States may take fight with FCC back to court They think they, not regulator, should set network-connection rates

September 12, 1997|By BLOOMBERG NEWS

WASHINGTON -- Several states may go back to court in their continuing fight with the Federal Communications Commission over the power to set prices that local phone companies must charge to connect their networks to competitors.

Returning to court is "certainly one of the options we're looking at," said Diane Munns, general counsel for the Iowa Utilities Board, who was lead counsel in the states' initial challenge to the FCC pricing rules.

The 8th Circuit Court of Appeals in St. Louis struck down the FCC rules in July, leaving state regulators to decide what the prices should be. The FCC then found another avenue to reassert itself in the process as it reviews Bell companies' long-distance applications.

"The FCC essentially ignored the 8th Circuit and resurrected their original interconnection rules under another legal interpretation," said Scott Cleland, managing director of Legg Mason's Precursor Group. "The court said, 'We don't like pale blue,' and the FCC said, 'What do you think of turquoise?' "

Under last year's telecommunications law, the Bell companies can't offer long-distance service in their home regions until they meet a 14-point competitive checklist and are facing real competition for their business and residential customers.

The FCC determines whether they have met the criteria, and the rates the Bells charge new entrants in the local phone markets as competition opens are part of the mix.

In its review of Ameritech Corp.'s application to offer long-distance phone service to customers in Michigan, the FCC said Bell telephone companies must charge potential customers interconnection prices that mimic the agency's model.

"I don't think it's a surprise to anyone that quite a few states have a problem with the Ameritech order," said Brad Ramsay, assistant general counsel of the National Association of Regulatory Utility Commissioners.

Ramsay had no comment on the state regulators' or NARUC's plans regarding the FCC's order.

Nevertheless, Munns said the state regulatory agencies are considering asking the 8th Circuit appeals court to force the FCC to comply with its July ruling.

The New York Times initially reported yesterday that several state regulators were planning to sue the agency.

FCC Chairman Reed Hundt said he objects to such action. "For the states to sue the FCC on behalf of the Bells is hardly the right way to open local markets," he said in a prepared statement.

Ameritech, for its part, doesn't intend to challenge the FCC's more than 200-page decision rejecting its long-distance application. However, other Bell companies haven't ruled out separate suits.

"We are considering filing our own" challenge to the Ameritech order, said Bill McCloskey, a BellSouth spokesman. SBC Communications is also considering challenging portions of the Ameritech order, although it has made no decision.

U S West Communications Group is considering whether to challenge the ruling.

One other Bell company that won't challenge the Ameritech decision is Bell Atlantic Corp. As a condition for approval to purchase Nynex Corp., it agreed to go along with the FCC's pricing methodology.

"Both sides -- the local and long-distance companies -- if they drag this out in a protracted war, everybody loses," said Jeffrey Kagan, president of Atlanta-based Kagan Telecom Associates. "How much money are they losing from not jumping into the marketplace but by staying in the courtroom? Those delayed revenues add up to a lot."

Pub Date: 9/12/97

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