In one of their most important actions since the 1980s breakup of the Bell System, Maryland regulators agreed yesterday to permit Bell spinoff Verizon Communications Inc. to sell long-distance service -- provided the company does more to crack open its local phone market in what has become one of the industry's least competitive states.
If the Federal Communications Commission approves the plan, Maryland consumers and employers may be blitzed by spring with new offers from Verizon, AT&T; Corp., Sprint Corp. and others vying for each other's customers in both local and long-distance service.
Verizon, the country's largest local phone company, also provides cell phone and high-speed Internet service in many areas, but it was forbidden under federal law from selling long-distance in several states until it proved it had allowed competitors into the local phone service market.
Congress put that process in place under Section 271 of the Telecommunications Act of 1996 to further distance the nation from the monopoly that ruled the telephone for most of the 20th century.
"I don't think it would be an overstatement to view this as a milestone," said Susan Stevens Miller, general counsel for the Public Service Commission of Maryland.
"In every state where they have gotten 271, there have been significant changes once the Bell company enters long distance."
But even as it granted Verizon's request, Maryland's commission attached 10 conditions and a rebuke to the company.
"Verizon needs to agree to give our citizens and businesses more opportunity for local choice," said Catherine I. Riley, the agency's chairwoman and a former state delegate. "We worked very hard to arrive at a fair and balanced outcome. I think the citizens of Maryland and the business community will benefit greatly."
Riley said the commission approved Verizon because the company is in "technical compliance" with a 14-point checklist that the FCC created under the 1996 law, but added conditions to see greater progress in local competition. Among them: Verizon must lower prices on parts of its system it leases to competitors to connect phone calls, can't tell competitors it has "run out of facilities" they can lease and must be more accurate in billing competitors and in phone directory listings.
Maryland's tepid competitive arena is indicated by the fact that Verizon's peers have gained only 6 percent of the state's local market since 1996 -- half the national average. Meanwhile, Verizon reaped 9 percent of the long-distance business in New Jersey just three months after 271 approval there, Riley said.
Maryland has eight companies offering phone service, compared with 20 or 30 in some states, according to recent FCC data.
"We're now ranked with South Carolina and Mississippi," Riley said. "We'll move into the monitoring and enforcement mode. If one year from now nothing has happened in the local market, we'll initiate proceedings" to re-examine Verizon.
Guns steps aside
Commissioner Ronald A. Guns was the only member of the state panel not to join the decision.
He removed himself from the case midway through hearings in October because his son works for Verizon. AT&T; had earlier sought Guns' removal because he is retired from Verizon.
In New York, Michigan and elsewhere, the telephone business reformed in recent years after the incumbent Bell entered long distance and ignited a price battle. But the Baltimore-Washington region hasn't felt the change. Verizon did win FCC approval weeks ago to sell long-distance service in Virginia.
"The PSC's support means that Maryland consumers and businesses now are closer to reaping the benefits of full telecom competition that their neighbors in Delaware, Pennsylvania and Virginia -- and eight other states in the mid-Atlantic and Northeast regions -- enjoy today," said William R. Roberts, president of Verizon Maryland.
"We will move forward quickly to make our case for Verizon long-distance to the Federal Communications Commission," Roberts said.
Verizon spokesman Harry J. Mitchell said the company hopes to be able to offer long-distance in Maryland by April. It would likely introduce in Maryland a program it began in several Northeast states, offering top discounts to customers who use Verizon for all communication services: local, long distance, wireless and digital subscriber line service for high-speed Internet use.
"We did what needed to be done, which is comply with the Telecom Act of '96," Mitchell said.
"The Telecom Act of the FCC didn't put in place a market share requirement. What is adequate, 2 percent or 5 or 30? The commission did a very thorough job."
Mitchell acknowledged, however, that Verizon executives anticipated that they would be asked to cut lease rates. In fact, when Maryland regulators contacted them late Tuesday to say they would tentatively approve the request if Verizon agreed to alter certain practices, the company responded affirmatively in writing hours later.
Verizon competitors said the decision will aid them and consumers -- if the commission follows up by lowering the lease rates.
AT&T;'s situation
AT&T; Corp., for example, doesn't offer Maryland consumers local service because it claims it can't turn a profit after factoring in Verizon's fees. Competitors pay more to lease Verizon switches to complete a local call in Maryland than in all but a few states in the country -- a disparity that the commission ordered Verizon to remedy immediately.
"It appears that the commission is on the right track," said Jeffrey Roberts, an AT&T; spokesman. "But with the ink not even dry on this decision, and the most important decision on the rates still to come, it's hard to say when true competition will be felt by Marylanders.
"Hopefully, it will be in short order."