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Bell Atlantic Offers to Sell GTE Backbone

Bell Atlantic Corp. is considering breaking up GTE Corp. in order to gain regulatory approval of the two companies pending merger.

According to industry analysts, Bell Atlantic (BEL) may spin-off GTE's (GTE) Internet assets in an effort to gain the Federal Communications Commission's approval of their consolidation.

Bell Atlantic has so far been unable to gain the federal nod from the Commission, but the deal has gained approval from state agencies in Washington, Virginia, Maine and Pennsylvania. Originally valued at $53 billion, the BA-GTE merger stalled because Bell Atlantic is prohibited from owning a high-capacity backbone.

According to a new filing with the FCC, Bell Atlantic would divest GTE's Internet-backbone operation, dubbed GTE Internetworking as a separate, publicly traded company.

Peter Thonis, GTE spokesperson, said the backbone spin-off proposal is just one of many options it is considering in an effort to win regulatory approval of the deal.

"This is just part of an exploratory discussion the Commission," Thonis said. "We've made other suggestions that would eliminate the inter-lata barrier currently at issue with the FCC, the backbone spin-off is one suggestion."

At issue is GTE's Internet backbone, which operates nationwide, essentially like a long-distance carrier. Bell Atlantic and GTE have proposed transferring the Internet backbone to a separate company that would be co-owned by the merged Bell Atlantic-GTE.

A FCC official confirmed that the agency is considering the plan, as well as several other options that would resolve the inter-lata issue for the deal.

Bell Atlantic, meanwhile, is proceeding with its long-distance offer in New York after a federal court Tuesday denied an emergency motion by AT&T Corp. and Covad Communications that would have delayed the Bell company's rollout of long-distance phone services in the state.

The U.S. Court of Appeals for the District of Columbia Circuit Tuesday denied a request by AT&T (T) and Covad (COVD) to block Bell Atlantic's long-distance entry. AT&T and Covad sought the stay pending the outcome of a lawsuit that seeks to overturn the FCC order that granted Bell Atlantic permission to offer long-distance services in New York.

William Kennard, FCC chairman, said the court took the right action in denying the stay.

"I'm pleased that the court has denied AT&T's motion for a stay and allowed the FCC's authorization of Bell Atlantic entry into long distance to take effect. This is good news for consumers," Kennard said. "As I have said repeatedly, it's time for the industry to take their battles out of the courtroom and into the competitive marketplace."

Bell Atlantic began selling long-distance services to consumers in New York earlier this week. The company intends to offer long-distance service to residential customers for 10 cents a minute. Bell Atlantic will also offer rates of five cents a minute on weekends and nine cents a minute on weekdays for customers who bundle their long-distance service with Internet access.

Bell Atlantic last month won permission to sell long-distance calling in the state of New York, but it still is prohibited from offering long-distance services in the rest of its East Coast footprint.



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