Originally created 02/14/98

Company's `niche' challenged



COLUMBIA -- Frances Brittain paid $30 to join a telephone service called VoiceMagic and $5 a month for as many as 15 long-distance calls.

She's thrilled, but local phone companies say the savings may be too good to be true -- or legal, and state regulators have stepped in.

Instead of charging Ms. Brittain by the minute, VoiceMagic assesses a flat rate per call, regardless of how long she stays on the line.

"It's great," she said. "It's extremely helpful in saving money."

But the South Carolina Telephone Association, which includes all local telephone companies in the state, complains that Ms. Brittain saves money because VoiceMagic is pirating phone service and undercutting prices.

By using a complex web of telephone services, VoiceMagic can sidestep the toll and access charges that competitors usually have to pay local phone companies, the association said.

This maneuver accounts for the savings on long-distance calls in the state.

"VoiceMagic is manipulating the network," said M.E. Clement, the association's executive director. "It needs to be stopped."

VoiceMagic said it is providing an enhanced voice messaging service that is not and should not be regulated.

At a Public Service Commission hearing Wednesday, lawyers on both sides presented their cases. The PSC will ultimately decide whether VoiceMagic's business falls within its regulatory authority.

The Columbia company, which began in 1993, says it has 6,000 customers in the Upstate and the Midlands.

Commission spokesman Gary Walsh said he had received a flood of calls about VoiceMagic from customers, state legislators and even Gov. David Beasley's office.

To demonstrate the association's allegations of fraud, Mr. Clement presented a scenario in which a VoiceMagic customer places a call from Pond Branch to Hampton.

The customer enters a series of identification numbers, and the call is routed by call forwarding to Lexington, then to Columbia and finally to Hampton.

Mr. Clement said each call is covered by extended-area or area-plus service, two phone options that do not incur toll costs.

Normally, phone companies pay each other for using their networks for in-state long-distance calls.

VoiceMagic simply pays the local phone company for the various services, not for the volume of calls crossing the lines. This lets the company offer customers a much lower rate, Mr. Clement said.

Dave Swetnam, vice president of operations for VoiceMagic, said the company provides enhanced telecommunications services such as voice messaging which, by law, are not regulated by the PSC. He said VoiceMagic is not in competition with long-distance or local phone companies.

"It's all a matter of interpretation," Mr. Swetnam said. "We've just found a niche."

A decision from the commission is not expected for several weeks.