Baby Bells Cry Foul, but Are They Crying Wolf?

The wailing is getting louder, but the Baby Bells' claims still don't ring true to some ears.

As the Federal Communications Commission prepares its "triennial review" of telecom policy, the complaints from one corner are reaching a fever pitch. The local phone giants are increasingly portraying themselves as hamstrung by rules that they say give big long-distance carriers a free ride on their dime.

The government-set pricing plan has long been a sore spot with the Bells. But recently SBC (SBC), Verizon (VZ) and BellSouth (BLS), and to a lesser degree Qwest (Q), have grown increasingly assertive in arguing that the setup -- known in the industry as unbundled network elements platform, or UNE-P -- gives their newly hatched local phone competition an unfair advantage.

But some analysts and investors say the Bells are once again talking out of both sides of the receiver, painting a woeful picture in Washington even as they highlight sunnier trends to Wall Street. The reality of the matter, these people say, is that as phone service trends evolve, the Bells are gaining long-distance and wireless subscribers even as their local businesses erode. And so, rather than unmasking a truly unfair network-pricing situation, the Bells are merely flexing their ample lobbying muscles in a more public setting.

Chiming In

Like many telecom industry disputes, this one starts with the Telecommunications Act of 1996. That landmark piece of legislation dictates that the Bells can't offer long-distance service in an area until they've given competitors a reasonable amount of access to their local network.

The Bells insist that the act allows outfits like AT&T (T) and WorldCom to essentially freeload by getting cut-rate access to the Bells' local customers. And if that's not bad enough, these phone squatters aren't saddled with the responsibility of buying gear or investing in the all-important "last mile" of network access.