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New Rules Could Jeopardize AT&T's Local Service Is A Merger Necessary?(A)

Investor's Business Daily

| February 04, 2003 | COPYRIGHT 2003 Investor's Business Daily, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan.  All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)Copyright

Byline: REINHARDT KRAUSE

As federal regulators study changes in rules that govern competition in local phone markets, AT&T Corp.'s fate could hang in the balance.

Pressure on Ma Bell to merge with another company would grow if federal regulators issue new rules that make it much more costly for AT&T to compete in local markets, analysts say. The Federal Communications Commission is expected to adopt new rules at its Feb. 13 meeting.

The stakes are huge for AT&T. Its consumer long-distance revenue is shrinking fast, but its emerging business of offering local service could offset this loss.

Ma Bell has signed up 2.5 million customers in nine states for local service. To offer this service, it leases local lines and switches from regional Bells at prices set by regulators.

The Bells claim the leasing deals, called unbundled network element platforms, or UNE-P, are unfair. They say discounts given to AT&T and others are too steep. And they argue that some parts of their networks, especially speedy Internet links, shouldn't be leased at all.

The big questions are: How much will the FCC change network-sharing rules, and how quickly will the new rules take effect?

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