Mega-bell SBC Communications cant ignore price controls when its subsidiary sells Digital Subscriber Line service to other providers, the U.S. Court of Appeals ruled Jan. 9. The decision may make it easier for upstart carriers to compete.
The appellant in the case was the Association of Communications Enterprises (ASCENT), a trade group that represents telecommunications and long-distance providers. The carriers complained that the price they were forced to pay for Digital Subscriber Line (DSL) service from lines owned by SBC is only slightly less than the retail price SBC charges customers, making it difficult for them to compete by reselling the service.
SBC, as part of its acquisition of Ameritech, was required by the Federal Communications Commission to siphon off its wholesale DSL business into a separate company. But the FCC also made it possible for SBC to avoid regulations that required it to sell advanced services such as DSL to other providers at or just above cost.
The FCC agreed to the incumbent carriers request that its subsidiary, Advanced Solutions, not be subject to the same regulatory conditions that applied to the parent company. Furthermore, the regulatory agency said the same rules would apply to all Bell companies that detach their DSL wholesale operations.
The Washington, D.C., appeals court threw out that exemption, calling the FCCs reasoning "legal jujitsu." In his opinion for the courts three-judge panel, Senior Judge Laurence H. Silberman wrote that when Congress passed the Telecommunications Act of 1996, it forbade the FCC from making exceptions to regulations, unless there were exigent circumstances.
"The Commissions order is simply a device to accomplish indirectly what the statute clearly forbids," he wrote.
SBC and Verizon Communications, which also separated its wholesale DSL business, were still studying the ruling late last week.
But the competitors that brought the case were delighted.
"I think the importance of this ruling is that it showed that [DSL] services are no different than regular telecom issues when needing to sell them [to resellers] at wholesale member. "Basically, from our perspective, whether they are a separate prices," said Claudia Jones, a spokeswoman at AT&T, an ASCENT entity or part of a parent company, whats important is that those services are treated the same."