from CBS marketwatch
Telecom Act case:
AT&T wins key court ruling
Court nixes 'tens of millions' in PacBell access charges
By Tom Murphy, CBS MarketWatch
Mon May 18 09:46:30 1998
SAN FRANCISCO (CBS.MW) -- In a decision that means "tens upon tens of millions of
dollars" to AT&T, a federal judge has ruled regional phone companies like Pacific Bell can't
tack on access charges when long distance carriers want to offer local phone service.
U.S. District Court Judge Susan Illston also ruled so-called Baby Bells must give volume
discounts to AT&T (T) and other rivals in the same way they offer discounts to banks and
other big customers.
The ruling in AT&T vs. Pacific Bell (SBC) is among the first in
the country to tackle the complex questions of access fees and
volume discounts under the Telecommunications Act of 1996.
And, although its jurisdiction is limited to California, the case is
likely to be cited as federal courts and state commissions
throughout the U.S. interpret new ground rules for local
competition.
Illston herself is expected to issue similar rulings in three parallel cases brought by MCI
(MCIC) and AT&T against GTE Corp. (GTE) and in MCI's case against Pacific Bell. Pacific
Bell and GTE are by far the state's two biggest phone companies.
In California alone, more than 100 companies have indicated they want to re-sell services
leased from Pacific Bell, a unit of SBC Corp. If Illston's ruling survives an expected appeal,
it would be a major financial and competitive setback for the state's biggest phone company.
"This will allow (Pac Bell's) competitors to enter the local market," said Rose Johnson,
AT&T's chief commercial counsel for the Western U.S. "It will mean tens upon tens of
millions of dollar a year to AT&T in the market."
Pacific Bell is still reviewing the portion of the ruling on volume discounts, but plans to
appeal Illston's ruling on access charges, according to the San Francisco Daily Journal, the
legal newspaper that reports the decision in Monday's editions. "In our view, an important
part of our ability to recover our total costs relies heavily on access charges," James Young,
Pacific Bell's assistant general counsel, told the paper. "This gives (AT&T), in our view, a
service below cost."
State ruling
The case stems from a dispute between AT&T and Pac Bell that was arbitrated by the
California Public Utilities Commission under terms of the Telecommunications Act. The Act
attempted to stimulate competition in local phone services with the aim of driving down costs
to consumers. It required Baby Bells to lease their local networks and services to competitors
at "fair, nondiscriminatory rates" and to allow competitors to buy services "at wholesale rates"
for resale to their own customers.
Pac Bell added access charges to the lease costs, saying it needed to recover its "historical"
investments in building its network and to offset higher-cost "universal service" to remote
parts of the state. Pac Bell also said it wouldn't provide volume discounts to long distance
companies unless the long distance company's end-customer was eligible for such a discount.
As allowed under the act, AT&T appealed the case to the California Public Utilities
Commission, which sided with Pac Bell.
"Access charges have always played a complex and critical role in the recovery of embedded
network costs. We believe it is unwise to modify these charges at this time," the commission
said. On the question of wholesale discounts, the commission said there was no regulation
that bar "those resale restrictions that we find reasonable."
Commission error
AT&T then took the case to federal court, which led to Illston's ruling. The judge said the
state commission "erred" in allowing the access charges because the Act "directs state
commissions to set prices that account only for the specific costs incurred in providing the
network elements, along with a reasonable profit." She said the commission itself noted the
access fees are "not a cost-based item."
On the question of volume discounts, Illston said the state commission cited a ruling by the
Federal Communications Commission that allowed state regulators to set "reasonable"
restrictions on promotions and discounts, but ignored the "much more specific" finding in the
next paragraph of the FCC ruling, which said "resale restrictions on volume discount
offerings were 'presumptively unreasonable.'"ÿ ÿ
Tom Murphy is managing editor of CBS MarketWatch.
ÿ
FRONT PAGEÿÿÿNEWS INDEXÿÿÿHEADLINESÿÿÿCOLUMNSÿÿÿMARKET DATAÿÿÿGLOBAL MARKETSÿÿÿÿMARKET MONITOR
CHARTINGÿÿÿPORTFOLIOSÿÿÿMUTUAL FUNDSÿÿÿWEALTH CLUBÿÿÿSTOCKCHATÿÿÿTRADING CENTER
FEEDBACK ÿÿ ADVERTISING ÿÿ INVESTOR'S PRIMER
CBS MARKETWATCH RTÿÿÿCBS MARKETWATCH LIVE
c 1998 MarketWatch.com, L.L.C. All rights reserved. Disclaimer.
MarketWatch.com is a joint venture of CBS and Data Broadcasting Corporation. Company Information.
CBS and the CBS "eye device" are registered trademarks of CBS Inc.
|
