Sign in Subscribe
Telecommunications industry

MCI Proposes Divestiture of Local Phone Networks to Spur Competition

Strategic Insights

— 2 min read

MCI Communications Corp.'s recent proposal to federal regulators to force the Baby Bells to spin off their local phone networks has sparked debate among telecommunications companies. The proposal, filed with the Federal Communications Commission, draws parallels with the 1984 breakup of AT&T Corp. into a long-distance company and seven Baby Bells, which led to increased competition and innovation. MCI's chief policy counsel, Jonathan Sallet, argues that complete divestiture of local phone networks is necessary to prevent the Bells from discriminating against new competitors and circumventing the requirements of the Telecom Act. However, Bell Atlantic Corp.'s assistant general counsel, Mike Glover, claims that MCI's proposal is designed to slow down long-distance competition, rather than spur local-phone competition.

Key Takeaways:

  • MCI's proposal to the FCC calls for the Baby Bells to spin off their local phone networks to promote competition, similar to the 1984 breakup of AT&T.
  • Jonathan Sallet, MCI's chief policy counsel, states that complete divestiture of local phone networks is necessary to prevent the Bells from discriminating against new competitors.
  • Mike Glover, Bell Atlantic Corp.'s assistant general counsel, argues that MCI's proposal is designed to slow down long-distance competition, rather than promote local-phone competition.
  • Competitors to Bell Atlantic provide more than 250,000 telephone lines in New York alone, as stated by Mike Glover.
  • Bell Atlantic plans to seek long-distance approval in New York from the FCC later this year, after receiving state regulatory approval.
  • The lobbying battle between local and long-distance companies has been ongoing for at least five years, according to Kim Wallace, a political analyst with Lehman Brothers.
  • LCI International Inc. proposed a similar plan last year, and other long-distance companies could call for the divestiture of local phone networks.
  • The Telecom Act requires the FCC and Congress to find ways to speed the process of opening the local market to competition, which has been slow to take off since its passage over two years ago.

Statistics:

  • More than 250,000 telephone lines in New York are provided by competitors to Bell Atlantic, as stated by Mike Glover.
  • The 1984 breakup of AT&T led to lower long-distance rates and the introduction of new products such as modems and fax machines.

Sources:

  • "MCI Floats Plan to Force Bells to Break Up" by [Source not mentioned in the text]
  • Federal Communications Commission, MCI's filing
  • Interview with Jonathan Sallet, MCI's chief policy counsel
  • Interview with Mike Glover, Bell Atlantic Corp.'s assistant general counsel
  • Interview with Kim Wallace, a political analyst with Lehman Brothers
  • Lehman Brothers
  • Bell Atlantic Corp.
  • MCI Communications Corp.

Read more