AT&T Smokescreen of the Day

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The Smoke Detector from Bell Atlantic is designed to give you early
warning anytime "smoke" shows up in the advertisements, press releases
or public statements issued by companies determined to keep Bell
Atlantic from offering long distance service. It will help detect and
shed light on the inflammatory disinformation coming from some big
telecommunications companies every day.

February 16, 1998

AT&T's Smokescreen of the Day

The following claims are made by Jim Ginty, president of
AT&T-Pennsylvania in a recent Reuters story.

AT&T CLAIM: AT&T is abandoning the Pennsylvania local phone market
because it is uneconomical to compete in Pennsylvania.

FACT: Wrong. Twice. AT&T is not abandoning the local phone market in
Pennsylvania and there is an economic incentive for companies to

AT&T recently spent $11.3 billion to acquire Teleport Communications,
which offers local service in Philadelphia and Pittsburgh. This
demonstrates that AT&T clearly is committing its money to local
competition even while it tries to persuade regulators that it can't

AT&T has the same economic incentives to compete for local phone
service in Pennsylvania as Teleport and the 37 other companies that
can offer local service in Pennsylvania. Teleport, in fact, reported
year to year growth of 89 percent in October 1997. Clearly,
competition is paying off for those who want to compete.

AT&T likes to have it both ways. To find out what AT&T really thinks
about local competition, don't follow what they say, follow where they
put their money.

And Teleport is just one example of the growth in competitive local
service. According to Dan Reingold at Merrill Lynch, market share for
all new entrants will nearly double in 1998 to 5.1 percent from 2.6
percent. And the market share for facilities and resale-based
providers will grow from $2 billion in 1997 to $5.4 billion in 1998
and $8.5 billion in 1999.

If other competitive carriers can make money and AT&T can't, it is
less an indictment of the regulatory environment than it is a
criticism of AT&T's management.

AT&T CLAIM: Other states, including New York, have been more
progressive in opening local markets.

FACT: In this article, AT&T's own spokesperson in Pennsylvania
highlights the progress in New York. Yet, just last week AT&T ran an
ad in the New York Times accusing Bell Atlantic of standing in the way
of competition in New York. AT&T is not even consistent in its own
statements about Bell Atlantic opening its markets to local

AT&T's strategy is clear: buy Teleport and compete while trying to
persuade regulators that they can't.

Bell Atlantic is committed to opening its local markets to
competition. In fact, in Pennsylvania Bell Atlantic has:

  • 54 interconnection agreements with competitors and
    competitors have bought approximately:
  • 13,000 residential lines;
  • 15,000 business lines; and
  • 11,000 unbundled loops.

AT&T CLAIM: Rates in Pennsylvania are twice as high as rates in other

FACT: Not true. Rates in Pennsylvania are comparable to those in
other states. In fact, the rate in Philadelphia and Pittsburgh are
comparable to rates in other cities like New York. For instance, the
rate in Philadelphia and Pittsburgh is $11.52 and the rate in New York
City is $12.49. Moreover, AT&T's claim does not take geographical
costs into account. The company bases its claim on a statewide
average that lumps together rural and urban areas, where costs vary

Second, Bell Atlantic does not set the rates in Pennsylvania - the
state Public Utilities Commission does.
If companies like Teleport, NETLINK and MFS can conduct business and
compete successfully with the current rates, why can't one of the
largest telecommunications providers in the world?

Apparently, the only price that AT&T would find acceptable is free.

AT&T CLAIM: It is impossible to compete with Bell Atlantic in
Pennsylvania. Bell Atlantic would charge AT&T around $30 per month to
use parts of their network that AT&T would need to provide local
service, while Bell Atlantic offer the same service in the low $20s.

FACT: The $30 figure is a figment of Mr. Ginty's imagination. We're
don't know where he got that figure from, but it simply does not

However, we do know that it is possible for companies to compete in
Pennsylvania and they can do so in one of three ways:

  1. They can buy Bell Atlantic's lines and re-sell them to customers at
    a 20 percent discount; or
  2. Competitors can purchase parts of Bell Atlantic's network, combine
    them with their own and by doing so achieve an even greater discount; or
  3. Finally, we'd like to remind AT&T that they are welcome to build
    their own networks at which point they could determine their own discount.

CLAIM: In the Reuters article, the reporter asserts that, "Some
industry analysts said competition was diluted in Pennsylvania by last
year's merger of Bell Atlantic and NYNEX..."

FACT: This is false. NYNEX never provided or had plans to offer
local service in Pennsylvania.

There is competition in Bell Atlantic's market and it is real. Bell
Atlantic has 393 interconnection agreements with competitors and has
assigned 20,000,000 phone numbers to competitors in local phone
service. That's more phone numbers than exist in the entire state of
New York.

In addition, Bell Atlantic has:

  • over 33,400 unbundled loops in its markets being used by
    competitors, about one-third of those in Pennsylvania;
  • 231,500 interconnection trunks currently in operation;
  • 404 collocations sites in our switching centers.

    At the current rate of growth, the number of additional minutes of
    conversation, data and faxes that will pass between Bell Atlantic and
    its in-region competitors over 12 months is more than all the phone
    traffic in Washington, D.C. and Vermont in a given year.

    Bell Atlantic's top priority is to become a full service, one-stop
    company that can better serve our customers in the most competitive
    region in the country - from Virginia to Maine. The merger of Bell
    Atlantic and NYNEX will help achieve this.



    • Bell Atlantic is spending over $1 billion opening markets.
    • Bell Atlantic has dedicated 1000 employees to open local markets to
    • In New York State, Bell Atlantic complies with the 1996 Telecom Act
      14-point checklist and has filed to offer consumers long distance
      service, giving them a much-needed alternative to the big three long
      distance companies.

    Dozens of other companies are successfully doing business in local
    phone markets.