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Administration Sides With Bells on Lease Discounts for Rivals
From: David Farber <dave () farber net>
Date: Thu, 10 Jun 2004 05:33:11 -0400
Begin forwarded message: 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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