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MCI Plans to Spend $2 Billion To Reach Business Customers

By Sandra Sugawara
The Washington Post

MCI Communications Corp., unveiling its strategy for competing with its telephone and cable rivals, said Tuesday it will go after the most profitable customers of Bell Atlantic Corp. and other regional phone companies.

MCI said it will spend $2 billion to enable business customers in 20 of the largest markets, including Washington, to bypass the local telephone company when connecting to long-distance service networks. It also plans by the end of 1994 to equip its entire domestic network -- which it is naming networkMCI -- with high-speed data transmission technology, as it races other companies to build the so-called information superhighway.

Officials of Washington-based MCI also said the company would join the flurry of combinations of telephone, cable, entertainment and computer companies in recent months, noting that no company can build these futuristic networks alone. But company officials declined to provide details of its plans.

Analysts said MCI is trying to position itself for the fierce competition that is expected to unfold over the next few years as new federal policies and powerful alliances tear down decade-old barriers in the telecommunications industry.

Residential phone service is subsidized by access fees the long-distance carriers pay for connections to local systems, and Bath said the highest come from business customers, especially in metropolitan areas. "That's why the returns are really so powerful," he said.

MCI's announcement set off a flurry of protests from Bell Atlantic and other regional phone companies, which said that if MCI enters the local market, they should be allowed immediately into the long-distance business.

MCI officials said they strongly oppose such a move until the restrictions on local competition are lifted. MCI said it is only allowed to offer a full range of local telephone services in four states -- New York, Massachusetts, Illinois and Washington. Nevertheless, MCI's decision to carve out a lucrative chunk of the business of Bell Atlantic and other Bell companies is likely to bring down some business phone rates, industry officials and analysts said.