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AT&T proposes end to Bell dependence

The phone giant proposes to build its own local telephone switching structure to eliminate its dependence on equipment from the four Baby Bells.

AT&T proposed a plan on Thursday to end its reliance on part of the local phone network owned by the Baby Bells.

The company has released a formal proposal to each of the four Bell companies--Verizon Communications, SBC Communications, BellSouth and Qwest Communications International--to move away from its current practice of leasing equipment to provide local service. AT&T would instead install its own gear to provide services to local customers.

AT&T and other telephone companies, such as MCI, have been trying to reach private commercial agreements with the Baby Bells since a U.S. Court of Appeals decision last month to eliminate requirements for local phone companies to share their infrastructure with competitors.

In the decision, the court struck down Federal Communications Commission rules that required the Baby Bells to lease access to their networks to rival providers at government-mandated rates. The court gave the FCC and carriers 60 days to come up with a solution.

In its proposal, AT&T said it would only lease wires into customers' homes and lines used to transport traffic from the Bells' local exchange points into the AT&T network. It would stop leasing the telephone switches that are needed to connect the calls. AT&T said it plans to either use its own switches or lease access to switches from non-Bell companies.

While AT&T works out these alternative arrangements and installs its own gear, the company said it would continue leasing access to some of the Bells' switches. But as incentive to install its own equipment, the company also proposed an annual price hike of between $1 and $4 per line through 2007.

Since the federal court's decision last month, the companies have been in a deadlock as to how to handle the situation. BellSouth, Qwest and SBC have all agreed to freeze their lease rates for 2004, until permanent deals can be worked out. Verizon has proposed a new framework for commercial agreements with its wholesale customers. It plans to offer customized, three-year agreements, restructured pricing and a number of other services not required under existing, government-mandated requirements.

But AT&T asserts that its plan is the best solution, since it provides a way for the company the phase out its dependence on the Bells' network.

"If the Bell companies accept this offer, the industry's leaders can turn confrontation into conciliation by solving one of the most significant controversies since the inception of the Telecommunications Act of 1996," David Dorman, CEO of AT&T, said in a statement. "This is a giant step forward that will relieve the Bell companies of the leasing obligations to which they most object and allow AT&T to expand the use of its own facilities to serve local customers."