Baby Bells slashing rates to keep or reacquire customers, prompting competitors to cry foul.

NEW YORK (CNN/Money) — Local phone service providers known as «Baby Bells» are cutting prices for residential customers in an effort that competitors say amounts to unfair competition, according to a published report.

The Wall Street Journal reports that companies such as SBC Communications Inc., BellSouth Corp. and Verizon Communications Inc. are trying to woo back local phone customers by making low-cost offers at the same time they are seeking permission to charge higher rates to other phone companies that want to compete for those customers.

The paper says that offers include introductory rates of $7.95 a month for unlimited local phone service or $100 checks to switch phone companies.

The $7.95 a month offer is for SBC for customers in Michigan, and it includes 30 minutes of free long-distance service. Even after the promotion rate ends, the paper reports, SBC is charging customers only $17.95 a month, which is still 36 percent below the $28 to which SBC is asking Michigan regulators to boost its wholesale rate. SBC now gets $14 per line from wholesale customers, who are crying foul about the rate cuts.

«You have to ask yourself: ’Why would SBC rather get $8 from a residential customer instead of $14 from us if their end goal isn’t to drive us out of business,» Bruce Yuille, co-owner of QuickConnect U. S. A. told the paper. QuickConnect is a small telephone company with about 11,000 customers in Michigan that is has consulted a bankruptcy lawyer due to the financial squeeze it now faces.

SBC Chief Operating Officer Randall Stephenson says SBC lost 165,000 phone lines during the second quarter to rivals leasing access to its network despite the discounts it is offering in Illinois, Ohio and other states in its territory. He said offering the lower rate offer to keep or reacquire customers will pay for itself when the promotional rates end.

The local phone companies are also facing new competition from wireless phone providers as well as from cable television operators, who are rolling out local and long-distance phone service over their systems.