Bell Atlantic Going, Going, Long (Breakfast News) December 22, 1999


Wednesday, December 22, 1999

"You can not create experience. You must undergo it."
-- Albert Camus

Bell Atlantic Going, Going, Long

By Richard McCaffery (TMF Gibson)

The Federal Communications Commission is expected today to grant local telecommunications company Bell Atlantic (NYSE: BEL) permission to enter the long distance phone market in the state of New York, making it the first baby bell to provide long distance service in its own market.

If it happens -- and the FCC has been widely reported as leaning in favor of approving Bell's bid -- consumers and shareholders should see rewards quickly. The system isn't perfect, but competition always makes companies smarter and leaner.

First, a little background. Until 1984 AT&T (NYSE: T) provided the vast majority of local and long distance phone service in the U.S. When the company agreed to a breakup, it was left in control of long distance services and the seven baby bells were given hegemony over local service.

The Telecommunications Act of 1996 changed all that, allowing the baby bells to enter the long distance market and vice-versa. Bell Atlantic spent the last two and a half years and over $1 billion to open up local lines to competitors. While there is disagreement over how easy it is for competitors to use Bell's facilities, the time is ripe for fulfilling the promise of the 1996 act.

Here's why the move is good news. First, increased competition should drive down prices and force carriers like AT&T and MCI WorldCom (Nasdaq: WCOM) to simplify payment plans. In addition to cost savings, it might make reading your monthly phone bill a lot easier. Imagine that.

Second, the move to offer long distance services is critical for Bell and its shareholders because competitors are challenging the company in its local markets. As Bell points out, competitors are already providing 1.3 million local phone lines in New York, and the company has agreements with 74 competitors giving them access to use Bell's facilities.

Since wireline (regular phones attached to the wall) markets in New York are mature, Bell must offer new services and expand to new markets to grow revenues. Getting a foothold in the lucrative New York long distance market is a big step.

Bell's plan is to provide more than 8 million homes and businesses in New York with a complete package of services -- local, long distance, data, and wireless -- and customers would receive one bill from one company.

Bell plans to seek approval to offer long distance services in Massachusetts, Pennsylvania, and New Jersey next year.

News to Go

Database software maker Oracle (Nasdaq: ORCL) and aerospace company Boeing (NYSE: BA) are discussing a deal to build a network that would allow the aircraft manufacturer to bid for all of its needed supplies online. Sound easy? Boeing has 31,000 suppliers and uses over 3 million parts, Bloomberg reported.

Internet healthcare company Healtheon/WebMD (Nasdaq: HLTH) is acquiring Kinetra, a joint venture of Electronic Data Systems (NYSE: EDS) and Eli Lilly (NYSE: LLY), which processes over 50 million electronic clinical transactions a year. The deal -- which creates a strategic relationship among Healtheon, Eli Lilly, and EDS -- is worth $300 million.

Online services giant America Online (NYSE: AOL) announced plans to acquire (Nasdaq: MQST) for $1.1 billion in stock to give its users maps, directions, and additional destination services. MapQuest is ranked among the top 50 Internet properties in terms of traffic.

Pharmaceutical firm American Home Products (NYSE: AHP) has settled most of the Fen-Phen diet drug lawsuits it faced in Mississippi by reaching agreement with the plaintiff's counsel. As a result of the settlement, the $150 million award handed down by a jury yesterday was set aside. Terms of the accord were not disclosed.

More Foolishness

Sound off in a message folder of your very own... Pick stock screens for a new millennium... Bone up on the basics... Have you given your five dollars for five charities?