Bell Has Long-Distance Near-Miss

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Washington -- Bell Atlantic Corp. could be on the verge of
becoming the first Baby Bell to offer long-distance service to its local phone customers.

Last week, the Department of Justice said Bell Atlantic had
complied with most, but not all, legal prerequisites to providing long distance to New
York residential and commercial customers.

In a statement, assistant attorney general for antitrust
Joel Klein said he was "confident that Bell Atlantic can solve the few remaining
problems in New York, and I am pleased that they have already started to do so."

Reaction to Klein's comments was mixed. Bell Atlantic
said it was "encouraged" by Klein's words, and it called the DOJ's
remaining concerns "technical." But analysts said that despite Klein's
favorable tone, the DOJ withheld the strong endorsement Bell Atlantic was expecting.

"It's definitely a negative, no matter how the
company spins it," said Michael Bowen, a telecommunications analyst with Deutsche
Bank Alex. Brown. "It further delays Bell Atlantic's entry into [long
distance]."

Analyst Scott Cleland of Legg Mason Wood Walker's
Precursor Group said Bell Atlantic was expecting a "green light" from the DOJ.

"I think [the DOJ was] saying close, but no cigar. I
still think the [Federal Communications Commission] can give Bell Atlantic a yes,"
Cleland said.

Under the Telecommunications Act of 1996, the Baby Bells
can't offer in-region long distance until they comply with a 14-point checklist that
establishes whether they have opened their phone networks to competitors.

The FCC, which has rejected five Bell entry requests, is
required to give the DOJ's opinion substantial weight. FCC officials have indicated
that Bell Atlantic's New York application had the best chance of winning approval.

In pointing to problems with Bell Atlantic's effort to
open its facilities to competitors, Klein said there was inadequate competitor access to
the lines that connect customers to Bell Atlantic's network and inadequate processing
of orders from customers seeking to switch to a Bell Atlantic rival.

The FCC has until Dec. 28 to issue a decision.

Klein said the FCC could deny the application and pinpoint
exactly what steps Bell Atlantic needs to take, or it could grant the application "on
the condition that it will not actually be permitted to offer in-region [long distance]
until it takes specified steps and demonstrates that its performance has met appropriate
requirements."

Bell Atlantic's entry into the New York market would
apply more competitive pressure on AT&T Corp., which is trying to cope with a price
war with MCI WorldCom Inc. and Sprint Communications Co., while gearing up to roll out
local phone service over its broadband-cable facilities.

Bell Atlantic president and chief operating officer James
G. Cullen told reporters he expects the company to grab 30 percent of New York's
residential customers within five years.

"Frankly, I think that is going to be a very quick
ramp-up. We are going to do really well in long distance in New York," Cullen said.

Bell Atlantic officials predicted success at the agency.
"We are going to get into long distance, and we are going to satisfy the
regulators," one official said.

Mark Cooper, research director of the Consumer Federation
of America, wouldn't respond to questions about the DOJ's announcement. He said
the CFA would announce its views today (Nov. 8), when comments are due at the FCC.

"We are going to propose a way to implement
Justice's recommendations," Cooper added.

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