Wednesday February 11, 10:34 pm Eastern Time
Judge stays order striking down some of telecom act
(Adds detail of appeal)
By Aaron Pressman
WASHINGTON, Feb 11 (Reuters) - The regional Bell companies will not be allowed to offer long-distance service immediately after a U.S. District Court judge on Wednesday temporarily set aside his earlier ruling allowing the Bells into the $80 billion market.
Judge Joe Kendall granted requests from long-distance companies and the Federal Communications Commission to stay, pending an appeal, his controversial Dec. 31 ruling that struck down key parts of the 1996 Telecommunications Act.
The FCC and long-distance companies, including AT&T Corp. (T - news) and MCI Communications (MCIC - news), have said they will appeal the case to the 5th Circut Appeals Court in New Orleans.
Under the law, the Baby Bells may not offer long-distance service until they open their local networks to competitors. Kendall concluded that the restrictions amounted to an improper ''bill of attainder,'' a rarely cited constitutional prohibition against laws aimed at specific individuals.
If Kendall had not stayed his ruling, the three Bells involved in the suit -- SBC Communications (SBC - news), US West Communications (USW - news) and Bell Atlantic (BEL - news) -- might have been able to offer long-distance service immediately. BellSouth Corp. (BLS - news) and Ameritech (AIT - news) are not directly involved in the litigation.
''What we've got now is a return to the status quo,'' said industry analyst Scott Cleland of the Legg Mason Precursor Group in Washington. ''This was the biggest wild-card in the telecom sector until the Supreme Court rules on these matters. Now we're in a holding pattern for the next year.''
MCI said it was pleased that Kendall granted the stay. The 1996 long-distance limits ''remain the law of the land and the RBOCs (regional Bell operating companies) must comply with the requirements of the Telecom Act before they can enter the highly-competitive long-distance market,'' MCI spokesman Dan Greenfield said.
Four times the Baby Bells have applied to the FCC for permission to offer long-distance, but all four times the commission concluded that the companies had not opened their networks sufficiently.
The FCC last month introduced a more collaborative process for handling Bell long-distance applications, but no companies have applied under the new policy.
Since the 1984 break-up of the old Ma Bell, the Baby Bells have been prohibited from offering long-distance within their local service regions. But in the 1996 law, Congress sought to encourage the Bells to open their local networks to competition by offering entry to long-distance as an incentive.
After two years, however, little competition has developed in the local market, especially for residential customers.
In addition to Kendall's ruling striking down the limits, a federal appeals court in St. Louis has thrown out FCC rules intended to force the Bells to lease parts of their networks to competitors at low prices. The Supreme Court will hear that case in its term beginning this fall.
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