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Verizon to Pull Plug on OneSource Service Plan

Telecom: Subscribers of money-losing all-in-one program would be forced to find other local, long-distance options.

February 26, 2001|ELIZABETH DOUGLASS | TIMES STAFF WRITER

More than three years after introducing the nation's first all-in-one phone plans, a unit of Verizon Communications is pulling the plug on the offering, forcing 370,000 consumers nationwide to switch their local and long-distance service to less attractive options.

The plans, which offered local and long-distance phone service for a flat monthly fee, were originally touted as a groundbreaking effort to simplify phone service and spur competition in local markets.

But after losing $100 million a year on the effort and making little headway in drawing customers away from local powerhouses such as Pacific Bell and BellSouth, Verizon has decided to throw in the towel on the plan, known as Verizon OneSource.

The move, which must still win approval from state regulators, is another in a string of setbacks for local competition in the residential local phone market, which despite deregulation is still dominated by the former Bell monopolies.

Affected customers have received at least three letters from Verizon since December notifying them that the OneSource package will be discontinued, pending regulatory clearance.

So far, three-quarters of OneSource subscribers have switched services. The remaining customers have been told that if they don't switch on their own, Verizon will automatically transfer them to the main local phone company in their areas, cancel special calling features, such as caller ID, and enroll them in full-rate long-distance plans.

State regulators already are bristling at Verizon's campaign to send OneSource customers on a forced march out of the plan.

In California, where Verizon had set a March 19 deadline to transfer its remaining 65,000 customers, regulators have temporarily thwarted the company's plans by scheduling public hearings in Los Angeles and San Bernardino three days after the deadline.

"There is no March 19 drop-dead date, and if people were told that, they should send letters to the commission," said Doug Dade, a supervisor in the Public Utilities Commission's telecommunications division. "Customers should really wait until a decision is issued."

In light of the planned hearings, Verizon officials on Friday backed off from their March 19 target date.

Many Verizon customers are irritated by the prospect of being booted from their chosen plan and forced to repeat mind-numbing price comparisons in the confusing phone market once again.

"I don't see how this could be good for the customers," said Keith Hamilton, a OneSource customer in Diamond Bar. "They're probably going to raise the rates and lower the service. . . . I think that this would be a fine class-action suit."

The OneSource plan was launched in late 1997 under the name GTE Unlimited. Its main attraction was its simplified pricing, with local service and a set number of long-distance minutes for a flat monthly fee of $34 to $110, depending on the amount of long-distance time.

Under the plan, which was renamed Verizon OneSource after a merger between GTE and Bell Atlantic created Verizon Communications, customers could add dial-up Internet access or wireless services to the same bill for an extra charge.

The bundled plan was offered through a separate company, now called Verizon Select Services, which was created in part to compete against the local Bell phone companies.

Business and residential customers in nine states signed up for the OneSource offering, with about half of the subscribers--about 185,000 customers--in California. The remaining subscribers were in Florida, Texas, Washington, Oregon, Illinois, Tennessee, Indiana and Kentucky.

But instead of capturing customers from rival territories, Verizon Select Services and its OneSource plan ended up cannibalizing most of its local customers from its larger sister phone companies, such as Verizon California.

At its peak, only 20% of its subscribers came from rival phone companies, adding up to a net gain of just 74,000 new customers.

In addition, the venture was losing millions of dollars and would need 1 million new customers to break even, said Larry Babbio, Verizon vice chairman and president.

Verizon officials say the pullback is temporary, and the company will return to combat PacBell and other rivals with a revamped offer that includes high-speed Internet service through digital subscriber line, or DSL, technology.

But critics are skeptical. AT&T, WorldCom and Sprint, as well as DSL providers NorthPoint and Covad, have sustained huge losses in an attempt to gain a foothold with residential customers. Only cable companies, which have their own lines into neighborhoods, have thus far made headway against incumbent phone companies.

"Here's the No. 2 voice carrier in the state bailing out of serving the ordinary residential customer . . . and leaving nearly 200,000 people in the lurch," said Regina Costa of the Utility Reform Network, a San Francisco-based consumer group. "It begs the question: If a company as large as Verizon can't compete with PacBell, who can?"

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