Striking a blow to Pacific Bell's aggressive push into new markets, state regulators late Friday said the company has not opened its local phone market enough to win entry into the long-distance business.
The California Public Utilities Commission staff issued a report saying PacBell's draft application has multiple "shortcomings" and that the company complies with only three of the 14 requirements that must be met before getting clearance to go into long-distance.
In the report, the PUC found that PacBell was providing rivals with adequate access to telephone poles, phone numbers and number-dialing capability. However, the company is falling short in providing space for competitors to connect to PacBell equipment, and providing an equal system for service ordering, repair and billing.
While the report is preliminary, it nonetheless sends a strong signal to PacBell that it is not close to complying with federal requirements for expansion.
A PacBell spokesman on Friday denied that the PUC report is a disappointment to the company, which has maintained that it has complied with all the rules and should quickly be allowed into long-distance.
"I don't think it's a proper characterization to say that this report is a rejection of our application," said Eddie Reeves, a PacBell spokesman. "There's no doubt that we have a lot of work to do--and it's certainly not going to be a two-inch putt--but I don't think it's more than we can do."
PacBell, the state's largest phone company, filed a 5,200-page draft application with the PUC at the end of March. By the time other phone companies, consumer groups and others had weighed in, the PUC's reading material on the issue had grown to 16,500 pages.
The phone company, a subsidiary of San Antonio-based SBC Communications Inc., will have a chance to rectify its shortcomings through a series of "collaborative workshops" scheduled for later this month at the California PUC.
"This is typical of what's happening across the country with all of the Baby Bells," said Jeffrey Kagan, president of Kagan Telecom Associates, an Atlanta-based consulting firm. "They are taking their best shots and filing applications and finding out after the fact that they have fallen short."
For months, consumer groups and competing phone companies have argued that PacBell's long-distance application was premature and that the company is still resisting competition.
To those opponents, the PUC's report was a vindication.
"I think it's encouraging that by and large, they found that Pacific has failed to comply with the law, and that's what we've been saying all along," said Regina Costa, a telecommunications analyst at The Utility Reform Network, a San Francisco-based consumer advocacy group. "This is a company that has fought competition tooth and nail."
Long-distance carrier MCI Communications Corp. also applauded the report.
"The PUC told Pacific Bell to go back to the drawing board," said Jim Lewis, MCI's senior vice president for policy. "I'm not surprised by it, because I know they're not ready."
Under the 1996 Telecommunications Act, local phone companies are allowed to sell long-distance phone service, but only after they prove that their monopoly local phone market is sufficiently open to rivals.
To help regulators assess a company's progress toward opening their markets, federal regulators created a 14-point checklist of issues that must be resolved in order to declare a local phone market "competitive."
But so far, every Baby Bell company's application for long-distance has been rejected by regulators--including applications by other SBC subsidiaries.
In PacBell's case, the PUC concluded that it has complied with only a few of the requirements and still falls short in several categories. The staff also cited "anti-competitive behavior" at PacBell, according to a release summarizing the report.
Now, the action will shift to a series of workshops, where PacBell, the PUC, consumer groups and rival phone companies will try to hash out solutions to the issues raised in the report. The PUC will issue a final report later in the year, and state commissioners will vote on the matter by November. The PUC's decision will be forwarded to the Federal Communications Commission, which has the final say on the application.
Times staff writer Jennifer Oldham contributed to this report.