Negotiations that ultimately could determine the future of cut-rate long-distance telephone services have begun, with the profits of the Bell System's competitors at stake.
Representatives of American Telephone & Telegraph Co. and its long-distance competitors such as Southern Pacific Communications Corp. and MCI Communications Corp. began complex talks yesterday in an effort to determine how much the carriers will pay the Bell System to hook into local phone networks.The competitors say an AT&T proposal now on the table could double the costs of linking individual telephones to the network.
"One of the things that clearly is at stake is our business," said George Vasilakos, Southern Pacific Communications executive vice president for engineering and operations. "We certainly can't afford to have our costs raised by 100 percent."
At issue could be not only the financial viability of the companies that have undercut AT&T rates successfully and aggressively marketed these long-distance services, but the consumers' ability to choose MCI, SP and International Telephone & Telegraph Co. services, whose rates in many cases are as little as half of AT&T's.
The negotiations for these arrangements -- which are known as Exchange Network Facilities for Interstate Access, or ENFIA, and which are complicated merely by the technology involved in switching calls from one system to the other -- also are likely to become bitter and to be lengthy in light of continuing antagonism between AT&T and its competitors.
That historic antagonism shows itself both in proceedings at the Federal Communications Commission and in the federal courts, where both MCI and Southern Pacific have major pending antitrust actions revolving around these particular subjects. The negotiations are held at the FCC and are under the supervision of agency officials, although it is widely believed that the FCC would approve any agreement the parties sign.
The arrangements with AT&T cost companies such as SP more than 20 percent of their gross revenues. In SP's case, the company paid AT&T more than $30 million last year for these interconnections. MCI's fees for the links connecting the company's microwave hookups with AT&T's local telephone systems are even greater.
AT&T said in a filing with the FCC this week that the company is prepared "to make available new interconnection arrangements" immediately after the filing as soon as mid-May of new rates for the services. Few rate breakdowns were released in the filing.
But in dispute is more than just the rates the firms pay the Bell System. For as customers of these services know, dialing into the microwave systems is complicated, if not intimidating. Typically the caller must dial a seven-digit numnber to hook into these networks by linking with the company's computer. Then the caller must punch a five-digit personal code, followed by 10 more digits for the area code and phone number.
AT&T's competitors would like simpler access to the network and hope to negotiate a pact that would enable customers simply to dial one or two digits before entering the system. AT&T says such simplified arrangements could require at least two years of technical testing.
The first ENFIA agreement was signed in late 1978. A second round of negotiations to carve out a new agreement fell apart in 1979, and the current pact runs out next March.
The competitors argue that the rates and the linking arrangements are discriminatory.
Yet another issue in the talks is how AT&T arrives at its cost data. Competitors say they cannot evaluate AT&T proposals without it.