The Federal Communications Commission has reached an informal decision to approve Bell Atlantic Corp.'s application to offer long-distance telephone service in New York, the first time a former Bell monopoly would gain the right to enter that business, sources familiar with the matter said yesterday.
The commission has not voted and is not expected to announce a decision before the middle of next week. Key details of provisions to be included in the order were not resolved last night. A proposal was circulating within the FCC outlining penalties that could apply to Bell Atlantic if the company retreats on steps it has taken to open its local market to competition.
But a key consensus was reached: After four years of courtroom wrangling, congressional lawmaking and lobbying, a former Bell monopoly will secure the central promise of the Telecommunications Act of 1996, to enter the long-distance business. Under the act, local Bell companies are allowed to offer long-distance service within their core area only after persuading federal regulators their local markets are unalterably open to competition.
The decision will hand Bell Atlantic a huge advance in its efforts to become a full-service provider of communications services, offering local and long-distance along with wireless telephone service and Internet access. Analysts say the company could capture as much as a third of New York's long-distance market within five years.
The approval also is expected to relieve political pressure on the FCC. Though the telecommunications law had been presented to the consumers as a dramatic spur for competition, some members of Congress have criticized the commission for holding up the promise by rejecting five long-distance applications since the act's passage.
"They have untied the Gordian knot of the last several years," said Scott Cleland, a telecommunications analyst with the Washington-based research firm Legg Mason Precursor Group. "We're finally seeing the revolution."
But Bell Atlantic's huge step will leave some of its competitors seething. AT&T Corp., which recently launched an aggressive marketing campaign for its local service in New York, has long argued that Bell Atlantic does not process orders to switch customers quickly enough and, therefore, has not fully opened its markets.
Companies that provide high-speed Internet access over telephone lines using a technology known as DSL have argued that Bell Atlantic discriminates against them and does not reliably deliver the new phone lines needed for their service. The Justice Department, in comments to the FCC, expressed concerns on this front. Covad Communications Group Inc., the largest such provider, has in recent weeks lobbied vigorously against Bell Atlantic's approval, asserting that withholding long-distance permission is the only tool the FCC has to force the local company to play fair.
FCC Chairman William E. Kennard and commissioners Susan Ness and Gloria Tristani, the three Democrats on the five-member commission, have agonized over the DSL issue and are sympathetic to Covad's entreaties, sources said. But these commissioners, the sources said, have been largely mollified by a proposal floated this week by Bell Atlantic offering to establish a separate subsidiary to sell extra lines to DSL customers.
Covad and other critics say the proposal is improper. While the telecom act says the FCC must assess long-distance applications based solely on the market conditions the day the paperwork is filed, Bell Atlantic floated its pivotal proposal 72 days into a 90-day review process.
"They freaked out at the last minute and threw this out there after they got nervous," said Jonathan Askin, senior legal counsel at the Association for Local Telecommunication Services, which represents Covad and other DSL providers. "This separate affiliate is in fact strong evidence they know that they weren't providing nondiscriminatory access" the day they filed.
Bell Atlantic has long tied its fate to gaining permission to offer long-distance service. For more than two years, it has conferred with the New York Public Service Commission, which has regulatory authority, negotiating steps to open its market, winning the body's endorsement in the process. Even its rivals have begrudgingly acknowledged the company has gone further than any other Bell company.
Bell Atlantic's success is expected to spur other local companies to pursue a similar course. On Thursday, a three-member state commission in Texas unanimously approved an application from SBC Communications Inc. to offer long-distance service in that state. Analysts say the Texas panel's endorsement will likely carry great weight with the FCC, much as Bell Atlantic benefited from the New York commission's blessing.