Justices monitor fray over phone law Long-distance giants, local monopolies argue over intent of 1996 act

Telecommunications

October 14, 1998|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON -- The Supreme Court waded into the maze of new legal rules for local telephone service yesterday, as the companies with a monopoly in that area complained that potential competitors want "a free ride on our networks."

In a two-hour hearing on the meaning of the Telecommunications Act passed two years ago, the justices seemed confused not only about a myriad of details of that law but also about what Congress had intended to achieve.

Little time was spent weighing the effects on telephone users, in homes and businesses, as the hearing parsed the law, section by section, technical phrase by technical phrase, word by word. The court heard clashing interpretations from the six lawyers who took turns debating the law's scope.

Attorneys for the federal government and would-be competitors in the local-service market -- the companies that now offer long-distance service -- argued that Congress meant to break the local telephone monopoly and that it gave the Federal Communications Commission a major role in encouraging competition.

Bruce J. Ennis Jr., speaking for the long-distance companies, said a lower-court ruling that curbed the FCC's authority "has severely undone the rapid achievement of competition" in the local market and said "multibillion-dollar decisions" about entering the market have had to be put on hold.

But lawyers for the local companies and the state regulatory agencies that oversee those companies insisted that the FCC must be restrained because it was trying to force the local companies to lease every service they offer -- including customer billing -- to new competitors, even though the entrants would not need every service to compete.

William P. Barr, a former U.S. attorney general who is a lawyer for the local companies, said the FCC had given the new competitors "the most promiscuous right of access you can imagine." The long-distance companies, Barr said, not only want the spring on the mousetrap, they want the whole trap, too, "and they're taking the cheese!"

Before Congress passed the 1996 law, there was a distinct separation in the telephone industry between local service and long-distance. State utility commissions policed the locals, and the FCC monitored the long-distance companies.

Competition had entered the long-distance market, but not the local scene.

Congress cleared the way for each segment to cross over into the other's business, with both the FCC and the state commissions given some role. The overall intent was to generate competition -- to give consumers a wider selection of services and better prices resulting from the new competitive atmosphere.

But in a sweeping decision in July 1997, the 8th U.S. Circuit Court of Appeals in St. Louis removed all of the FCC's power over the prices that local phone companies charge when they open their networks to rivals.

The appeals court said Congress left that task with the state commissions. The court also cut back on most of the FCC's network-sharing rules, while upholding a few of those.

Both sides in the dueling industry, along with the FCC and the state commissions, took the case on to the Supreme Court. After yesterday's hearing, the justices will begin studying the case and writing a decision that is likely to emerge sometime next year.

Besides hearing the local telephone cases, the court acted on another business-related case yesterday. It agreed to clarify when state laws that regulate insurance policies are to be displaced by the federal law governing employee benefit rights, the Employee Retirement Income Security Act.

The justices said they would review a case on whether ERISA bars California from enforcing a state common-law rule that allows insured people to collect benefits even though they filed their benefit claims after the deadline imposed by their policy. The issue was raised in an appeal by UNUM Life Insurance Co. of America.

Pub Date: 10/14/98

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