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Baby Bell Legal Victory Could Slow Down Local Phone Competition

MCI and FCC join forces for supreme court appeal.

By Courtney Schlisserman, PCWorld   

Consumers are looking forward to competition in the telecommunications market driving down local phone rates, but a legal development this week may slow down progress. Long distance and Regional Bell companies continue to wage fierce battles over access to local phone networks and this week, the Bells won a significant round. Missouri%squots 8th Circuit Court of Appeals handed down a ruling Tuesday suspending a significant FCC order: The order, given in August, would have forced local Bell companies to give discounts and perks to rival companies wanting to offer local phone service. The discounts would help spur low local phone rates for consumers.

This new decision suspends provisions of the FCC rules until GTE, the regional Bells and a few states have completed the court process. That could take more than a year.

%dquot It (the decision) will delay the benefits that competition always brings,%dquot said MCI chief policy counsel Jonathan Sallet. When more companies are in the market place, prices tend to drop and innovations in service increase, he said.

MCI is joining the FCC in appealing to the Supreme Court to overturn the Missouri ruling, which also gave state regulatory panels oversight for local phone issues. The Supreme Court could decide whether to hear the appeal as early as next week, Sallet said.

%dquot The 8th Circuit%squots stay throws a monkey wrench into the carefully designed Congressional machinery for introducing competition into the local exchange market,%dquot FCC Chairman Reed Hunt said Wednesday.

An AT&T vice president was more sanguine. %dquotThe question before the court was only whether the FCC had the authority to adopt these rules,%dquot said Mark Rosenblum. %dquotRegardless of how that question is ultimately answered, the Telecomm Act remains the law of the land,%dquot he said.

Under FCC rules, competitors could lease entire local phone networks at discounts of 17 percent to 25 percent below retail prices charged by the local carriers. Competitors could also lease as many as seven individual components of local phone networks, including switches and directory assistance. The three-judge Missouri panel called the FCC rules a %dquotroundabout construction%dquot of the new telecommunications law. It added that the local phone companies and others challenging the agency %dquot have a better than even chance of convincing the court that the FCC%squots pricing rules conflict with the plain meaning of the Act.%dquot Stay tuned for possible developments in the Supreme Court appeal next week.