[IP] Administration Sides With Bells on Lease Discounts for Rivals
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Administration Sides With Bells on Lease Discounts for Rivals
June 9, 2004
By STEPHEN LABATON
WASHINGTON, June 9 - Siding with the four dominant regional
Bell companies in the long-running telephone wars, the Bush
administration reversed course today and decided not to
seek an extension of the regulations that require those
companies to lease their equipment to their rivals at heavy
discounts.
The administration's decision, which was announced in a
legal case making its way to the Supreme Court, followed
fierce lobbying and hardball tactics. Rivals of the Bells
have threatened the administration that they intend to run
television advertisements in swing political states
accusing the White House of being responsible for higher
telephone rates. For their part, the Bell companies have
pledged not to raise rates before the November elections.
The rivals of the Bells - notably AT&T and MCI - joined
consumer groups to denounce today's decision. They said
that if the Supreme Court does not intervene, the
expiration of the rules next week would lead to lower
competition and higher telephone rates in local markets
beginning later this year or in 2005.
"The results of this decision will be especially harmful,"
said James Cicconi, general counsel at AT&T. "Failure to
appeal this case could do lasting damage to the entire
competitive telecom industry - and will lead inevitably to
higher prices and fewer choices for Americans." MCI issued
a similar statement.
The Bell companies disputed that rates would rise and
called the complaints unduly alarmist. They said that the
administration's decision, by discouraging the Supreme
Court from considering the issue, should help to clear the
way for prices to be set through commercial negotiations
rather than regulation.
"I read the AT&T press release and it is completely
unfounded," said James Ellis, general counsel at SBC
Communications. "You talk about crying wolf and inciting
people. What they said is completely unfounded."
Mr. Ellis said that the high profit margins AT&T has been
able to reap by cheaply making use of the networks of
competitors should enable AT&T "to easily absorb" any
modest increases in the wholesale rates it would be charged
by SBC and the three other Bell companies, Verizon,
BellSouth and Qwest Communications.
The administration, which had supported an extension of the
rate regulations in an appeals court even as President
Bush's political fund-raisers have raised millions of
dollars in campaign contributions from both sides,
announced its decision when the solicitor general decided
that he would not ask the Supreme Court to block a lower
court order that strikes down the rules next week. The
solicitor general's decision reduces the chances that the
Supreme Court will intervene.
The companies and state regulators that lost the appeals
court case have until the end of June to file their appeal
with the Supreme Court. They have indicated their intention
to petition Chief Justice William H. Rehnquist this week to
block the order that strikes down the regulations next
Tuesday.
The battle now shifts to the Federal Communications
Commission. Three of the five commissioners have previously
said they intended to vote to authorize the agency to file
a Supreme Court appeal. But industry executives said that
one of those commissioners, Republican Kevin Martin, had
been coming under significant pressure from the
administration to stand down and not cast the decisive vote
to authorize the F.C.C. to proceed with that appeal. Mr.
Martin, who worked at the White House before joining the
commission and whose wife is an aide to Vice President Dick
Cheney, did not return a telephone call today seeking
comment.
Both sides agree that if the Supreme Court does not alter
the appeals decision, it would have the effect of repealing
a central tenet of the landmark Telecommunications Act of
1996.
The act requires the Bell companies, which have long been
accused of holding near-monopoly positions in local
markets, of leasing valuable pieces of their networks at
low rates to both small and large competitors including
AT&T and MCI so that those companies could introduce some
measure of competition.
"If the FCC's rules are allowed to lapse and wholesale
rates rise MCI may be forced to raise prices in some
markets and pull out of others," said Stasia Kelly, MCI's
general counsel.
Mark Cooper, research director for the Consumer Federation
of America, said that the 19 million consumers who rely on
service from smaller carriers and 30 million Bell customers
who get discount packages because of the current
competitive climate could be affected if the Supreme Court
did not intervene.
"The result will be increases of billions of dollars in
local phone bills," Mr. Cooper said.
The regional Bell companies, who for years have fought in
the courts and congress to repeal the rules, disputed that
the changes will lead to higher rates. Rather, the
elimination of what they consider an onerous pricing
structure will prompt them to pour additional capital
investments into their networks, which could further drive
down prices.
http://www.nytimes.com/2004/06/09/business/09CND-PHON.html?
ex=1087823241&ei=1&en=4654d42c716147fc
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