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AT&T spinoff would face regulatory scrutiny

Any spinoff or sale of consumer long-distance units by Ma Bell or WorldCom would be subject to close scrutiny by the government, a federal regulator says.

    WASHINGTON--Any spinoff or sale of consumer long-distance units by AT&T or WorldCom would be subject to close scrutiny by the government, a federal regulator said today.

    AT&T reportedly is considering a spinoff of its consumer long-distance unit. The company also may be considering a sale of that unit. Creating a spinoff would enable AT&T to exit a business of declining revenues and narrowing profits while boosting its disappointing stock price. WorldCom management also has considered spinning off its consumer long-distance unit under the MCI brand for similar reasons.

    "We would be very concerned about the consumer ramifications" of a sale or spinoff of long-distance by AT&T or WorldCom, said Dorothy Attwood, chief of the Federal Communications Commission's Common Carrier Bureau.

    "There would be public policy implications if there were such a massive sale," Attwood said, referring to the fact that AT&T and WorldCom are the largest and second-largest long-distance carriers, respectively, in the United States.

    The FCC has jurisdiction over numerous aspects of long-distance service, including pricing and features, under the Communications Act.

    Attwood, at a briefing for reporters at FCC headquarters, dismissed the notion that Verizon Communications could be considering buying AT&T's long-distance service, as has been reported.

    "That would be illegal," she said. Bell companies can only offer long-distance in states in which it has received explicit permission from the FCC, and Verizon only has that authority in New York.

    "All of AT&T's customers would have to be in New York," Attwood said.

    Meanwhile, Attwood said she expects two to four more Bell company applications for long-distance service before the end of the year. SBC Communications has been granted the right to offer long-distance in Texas. Verizon, having won the right to serve New York, has an application pending to provide long-distance service in Massachusetts.

    Baby Bells moving in
    The ever-increasing presence of Baby Bells in the long-distance market is one of the factors eroding revenues among traditional long-distance carriers.

    Attwood saidsee story: Telecom shakeout brings merger frenzy that she would have all the staff she needed to handle those Bell applications, which can run hundreds of pages, even if she has to borrow workers from other bureaus at the commission. "It's in the commission's acute self-interest to look at each one of those applications thoroughly."

    She also acknowledged that consumers in the Midwest served by Ameritech, since bought by SBC, have been complaining of poor service. Referring to monthly data SBC is required to provide to the commission as part of the agency's approval of its acquisition, she said, "Clearly there seems to be a deterioration of quality in the objective reports we're getting in Ameritech territory."

    The commission is watching the situation closely and is considering several possible courses of action, she said, but no decision to act has been made.