Originally created 01/26/99

Court decision to help open local phone markets



WASHINGTON -- The Supreme Court backed the federal government's efforts Monday to open the $110 billion local phone market to competition. The ruling means consumers are more likely to get more choices for local phone service faster and cheaper, government regulators said.

The high court, in a 5-3 decision, said a 1996 law gives the Federal Communications Commission the power to set pricing guidelines for long-distance companies and other potential competitors to connect with local phone companies' networks. Rivals need to do this to offer competing local service.

The ruling overturns a 1997 decision by a federal appeals court in St. Louis that said states -- not the FCC -- have this power.

The Supreme Court ruling is a defeat for the five regional Baby Bells, GTE and state regulators, and a big -- although not complete -- victory for the FCC and long-distance companies. The ruling boosts the federal government's ability to spur competition for local phone service.

"This is a monumental victory for consumers who want choice among telephone providers," said FCC Chairman Bill Kennard. AT&T and MCI agreed.

The Consumer Federation of America estimated savings of about $10 a month off total residential phone bills as a result of local phone competition.

State regulators and big local phone companies had argued that the price rules must be set by the states because the 1996 law didn't explicitly give that power to the FCC.

"Of course I'm disappointed," said Bob Rowe of the National Association of Regulatory Utility Commissioners, which represents state telecommunications regulators. The decision, he said, underscores the need for state and federal regulators to work together.

The pricing matter now returns to the St. Louis court, where the substance of the FCC's price rules, which the high court did not address, will be examined to determine whether they are consistent with the 1996 law, attorneys for Bell Atlantic, GTE and US West said.

"This is a tremendous victory for consumers on all fronts," said Sprint spokeswoman Eileen Doherty.

"Competitors don't have to juggle the rules and rates of 50 states," added Jeffrey Kagan, a telecommunications analyst in Atlanta.

But Mark Roellig, executive vice president of US West, said federal involvement won't accelerate local competition because states already have issued rules and rates similar to those from the FCC.

In another action, the Supreme Court vacated a government rule that forces local phone companies to give their rivals blanket access to any piece of the local network they want. The court said the FCC didn't adequately consider whether rivals could obtain these pieces elsewhere.

Mr. Roellig said this part of the ruling will make it difficult for the FCC to require local phone companies to provide rivals with access to new high-speed Internet connections, something the FCC is considering doing this week.

FCC attorneys, speaking on condition of not being further identified, acknowledged that the FCC's Internet data proposal could be delayed as a result of the court ruling.

Joining Justice Antonin Scalia, who wrote the majority opinion, were Justices John Paul Stevens, David H. Souter, Anthony M. Kennedy and Ruth Bader Ginsburg.

Chief Justice William H. Rehnquist and Justices Clarence Thomas and Stephen G. Breyer dissented. Justice Sandra Day O'Connor, who long has owned AT&T stock, did not participate.