It’s been a little more than a month since BellSouth reigned in its quest to gallop into the long distance business in Georgia and Louisiana, and since that time the telecommunications world has been holding its collective breath until the Baby Bell makes its next move.

Inexplicably, competitive local exchange carriers, so-called CLECs, which have argued for years that BellSouth was not complying with federal access laws, are not using this time to mount a campaign against the $9.6 billion telecom giant.

Many CLEC executives prefer not to speculate exactly how BellSouth’s entry into long distance will affect telephone rates. Richard Brown, CEO of Cary-based Access Point, tells LocalTechWire there is not much point in worrying about BellSouth’s entry because telecom providers everywhere knew that at some point the Baby Bells would get permission.

“They can bring it on,” says Brown, who navigated his company out of the treacherous waters of Chapter 11 bankruptcy protection last summer. “The funny thing is BellSouth already gets about 60 percent of all long distance revenues because of all the access fees it charges (long distance companies must pay a fee each time a call is terminated over a BellSouth connection). But rates keep dropping so much that by the time they get here long distance will probably be free.”

Russell Frisby, president of the Competitive Telecommunications Association, a Washington D.C.-based organization that represents CLECs from around the country, agrees with Brown’s assertion that BellSouth’s entry into the market will not have a huge impact on the industry. That is, as long as the company is in compliance with the Telecommunications Act of 1996, which required the Bells to open its telephone lines to competition and opened the industry to competition, among other tenements.

“We don’t oppose BellSouth entering into the market, but we do oppose their premature entry,” Frisby says. “Once they comply with the law we believe they should be allowed in. But entering before it’s found they are in compliance will strain competition because there would be no mechanism to ensure that local markets are open. I would reinforce their monopoly,” which may result in smaller long distance companies falling into bankruptcy.

Frisby notes that CLECs are quietly watching an internal exam of BellSouth’s operations that is underway in Florida known as the “Florida Test.” Florida regulators are scrutinizing BellSouth’s every move to see if the telecom indeed is complying with the Telecom Act before granting it permission to enter into the Sunshine State’s long distance market.

Baby Bell is on its ‘best behavior’

Jake Jennings, former deputy chief of the Federal Communications Commission’s policy division, who now works as vice president of regulatory affairs for South Carolina-based New South Communications, is one of those telecom executives who is anxiously waiting to see if BellSouth can come out of the Florida test squeaky clean.

“They’ve had to be on their best behavior since about six months before they filed the application,” Jennings says. “Our concern is that if they are allowed to begin offering long distance services, that BellSouth must at least maintain its current level of service to the CLECs. We measure their performance with us every week, and if they start to backslide we will begin looking at ways to file a complaint with the appropriate parties.”

BellSouth tried to put its best foot forward last summer by paying off some fines. In July, the company paid $4.5 million to Georgia regulators after failing to meet performance standards for services it provides competitive local telephone carriers. In August, BellSouth settled with US LEC to pay $41 million of the $70 million that it owed in back fees for reciprocal compensation

And on Dec.14 BellSouth received permission from the North Carolina Utilities Commission to give customers a larger local free calling area, a move that is estimated will save consumers $27 million annually.

Worried that the FCC was going to deny the bid, Atlanta-based BellSouth pulled its Federal Communications Commission application on Dec. 8, just days before the FCC’s deadline to rule on the case. Industry analysts say they expect BellSouth to submit a revised application within the next two to six weeks. A similar hearing in front of the NCUC has been postponed pending BellSouth’s revised application and the subsequent FCC ruling.

“We believed that we had built a very solid case that presented compelling evidence of BellSouth’s compliance with the Telecommunications Act of 1996,” said Margaret Greene, BellSouth’s president of regulatory affairs, in a prepared statement in December. “We still believe this is true; however, we will comply with the FCC’s request for additional information to supplement the record and believe that this will result in a timely and decisive approval.”

Delaying the inevitable?

Many observers say the withdrawn application only delays the inevitable, and that they expect the FCC to approve BellSouth’s request by the end of the summer. The Baby Bells have been prohibited from providing long distance voice or data services to their own customers until they prove to the FCC that they are providing open access to competitors in markets the Baby Bell already dominates.

In early 1998, when the BellSouth initially filed to provide long distance services in North Carolina, the NCUC determined that the telecom had satisfied 12 of the 14 checklist items it required, but the commission wanted more information about those same old sticking points — co-location practices and order processing systems.

This time around the Public Staff, a government agency designed to represent consumers in rate cases and other instances, has conditionally approved BellSouth’s application, but said the incumbent carrier must meet several conditions, including paying fines and other penalties for not fairly granting access to its rivals, before being granted unconditional approval.

Nationally, BellSouth owns 15.5 million telephone lines. In North Carolina, the company owns about 2.4 million telephone lines across the state. Its next closest competitors are Carolina Telephone and Telegraph with 1.2 million, Verizon South with 354,000, and Central Telephone Company with 285,000 lines, according to Nat Carpenter, director of the Public Staff’s communications division.

While attention is being focused on BellSouth’s long distance determinations, the company is quietly beginning to dominate another telecommunications service. BellSouth officials said new subscriptions to its DSL service increased more than 200 percent above last year’s totals, from 215,000 in January 2001 to 620,500 this month. BellSouth’s goal is to reach 1.1 million DSL subscribers by December. Company officials are speculating that revenue from DSL services will reach $600 million by the end of 2002, an increase of $375 million compared to last year.