Local phone market to open

Associated Press

The Supreme Court on Monday upheld a key part of the government’s effort to give Americans choices for local telephone service.

The ruling keeps costs low for companies that want to get into a market and could eventually lead to cheaper service for consumers.

Congress approved a plan to open up the $110 billion local telephone service market to competition in 1996. Since then, companies ordered to make lines available to upstart competitors have been contesting the details in court, and many people still have no options.

The loser in the case was a conglomeration of former Bells, including Verizon Communications, which wanted to be able to charge other telephone companies higher fees to use their lines. Verizon, the company that provides service to Snohomish County, contested the fee system set up by federal regulators, arguing that it cannot recover it own construction costs.

Competitors were ecstatic over the decision.

"It’s a big vote of confidence and this could be the turning point for our industry," said John Windhausen Jr., president of the Association for Local Telecommunication Services, calling the decision an affirmation of the 1996 law. "It’ll make investors feel a lot more comfortable."

Since the 1996 Telecommunications Act, which opened local service to long-distance companies and allowed the Bells to eventually sell long-distance, local competitors have been stymied by legal uncertainty and thin profit margins.

The regional Bell companies — BellSouth Inc., Qwest Communications, SBC Communications Inc. and Verizon — argued that such a scheme didn’t allow them to recover their infrastructure expenses.

The court ruling was "fundamentally unfair to the Bells" but bolsters the regulatory community’s desire to increase competitive local phone service, said Jeff Kagan, an independent telecom analyst in Atlanta.

"It’s one of those rare moments in history where the right thing isn’t done, but the wrong thing’s done for all the right reasons," he said. "This ruling was done to try to jump-start companies on the consumer side."

Despite the 1996 law, the nation’s four Bell monopolies have maintained a firm grip on local telephone service — more than 90 percent of the nation’s local calls are still handled by the regional Bells.

The court’s ruling is likely to spur more investment and national plans that include local phone service, said Ramkrishna Kasargod, a telecom analyst with Morgan Keegan &Co.

"This (ruling) makes it easier for long-distance carriers to provide a competitive local offering," Kasargod said. "In some states, it was becoming uneconomical for them to offer that."

Last month, Worldcom’s MCI unit announced that it will offer local-service in all 50 states by next year as part of a new calling plan.

Local competitors contend they’ve been unable to make inroads because it was unclear whether the Supreme Court would uphold the FCC’s rules governing what incumbent Bells can charge competitors.

Without that clear signal on the costs to access Bell networks, many companies were reluctant to offer residential service, said Mark Rosenblum, an AT&T vice president.

"A competitor has to know with some degree of confidence what the future holds — not to be guaranteed a profit — but they have to know that some court somewhere is not going to toss out the pricing structure," Rosenblum said.

Copyright ©2002 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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