Pa. Operators Praise Utility Telco Reforms

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Cable and other telephony competitors are celebrating
sweeping regulatory reform in Pennsylvania, while incumbent Bell Atlantic Corp. swore it
would do everything necessary to strike down the "anti-consumer" ruling.

By a 4-1 vote, the state's Public Utility Commission
reversed a trend of incumbent-friendly oversight and socked Bell Atlantic with regulation
meant to provide competitors with more cost-effective access to the telco's network.

"Local phone competition has been an unfilled promise
for too long … Our efforts have been frustrated for too long. Today is the day we
make good on the promise," PUC chairman John Quain said after the vote.

The Pennsylvania PUC capped Bell Atlantic's local telephone
rates until Jan. 1, 2003; said the telco must form separate wholesale and retail
operations; classified Internet-connection phone calls as local; and cut by 16.5 percent
the cost to competitors to lease parts of Bell Atlantic's network.

Further, the ruling makes it easier for competitors to
colocate their equipment in Bell Atlantic facilities.

And the PUC lowered toll-call access fees. The commission
estimated that this would reduce access-fee charges in Bell Atlantic's territory alone by
$78 million.

Reaction to the ruling fell along party lines. Executives
from AT&T Corp. -- which owns a long-distance carrier that pays access fees and that
hopes to be a local-phone provider -- were especially pleased with the lease-rate and
access-fee cuts.

The structural-separation requirement is "extremely
significant," added Jim Ginty, president of AT&T-Pennsylvania, in a prepared
statement. "With this decision, Pennsylvania has taken a leadership position in
creating one of the best climates for telecommunications competition in the nation."

AT&T plans to offer local phone service
"broadly" by next year, he added.

The PUC decision will also make marketing easier for
AT&T's varied products. The PUC will allow utilities to sell bundled services on a
single bill, making it easier for AT&T Broadband & Internet Services, which has
significant penetration in the state, to sell telephone, Internet and cable in a single
package.

The Pennsylvania Cable Telecommunications Association also
applauded the decision, calling the 16.5 percent cut in lease rates "critical to
spurring competition."

PUC decisions in the past have been pro-incumbent and
moving away from competition, PCTA executives said, but if regulators can enforce this
ruling, that trend will reverse.

But Bell Atlantic made it clear that the future of the
ruling is in doubt.

Executives from the incumbent telco called the new rules
draconian and unnecessary. Bell Atlantic CEO Ivan Seidenberg said in a prepared statement
that the ruling runs contrary to public policy across the country.

And Daniel Whelan, the telco's Pennsylvania president, said
the separate-subsidiary requirement is especially troubling and questioned its legality.
Bell Atlantic will "take all steps to correct this anti-competitive, anti-business
and anti-economic decision," he added.

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