On June 14, in a swift and surprising move, the U.S. Supreme Court declined to stop the federal government from trashing rules that forced incumbents to lease network elements to competitors at deep discounts.
The decision halted an 8-year business regime that competitors relied upon for their very survival against the owners of the last mile—the Regional Bell Operating Companies (RBOCs).
The high court informed the FCC of its decision just days after U.S. Solicitor General Theodore B. Olson said he wouldn’t ask the Supreme Court to appeal a lower court’s ruling that threw out UNE-P agreements.
The telecommunications industry had been awaiting Olson’s decision ever since the D.C. Circuit Court rejected the FCC’s Triennial Review Order (TRO) last winter. The TRO, among other things, rejected the FCC’s request to have states determine which CLECs could lease network elements at a discount rate and which competitors had to buy the equipment.
The Supreme Court’s refusal to grant a stay means ILECs and CLECs will continue to negotiate new agreements without the discounts in place. “Access to monopoly networks is at the heart of the 1996 Telecommunications Act, which was designed to foster a competitive environment,” said H. Russell Frisby Jr., CEO of competitive telecom trade association CompTel/Ascent, after Olson’s decision on June 9. “But the mandate puts these valuable benefits at great risk and ultimately could be responsible for stunting our nation’s economic development and creating significant financial burdens on American consumers and small business.”
John Winhausen, president of the Association for Local Telecommunications Services (ALTS), put the blame in the lap of the current presidential administration. “The Bush administration’s decision not to defend the decision of its own Federal Communications Commission before the Supreme Court is a remarkable gift to the four Bell companies, the giant monopolies that control 95 percent of the telephone lines to American consumers.”
AT&T, which had been negotiating with Verizon and other ILECs for line sharing agreements so it can sell local phone service, called for binding arbitration in May after it had difficulty making a pact with Verizon. AT&T argued that if the RBOCs can’t agree to a pact, regional phone companies will raise rates, resulting in higher bills for millions of businesses and residential customers. AT&T said after the Supreme Court’s decision that it would stop selling local service in two large markets.
Competitive industry groups such as ALTS, CompTel/Ascent and the National Association of Regulatory Utility Commissioners (NARUC) had also planned to ask the Supreme Court to review the Circuit Court ruling before the court made its decision, Frisby says.
The Supreme Court would have been much more likely to review the lower court ruling had Olson, who represents the federal government before the Court, asked it to do so. Frisby blames heavy lobbying by the RBOCs, which contributed greatly to the Bush campaign, for the solicitor general’s decision. AT&T, which also contributed to the Bush campaign, lobbied the White House in the opposite direction—to review the Circuit Court decision.
“I think you have to talk to the Bush administration,” Frisby said when asked why the decision was made. “They were under intense lobbying pressure from the largest monopolists; The [White House] recognized that put together, the four Bells are larger than AT&T.”
Companies like Verizon, SBC and the other regional carriers say they shouldn’t be forced to lease network elements to competitors at discount rates because they built the networks and pay to maintain them. They say the discounted rates also discourage them from investing in next-generation technology and networks.
RBOCs were happy about the administration’s decision not to appeal to the Supreme Court. “This is bold leadership from the [Bush] administration on American jobs, investment and economic growth,” said United States Telephone Association (USTA) President and CEO Walter B. McCormick Jr. “The administration had a clear choice: Continue down a path of extreme government intervention in a competitive marketplace or embrace the free-market principles that make our economy strong. The clear public interest today lies with encouraging companies to face each other across a negotiating table rather than a courtroom.”
Meanwhile, Frisby says, negotiations between the Bells and CLECs will continue as FCC Chairman Michael Powell has urged both sides to do. However, according to Frisby, the negotiations are not going well.
“Clearly the agreements are more expensive, and the Bells are trying to restrict our companies from moving traffic away from the Bell facilities,” said Frisby. “The Bells are trying to hold us hostage.”
Several states have told the RBOCs that they must continue to let competitors purchase UNEs at a discount under existing contracts until those contracts are amended, Winhausen says. Many CLECs will operate under present contracts until they run out, some as long as two years from now. But those with contracts about to end must negotiate with the RBOCs without protection of the former UNE platform rules.
“The Solicitor General's decision is disastrous,” Winhausen said. “The Bell companies have already said they will raise our rates when this court of appeals decision takes effect. If that happens, consumers and competitors will be the losers.”
CompTel/Ascent will track negotiations and publish any results or prices it deems to be unfair, Frisby says.
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