Telecom reform goes to Supreme Court
By David Rohde
Network World Fusion, 10/9/98
Next week the U.S. Supreme Court finally starts
getting its say over telecom reform.
After nearly three years of legal wrangling and
name-calling among carriers, on Tuesday, the
court will take up key disputed provisions of the
Telecommunications Act of 1996. Most notably,
the court will decide whether the Federal
Communications Commission has the right to set
prices for new local competitors to lease pieces of
incumbent local carriers' networks - in a suit
brought by those carriers.
The FCC set those prices in August 1996, six
months after the act's enactment. The FCC action
led to hopes that users would see many
competitors in numerous cities lease parts of
existing local networks to quickly compete with
regional Bell operating companies.
But a St. Louis federal appeals court threw out
the FCC's prices in 1997, ruling Congress gave
each state the right to set its own wholesale
prices. Backed by long-distance carriers, the
government appealed that ruling to the Supreme
Court. The long-distance carriers claim that
without a national pricing standard for buying
wholesale network elements, they cannot enter
the local market that way.
For large users, experts agree that the case has
somewhat less impact than it might have had a
year ago. That's because the two top national
carriers have since jumped into the local market
through another avenue: buying or merging with
competitive local carriers that have built complete
networks rather than lease pieces. AT&T recently
closed its acquisition of Teleport
Communications, and the MCI WorldCom
merger joins WorldCom's former MFS local unit
with MCI's long-distance business.
Still, a Supreme Court ruling reinstating the FCC
pricing rules would help users obtain more options
in small cities, branch offices and other locations
that don't pass competitive carriers' local rings,
says Washington, D.C. user attorney Jim Blaszak.
Right now, potential competitors ''have to
collocate their own switches in every RBOC
end-office” to cover an entire area, Blaszak says.
Reinstating the FCC rules would give the
competitors an economic way to piggyback on
RBOC switches, he says.
The case will turn on whether the Supreme Court
gives more weight to certain clauses in the
Telecom Act that appear to give pricing decisions
to the states than it does to others that give the
FCC overall authority over the process. For
example, one pricing clause prohibits the FCC
from blocking any state ruling that succeeds in
giving competitors reasonable access and
interconnection rights.
''But this begs the question of whether the state
commissions are to be guided by a uniform
approach,'' says Tom O'Neil, MCI WorldCom's
chief litigation counsel. ''We think the statute has
to be looked at as a whole.'' O'Neil cites other
clauses in which Congress appeared to give the
FCC blanket authority to promote local
competition however it saw fit.
The local-exchange carriers, who oppose national
pricing rules, will have some heavy hitters on their
side. Presenting their arguments to the Supreme
Court will be former U.S. Attorney General
William Barr, now a top lawyer at GTE Corp., as
well as Laurence Tribe, a well-known Harvard
law professor. Lawyers for AT&T and MCI
WorldCom, plus U.S. Solicitor General Seth
Waxman, will present the case for the FCC rules.
The justices are not expected to issue their
decision until next spring.
In the run-up to the case, some analysts have
suggested that even if the FCC's rules are
reinstated, long-distance carriers will still be
reluctant to serve the broad residential and
small-business local market.
''I think it will make a big difference,'' counters
MCI WorldCom's O'Neil. ''If competitive pricing
structures are established, I think you'll see
companies move as quickly as possible [to enter
the broad local market].'' But O'Neil stopped
short of firmly committing MCI WorldCom to
entering the residential, small-business and
branch-office local markets if it wins the case.
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