Rivals challenge Bells to high court rumble

On Tuesday, the U.S. Court of Appeals for the District of Columbia struck down provisions in the Federal Communications Commission's Triennial Review that provided guidelines for determining which Bell networks were required to share switching resources and which networks weren't. These new rules also delegated decision-making authority to state officials. Competitors have rallied to say that they will appeal the matter to the highest court in the land.

During a press conference Wednesday, lawyers representing competitive carriers in the case before the federal appeals court denounced the decision, calling it the most unbalanced ruling they had ever read.

"We actually feel good right now, because the decision was so outrageous," said Russell Frisby, CEO of the Competitive Telecommunications Association and the Association of Communications Enterprises, a trade organization representing about 400 local competitive carriers. "We feel the case will go to the Supreme Court, and we will win."

The basic issue scrutinized by the court was whether the FCC had the authority to allow states to decide when the Baby Bells must allow competitors access to their voice switching networks. According to the Telecom Act of 1996, the incumbent phone companies are expected to open up, or "unbundle," certain network elements to promote competition. Several long-distance carriers have already taken advantage of this provision, and most of them now offer both long-distance and local calling packages.

In its Triennial Review, which came out last year, the FCC mandated a basic set of rules to be used in making this determination, and it delegated the actual decision-making authority to state regulatory commissions.

On Tuesday, the court struck down this plan. It ruled that the FCC had no right to delegate this responsibility to the states. And as a result, it gave the FCC 60 days to come up with its own rules for each individual market throughout the United States.

"To think that the FCC could accomplish the task in 60 days is ridiculous," said Donald Verrilli, a partner at Jenner & Block, one of the law firms arguing for the competitive carriers. "It's impossible. The FCC is being forced to make these decisions for every specific market and product offering within 60 days."

The court reasoned that the time frame was justified because the FCC has had eight years to come up with these rules.

"In my opinion, the court is wrong," said David Carpenter, a partner at Sidley & Austin, another law firm representing the competitors. "The 1996 Act already gives clear authority to the FCC to delegate decision-making power to the states. It's already in the act."

Three of the FCC's commissioners agreed. On Tuesday, they issued a statement declaring they will ask for a stay to delay the decision and will appeal to the Supreme Court to have it overturned.

"Today over 50 million Americans benefit from the new local and long-distance one-rate plans offered by both incumbents and competitors that are a result of our rules," said the statement, which was also signed by commissioners Kevin J. Martin, Michael J. Copps and Jonathan S. Adelstein.

Frisby cautioned that if the appeal is not accepted by the Supreme Court, the court's decision could cost local telephone consumers billions of dollars, because it would eliminate competition in the local telephony market.

AT&T and MCI, which are directly affected by this ruling because they use Bell switching infrastructure to offer local phone service, issued statements denouncing the court's decision.

"The right of all Americans to choose their local telephone service provider is at stake, and the advancement of competitive broadband services is at risk," Jim Cicconi, AT&T's general counsel, said in a statement. "Consumers across the nation should be outraged at the prospect of being unplugged and underserved if the D.C. Circuit decision is left unchallenged."

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But all of this arguing and appealing could become moot in the next few years as carriers, such as AT&T, begin offering voice over Internet Protocol. VoIP technology bypasses the old voice switching network and routes telephone calls over the Internet. Because the court's ruling refers only to the traditional circuit switched infrastructure for voice, the Bells are still required to provide access to their existing copper-based data networks.

Verizon Communications and the United States Telecom Association, a trade organization representing the Baby Bell companies, filed the original lawsuit in August 2003.