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FCC Probing SBC for Allegedly Misleading Rival

Telecom: Based in part on the inaccurate data, the agency authorized the phone firm to offer long-distance service in two states.


WASHINGTON — Federal regulators are investigating the parent company of Pacific Bell for allegedly submitting false data to try to win government approval to offer long-distance service in Kansas and Oklahoma.

The Federal Communications Commission is examining whether three employees of San Antonio-based SBC Communications Inc. knowingly misled a rival firm about the number of SBC customers who might be interested in high-speed Internet access lines.

SBC has conceded that it provided inaccurate information, stating that some SBC customers' phone lines could not carry high-speed Internet signals. This incorrect data prevented IP Communications, a rival high-speed Internet provider in Dallas, from marketing to some SBC customers.

SBC is the U.S.' second-largest local phone company..

The landmark 1996 Telecommunications Act says states may allow SBC and the other regional Baby Bell companies to enter the long-distance market, but only after they open their local monopolies to competition. The law gives the FCC 90 days to confirm or contest claims of local competition.

During the Clinton administration, a skeptical FCC approved Baby Bell applications to provide long-distance service in only New York and Texas. But two days into the Bush administration, based in part on the inaccurate data from SBC, the FCC authorized SBC to begin providing long-distance service in Kansas and Oklahoma.

In a letter to the FCC on April 13, SBC acknowledged the misleading information, but said it was not trying to guide its rival away from potential customers. "There is no evidence . . . [that the inaccurate data] resulted in any discrimination or the denial of a meaningful opportunity to compete," the company said.

James Ellis, senior executive vice president of SBC, characterized the inaccurate statements made by the three employees as simple oversights that stemmed from the voluminous records the company must keep to comply with FCC regulations.

"We are not having any disputes with providing people the access they need to get to the [telephone] loop," Ellis said. We "made a mistake and we corrected it."

But some regulators and rivals say the inaccurate data typify SBC's indifference to rules aimed at stimulating competition in the $112-billion local phone business.

SBC, for instance, has paid the U.S. Treasury almost $27.6 million in the last five months for failing to meet certain federal benchmarks to ensure quality phone service. The FCC says SBC has been particularly poor at coordinating basic communications services with rival carriers.

SBC has paid an additional $13 million since July to Illinois and other states for similar shortcomings.

"The Bell companies have waged a war of attrition to slow-roll compliance with the law," said Jason Oxman, a senior vice president at Covad Communications, a high-speed Internet access provider. "These multibillion-dollar phone companies . . . have [decided] that it is more favorable to pay millions of dollars in fines than to comply with the law."

Richard L. Mathias, chairman of the Illinois Commerce Commission, said the commission is "very concerned about their performance. In seven of the last eight months we have increased fines against [SBC]." The company's foot dragging, Mathias added, "certainly slows competition."

FCC deputy general counsel John E. Ingle disclosed the inquiry in an April 23 letter filed in a lawsuit that long-distance giants Sprint, WorldCom, AT&T and others have brought against the agency.

The three big long-distance companies went to the U.S. Court of Appeals in Washington to challenge the FCC's approval of SBC's application to offer long-distance service in Kansas and Oklahoma.

Ingle said in his letter that the FCC staff "is investigating the circumstances of the reply affidavits" submitted by the three SBC employees. The FCC or the court could levy fines on SBC or revoke its long-distance authority.

FCC officials declined to comment on their investigation.

Communications policymakers are closely watching the FCC's oversight of phone competition to see how strictly the administration of FCC Chairman Michael K. Powell will enforce its competition rules.

Although Powell favors deregulation of the communications industry, he has said repeatedly that he will crack down on companies that defy FCC rules already on the books. "I will hurt you and I will hurt you hard," Powell testified in March before the the House Energy and Commerce Committee.

What's more, Powell told the committee that he favors legislation allowing the FCC to impose higher fines and penalties on scofflaws. "Our fines are trivial," said Powell. "They are the cost of doing business for some of these companies."

Although House Energy and Commerce Chairman Billy Tauzin (R-La.) is leading an effort to further deregulate the telephone industry, some lawmakers want tougher scrutiny. Today, for example, Reps. John Conyers Jr. (D-Mich.) and Chris Cannon (R-Utah) plan to introduce a bill to strengthen enforcement of the Telecommunications Act.

Neither lawmaker was available for comment, but their aides indicated that the measure might give regulators or rivals greater leeway to bring antitrust lawsuits to ensure competition.

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