• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

FCC Rule on Local Phone Service Rejected

Posted on: Wednesday, 3 March 2004, 06:00 CST

A U.S. appeals court yesterday struck down key elements of a Federal Communications Commission rule governing local telephone competition, handing a major legal victory to the regional telecom giants as they attempt to ward off insurgent rivals.

If implemented, both sides in the debate said the decision would put in jeopardy an eight-year-old system that allows competitors to lease phone networks owned by large local carriers such as Verizon Communications Inc. at government-mandated rates.

In a 3-0 ruling by the D.C. Circuit Court of Appeals, the judges wrote that the FCC lacks the authority to delegate responsibility for setting those rates to the states. The court also ruled the FCC had failed to prove that competitors in the local phone market are "impaired" without government-regulated access to critical parts of the phone network controlled by the regional giants.

The ruling, scheduled to take effect in 60 days, represents the latest chapter in a long-running debate over what kind of government safeguards are needed to ensure consumers have a choice in their phone service. The matter has now been kicked back and forth between the courts and the FCC several times.

In their written opinion, the judges lashed out at the FCC for its "failure, after eight years, to develop lawful . . . rules, and its apparent unwillingness to adhere to prior judicial rulings."

But a majority of FCC commissioners, the panel's two Democrats along with Republican Kevin J. Martin, issued a statement declaring they will ask for a stay to delay the decision, and will appeal to the U.S. Supreme Court to have it overturned.

"Today over 50 million Americans benefit from the new local and long distance one-rate plans offered by both incumbents and competitors that are a result of our rules," said the statement, which was also signed by commissioners Michael J. Copps and Jonathan S. Adelstein.

Meanwhile, the United States Telecom Association, a trade group for the regional phone giants that had challenged the FCC's rules in court, trumpeted the decision as a win for "real competition" as opposed to "government-managed competition."

"This is a decisive victory for consumers, for innovation and for free markets," USTA President Walter B. McCormick Jr. said in a statement. The USTA represents the Baby Bells, so named because they were created following the 1984 breakup of AT&T Corp., then known as Ma Bell.

While the court rejected rules governing basic phone lines, it upheld an FCC ruling that would allow broadband providers to build their high-speed networks without being forced to share them with competitors.

A trade group representing telephone equipment makers cheered that choice, saying it will give carriers more incentive to invest in new networks.

"Once again, it just proves that the broadband rules are correct," said Grant Seiffert, vice president of external affairs and global policy for the Telecommunications Industry Association. "If you're going to take the risk to invest, you're going to get a return on your investment now."

The Bells, which have expressed reluctance to spend on broadband until their existing voice networks are freed from regulation, indicated yesterday that they'll be more willing to spend now in light of the ruling.

"It's given us the green light to go forward," said James C. Smith, senior vice president of SBC Communications Inc., though he added that some rules still merit changing in order to "create the best environment for broadband."

The Bells have argued that government regulation of the local phone networks is not needed because there already is plenty of competition from wireless and cable firms and from companies selling phone service over the Internet.

Smith of SBC said that even without regulation, the Bells will continue to give competitors access to their networks -- but at rates set by the market, not by the government.

The Bells say that the government rates are too low and that they give Bell rivals an unfair advantage. Competitors such as AT&T Corp. and MCI say that without the regulated rates, they would have to get out of the local phone business in many markets because the Bell rates would be too high.

"The right of all Americans to choose their local telephone service provider is at stake, and the advancement of competitive broadband services is at risk," said AT&T general counsel Jim Cicconi in a statement. "Consumers across the nation should be outraged at the prospect of being unplugged and underserved if the D.C. Circuit decision is left unchallenged."

The FCC itself has been deeply divided over the issue. Last February, Chairman Michael K. Powell lost a key vote on the matter when Republican Martin sided with the Democrats.

Powell indicated yesterday that he is not interested in appealing the circuit court's decision, and would rather take another shot at rewriting the rules in a way that satisfies the court's criticisms.

"More litigation and appealing to the Supreme Court could take two to three years. The commission should not ask consumers to wait that long. It should roll up its sleeves and get to work to respond to the court's decision," said Christopher Libertelli, senior legal advisor to Powell.

Scott C. Cleland, chief executive of the Precursor Group, said he doesn't expect the matter to be resolved any time soon. With appeals planned, Cleland said it could be a long while before the Bells realize any benefits from the decision. "As expected, this was a clear legal victory for the Bells," Cleland said. "The big question is whether it changes anything on the ground. And that's less clear."

Staff Writer Yuki Noguchi contributed to this report.

Reported By TechNews.com, http://www.TechNews.com

(20040303/WIRES /)

More News in this Category