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Appeals court throws out FCC phone rules

Posted on: Saturday, 6 March 2004, 06:00 CST

An appeals court on Tuesday rejected federal rules giving states more authority to determine which companies may offer local phone service within their borders.

The three-judge panel of the D.C. Circuit Court of Appeals unanimously sided with former Bell companies Verizon, BellSouth, SBC and Qwest. They claimed the rules adopted by the Federal Communications Commission forced them to give competitors access to their networks at artificially low prices.

It's the third time the commission's attempts to write rules for local telephone service competition have been rejected by the courts. The latest ruling decried the FCC's "apparent unwillingness to adhere to prior judicial rulings."

At issue is how to spur competition for local telephone service, which Congress mandated in 1996.

Since it's too costly for a company to duplicate the existing network of switches and wires, the FCC looked for a way to let competitors use existing systems. The rules issued last August gave states the ability to require the former Bell companies to lease elements of their networks, such as lines and central office switching capabilities, to competitors like AT&T and MCI.

State regulators, eager to give consumers more choices, have set those lease prices very low. The Bell companies say that leaves them at a competitive disadvantage and takes away incentive to build better networks.

The rules were the result of a contentious 3-2 FCC vote in February 2003. Chairman Michael Powell was on the losing end of the vote, the first time he had been on the losing side since taking over the five-member panel in 2001.

Powell applauded the court decision and said he already has ordered the FCC staff to begin work on new rules.

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