High court affirms federal phone plan
WASHINGTON (AP) – A divided Supreme Court cleared the way Monday for competitors to fight for the $110 billion local telephone business against companies that emerged from the Bell System breakup – a ruling that probably will give consumers more choice. Most Americans who were promised competition in 1996 have seen neither options nor lower phone bills. But the Supreme Court said the government’s plan to open the market is reasonable and should be given a chance.
Time will tell if competition hopes were an illusion, the court said.
The ruling would keep costs low for companies such as WorldCom and AT&T Corp., which pay fees to piggyback on a local telephone companies’ calling networks.
A conglomeration of former Bells, including Verizon Communications, wanted the ability to charge other telephone companies higher fees for using their lines. The court said no.
“Competitors and consumers dodged a bullet,” said Mark Cooper, with the Consumer Federation of America.
He said residential customers could save $10 a month when competition becomes nationwide. It is available now mostly in larger markets like New York.
The defeat at the Supreme Court for the former baby Bells sends the fight back to the Federal Communications Commission, which has struggled for a way to satisfy all sides while giving choices to users. So far, less than 10 percent of the old Bell system is being leased by rival companies for residential service, consumer advocates have said.
The court ruled 5-3 in 1999 that the FCC could set pricing rules. Justice Stephen Breyer, joined by Justice Antonin Scalia, said Monday the court was giving the FCC too much authority with the latest ruling. Justice Clarence Thomas endorsed only part of the decision.
The issue for the justices was the 1996 Telecommunications Act, which requires local phone markets to be opened.
Justice David Souter wrote for the majority: “We cannot say whether the passage of time will show competition prompted by TELRIC to be an illusion, but TELRIC appears to be a reasonable policy for now, and that is all that counts.”
Federal Communications Commission Chairman Michael Powell said the ruling “brings much-needed additional certainty to the legal landscape.”
Verizon spokesman Bob Bishop said the companies that lost in the court case hope Powell “won’t reflexively follow these bankrupt policies of the past.” Bishop said the FCC’s plan has not worked, and changes should be considered.
BellSouth Inc. spokesman Bill McCloskey said the “decision maintains an unfortunate status quo: BellSouth must continue to provide pieces of its network to competitors at below-cost prices. This status quo discourages investment by both us and our competitors, resulting in poorer choices for customers.”
In addition to the fees issue, justices ruled that regulators could require the Bell spinoffs to make more network connections available to competitors.
The decisions on the two issues mean that FCC rules, “which were designed to break open the Bells’ lock on local customers, are now the law of the land,” said Michael Salsbury, WorldCom general counsel.
Mark Rosenblum, an AT&T vice president, said the ruling should “sharply reduce the uncertainty” involved in getting into new markets.
The ruling had little effect on stock prices Monday. Analysts said that’s because the court only affirmed what is being done now, and barriers remain to competition.
“For many new local competitors, the ruling is akin to completing a fourth-and-long pass for a first down while trailing late in the game. It keeps the drive alive, but they still have a long way to go to score,” said Blair Levin, a Washington-based telecommunications analyst.
Adam Thierer, who handles telecommunications issues for the libertarian Cato Institute, said the decision “is based on Romper Room economics: sharing is better than competing.” It will discourage companies from building their own networks, Thierer said.
Justice Sandra Day O’Connor, who has stock in AT&T and WorldCom, did not participate in the case.
The cases are Verizon Communications v. FCC, 00-511; FCC v. Iowa Utilities Board, 00-587; General Communication Inc. v. Iowa Utilities Board, 00-602; AT&T Corp. v. Iowa Utilities Board, 00-590; WorldCom Inc. v. Verizon, 00-555.
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