Verizon Fulfills the Checklist in Mass.

Washington— Federal regulators last week granted Verizon Communications permission to provide consumer long-distance phone service in Massachusetts — the fifth state to see Baby Bell entry in the past six months.

In a 3-1 vote, the Federal Communications Commission ruled that Verizon met the 14-point, market-opening competitive checklist contained in the Telecommunications Act of 1996.

Verizon — the state's dominant local-exchange carrier, which controls 84 percent of Massachusetts telephone lines — may start offering long distance on April 26.

The agency's two Republicans, chairman Michael Powell and commissioner Harold Furchtgott-Roth, joined with Democratic FCC member Susan Ness to provide the majority.

Democratic FCC member Gloria Tristani voted to deny the application. She said the switching rates paid by Verizon's competitors were not consistent with FCC pricing rules.

In December 1999, Verizon became the first regional Bell operating company to enter the long-distance market when the FCC approved the company's application in New York state.

The agency has also given SBC Communications Inc. the nod to offer long distance in Texas, Kansas and Oklahoma.

The 1996 law ended the Baby Bells' banishment from the long-distance market, a ban put in place in 1984. That's when AT&T Corp. agreed to split into a long distance unit and seven regional local phone companies. After mergers, only four RBOCs remain.

The RBOCs were excluded from long distance by U.S. Judge Harold Greene's consent decree, which prevented them from using their local monopolies to undermine competition in adjacent competitive markets, such as long distance.

Verizon presently has 4 million long-distance subscribers — 1 million of whom are in New York — which makes it the No. 4 U.S. long-distance carrier.

Verizon's other long-distance customers came from GTE Corp., a local carrier that the 1996 law immediately allowed into the long-distance market. Verizon was formed in the merger of GTE and Bell Atlantic Corp.

The FCC's review process for Bell entry applications continues to be contentious. AT&T repeatedly argues that the RBOCs have failed to meet the competitive checklist and have hindered local phone competition by overcharging their wholesale customers for the lease network elements needed to provide service to end users.

AT&T vice president of federal government affairs Len Cali complained that the FCC allowed Verizon to offer long distance in Massachusetts, even though the Bell's wholesale rates are much higher than comparable rates in Texas, Oklahoma and Kansas.

"The FCC afforded Verizon far too much latitude in approving its application to offer long-distance service in Massachusetts," Cali said in a statement. "Absent reductions in Verizon's wholesale rates, the result will be higher costs and fewer choices for consumers."

In its order, the FCC noted that Verizon's competitors in Massachusetts serve more than 513,000 local phone lines, more than 93,000 unbundled loops, over 238,000 resold business lines and more than 30,000 resold residential lines. Verizon has 4.3 million access lines in the state.

Frustrated with the FCC, the Bells have complained to Congress that the agency has expanded the checklist and failed to provide clear guidance for gaining approval in past decisions that rejected their entry applications.

In a statement, Powell said the FCC has been working hard to "provide more detailed guidance" to mitigate concerns that it had been "hiding the ball."

The FCC has 90 days to act on a Bell application, a process that can become hectic when a company files supplemental information as the deadline quickly approaches. Powell told Congress he would like the law changed to allow the agency to grant time extensions, rather than having to reject an application and trigger a new 90-day review period.

Legg Mason Wood Walker Inc. analyst Blair Levin told clients last week to expect a "flood of Bell applications" in the near future, including an SBC application for California.

Should the FCC continue to approve the Bells' applications, Levin added, House Energy and Commerce Committee chairman Rep. Billy Tauzin (R-La.) and Rep. John Dingell (D-Mich.) might see support for Bell-favorable legislation dwindle.

Tauzin and Dingell are expected to reintroduce a bill that would allow the Bells to transmit data long distance without meeting the checklist and provide high-speed Internet access over lines that competitors could not lease or resell.