07/14/97 THE LOCAL-PHONE WAR HEADS FOR COURT

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THE LOCAL-PHONE WAR HEADS FOR COURT

Last February, Virtual Spin, a Seattle-based software company, suffered a two-month setback when programmers couldn't dial into a private telecommuting network provided by Electric Lightwave Inc. (ELI), a new local phone company. ''It was a nightmare,'' says Spin President Brook W. Lang. But he doesn't fault Electric Lightwave. He blames U S West Communications Inc., the local Baby Bell phone company that was supposed to provide adequate phone lines to Electric Lightwave's customers. U S West, says Lang, installed voice lines instead of the needed data lines. U S West claims the mistake was the new company's. But Electric Lightwave isn't letting the matter drop. On June 30, the Vancouver-based company filed an antitrust suit against U S West, charging it with using its ''monopolistic'' powers to block the entry of competitors into the local-phone market.
Electric Lightwave is not the only one taking the telephone wars to the courts. On July 2, SBC petitioned a federal court in Texas to rule unconstitutional provisions of the Telecommunications Act of 1996 that allow the federal government to regulate the entry of the Baby Bells into the long-distance market. The next day the company was prepared to file a similar but more limited suit in Washington, challenging the FCC's denial of SBC'S petition to offer long-distance service in Oklahoma.
Telecom experts now predict that the courts will soon be filled with phone war participants. Considered the most likely litigants are local phone wannabes, possibly including such powerful players as AT&T and MCI. Says Washington telecom lawyer Richard M. Rindler: ''The inherent interest of a monopolist to remain a monopolist is something the courts will eventually have to deal with.''
The Electric Lightwave suit clearly reflects the tremendous frustration of would-be competitors in local-phone markets over their lack of progress. Long-distance companies ranging from tiny startups to AT&T are complaining about obstacles they face in getting basic services they need from the Bells to enter local markets, as mandated by the Telecommunications Act of 1996. The Bells, they charge, are deliberately dragging their feet. ''I've not yet seen a single Bell company obey the letter or spirit of the law,'' fumes MCI Communications Corp. President Timothy F. Price.
Meanwhile, local upstarts are taking their gripes to regulators, too. On May 30, LCI International filed a petition with the Federal Communications Commission seeking a firm deadline for Baby Bells to provide new local-market entrants access to automated customer-service systems. The lack of such access makes it difficult for new companies to sign up customers, says LCI. On June 24, MCI filed a complaint with the Washington Utilities & Transportation Commission, charging that U S West is slow in providing access to billing systems.
The FCC has already shown that it finds the evolution of local competition inadequate as well. On June 26, it rejected SBC's application to enter the long-distance market in Oklahoma because of the Bell's apparent failure to open its own local markets to competition. That sparked SBC's July suit. Similarly, the Justice Dept. has recommended that the FCC deny Ameritech Corp.'s bid to enter Michigan.
CHERRY-PICKING? The Bells claim they are working as fast as they can to install new local-phone capacity for rivals, who then resell service. And they complain that, for their trouble, they watch helplessly as newcomers cherry-pick the best customers. U S West has added 8,900 new lines for Electric Lightwave. And in 1997, it expects to add 75,000 new lines, at an estimated cost of $40 million to $60 million. Moreover, U S West claims that it meets 75% of reseller requests on time. Most of the rest, it says, require new construction. ''We feel we're bending over backwards,'' says Christine H. Butler, U S West's director of technical, regulatory, and financial initiatives.
Skirmishing among the Bells and new rivals is likely to intensify. The battle for the $100 billion local-phone business is now being waged on all fronts--in the courts, in the regulatory agencies, and in the market.
By Catherine Yang in Washington

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