Originally created 01/06/98

Government urged to create more local phone competition



WASHINGTON -- Now that a federal court has given at least two regional Bell telephone companies a clear path into the long-distance business, the government should consider new ways to make the Bells open their local phone markets to rivals, AT&T's chief said Monday.

As key provisions of a 1996 law have been struck down by the courts, AT&T has had trouble building its local phone business. Although the company has stopped marketing local service, AT&T has said it will not abandon the business. It has spent $3 billion to $4 billion on it.

The latest blow to AT&T and other local phone competitors came Wednesday when a federal judge paved the way for SBC Communications and US West to offer long-distance service to their local customers.

"I would submit that the industry and the government need to step back in the midst of all this and discuss alternatives to accomplishing opening markets, having choice and creating local competition," said AT&T Corp. Chairman C. Michael Armstrong.

"I would welcome that opportunity," he added, responding to the court decision in a conference call with analysts.

Armstrong did not say what specific alternatives he has in mind.

AT&T took a beating on Wall Street Friday, with its shares falling 4.1 percent amid worries the No. 1 long-distance company could be facing more competition after last week's ruling.

Still, AT&T executives played down the long-term impact of the decision, saying they are confident it would not take effect and would be overturned on appeal.

AT&T, Sprint and MCI asked U.S. District Judge Joe Kendall of Wichita Falls, Texas, to defer his decision.

Mark Rosenblum, AT&T's vice president of law and government affairs, said: "Stays are granted almost as a matter of routine to allow full review of the constitutional challenge by the court of appeals and, if necessary, by the Supreme Court."

If the case goes to the Supreme Court, the earliest the high court would decide it would be 1999, he said.

Kendall ruled that a key portion of a 1996 telecommunications law discriminates against the Bells because it does not apply to many other local phone companies, such as GTE Corp., Southern New England Telephone Co. and Frontier Corp.

The overturned provision required the Bells to open their local phone markets to competitors as a condition of winning federal approval to provide long-distance service to local customers.

"We have spent hundreds of millions of dollars to be prepared when an economically viable means of doing local business is available and we have systems and resources people set up all over the country to take that step when it offered," Armstrong said.