FCC details phone-competition rules

THE BALTIMORE SUN

WASHINGTON - The Federal Communications Commission released an order yesterday detailing new rules on local telephone competition, setting the stage for regulatory proceedings in 50 U.S. states and legal challenges in potentially dozens of courts.

"Every aspect of this order will be appealed," Robert Quinn, vice president of federal government affairs at AT&T; Corp., the largest U.S. long-distance carrier, said before the order was released.

The guidelines, adopted in February, increased states' authority to decide discount rates that new local competitors such as AT&T; pay to rent parts of the large regional-phone providers' networks. They also deregulate high-speed Internet lines owned by the four largest local-service companies.

The first legal venues will probably be some of the 12 U.S. appeals courts that hear challenges to FCC regulations, a telecommunications attorney said. Verizon Communications Inc. and other big local carriers are expected to object to rules over discount leasing, while rivals will seek to halt the deregulation of the regional phone companies' data networks, analysts said.

The rules are to be available on the FCC Web site.

About 36 phone companies, including Allegiance Telecom Inc. and Focal Communications Corp., are likely to challenge parts of the order easing requirements that the dominant local-phone companies rent parts of high-capacity data lines at discounts, said Andrew Lipman, lead telecommunications attorney at law firm Swidler Berlin Shereff Friedman LLP, which is representing the companies.

"I believe this decision will prove too chaotic for an already fragile telecom market," FCC Chairman Michael K. Powell said in a statement. The FCC "has brought forth a molten morass of regulatory activity that may very well wilt any lingering investment interest in the sector," he said.

The order is "remarkably similar" to the previous two that were rejected by courts, Powell said. The commissioners have "contorted the letter and spirit" of the law to preserve discount leasing, he wrote.

Lipman said various companies will first try to keep the FCC's order from going into effect and will tangle over which court will hear the cases.

In about a year, a federal appeals court will issue a decision on whether to uphold the rules, said Paul Glenchur, telecommunications analyst at Schwab Capital Markets.

AT&T;'s Quinn said the company will review the order before deciding how to proceed. He said the company expects to appeal the part of the order governing fast Internet lines.

The appeals courts will be resolving the legal aspects while regulators in 50 states, as required by the FCC, are to decide within nine months whether the four regional local-phone companies must continue to rent a major component of their networks - switches - at discounts in most U.S. markets to new local rivals such as AT&T.;

SBC Communications Inc. of San Antonio, the No. 2 U.S. local-phone carrier, has said the network-sharing arrangement costs it $2.3 billion a year.

Verizon's shares rose 25 cents to $36.05 yesterday on the New York Stock Exchange, cutting this year's decline to 7 percent. SBC stock, which gained 3 cents to $23.77 yesterday, has declined 12 percent this year. BellSouth Corp.'s shares lost 23 cents to $26.03, cutting this year's gain to 0.6 percent. AT&T; shares rose 3 cents to $21.36.

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