High Court to Hear Telecommunications Arguments

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WASHINGTON (Bloomberg) -- The U.S. Supreme Court will review federal rules restricting the prices and terms Baby Bells can demand from potential rivals under a 1996 law designed to open the $100 billion a year local phone market to competition.

The justices, though, said Monday they will wait until at least October before hearing an appeal by long-distance phone companies and the Clinton administration of a lower-court decision throwing out Federal Communications Commission rules implementing the law.

The decision to take the case puts the court squarely in the middle of a war over the future of the U.S. telecommunications industry. The court's decision is likely to determine the ability of would-be rivals, led by major long-distance companies, to challenge the Bells and GTE for local phone customers. `This case is the rub over who has the advantage in local competition -- the incumbent or the competitor," said Scott Cleland, managing director of Legg Mason's Precursor Group. The delayed review by the court, which could push a decision into 1999, is likely to lead to uncertainty in the marketplace, said George Reed Dellinger, a telecommunications analyst with HSBC Washington analysis. "The bottom line is once a lot of fundamental issues go into the hands of the courts, that's more uncertainty than either legislative or regulatory risk." The regional Bells and GTE complain the FCC rules don't ensure they will be adequately compensated for selling access to their phone lines and networks. They want prices to be set by state regulatory commissions, which are expected to be more generous than the FCC to incumbent local phone companies. The Bells and GTE also seek to avoid a series of FCC rules they say unfairly force them to package facilities for use by would-be rivals. Long-distance companies argue those rules are essential for them to have a fair shot at competing for local customers. "We are extremely pleased that the Supreme Court has recognized the importance of these issues to local competition," said Jonathan Sallet, MCI Communications' chief policy counsel. "The American people will reap the benefits of competition much sooner if the Supreme Court upholds the interpretation of the Telecommunications Act urged by the FCC," FCC Chairman William Kennard said in a statement. The dispute stems from the 1996 telecommunications overhaul, Congress' bid to subject local phone companies to competition for the first time. The law required the Baby Bells and GTE to sell "unbundled elements" of their networks -- such as the line that runs from the home to the street -- to potential competitors. The statute, however, didn't clearly say whether federal or state regulators would establish rules governing how much the local carriers could charge for those components. …