Regional Bell telephone companies that want to sell their local phone customers long-distance service provided by another company got bad news from federal regulators: It's illegal.
US WEST Communications Inc. and Ameritech Corp. - both Bell companies - were told by the Federal Communications Commission Monday that their separate alliances with the long-distance company Qwest Communications Corp. violate federal law.But the FCC's decision, if upheld, would have implications for other Bells that want to enter into similar alliances to offer customers one-stop shopping for local and long-distance services.
US WEST said it will appeal the FCC's decision to a federal court. Ameritech is considering its legal options.
"Unfortunately, the commission has once again failed to place the interests of consumers first," said US West spokesman Jerry Brown. "We think consumers are losers in this ruling."
Specifically, the FCC said that US WEST's and Ameritech's marketing alliances with Qwest violated a provision in a 1996 telecommunications law that bars a Bell company from providing long-distance service to its own customers.
The law says a Bell company must open its market to competitors and get FCC approval before it may provide long-distance service to local customers. No Bell has done so.
"We can't trade the short-term convenience of one-stop shopping for long-term monopolies," said FCC Chairman Bill Kennard. "That wouldn't be right for consumers and it's not what the law requires."
Under the pacts, Qwest paid US WEST and Ameritech an undisclosed recruiting fee for each client in the Baby Bells' local phone regions that chose Qwest for long-distance service.
US WEST, Ameritech and Qwest have said the arrangements are consistent with the 1996 law.
US WEST and Ameritech are not marketing Qwest's long-distance service now. They did sobriefly earlier this year, but they were ordered to stop until the FCC decided whether the marketing alliances were legal. US WEST was told to halt by a federal court and Ameritech by the FCC.
AT&T and MCI had contended that the alliances violated the law and hailed the FCC's decision. "The Qwest marketing deals were just another example of Bell company efforts to end run the requirements of the Telecom Act," said Jim Cicconi, AT&T's senior vice president of government affairs and federal policy.
Nothing in the FCC's order, however, prohibits Ameritech and US WEST customers from going directly to Qwest for long-distance service. And Ameritech and US WEST customers who already signed up for Qwest's long-distance service can stay with Qwest at the same low rates if the company lets them. But US WEST and Ameritech will be forbidden from marketing Qwest's service to other customers.
Ameritech didn't say whether it would appeal, but the company does believe the FCC's decision "penalizes consumers," said Diane Primo, president of product management.
Qwest was studying the FCC's order and had no immediate comment.
"The biggest loser is Qwest, who just saw hundreds of thousands, if not millions, of potential customers sucked down the drain," said analyst Jeffrey Kagan of Kagan Telecom Associates, a telecommunications consulting firm in Atlanta.