as SBC are complying with the 1996 Telecommunications Act. Under the 1996 Act, RBOCs are can offer long-distance service only if they prove that their local networks are open to competitors. RBOCs must satisfy a 14-point FCC checklist in each state to obtain long-distance authorization. Bell Atlantic Corp. is the only RBOC to get long-distance approval, in its case only in New York. Bell Atlantic bought into the New York market with its purchase of NYNEX Corp. in 1997 for $25.7 billion. The company would once again become the nation’s largest local telephone company, when it completes it planned $66.9 billion merger with GTE Corp. sometime this summer. SBC, originally one of the smaller Baby Bells, became the nation’s largest local phone company after acquiring Pacific Telesis Group, parent company of Pacific Bell, in 1997 for $23.5 billion, and Ameritech Corp. in October 1999 for $76.2 billion. The purchase of Pacific Bell gave SBC access to the California market. An SBC spokeswoman said California would likely be the next state where the company, which serves 13 states, would seek to offer long distance. SBC and Bell Atlantic say they need to enter the long-distance market to counter the entrance of new local service carriers. AT&T, which has expanded its local phone service in Texas in recent months, opposed SBC’s long-distance application. A company spokesman said SBC has failed to fulfill its obligations to CLECs and long-distance carriers. “We still have some concerns about services that we don’t think they are providing to newcomers in the market in a fashion the law requires,” said the spokesman. In a filing with the FCC, the New York-based telecom giant cited the DOJ’s own research that SBC’s performance data was unreliable. SBC, like all RBOCs, is required to submit monthly records demonstrating its compliance with the Telecommunications Act. As part of the DOJ’s approval, the agency outlined a series of “anti-backsliding provisions” to guarantee that SBC will insure open competition. Royce Holland, chairman and CEO of Allegiance Telecom Inc., a CLEC based in Dallas, said his company continues to monitor SBC’s willingness to open its local access lines. While Allegiance opposed SBC’s application in March during its first round of negotiations with the FCC, the company chose to abstain during the second round. Holland said Allegiance would decide in the coming week whether to ask the FCC to deny SBC the ability to offer long-distance service in Texas. Teligent Inc. and Time Warner Telecom Inc. have tempered their complaints against SBC. Though both companies argued against allowing Bell Atlantic into the New York market, they chose not to oppose SBC’s request after some of their local concerns were addressed. Under the 1996 Act, the FCC must rule on SBC’s application by July 5, 90 days after its revised request was filed. Copyright �2000 TDD, LLC. All rights reserved.

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