BUSY SIGNAL: TELEPHONE COMPANIES SQUARE OFF

Congress passed the Telecommunications Reform Act of 1996 to deregulate the nation's local telephone markets.

But a year later consumers are getting a busy signal as long-distance companies square off with the Bell telephone companies and GTE over efforts to bring competition to the local level.

AT&T officials accuse Southwestern Bell of dragging its feet in negotiating interconnection agreements; Bell officials deny it.

Last September Bell and other phone companies filed suit in federal court to block implementation of Federal Communications Commission rules on the discount rates that phone companies would charge competitors for access to the local phone systems.

In October a three-judge panel of the St. Louis-based 8th U.S. Circuit Court of Appeals suspended key FCC rules aimed at opening the $90 billion local phone market to competition.

A final ruling in that case could come this summer, said Bell spokesman Eddie Reeves with the corporation's St. Louis office.

In Missouri the Legislature passed a law last year that mirrors the federal legislation.

The Missouri Public Service Commission ruled last year that Southwestern Bell must offer to resell local service to AT&T at a 20.3 percent discount rate off its retail customer price. But Bell filed suit against the PSC in federal district court in Kansas City, objecting to the ruling. The ruling was calculated by using unreasonable FCC guidelines, said Reeves.

"They came up with a discount rate that, if forced to offer that discount rate, we actually would be offering our network at below cost," he said.

Reeves said Bell calculated the discount rate should be around 13 or 14 percent.

The rhetoric of deregulation is one thing; getting it done is a lot harder, state regulators said.

"The local market is a very entrenched monopoly," said Martha Hogerty, Missouri Public Counsel.

Hogerty's office represents the interests of utility customers in proceedings before the Missouri Public Service Commission.

"Breaking up this monopoly is not something you can do with a stroke of a pen,' she said.

The vast majority of Missourians receive their local phone service from Southwestern Bell. That includes residents in Cape Girardeau and the Southeast Missouri region.

Fewer than one in 500 Missouri consumers has a choice in local phone service, said J. Steve Weber, AT&T's state director for government affairs.

"The benefits of competition -- lower prices, more choices, new services -- are being denied to Missourians," he said.

The super information highway ends in a gravel pit, said AT&T spokesman Jim Van Orden, who works out of the firm's Dallas, Texas, office.

"The last 10 feet is the problem," said Orden. The lack of competition at the local level means telephone customers must put up with antiquated service, he said.

But Bell's Reeves said his company is making a good-faith effort to reach agreements on access charges with companies that want to compete for the local phone market.

Agreements have been reached with some of the smaller competitors.

"The Public Service Commission has already certified 10 new competitors for local phone service," Reeves said. "Another 40 are still negotiating to get in the local market."

Telephone monopolies have benefited from more than $10 billion annually in overcharges for long-distance access to their local phone systems, said AT&T's Weber.

MCI and AT&T have accused Southwestern Bell of overcharging consumers.

Bell's Reeves said AT&T is fighting the local phone company's efforts to enter the long-distance telephone service market.

"It is not surprising to us that AT&T would make all kinds of charges in that they probably hope they can keep us tied down in a regulatory morass to delay the day they have to compete with us in long-distance," Reeves said.

Under federal law, local phone service must be opened to competition before local service companies such as Southwestern Bell can enter the long-distance market.

"If Southwestern Bell is allowed into the long-distance market before consumers have choice in local service, Bell will have no incentive to open its local markets to competition," Weber said.

But Reeves said it is AT&T that is holding up competition. "We want to compete with them in long-distance. They now have access to our market, but we don't have access to theirs," he said.

Reeves said the FCC must address the issue of hidden subsidies.

Long-distance charges subsidize local calls, business users subsidize residential service and urban customers subsidize rural service, he said.