AT&T Opposes Arizona Regulators Order

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The Arizona Corporation Commission has given a leg up to
incumbent U S West in the telecommunications wars by striking down the state's local
long-distance boundaries, which will allow the company to expand beyond its local service
calling area.

The state regulator's decision may not stand, though.
AT&T Corp. has already filed a complaint with the Federal Communications Commission,
arguing that the state body overstepped its authority.

There is legal precedent for that argument: A 1997 case in
Minnesota found that the FCC has sole discretion to set local and long-distance
boundaries.

The ACC decision, which commissioners characterized as a
"stand for states' rights," eliminated the local-access and transport areas
within Arizona.

The borders, set by the FCC after the breakup of AT&T
in 1984, allow U S West to carry traffic between Phoenix and Flagstaff, for instance, but
not between Phoenix and Tucson.

U S West -- which recently agreed to sell out to Global
Crossing Ltd. for about $47 billion -- said it intends to move into the local
long-distance market immediately with rates less than one-half those of competitors such
as AT&T and Sprint Corp.

Competitors are howling in protest. Those include the cable
lobby, Arizonans for Competition in Telephone Service, the American Association of Retired
Persons and the Sun City Homeowners Associations. Those groups have joined together to
fight U S West's application to become a long-distance carrier.

The ACC will decide in August whether the telephone company
has met the 14-point criteria checklist set by the FCC to qualify to move into long
distance.

Competitors said this month's decision removes any
incentive for U S West to cooperate with them in opening up its network. They argued that
they are charged more than $21 to rent residential lines for resale, while the same lines
are sold to homeowners for just over $13.

Further, U S West will have yet another product to anchor
itself into consumers' homes because of the Arizona decision.

At this time, competitors said, only 0.5 percent of
customers in U S West's service area are served by competitors such as Cox
Communications Inc.'s Cox Cable in Phoenix.

Cox is making some headway: According to press reports, the
operator signed an agreement in April to offer bundled services including high-speed data,
cable and telephony to multiple-dwelling-unit developments served by Mark-Taylor
Residential.

The ACC decision will also impact the merger between SBC
Communications Inc. and Ameritech Corp.

Officials for SBC have stated publicly that they are
interested in expanding Ameritech New Media's cable operations into Arizona, as well
as delivering other telecommunications services.

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