Originally created 12/16/01

Long-distance relationship



Phil Jacobs can hardly contain his excitement. The BellSouth Georgia president is anticipating the "most visible product launch you've ever seen from BellSouth."

The Federal Communications Commission will rule by Dec. 31 whether to allow BellSouth entry into the state's lucrative long-distance market. Under Mr. Jacobs' direction, BellSouth already has trained employees and designed bundled-service packages in anticipation of a favorable ruling.

If approved, BellSouth will have 10 days to file tariffs outlining pricing plans with the state public service commission for intrastate calls and the FCC for interstate calls. That process is already under way.

"If we got the word tomorrow we'd be ready to roll," Mr. Jacobs said.

The market won't change just for consumers. Smaller telecommunications companies that have sprung up in the past five years will face a new and formidable competitor in the long-distance market.

These competitive local-exchange carriers, known in the industry as CLECs (pronounced See-Lecks), lease space on BellSouth's multibillion-dollar network and sell telecommunications services of their own. BellSouth is required by the 1996 Telecommunications Act to sell this space at wholesale prices in order to foster competition throughout the state.

Some CLECs, such as Birch Telecom and KMC Telecom, have been outspoken in opposing BellSouth's entry into Georgia's long-distance market. Others, such as NewSouth Communications, support the Bell company.

The Chronicle spoke with representatives of the five major CLECs operating in the Augusta market about how the market will change if BellSouth is allowed to sell long-distance service, how it will affect the way they serve their customers and whether the Georgia telecommunications market is open to competition.

BIRCH TELECOM

REGULATORY STANCE:

AGAINST

HEADQUARTERS:

Kansas City, Mo.

EMPLOYEES:

10 in Augusta; 1,450 total.

OWNERSHIP:

Privately held; majority shareholder is an affiliate of investment firm Kohlberg Kravis Roberts & Co.

PRODUCT:

In Augusta, Birch recently began offering local and long-distance calling packages to residential consumers, supplementing its burgeoning base of business customers. In other markets, it also offers high-speed Internet access and Web hosting.

CUSTOMERS:

800 in Augusta; 2,800 in Atlanta; 100,000 companywide.

MARKETS:

Augusta and Atlanta, as well as 35 major metro areas in Texas, Tennessee, South Carolina, Oklahoma, North Carolina, Missouri, Kansas, Mississippi and Alabama.

Birch Telecom owns its own network in some states, but uses BellSouth's network exclusively in Georgia to offer local and long-distance service. Birch said it will halt all short-term plans of expansion in BellSouth territory if the FCC approves BellSouth's application.

Birch says BellSouth's system for processing wholesale orders, which is only 60 to 65 percent mechanized, results in costly miscues caused by human error.

"It's very expensive to do business with BellSouth - they are not a viable wholesale partner," said John Ivanuska, Birch vice president of regulatory and carrier relations. "We spend a lot of time and resources fixing their errors."

"That considered," he added, "our investors would be hesitant to pump more money into offering other services."

Birch insists its stance is not vindictive. The CLEC supported Southwest Bell's FCC applications in Kansas, Missouri and Oklahoma.

KNOLOGY

REGULATORY STANCE:

INDIFFERENT

HEADQUARTERS:

West Point, Ga.

EMPLOYEES:

270 in Augusta; 1,000 total.

OWNERSHIP:

Privately held; major shareholders include ITC Holding Co. Inc., SCANA Corp., Blackstone Group, J.H. Whitney & Co. and South Atlantic Ventures.

PRODUCT:

Provider of cable TV, telephone and high-speed Internet services, which are primarily marketed to residential consumers and business customers as a bundled package.

CUSTOMERS:

Augusta numbers not available; 125,000 companywide.

MARKETS:

Augusta, Columbus and West Point, Ga.; Montgomery and Huntsville, Ala.; Panama City, Fla.; Charleston, S.C. The company plans to build networks in Nashville and Knoxville, Tenn., and Louisville, Ky.

Knology is the only local CLEC not leasing space on BellSouth's network. As a result, company officials are apathetic toward BellSouth's long-distance application.

"We're not for it; we're not against it," said Tony Palermo, Knology vice president of operations. "We've always acted under the assumption that BellSouth would eventually gain acceptance into the long-distance market. We're not surprised; we're not panicked. We're just sticking to the game plan."

FCC approval means BellSouth can offer complete local and long-distance packages to Georgia consumers, just as Knology does now. Mr. Palermo says that hasn't swayed his company's market strategy, but Knology is planning to unveil some new bundling services in early 2002, which will center around high-speed data products.

KMC TELECOM

REGULATORY STANCE:

AGAINST

HEADQUARTERS:

Incorporated in New Jersey; bulk of corporate offices in Lawrenceville, Ga.

EMPLOYEES:

20 in Augusta; 1,100 total.

OWNERSHIP:

Privately held; majority shareholder is Harold Kamine.

PRODUCT:

Local and long-distance voice, data and Internet service to area businesses. No residential.

CUSTOMERS:

700 in Augusta, including Augusta-Richmond County government; 15,300 companywide.

MARKETS:

Company targets cities with populations of 100,000 to 750,000, including Augusta and Savannah, and 35 other cities in 16 states.

KMC Telecom officials say leasing network space from BellSouth is a flawed system. They advocate splitting the Bell companies into retail and wholesale business units to avoid putting CLECs in the awkward position of competing with their main supplier.

"They have the ability to obstruct our access to their network," said Chuck Weiss, KMC city director in Augusta. "Whether they are obstructing or not is a point for debate, but the important point is they are in position to - and that compromises our business goals."

KMC has a stand-alone network for larger customers, including Augusta-Richmond County government, but it leases BellSouth network capacity in places where it doesn't have a concentration of customers.

KMC has alleged BellSouth has purposely provided poor service in documents filed with state regulators. Mr. Weiss said BellSouth can hook up a customer much quicker than the seven days it usually takes to hook up a KMC customer.

NEWSOUTH COMMUNICATIONS

REGULATORY STANCE:

HEADQUARTERS:

Greenville, S.C.

EMPLOYEES:

10 in Augusta; 850 total.

OWNERSHIP:

Privately held; majority sharholder is Kohlberg Kravis Roberts & Co.

PRODUCT:

Markets local and long-distance telephone service, high-speed Internet, Web hosting and networking exclusively to businesses.

CUSTOMERS:

Augusta numbers unavailable, but include Fort Gordon; 2,500 companywide.

MARKETS:

Augusta, Atlanta and Savannah, and 25 other cities in eight Southeastern states.

NewSouth, which leases space on BellSouth's network, has filed a statement with the state public service commission supporting BellSouth's application.

"We're not as concerned as some other CLECs," said Jake Jennings, vice president of regulatory affairs at NewSouth. "Access to their network has been satisfactory to this point, and it's gotten a lot better in the past year."

Mr. Jennings acknowledges NewSouth could not serve its customers without BellSouth, and that it's a bit awkward competing against your main supplier.

"We'll have to compete with them, but we're going to do that on price and quality," he said. "We don't expect to lose any customers."

NewSouth recently instituted standards to monitor BellSouth's performance as a supplier. Mr. Jennings said the monitoring will be pursued vigilantly.

"We need to know how well our suppliers are serving our needs. If there is any change in their performance, we will certainly take action," he said.

ALLTEL CORP.

REGULATORY STANCE:

DECLINED COMMENT

HEADQUARTERS:

Little Rock, Ark.

EMPLOYEES:

150 in Augusta; 6,000 companywide.

OWNERSHIP:

Publicly held.

PRODUCT:

Provides local phone service to about 2.5 million customers in 15 states, mostly in rural areas. Wireless operations serve about 6.4 million customers in 21 states. Offers long-distance, Internet and paging services to about 1 million customers. Wireless service is offered in Augusta, but CLEC service available only to business customers.

CUSTOMERS:

Augusta numbers not available; more than 1 million in Georgia; 10 million companywide.

MARKETS:

Serves every region in Georgia and 24 other states, and 50 other countries and territories.

Alltel representatives refused to comment about their stance on BellSouth's FCC application.

Reach John Bankston at (706) 823-3352 or john.banks@augustachronicle.com