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To: TheSlowLane who wrote (3245)	1/1/1998 9:30:00 AM
From: Steven Bowen	Read Replies (2) \| Respond to of 12468

January 1, 1998 Judge Strikes Down Key Sections of '96 Telecommunications Act By SETH SCHIESEL A federal judge Wednesday struck down major sections of the 1996 act that deregulated the telecommunications industry, saying that the law unfairly kept the regional Bell telephone companies out of the long-distance business. If the judge's ruling withstands appeals, it would allow local telephone companies to offer long-distance service for the first time since AT&T Corp. was broken up under court supervision in 1984. Long-distance giants, which could face a range of new competitors, are certain to challenge the decision. "This is so big I can't believe it," said Scott Cleland, a telecommunications analyst in Washington for the Legg Mason Precursor Group. "This was the cornerstone of the telecom act. This turns the telecom act upside down." Wednesday's ruling is the latest and largest salvo in a battle between state regulators and the Bell companies on one side and federal regulators and long-distance carriers on the other. The long-distance companies and the FCC have been pushing the Bells to demonstrate their networks are wide open to competitors before the Bells can offer long-distance service. The Bells and many state regulators have said the commission is making excessive demands on the Bells. The ruling is not the first time a federal court has invalidated portions of the Telecommunications Act of 1996: the 8th U.S. Circuit Court of Appeals in St. Louis did so last year. But that decision did not strike at central provisions of the act. SBC Communications Inc., once known as Southwestern Bell, filed a lawsuit against the the government after it was denied access to the long-distance market in Oklahoma. The company hailed Wednesday's decision as a big victory and said that it could begin offering long distance service as quickly as the end of this month. All five Bell Companies could quickly begin offering consumers packages of combined local and long-distance services. Long-distance companies like AT&T and MCI Communications probably would not be able to offer a comparable basket of services as quickly. Wednesday's ruling, issued late in the day by Judge Joe Kendall of U.S. District Court in Dallas, said that the system established by the telecommunications act to determine when the Bell companies may enter the long-distance market is unconstitutional. Under the act, the Bells are not to be allowed to sell long-distance service until they convince the FCC that they have opened their local networks to potential competitors. By barring the Bells from the long-distance market as a regulatory default, the judge said, Congress passed a sort of law, known as a bill of attainder, that is specifically prohibited in the Constitution. Such a law pronounces someone guilty of an alleged crime without a trial. While the Bell companies must receive approval from the commission before selling long-distance service, other local telephone operators including GTE and Southern New England Telephone are allowed to sell long-distance service without that restriction. Until the passage of the 1996 act, the Bells were kept out of the long-distance market by the agreement made by AT&T when it broke itself up in the 1980s. That agreement, which essentially settled an antitrust lawsuit by the government, was supervised by U.S. District Judge Harold Green. But Green eliminated that agreement when the telecommunications act was passed. The system established in the act was meant to replace the agreement. Kendall said Wednesday that Congress may not bar the Bell companies from the long-distance market while allowing other traditionally local telephone companies into the long-distance arena without a legal determination that the Bells have acted illegally. Referring to the Bell operating companies, or BOCs, the judge wrote: "The Special Provisions prevent the BOCs from engaging in a lawful business for what the court only can conclude were the sins of the parent, AT&T, or for what offenses Congress believes the BOCs may (without any evidence) commit in the future. While the sanctions imposed by the Special Provisions do not result in imprisonment or banishment of the BOCs, they punish the BOCs in the only manner possible for a corporation -- financially." "This is a victory for consumers," said James Ellis, SBC's general counsel. "This will break the logjam. It will open the floodgates for competition, and not just in long-distance. It will be the precipitating factor that will cause the long-distance carriers to come into the local market. People want to be able to get both long-distance and local from one carrier and if we are offering it the long-distance carriers will not be able to sit on the sidelines." But the long-distance companies, the chairman of the FCC and experts in telecommunications law described Wednesday's decision as quirky at best. AT&T in a statement called the ruling "inexplicable and clearly erroneous." The decision upsets "the careful sequence Congress kept in place because it would apparently permit SBC Communications Inc. to provide long distance service while its local monopoly is still intact." Philip Verveer, a communications lawyer who argued the government's antitrust case against AT&T when he worked in the Justice Department, said: "It's just one of a line of sort of loony decisions and this is probably the looniest of all with respect to the '96 act. So long as this persists it creates yet more doubt about the congressional arrangement and until the Supreme Court begins to rule on this thing we are all going to be in a kind of limbo, a never-never land." Gene Kimmelman, co-director of the Washington office of Consumers Union, has argued that the Bells have not yet done enough to open their local systems to potential competitors. "This is an extremely bizarre interpretation of the Constitution," he said Wednesday. "I expect it will be immediately challenged and is likely to be overturned." The FCC has already appealed parts of the 8th Circuit's rulings to the Supreme Court, arguing that the present system is working to encourage competition in both local and long-distance telephone markets. William Kennard, the commission's chairman, stood by the act and one of the particular sections struck down by Kendall. "Because of section 271 the Bell operating companies have made great strides toward opening their local markets to competition," he said in a statement. "While I have not yet studied today's decision, I am extremely concerned about what seems to be a court's invalidation of much that Congress, this commission and the affected phone companies have done to bring consumers the benefits of competition."