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SBC’s MidWest Long Distance Play


Insiders say effects are minimal


Milwaukee, WI- A week and a day after the Federal Communications Commission (FCC) approved an application by SBC Communications Inc. to offer long distance telephone service in four remaining Midwestern states, the San Antonio-based telecom giant held press conferences in Madison and Milwaukee to officially launch the service here.

Telecom industry insiders say the deregulation of SBC will not overtly affect market share for telecom and Internet connectivity services in Wisconsin.

SBC and other Incumbent Local Exchange Carriers (ILECs) were barred from entering the long distance market after the Telecommunications
Act of 1996 mandated a competitive market, breaking up the Baby Bells that had enjoyed regional monopolies.

“We had to demonstrate that the market was open to competition,” SBC Wisconsin President Paul La Schiazza said of the FCC’s deregulation of long distance in Wisconsin, Illinois, Indiana and Ohio. “Today more than 645,000 lines are served by competitors – or about 26 percent of the lines in our service territory. And almost 37 percent of the businesses are served by competitors. So I think there is no question that there is vibrant competition.”
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Schiazza used the opportunity to tout SBC’s newly-created bundled service packages for small, medium-sized and large businesses. But industry insiders stressed that Competitive Local Exchange Carriers (CLECs) are positioned to hang onto market share in the four Midwestern states opened to long distance competition. CLECs offer local phone service, long distance and other telecom services in areas served by former Baby Bell companies. They rely on the ILECs, however, to provide wire from switching equipment to the individual business or consumer being served. In some cases, CLECs rely entirely on the ILEC’s switching system, and simply mark up telecom services the way a retailer would mark up goods. Some industry analysts have posited that as ILECs gain long distance approval, they will use their market strength to deny services to CLECs and eliminate the competition.

Lisa Schnorr, director of corporate communications and investor relations with Rochester, NY-based Choice One Communications pointed to her company’s experience in states deregulated in recent years.

“Based on other states, I don’t think things will change too much,” Schnorr said. “In 2000 and 2001, Verizon was the first of Baby Bells to gain long distance approval in New York State. They were fairly quick to get long distance approval. But in New York State, CLEC market share is in the 25 percent range. CLECs have been competing very effectively in the state since Verizon has long distance approval.”

Schnorr also indicated Verizon had not treated CLECs like Choice One differently since the ILEC won the right to sell long distance service.

“We continue to compete very successfully,” Schnorr said. “We have not seen a significant chance in the services that we receive from Verizon in provisioning and things like that. They continue to perform similarly to the way they did before.”

Schnorr said her company’s strategy of working strictly with businesses and providing each business a dedicated account representative will continue to differentiate them from SBC. The other major CLEC serving Wisconsin – Chicago-based TDS Metrocom – serves both businesses and individual consumers. TDS offers discounts to consumers employed by business customers.

A Milwaukee-based telecom consultant involved in settling disputes between SBC and business customers said that if anything, the ILEC’s entry to long distance would mean businesses should closely examine the newly-created package deals. When businesses opt into services involving local, long distance and Internet connectivity, the devil may be in the details.

“What would change is determining whether or not you are getting the best deal,” Tariff Patrol Vice President Craig Siwy said. “Those bundles are only as good as the amount of time you are on the phone. If they are not making very many long distance calls, it might not make sense. But for SBC -- the cost to bring somebody onto long distance is not very high if that company is already a customer. The biggest cost is the bill and collections and establishing that account.”
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Chuck Rathmann is a freelance writer and contributor to Wisconsin Technology Network. He can be reached at chuck@wistechnology.com.

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