As the regional Bell operating companies continue to win broader permission to offer long-distance services, they are assembling strategies to attack an enterprise business market that represents billions of dollars in untapped revenue for the carriers.

The ability to offer long-distance within their regions lets the RBOCs serve not only as a business' local exchange carrier, but long-distance carrier as well. With that comes the opportunity to offer lucrative data services such as frame relay and ATM, an opportunity that previously has gone to interexchange carriers such as AT&T, MCI and Sprint.

Frame relay alone is a $15 billion business, according to market research firms.

"We realize there are segments in the upper end of the large-business market where we do not compete. So we look at that market opportunistically," BellSouth CEO F. Duane Ackerman said during a Nov. 10 analyst meeting.

Large businesses account for only 17% of BellSouth's overall Communications Group revenue, or about $3 billion annually. Yet the large-business telecom market in BellSouth's region is worth $10.1 billion and growing at about 2% annually.

BellSouth already has had some success in this market. It has landed 5,500 long-distance contracts valued at $600 million with large companies in its region, Ackerman says.

The carrier also is investing in network VPN and metropolitan Ethernet services, IP PBXs, IP Centrex and softswitch equipment, and an in-region IP backbone. But Ackerman acknowledges that BellSouth cannot meet the needs of "the highest of the high-end" enterprise customer.

That's where many thought AT&T, with its nationwide frame relay and ATM data network, might help BellSouth. According to published reports, the two were discussing a merger for some time before BellSouth walked away, reportedly believing that $19 billion was too high a price.

On the analyst call, Ackerman said that BellSouth would continue to target customers with headquarters in BellSouth's nine-state region in the Southeast, position itself more as a data networking provider, and leverage partnerships with Cisco and IBM.

The in-region focus is where BellSouth is strong - and weakest, according to analysts.

"In the long term, shoring up in-region revenue could put BellSouth on the defensive and make it more difficult for the carrier someday to go after market share outside its region," said Brian Washburn, an analyst at Current Analysis, in a recent report on BellSouth. "If it's going to compete with the likes of AT&T and MCI (and potentially SBC and Verizon) sometime beyond the foreseeable future, BellSouth will need to get into mergers and acquisitions or expensive network builds, which are both risky strategies that could backfire."

SBC also is looking to grab a greater share of the $34 billion enterprise opportunity in its region, says CEO Ed Whitacre. But in addressing analysts two weeks ago, Whitacre acknowledged that the ability to offer long-distance is the key. "Long-distance . . . allows for expansion into the enterprise market," he said.

Analysts agree.