AUSTIN--Mar. 17--Private negotiations over telephone deregulation erupted into a public feud Thursday when an AT&T-led coalition of business and consumer groups unveiled a huge television ad campaign attacking Southwestern Bell Co.

The ads, which will run statewide for 10 days at a cost of over $1 million, say ``the Southwestern Bell monopoly is grabbing for more power - at our expense.''

Officials with AT&T and a coalition called the Alliance for Communications Choices said they decided to run the ads after negotiations between Bell, AT&T and newspaper publishers failed to produce an agreement.

They are arguing over a Texas bill that would open local telephone service to competition, freeze rates for four years and free regulated phone companies from state oversight on prices. Bell's opponents include groups that either want to compete with Bell and other local phone companies or hope to deliver news, entertainment and other services over phone lines.

``We got to a point where they remain intransigent on critical issues to competition,'' said Bill Magness, whose coalition of consumer groups, cable companies and potential phone company competitors is part of the Alliance for Communications Choices.

``I've been working this deal for a long time, all with the idea that we could work something out, but that's not their agenda,'' he said. ``We've got to respond to the picture they're painting of this.''

A spokesman for Bell said the negotiators had been making progress and said AT&T was the party that wouldn't budge.

``It's no secret that for some years AT&T has spent a lot of money on TV ads that question the honesty of its long-distance competitors,'' said Bell spokesman Glenn Smith. ``Now AT&T is attacking Southwestern Bell. What else is new?''

The private negotiations began last week, at the urging of Gov. George W. Bush, Lt. Gov. Bob Bullock and House Speaker J.E. ``Pete'' Laney, who told top executives to get together and try to work out a deal. The three state leaders also asked AT&T to refrain from running advertisements that could turn the private differences into a public fight.

But Vaughn Aldredge, a spokesman for AT&T, said the company felt it had to do something to arouse the public to a fight the company is losing at the bargaining table. Though he said Bell Chairman Ed Whitacre Jr. has made an honest effort to negotiate, Aldredge also said the changes offered during the talks do not go far enough.

``We've got a House hearing coming up Monday on a bill that we feel is very favorable to Bell and unfavorable to everyone else,'' he said.

Newspaper publishers, loosely aligned with the Alliance, said they have nothing to do with the advertising campaign. ``I don't know who's buying an ad,'' said Burl Osborne, publisher and editor of The Dallas Morning News. ``I know I ain't.''

Osborne said the talks this week centered on differences between Bell and AT&T.

``To be candid, I came out of the meeting yesterday thinking they had chopped two or three more branches out of the undergrowth, that they had solved some of the problems.'' he said. ``I thought that they were making headway.

``That's why this is something of a surprise to me,'' he said. The ads imply Bell is investing less in Texas than phone companies in other states and say the company has been investing its profits in France,

Chile and Mexico.

``Five years ago, Southwestern Bell promised us 21st century technology,'' the announcer says. ``They clearly didn't deliver. Now, they're making promises again. Stop the Bell monopoly.''

Bell's Smith said AT&T is being unreasonable. ``Their goal appears to be to stop Southwestern Bell from competing in the long-distance and cable business, but to allow them to use our network and our equipment to cherry-pick only the lucrative customers without regulation and without a commitment to invest a penny in Texas,'' he said.

Bill Miller, a spokesman for the Alliance, said the group is still willing to negotiate.

``I believe that the group thought it might promote a more productive discussion at the table,'' he said. ``Progress, in their opinion, wasn't being made, and time was running out.'' END!I&3?HO-PHONE

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