Billings Gazaette

U.S. Won't Appeal Phone Ruling

Billings Gazette — Friday, June 11, 2004

Knight Ridder News

HACKENSACK, N.J. — Verizon and the Baby Bells scored a victory this week as the Bush administration declined to seek reversal of a U.S. Court of Appeals decision that struck down key phone rules.

A decision by U.S. Solicitor General Theodore Olson not to ask the U.S. Supreme Court to reverse the lower court may lead to higher phone bills, consumer groups have warned.

The rules had been crafted by the Federal Communications Commission as part of its effort to deregulate local phone service. They required Verizon and other Baby Bells to lease their networks at discount wholesale rates to rival companies such as AT&T, which resell local phone service to consumers. The appeals court threw out the rules in March.

Meanwhile, in New Jersey, with the appeals court decision set to take effect Tuesday, regulators at the Board of Public Utilities on Wednesday ordered Verizon's New Jersey division to honor a commitment it made earlier this month to continue offering network access at discounted rates to rivals for at least 90 days.

Anthony Centrella, telecommunications director at the BPU, said many legal questions remain as to what might happen after those 90 days are up.
"I just don't think this is the end of it," said Centrella.

For instance, Verizon's rivals have argued in papers filed with the BPU that the agreements currently in place – governing how they lease Verizon's network and at what cost – should continue after the 90-day period.

Verizon, for its part, called the BPU's order unnecessary.

"The BPU is taking action where no action is needed," said Bruce D. Cohen, vice president and general counsel of Verizon New Jersey. "We at Verizon have made clear that we will not throw any of our competitors off our network."

Verizon spokesman Larry Plumb said the company is committed to keeping wholesale rates in place for several months, but after that period he couldn't say what the company's plans would be.

Companies such as AT&T, MCI and Sprint, which don't own local phone networks but want to offer both long-distance and local service, have no choice but to lease parts of the local network from the Baby Bells.

Those companies fear that the Bells will raise wholesale rates and price them out of business. Consumer groups say higher wholesale rates could lead competitors to raise their retail rates, which could mean higher phone bills for consumers.

Independent telecommunications analyst Jeff Kagan said the decision by the solicitor general reflects a hands-off position.

"It's a matter of trusting market forces to work and hoping those forces - in an industry that's in the process of deregulating - are up to the task," he said.

On the federal level, a number of parties – including the FCC, AT&T, MCI, and the National Association of Regulatory Commissioners – are expected to ask the Supreme Court to reverse the lower court ruling. But Bush administration support would have made it more likely that the Supreme Court would review the case.

The FCC has urged companies to negotiate so-called interconnection agreements with each other but so far only two large companies – Qwest and MCI – have reached agreement.

Verizon and others say they will negotiate with each competitor to hammer out deals where price increases will be incremental over time, said Kagan.

"But the truth is we don't know exactly what will happen until it happens," he said. "So regulators will have to watch and step in after the fact if necessary."

Reaction to the solicitor general's decision was predictable.

The Association for Local Telecommunications Services, a trade group that includes AT&T and other competitors, said, "Just as the nation's economy is on the verge of recovery, the Bush administration has just told over 20 million American consumers and small businesses that it does not care if they pay higher prices for phone and broadband services."

The United States Telecom Association, a trade group representing Verizon and others, called the decision "bold leadership from the Bush administration on American jobs, investment, and economic growth."

New Jersey Citizen Action, a citizen watchdog group, said today that it was distressed by the solicitor general's decision.

"With gasoline prices soaring, New Jersey consumers will have a doubly hard time making ends meet if Verizon gets to remonopolize local service or force its competitors to raise their rates," said Steve Bonime, an organizer with Citizen Action.

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