Bell Atlantic, the US regional telephone company, has received approval from the US government to begin offering long-distance services to its customers.

The "baby Bell", which serves local customers in the East Coast of the United States, will be the first regional company allowed to compete with AT&T, the US long-distance giant.

The move comes more than a decade after the US telephone monopoly was broken up, creating seven regional telephone companies and one long-distance carrier.

AT&T immediately said it would file suit to prevent the move.

Under a law passed by the US Congress in 1996, the Federal Communications Commission was authorised to allow regional companies to move into long-distance markets provided they allowed competition in their own local call markets.

FCC Commissioner Susan Ness said the approval would quickly lead to lower prices and better service in New York.

"This increased competition should lead to more consumer choice, improved services, lower prices, and greater innovation," she said.

Battle looms

AT&T, and other new companies that offer telephone services through cable television links, are keen to penetrate the local market, which could be crucial for the roll-out of high-speed internet connections which allow telephone calls, television channels, and internet links all to be sent down the same wire.

The move comes as both Bell Atlantic and Ameritech, which operates on the Pacific Coast, the Midwest and Texas, plan aggressive marketing campaigns to sell their long-distance services.

They are also beginning to compete more actively in providing high bandwidth telephone services through existing wires.

"The dropping of the barrier keeping the local telephone companies from the long-distance market is in fact the beginning of the end of regulation," said Reed E. Hundt, former chairman of the FCC.

The move was also spurred by the merger of MCI and Sprint, the only two national competitors to AT&T, which reduced competition in the $80bn long distance market.

The price of Bell Atlantic stock rose 1/8 to 65-3/4 while AT&T's stock price fell 1-1/4 to 52-15/16 and MCI WorldCom lost 2-5/8 to 77-7/16.

Bell Atlantic has been aggressively expanding, buying up another long distance operator GTE and doing a deal with the UK's Vodafone Airtouch to jointly run its mobile phone business.