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MCI Seeks Regulators' OK to Start Local Phone Service : Telecommunications: Five states are targeted. Market brings in $80 billion a year nationwide.

October 04, 1994|From Associated Press

WASHINGTON — Long-distance telephone company MCI is attempting to take its first step into the local arena, asking regulators in five states for permission to provide service.

The move comes as local and long-distance phone companies try to invade each other's businesses.

MCI Metro, a subsidiary of MCI Communications Corp., filed requests with state regulators to provide residential and business services, officials said Monday. The states are Washington, Maryland, Illinois, Michigan and Pennsylvania.

US West Inc. currently provides local phone service to Washington; Bell Atlantic Corp. serves Maryland and Pennsylvania, and Ameritech Corp. serves Illinois and Michigan.

If the plan is approved, MCI stands to gain a piece of the lucrative local phone market, which brings in $80 billion a year nationwide.

It would also let MCI bypass paying costly fees to local telephone companies to originate and terminate long-distance calls, analysts said. Long-distance companies typically pay 45 cents on every dollar of long-distance revenue to local phone companies for this service.

By skirting those fees, "prices for long-distance service should go down, so MCI's customers would benefit," said Michael Balhoff, an analyst.

Some analysts believe that added competition could also drive consumer prices down for local service. But Balhoff thinks local rates could increase slightly over time as local phone companies lose revenue to new competitors.

Ameritech, which wants permission to provide long-distance service, used MCI's announcement to underscore the need for regulatory symmetry.

"We look forward to facing off in the marketplace on an equal regulatory footing," said Lawrence Strickling, an Ameritech vice president.

Currently, regional phone companies are barred from providing long-distance service, but a handful of phone companies are seeking to overturn the restriction in federal court.

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