High court to hear phone service case Justices to handle local market issue later this month

6 appeals pending

FCC, long-distance firms, regional Bells seek changes

January 13, 1998|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON -- The Supreme Court agreed yesterday to put on a fast track for final action the growing dispute over how to restructure the nation's telephone business to spur competition to provide local service.

The justices issued a brief order saying they will take up later this month the controversy revolving around the $100 billion local market. A decision could come by early summer.

The court has before it six separate appeals -- from long-distance companies, the Federal Communications Commission and local companies. All are dissatisfied with parts of two rulings last summer by the 8th U.S. Circuit Court of Appeals based in St. Louis.

The appeals court removed much of the FCC's authority under the Telecommunications Act of 1996 to regulate the entry of long-distance companies into the local telephone market, though upheld a few of the FCC's rules for new competition. That court left the local phone segment of the industry to be largely overseen by state utility commissions.

The FCC and the long-distance companies say that the rulings all but destroy the prospect of real competition in the local telephone market by allowing local companies to continue operating as monopolies. For their part, the local companies, including four of the regional Bells, contend that the decisions will make it too easy for long-distance companies to enter local business and to buy facilities from existing local companies and create no local facilities or networks of their own.

The justices' first step, likely to be announced Jan. 23, will be to decide whether to hear any of the appeals. The likelihood is that the justices will take them on, given the national consequences of the outcome. If they do, a hearing is likely in April, with a ruling vTC before the summer recess starts in late June or July.

But the possibility arose yesterday that the appeals court ruling could be left intact.

One of the nine justices, Sandra Day O'Connor, disqualified herself from the cases without giving a reason.

With only eight justices taking part, a 4-4 split would have the effect of upholding the lower-court decision. The dissatisfied challengers would then only be able to go to Congress for help.

The 1996 law marked an abrupt change from decades of sharp demarcations between local and long-distance service.

Congress chose to replace that system with a mixed industry, with long-distance companies allowed into the local market as competitors and local companies given a limited opportunity to provide long-distance service if the FCC approved.

The appeals court rulings being challenged before the court involve only the local telephone market. The appeals court said Congress had not given the FCC authority to control the rates at which local services are offered to the long-distance firms entering local markets.

Meanwhile, a federal judge in Texas ruled that three of the regional telephone companies -- including Bell Atlantic -- should be allowed to offer long-distance service.

U.S. District Judge Joe Kendall in Wichita Falls, Texas, said Congress had wrongly sought to limit that opportunity as punishment for antitrust violations that Congress expected the local companies to commit in the future, but of which there is as yet no evidence.

Kendall is studying requests from the FCC and long-distance companies to postpone his ruling until after it can be appealed to higher courts.

If he declines to postpone his ruling, the challengers have said they will ask higher courts to do so. That dispute could reach the Supreme Court in some form shortly.

Pub Date: 1/13/98

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