Originally created 02/13/98

Judge delays immediate long-distance entry for regional Bells



WASHINGTON -- A federal judge has decided to postpone implementing an order that would have given at least three regional Bell companies an unobstructed path to compete in the $80 billion long-distance business.

Acting on requests from the government, AT&T, MCI and Sprint, U.S. District Court Judge Joe Kendall of Wichita Falls, Texas, decided Wednesday to delay his surprise Dec. 31 ruling, which overturned key provisions of a 1996 telecommunications law, until an appeal is heard.

SBC Communications, US West and Bell Atlantic expressed disappointment but said they were optimistic Kendall's Dec. 31 ruling would be upheld.

At the same time, the Bells were heartened by Kendall's decision denying long-distance companies' request for an injunction to prevent the Bells from selling or preparing to sell long-distance service.

"This is yet another indication of the strength of our case," SBC said in a statement.

MCI attorney said Kendall's denial of the injunction his company sought does not make it easier for the Bells to provide long-distance.

Federal Communications Commission Chairman Bill Kennard agreed, saying Kendall's action means that a 1996 law governing entry into the long-distance business and his agency's enforcement of it remain "in full force."

MCI, AT&T and the FCC predicted that Kendall's Dec. 31 ruling would be reversed on appeal.

But Kendall thought otherwise: "Defendants have not shown a likelihood of success on the merits," he wrote.

US West welcomed this, saying it "makes us optimistic that the stay will be short-lived and that millions of American consumers will get greater choice in long-distance in the near future."

With the judge delaying the order, SBC Communications, US West and Bell Atlantic will have to abide by key provisions of the 1996 law, just as the other Bells do.

Those provisions require all five Bells to open their local phone markets to competitors as a condition of winning federal approval to offer long-distance service to local phone customers.

Kendall had ruled that these provisions discriminate against the Bells because they do not apply to GTE Corp., Southern New England Telephone Co., Frontier Corp. and other local phone companies.

If Kendall's ruling had taken effect, it would have cleared the way for SBC, US West and Bell Atlantic to offer long-distance service without first having to open local phone markets to rivals.

SBC took the case to court, with US West and Bell Atlantic subsequently joining the suit. They have not decided what their next legal step will be.

The government and long-distance companies are preparing to appeal Kendall's Dec. 31 decision that declared the 1996 law's provisions governing Bell entry into long-distance unconstitutional.

Under the provisions Kendall declared unconstitutional, the Bells enjoyed unprecedented access to the long-distance market because the provisions superseded a 1982 consent decree that barred the Bells from the business. That decree broke up the Bell System into a long-distance company, AT&T, and seven regional Bell companies to provide local phone service. After mergers, five regional Bells now exist.

In his order Wednesday, Kendall also said the provisions he declared unconstitutional don't affect the rest of the 1996 law. "This means that the consent decree does not come back to life ever," said John Thorne, Bell Atlantic's associate general counsel. Long-distance companies had argued that the consent decree could be resurrected if the disputed provisions weren't legally severed from the rest of the law.