Many Little Rivals Take on Big Baby Bell

Article excerpt

The opening of Washington's local telephone market has been bad for Bell Atlantic, good for its competitors and a boon to local businesses, in a pattern that is being repeated across the country.

While Bell Atlantic's dominance remains unquestioned, at least 25 competitors are nipping at its heels, taking bites out of the $6.8 billion pie for local calling services in the District, Virginia and Maryland.

The impetus for this activity is the Telecommunications Act of 1996, a landmark federal law that allowed local and long-distance carriers, as well as wireless and cable companies, to compete against one another.

During the past four years, hundreds of new companies nationwide have joined the telecom free-for-all. For the first time, many residential and commercial customers have a choice of local-service providers offering lower prices and customized services.

"We had no choice but to stay with one vendor" before 1996, said Angela Searles, an administrator in Hughes Network Systems' Information Technology group. Now the Germantown-based electronics company uses four carriers to handle its local telecom needs.

"It helps make our [telecom] infrastructure more reliable," Miss Searles said. "Sometimes even the big carriers can go down."

Miss Searles said she gets two or three solicitations per week from competitive phone companies. The upstart carriers are gradually encroaching on Bell Atlantic's turf.

In Washington alone last year, competitive firms controlled 7 percent of local access lines connecting businesses and homes to outside phone networks, up from 2.7 percent in 1998, said Phylicia Fauntleroy Bowman, executive director of the D.C. Public Service Commission.

She said the number of competitive firms increased from 15 in 1998 to 21 at the end of last year, when they accounted for more than $50 million or 4 percent of local service revenue; up from $34 million or 2.7 percent at the end of 1998.

Carriers say Washington is one of the most desirable U.S. markets because of its sheer size, affluence and concentration of bandwidth-hungry organizations.

"It is extremely competitive," said Tim Germain, the local general manager for Focal Communications Corp., a Chicago-based carrier that entered the D.C. market in March 1999. Like many of its peers, Focal spent millions of dollars installing switches and building or leasing transmission lines.

"There's no better market in the country," added Charlie Thomas, CEO of Net2000 Communications Inc., a carrier based in Herndon. "The regulators are here . . . and it's good to be close to the [government] process. But mostly the economy in this area is just booming. This is one of the key hubs for telecom and Internet traffic."

This high-tech boom means lots of demand for telecom services - everything from "plain old telephone service" to high-speed Internet access. Many carriers offer customers a full menu of services, including local, long distance, Internet access and data offerings.

Taking on Bell Atlantic is no easy task. Like the politicians here, it has the power of incumbency, and its marketing muscle is hard to beat.

Mr. Thomas said, "Bell Atlantic has tremendous brand recognition, and that's difficult to overcome."

In addition, almost all competitors rely on Bell Atlantic to some degree, by reselling its services, leasing parts of its network and locating equipment in its central offices.

"Bell Atlantic is at once our most important supplier and our biggest competitor. It's a weird relationship," said Michael W. Smith, regional marketing manager for Covad Communications Inc., of Santa Clara, Calif.

While many carriers manage to work out their hitches with Bell Atlantic, not all do. Covad is suing Bell Atlantic in U.S. District Court in Washington, alleging antitrust violations stemming from equipment location, pricing and other services. …