Justices keep FCC out of pricing States will supervise linkup-cost deals by local phone companies

November 13, 1996|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF Timothy J. Mullaney, Sun staff writer contributed to this article.

WASHINGTON -- The Supreme Court refused yesterday to clear the way for the government to hold down prices that local telephone companies may charge competitors for linking up with their systems.

As a result, local phone companies, including the Baby Bells, and their future competition will have to negotiate individual pricing deals under supervision of the 50 state public utility commissions.

The Federal Communications Commission, rebuffed in its plea for a nationwide pricing structure, contends that individually bargained deals will slow the arrival of new competition in local phone markets.

The FCC also fears that, without controls, prices charged to the competitors will rise too high, resulting in extra costs to customers.

The Telecommunications Act of 1996 requires local phone companies, which long had a monopoly on local phone service, to allow other companies to connect to those systems, to offer cable television and other services.

The FCC is allowed to make rules for those new ties.

But its power to act as price regulator is under challenge by the local companies and state utility commissions in a case pending in a lower federal court.

The local phone companies contend that the FCC rules will set prices too low, denying them recovery of their costs and subsidizing their competition.

The justices gave no explanation yesterday for rejecting requests from the FCC and hundreds of companies seeking to move into the local telephone business to reinstate the FCC pricing rules that the agency announced in August.

Those rules were blocked temporarily last month by the 8th U.S. Circuit Court of Appeals in St. Louis. The appeals court order keeps the rules on hold until that court decides their legality under the Telecommunications Act.

The appeals court is not set to hold a hearing until January and is unlikely to decide the case for months after that. As a result, many negotiated deals on local competition will have to be completed in the meantime without the rules.

The FCC contends that local phone companies will price the interconnections with competitors so high that the new federal law's goals will be frustrated.

The appeals court said the local companies and state utility commissions likely would succeed in their challenge to the FCC price controls.

H. Russell Frisby Jr., chairman of the Maryland Public Service Commission, praised the court's action, saying it helped protect state power over local telephone pricing.

It will not slow competition, he argued, noting that Maryland regulators last week issued key decisions to set new relationships between Bell Atlantic Corp. and four newcomers to its market.

Eric Rabe, a spokesman for Bell Atlantic, said his company was not the winner yesterday.

It was "the states and the people in the states, who are going to have local phone rates set by local regulators."

Pub Date: 11/13/96

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