Baby Bells

Two dozen telecommunications companies will urge Congress today to determine whether the Baby Bell phone companies violated antitrust laws when they discussed plans to build a war chest of as much as $40 million to lobby for an end to government regulations that restrict their ability to raise prices.

Chief executives of powerful Baby Bells are wooing their counterparts at major high-tech companies to help persuade federal officials to slash regulations and let the phone companies raise prices. In an unusual power dinner in Washington last week, the CEOs of SBC Communications Inc., Verizon Communications Inc., BellSouth Corp.

SBC Communications Inc., Verizon Communications Inc. and other local telephone companies Thursday asked a court to overturn new federal rules that give states more authority to decide whether the carriers must lease network components to rivals at discounts. SBC, BellSouth Corp., Qwest Communications International Inc. and the United States Telecom Assn., which represents local carriers, filed the petition with the U.S.

Local telephone giant SBC Communications Inc. is getting into the television business. California's dominant phone company announced Monday that it struck a deal with EchoStar Communications Corp., which owns the Dish Network satellite TV service, so it could offer TV along with phone and Internet services in 13 states. SBC said it invested $500 million in EchoStar securities as part of the deal. Neither company released other financial details.

SBC says it's forced to lease lines to competitors at below cost, which is like McDonald's subsidizing Burger King ("Phone Rivalry as Simple as McDonald's vs. Burger King, SBC Head Says," May 26). That's baloney, not hamburger. Unlike businesses that compete in an open marketplace, the Bell phone companies once were legal monopolies. The law prohibited competition and guaranteed them a profit at ratepayer expense. Under this regime, the phone system was built as a public asset. Now that competitors can lease phone lines, the Bells complain because they want to continue as monopolies and reap all the profit from the public investment in the phone system.

The Baby Bells earn healthy profits off regulations that require them to lease their local phone networks to rivals at discounted rates, according to a study to be released today by a trade group of those competitors. The study by the Competitive Telecom Assn. is designed to rebut the claims of Baby Bells such as SBC Communications Inc., California's dominant local carrier, that they have to lease their lines and other equipment to rivals at prices below their costs.

Accounting changes and the sale of a stake in a foreign firm bumped first-quarter profit at SBC Communications Inc. to $5 billion, but the nation's second-largest local phone company said Thursday that the defection of local phone customers to rivals continued to hammer its core business. Net income of $1.50 a share handily beat the net loss of $193 million, or 6 cents, posted a year earlier. Sales, however, fell 1.8% to $10.3 billion.

In a setback for Chairman Michael K. Powell, the Federal Communications Commission approved new rules Thursday requiring the regional Bell phone companies to continue renting their local networks to rivals at discounted rates. But the commission also freed the Bells from sharing new, high-speed data lines with competitors -- a key concession demanded by Powell. The FCC's 3-2 vote was a victory for AT&T Corp., WorldCom Inc.

A key member of Congress has asked federal antitrust officials to explain how they will be able to ensure that the regional Bell companies will keep local markets open to rivals if the Federal Communications Commission makes wholesale changes to the rules governing phone competition. In a letter to the Justice Department, Rep. F. James Sensenbrenner Jr. (R-Wis.

The Federal Communications Commission, under heat from Congress for its chairman's push to scale back key tele- communications regulations, is working on a compromise plan, two industry sources said Friday. Under the arrangement being discussed, the FCC would preserve competitor access to the Baby Bells' local phone networks but allow the Bells to exclude their rivals from certain new fiber-optic lines.