February 21, 2000

Printer ready

Regional Bells Struggle To Offer Full Line Of Services

By Bob Wallace

early every high-tech company these days is moving at Internet speed. National service providers are ramping up to become one-stop shops with a variety of offerings. The regional Bells also seek to diversify well beyond local services. But because they require regulatory approval to offer long-distance services within and between states in their territories, expansion-minded Bell Atlantic, SBC Communications, and US West aren't close to offering complete service bundles for businesses.

How slow is the pace? It's taken a full four years after enactment of the Telecommunications Reform Act of 1996 for the first company, Bell Atlantic, to win permission to provide long-distance services in a single state, New York--hardly Internet time. And when calls leave New York, Bell Atlantic must resell service from another provider--hardly a one-stop shop.

"There's no reason for IT managers looking for one-stop shopping to change the way they look at Bell companies for the next two years," says Lisa Pierce, a VP at Giga Information Group. "It will take them about 18 months to get the approvals they need on the long-distance front."

After that, the Bell companies must develop solid service bundles and convince loyal AT&T or MCI WorldCom customers to switch their business. "If one of these Bell companies grows to provide truly national services at a compelling price and with stability down the road, we wouldn't rule them out as an alternative," says Brian Spears, IS director at camera maker Konica Technologies America Inc. in Windsor, Conn., an MCI WorldCom customer. "But since we have branch offices all across the country, anything short of that, like using multiple regional carriers, would be too resource-intensive for us."

Bell Atlantic hopes its pending mergers with GTE Corp. and Vodafone-AirTouch will give it the assets to become a supercarrier. "We've realized that being a regional carrier offering local services wouldn't lead us to success because most enterprise customers won't deal with you unless you can satisfy all their domestic needs," says Larry Babbio, Bell Atlantic's chief operating officer. "Our objective is to become a full-service provider."

Regulatory restrictions will quell this objective for some time. To gain approval for its mergers, assets must be divested. For example, GTE has proposed restructuring its internetworking unit as an independent public company.

SBC has bought other Bells, Ameritech and Pacific Telesis, and formed partnerships to offer bundled services. "We've brought together assets in wireless, global networking, and Internet access," says John Jennings, VP of business marketing at SBC, "but we need to fill out our E-commerce offerings to complement our Web-hosting business. And noticeably absent is long distance." SBC signed a deal last year to have Williams Communications Inc. carry SBC traffic over its nationwide network. But SBC must first receive long-distance approval in at least one state. In the meantime, SBC plans to provide local services in 30 metropolitan areas outside its territory and spend $6 billion on network upgrades.

US West's proposed $45.2 billion merger with Qwest Communications International Inc. won't deliver one-stop shopping for a few years. Qwest first must divest its long-distance assets in US West's 14-state region. And it can't serve this market until US West gets long-distance approval in each state. Still, Qwest is planning for what US West brings to the table: 25 million customers, expansive digital subscriber line assets, some wireless holdings, and manpower. Qwest brings a 25,000-route-mile IP fiber network and an ASP venture with consulting firm KPMG, under which Qwest subsidiary Cyber.Solutions rents seats on hosted apps. Qwest says it plans to offer hosting and ASP services to US West's customers, but it's unsure whether Cyber.Solutions must be divested first. "The biggest challenge I see for Qwest," says Jeanne Schaaf, a senior analyst with Forrester Research, "is avoiding creating a legacy organization."

Return to main story, "The Next Frontier."

Illustration by William Rieser

Back to This Week's Issue
Send Us Your Feedback
Top of the Page

---