FCC seeks wholesale phone rate truce

Regional firms are asked to negotiate with rivals

April 01, 2004|By Jon Van | Jon Van,CHICAGO TRIBUNE

Federal regulators asked phone companies yesterday to negotiate a truce in the war over wholesale rates, but analysts doubt that a peaceful end is in sight.

More than eight years after Congress revamped the nation's telecom laws to replace regulated monopolies with a competitive phone market, the players are still locked in a life-and-death struggle over regulatory issues.

Even the Federal Communications Commission has been split over how much former Bell companies like SBC Communications Inc. can charge rivals such as AT&T Corp. to use SBC's local lines to provide competitive service.

In letters to former Bell phone companies and their rivals, the five FCC commissioners yesterday presented a rare united front in asking for good-faith negotiations to set wholesale rates and thereby restore industry stability.

SBC and the other regional phone companies contend that government-imposed wholesale rates are below their costs. AT&T, MCI Group and others dispute that, pointing to a long-distance industry where calling rates are low and consumers have many choices.

Analysts said it is unlikely that the regional companies - which own the local lines - and their rivals will reach an acceptable compromise. For one thing, technology has changed since passage of the 1996 federal telecom law. The local telephone network has grown far less relevant as wireless, broadband and Internet-based telephone services have all advanced.

"In a few more years, as more customers get broadband, the issue of reselling traditional phone service will become moot," said Jeffrey Kagan, an Atlanta telecom analyst.

"Both sides have been fighting about rates and how to achieve competition for eight years, and that argument gets less relevant with every passing month."

The FCC needs to disengage itself from irrelevant issues and focus on promoting competition through broadband and other new technology, said Blaik Kirby, a senior vice president with Adventis, a Boston consultant.

"The war between the long distance and local phone companies is over," said Kirby. "The long distance companies lost. The next war is between the local phone companies and the cable operators, and it's not clear who'll win that."

In March, a federal appeals court in Washington threw out many of the FCC's rules governing wholesale rates, leading to the current turmoil.

Since the ruling, the feuding phone companies have lobbied the government's decision over whether to appeal the matter to the Supreme Court.

As part of their plea for a negotiated settlement, the FCC commissioners said they would seek a 45-day extension from the court to delay until mid-June a final decision on whether to appeal the matter.

The Chicago Tribune is a Tribune Publishing newspaper.

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