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Federal Appeals Court Rejects Local Phone Service Rules; Oklahoma Unaffected

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

Mar. 3--An appeals court in Washington on Tuesday rejected federal rules giving states more authority to determine which companies may offer local phone service within their borders.

However, an Oklahoma Corporation Commission official said the ruling won't affect any of the 150 or so companies that offer Oklahomans an alternative to the incumbent phone company, which in most cases is SBC Communications.

Joyce Davidson, director of the Public Utility Division of the commission, described it as "status quo" for Oklahoma's local telephone companies and their customers.

"Our rules do not change; the requirement that SBC has to lease their facilities is still in place," she said. "The interconnection agreements that they have with the various companies are still in force."

The three-judge panel of the District of Columbia 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 commission'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. Davidson said Oklahoma's rules are based on the 1996 act and not the commission's rules adopted last year.

Since it's too costly for a company to duplicate the existing network of switches and wires, the federal commission 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 such as 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 court said the responsibility for encouraging competition rested with the FCC, not the states.

"It is clear here that Congress has not delegated to the FCC the authority" to pass the responsibility elsewhere, the decision said.

William Daley, president of SBC Communications, applauded the decision, calling it a "victory for consumers."

"The country, the industry and consumers nationwide have been waiting eight years for a clear and legally sound set of rules that is true to Congress' pro-competitive and pro-investment intent in the Telecom Act," Daley said.

"This appears to be a victory for those who support markets free of rules that have repeatedly been judged illegal and which have eliminated jobs, shrunk investment and hurt fair competition."

The telephone industry's trade group, the U.S. Telecom Association, praised the ruling.

President Walter B. McCormick Jr. said the rules impede "the vigorous investment and real competition that Congress sought to foster."

"Real competition means making investments that deliver a range of innovations to communities across the country," he said.

A coalition of Bell competitors, led by AT&T, urged the Bush administration to appeal the decision to the U.S. Supreme Court.

"The fact that so many millions of Americans have opted to switch service providers shows that this genie is not going back in the bottle," said Peter Arnold, spokesman for the Voices For Choices coalition.

"If the administration declines to appeal to the Supreme Court, these consumers will be forced back to the very Bell monopolies they have consciously tried to leave."

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.

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(c) 2004, The Daily Oklahoman. Distributed by Knight Ridder/Tribune Business News.

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