New FCC Rules Draw First Court Challenge

Regional Bell Operating Companies take FCC to court over new rules governing telephone competition.

In what is expected to be the first in a long line of legal challenges, the Regional Bell Operating Companies took the Federal Communications Commission to court today over new rules governing telephone competition. Given that the FCC chief himself last week denounced the rules as "chaotic" and "a litigation bonanza," a court filing one week later came as no surprise.

The United States Telecom Association, which represents local telephone companies, SBC Communications Inc., BellSouth Corp. and Qwest Communications International Inc., filed their petition in the U.S. Court of Appeals for the District of Columbia Circuit.

The telephone companies charged that the FCC abdicated its responsibility to create a national local telephone policy and instead chose to "punt" decisions to state regulators. Arguing that the new rules violate earlier orders issued by the D.C. Circuit court, the telcos asked for a writ of mandamus to block the rules and give the FCC 45 days to revise them.

At the crux of the Bells complaint is the FCCs decision not to eliminate the obligation to lease parts of the local networks to rivals at discounted rates for services to the residential market. The most controversial of the network elements is circuit switching, which the Bells say they are forced to sell below cost. In regulatory circles, switching and other separate parts of the network are known as "unbundled network elements," and the Bells complain that the FCC has put no limitations on which elements must be leased at a discount.

For medium-to-large enterprises, the commission found that the Bells obligation to lease network elements at discounted rates is no longer necessary to promote competition. State regulators have three months to rebut the commissions finding, but if they do not, the Bells would no longer have to offer discounted access to rivals for business customers using DS-1 line capacity.

The Bells petition draws heavily from FCC Chairman Michael Powells own criticism of the commissions order. Powell set the stage for such a petition, stating upon the release of the rules that they "flout" the courts directives.

Competitive local exchange carriers, who oppose altogether different sections of the FCCs order, maintain that without the unbundled network element regulations, there would be fewer service providers in the marketplace. Charging that the Bells petition should be summarily rejected, Russell Frisby, president of the Competitive Telecommunications Association in Washington, accused the Bells of seeking a court sympathetic to its view.

"The USTA petition ignores both the facts and the law," Frisby said. "USTA is simply engaged in a blatant attempt at forum shopping."

While applauding the commissions refusal to eliminate access to unbundled network elements for residential customers, CLECs take issue with the decision regarding business customers. CLECs and consumer advocates also oppose a separate part of the order that relieves the Bells of network leasing obligations when it comes to new facilities deployed for broadband services.

Asked earlier this week about his own predictions on which parties would seek to overturn the new rules and when, Mark Cooper, director of research at the Consumer Federation of America in Washington, said that numerous initiatives are in the works.

"You can smell the smoke here in Washington from all the brains burning," Cooper said.