Supreme Court will consider effects of 1996 telephone act

Associated Press

WASHINGTON — The U.S. Supreme Court delved into the intricacies of local telephone competition Wednesday, five years after Congress passed a law aimed at giving consumers more choices at better prices.

Although Congress intended to promote competition, many Americans do not yet have a choice of local phone companies.

The court will review provisions in the 1996 Telecommunications Act requiring the companies that were a part of the old Bell system to lease their lines to upstart companies.

The former Bell companies argue that federal regulators are cheating them out of their sizable investment by limiting what they can charge companies for using the phone lines.

The courts have been a battleground over the huge amounts of money to be made in local telephone service, a $110 billion market.

"There’s an enormous danger that if the Bells win this case, we’ll see the little competition that’s there dry up," said consumer advocate Gene Kimmelman, who supports government limits on rates.

The Supreme Court has already said that federal regulators can set price guidelines for the leasing of the lines and other equipment, in a 1999 ruling that prompted another round of lawsuits.

In the latest case, William Barr, representing Verizon Communications, a conglomeration of former Bells and GTE Corp., said the government cannot have "a roving license to go around and take property."

Donald Verrilli Jr., a lawyer for other phone companies including AT&T Corp. and WorldCom Inc., told the justices that companies should not have to pay costly fees to use phone lines built when there was a monopoly.

"The reality is they are making all the money and we are in trouble," Verrilli said.

Where there is competition, new providers often pay to lease existing equipment. Verrilli said just 3 percent of the old Bell system is now being leased by rival companies.

Verizon had sued the Federal Communications Commission, contending it should be reimbursed for the actual cost to build and maintain phone systems.

"They were never promised … that they would recover every nickel of their investments," said Solicitor General Theodore Olson, arguing his first high court case since being named to the job by President Bush.

He said it was premature for the Supreme Court to get involved in the dispute because there is no proof the FCC rate structure is not working. State utility officials set prices using FCC guidelines. There have also been lawsuits in individual states over charges.

Olson reminded the court that Congress intended the competition to lead to lower prices for consumers.