The Federal Communications Commission yesterday gave American Telephone & Telegraph Co. the authority to offer two new services for large businesses, while congressmen and consumer advocates said the decision will be to the detriment of local ratepayers.
The new services are opposed by regional telephone companies that say they will encourage the largest users of long-distance to directly connect to AT&T, bypassing the local phone companies. This, they say, could result in a loss of billions in revenue to local companies and much higher local rates.
"The FCC has stacked the deck in favor of the biggest player in a cutthroat marketplace," said Rep. John D. Dingell (D-Mich.), chairman of the House Energy and Commerce Committee. "The commission action gives the green light to the re-monopolization of the telecommunications industry at the expense of the ordinary ratepayer."
Rep. Timothy E. Wirth (D-Colo.), chairman of the House telecommunications subcommittee, also chastised the commission's decision and has scheduled hearings this month to explain the FCC's transition plan to competition. "Since the FCC has failed to develop careful policy, it is time for the Congress to step in," he said.
James R. Billingsley, AT&T senior vice president for federal regulation, called the FCC decision "a good one for the country. . . . With these new services, customers will be able to customize their services over AT&T's network and thus operate more effectively and economically." AT&T had argued that other companies, such as MCI Communications Corp., already offer similar services. The company said the new services will not force local telephone companies to raise rates.
The two AT&T service offerings are Megacom and Software Defined Network. Megacom charges a lower rate to very-high-volume long distance users and would connect customers directly to AT&T, bypassing the local telephone network. The second service allows companies to computerize their private networks to keep the use of regular telephone lines to a minimum. The services will go into effect Nov. 8 and 4, respectively.
The FCC said large customers want to bypass the local phone companies because of the price structure used by those companies for long distance connections.
"We have a terrible problem with bypass but this is not the place to solve it," said Commissioner Mimi Weyforth Dawson.
"The phone companies have to come up with flexible tariffs" for their connections, she said.
"We have got to continue to address the root cause [of bypass], which is mispricing," said FCC Chairman Mark S. Fowler.
Currently, long-distance phone companies pay about 80 percent of the billions of dollars local companies charge for the upkeep of the local telephone network between customers and the point where it connects to long-distance networks. In addition, residential customers pay $1 a month and multiline businesses pay $6 per month per line as a contribution to that upkeep.
Long distance companies pay the fees based on amount of usage. AT&T is the largest single contributor, paying $20.6 billion last year, or 94 percent of all the access fees charged by local phone companies. Because the fees are added to long-distance charges, large business customers have an incentive to avoid the payments by not using the local network, consultants and industry officials have said.
Any interim pricing solution would only be a "Band-Aid" and not a solution to the bypass problem, said Fowler. Consumer advocates fear the agency will simply put more of the burden of the costs of maintaining the network onto consumers directly.