California Telecommunications Coalition Urges CPUC to Reject Pacific Bell/MFS Intelenet Inc. Deal.

SAN FRANCISCO--(BUSINESS WIRE)--Dec. 11, 1995--The California Telecommunications Coalition today urged the California Public Utilities Commission (CPUC) to reject portions of the recently announced interconnect agreement between Pacific Bell and MFS. The Coalition argued that this agreement is not and should not be used as a model for effective local telephone competition in California.

The timing of the Coalition's filing is crucial because the CPUC has recently proposed new rules eliminating the earnings restrictions placed on Pacific Bell and GTE. The Coalition emphasized the importance of establishing rules necessary to ensure all competitors can compete fairly in the local telephone market. Regrettably, the MFS/Pacific Bell deal does not serve this goal but would perpetuate Pacific Bell's monopoly position.

"This agreement between Pacific Bell and MFS is a bad deal for California consumers and a poor model for local telephone competition," said James L. Lewis, Senior Vice President of MCI Regulatory Affairs and spokesperson for the Coalition. "If this business deal becomes the blueprint for the CPUC's local competition policy, it will have dire consequences for the investment potential for the 65 telecommunications companies that want to compete in California's $6 billion local telephone market."

"Pacific Bell can't be allowed to have it both ways -- the freedom to earn unlimited profits and the ability to maintain its dominance in the local telephone market," said Lewis. "If the CPUC is going to move immediately to deregulate Pacific Bell's earnings, it is mandatory that the CPUC adopt rules that foster fair and effective competition. The Pacific Bell/ MFS deal does not achieve this goal. The real blueprint for competition we are working toward will not allow Pacific Bell to use its monopoly power to make deals that are not in the public's interest."

Recently, three CPUC commissioners proposed the elimination of the annual price cap formula for Pacific Bell's local and short haul toll rates under the terms and conditions of California's incentive-based new regulatory framework (NRF). Their approach would reverse last month's proposed decision by the CPUC Administrative Law Judge (ALJ). That decision concluded that because real competition had not yet developed in California's $6 billion local telephone market, it is premature to relax regulations on the monopoly telephone companies.

The agreement between the companies calls for MFS to lease services from Pacific Bell at rates far exceeding what Pacific Bell charges its retail customers. In addition, the agreement requires MFS to pay Pacific Bell a fee for completing calls despite the CPUC rules stating that such fees are not appropriate.

"While this arrangement may be useful in the short term for limited niche players such as MFS who plan to serve only the high-end business market, the terms of the agreement will make it impossible for Pacific Bell's competitors to serve residential customers in surburban and rural areas," said Lewis.

"MFS has every right to sign a deal that sacrifices its long-term health. But the CPUC should not use the pact as a model for other competitors to follow," said Lewis.

"California consumers need to be protected from the Pacific Bell monopoly. If that protection doesn't come from incentive-based regulation, the CPUC must make sure that fair and effective competition is in place to enable consumers to enjoy lower prices, better service and more innovations," added Lewis.

The California Telecommunications Coalition was formed in December, 1994 to work toward a competitive telecommunications marketplace in California. Members include: AT&T, Bay Area Teleport, California Association of Long Distance Telephone Companies, California Committee for Large Telecommunications Consumers, California Cable TV Association, California Pay Phone Association, ICG Access Services Inc., MCI Telecommunications, Sprint, Teleport Communications Group (TCG), Time Warner AxS of California and Toward Utility Rate Normalization (TURN).

CONTACT: CCTA 

Peggy Keegan, 510/428-2225

or

AT&T

Kathi Oram, 415/442-2223

or

Ketchum Public Relations for MCI

Nancy Prater, 415/984-6305