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
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
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 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. …