Local Phone Carriers Win Long-Distance Charge Fight (Update1)
Bloomberg News
May 21, 1999, 4:02 p.m. ET
Local Phone Carriers Win Long-Distance Charge Fight (Update1)
(Adds AT&T reaction in 11th paragraph.)
Washington, May 21 (Bloomberg) -- U.S. local telephone
companies won a federal appeals court fight that could let them
charge tens of millions of dollars more to complete long-distance
calls in their regions.
The U.S. Court of Appeals for the District of Columbia told
federal regulators to reexamine part of a complex formula used to
determine how much the regional Bells, GTE Corp. and other local
carriers can charge long-distance companies such as AT&T Corp. to
patch through calls. Long-distance carriers then can pass on
those access charges to consumers.
The U.S. Federal Communications Commission rules at issue
require local phone companies to reduce their access charges
every year to reflect their improved productivity. Local carriers
argued the FCC is forcing them to relinquish too much of the
money they save.
Writing for a three-judge panel, U.S. Circuit Judge Stephen
Williams today said the FCC ''failed to state a coherent theory''
for its formula. The court sent the case back to the agency for a
better explanation.
The FCC rules are meant to give consumers much of the
benefit of technological improvements that make the local phone
business more efficient, while ensuring the Bells and GTE retain
an incentive to streamline their businesses.
The court fight centers on the percentage by which the FCC
plans to reduce the permissible charges every year. It calculates
the percentage, known as the ''X-factor,'' by comparing gains in
local phone-business productivity to similar improvements in the
entire U.S. economy.
In 1997 the FCC, looking at productivity figures over the
previous decade, concluded the reasonable range for the X-factor
was between 5.2 and 6.3 percent. The agency then selected 6.0
percent as the X-factor it would use.
Lower Figure Sought
The Bells and GTE attacked that conclusion at the appeals
court, saying the FCC should have selected a lower figure. Every
0.1 percent change translates into $23 million in access charges.
Williams said the FCC's selection of the X-factor seemed
arbitrary. ''None of the reasons give for choosing 6.0 percent
holds water,'' he wrote.
Long-distance companies argued unsuccessfully that even 6.0
percent was too high. The appeals court rejected related appeals
by AT&T, MCI WorldCom Inc. and other long-distance companies.
''No matter what adjustment formula is used, the fact
remains that access prices are outrageously high to begin with,''
AT&T General Counsel Jim Cicconi said.
One regional phone company, BellSouth Corp., called on the
FCC to consider broad policy changes when it reviewed the issue.
''This ruling cries out for the FCC to use it as an
opportunity to address both access charge reform and universal
service subsidies in a comprehensive way,'' BellSouth Corp.
General Attorney Robert Sutherland said. The access charges help
pay for a complex subsidy system designed to make local phone
service affordable.
An FCC spokeswoman said the agency will seek a stay of the
ruling until it can file a request for reconsideration. The
agency also could ask the Supreme Court to review the case.
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