Bells Lose at U.S. High Court on Phone Pricing Rules (Update1)
Bloomberg News
January 25, 1999, 10:57 a.m. ET
Bells Lose at U.S. High Court on Phone Pricing Rules (Update1)
(Adds share prices in 4th paragraph.)
Washington, Jan. 25 (Bloomberg) -- The regional Bell
telephone companies lost key aspects of a U.S. Supreme Court
battle with long-distance companies over the rules governing
deregulation of the $100 billion local phone business.
The high court said the 1996 telecommunications act
authorizes the Federal Communications Commission, not the states,
to set the pricing methodology that will govern the entrance of
new competitors to the five Bells that now dominate the local
phone industry.
That's a setback for the Bells because state regulators were
expected to be more generous to the incumbent local carriers than
federal rule makers.
Prices of most of the regional phone companies fell in early
trading. Bell Atlantic shares fell 1 1/16 to 57 5/8. BellSouth
fell 1 /3/16 to 46 7/8. US West dropped 2 1/16 to 59 3/8. SBC
Communications Corp. dropped 1/16 to 56 9/16. Ameritech shares
rose 1/2 to 68 3/4.
The high court also said potential competitors won't be able
to demand that the Bells offer them particular provisions from
lease contracts the incumbent carriers have already reached with
other companies. Although new rivals can demand the Bells offer
them the same agreements in their entirety, they won't be able to
''pick and choose'' particular items from a contract.
Under that provision, if one rival reaches an agreement with
an incumbent to use part of a network, others may piggyback onto
it and demand the same arrangements in their own contracts. The
issue for the high court was whether new entrants can pick out
particular clauses or instead can demand only an entire package.
On a third key issue, the justices took a middle ground. The
justices upheld an FCC rule barring the Bells from disassembling
individual elements of their networks -- such as the line that
runs from the street to the house and the box that connects the
outside lines to the inside of the house -- before leasing them
to a potential rival.
The high court, however, gave that clause a narrow
interpretation, with Justice Antonin Scalia saying it was
''ambiguous'' as to whether the Bells had to offer the elements
on a packaged basis. He said the rule was aimed only at
preventing the Bells from ''disconnecting previously connected
elements.''
The stakes in the fight have diminished since the justices
agreed to hear the case in January 1998. State regulators have
proven somewhat tougher than expected on the Bells, lessening the
relevance of the state-federal government controversy. And new
competitors generally have opted to build their own facilities,
reducing the importance of the prices for leasing elements.
Still, the Supreme Court fight drew widespread attention as
a showdown at the nation's highest tribunal. Coupled with the
high court's recent rejection a Bell appeal that challenged the
constitutionality of the law, the ruling resolves the last of the
key legal issues surrounding local phone deregulation.
The case, actually eight consolidated appeals, is known as
AT&T v. Iowa Utilities Board, 97-826.
--Greg Stohr in Washington, (202) 624-1841 /jhr
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