Doubts Linger on Bells’ Success
Federal regulators and the Bush administration are increasingly skeptical that negotiations between Baby Bell phone companies and their competitors over access to local networks will succeed.
But the Federal Communications Commission and the White House appear to be at odds over how to bring the two sides together before June 15, when a federal appeals court lifts a stay on a ruling that tosses out existing phone competition rules.
The Bells, which control local phone service, are required to lease their networks and gear to rivals at regulated rates as part of the Telecommunications Act of 1996, which aims to promote competition in the telecommunications industry. A court in March rejected phone competition rules devised by the FCC under the act, but stayed the order so the industry could negotiate deals or appeal to the Supreme Court.
FCC Chairman Michael K. Powell wants to devise interim rules. But Michael D. Gallagher, head of the National Telecommunications and Information Administration, wants to push mediation to reach settlements.
“What’s very clear is that everyone is scrambling to come up with some solution to avoid going to the Supreme Court for a decision,” said Bruce Fein, a former FCC general counsel.
“But I’m not sure this whole process was viable from the outset,” he said about the current short negotiating period. “The court may be the only place to get this hammered out.”
The stakes are huge both for telecom firms, which have seen dwindling revenue from the wireline business, and for consumers, who are saving $10 billion a year through lower prices and more choices of carriers that competition has brought.
Baby Bells like SBC Communications Inc., California’s dominant local phone company, want much more money for leasing their networks to competitors. In talks, SBC said it wanted to hike the California wholesale rates about $8 to $22 a month per line.
Rivals like AT&T; Corp. want much smaller increases, $3 over three years, for the entire platform of gear needed to provide phone service, and reductions in rates for renting just the lines to customers’ homes and businesses. AT&T;, MCI Inc. and other rivals say that will encourage them to invest in their own facilities.
“We would be open to consider mediation,” said SBC spokesman Selim Bingol. “It’s something we’d have to take a close look at.”
AT&T; spokeswoman Claudia Jones said her company would accept “anything that moves the negotiations forward, including mediation.” AT&T; favors an “open, transparent” process that would allow regulators to see the kinds of proposals being made.
Qwest Communications International Inc. in Denver has been the only Bell company to accept mediation and to open negotiations to all interested competitors. But its response, made public this week, to a counter-proposal from 35 rivals indicates that the two sides were still very far apart.
Fein, however, doesn’t believe that mediation will work in the time remaining, even if the FCC seeks, as it is expected to, a further stay of the court order.
“Mediation at this point complicates things,” he said. “I would be stunned if it went forward. But when you’re in desperate times, all sorts of things surface.”
Bingol said SBC wasn’t keen on getting a further court extension. After eight years of failed negotiations and three court decisions that have tossed out key FCC competition rules, “we need a final deadline so this thing won’t go on forever.”
SBC, Verizon Communications Inc., California’s second-largest local phone company, and BellSouth Corp. also had insisted on private one-on-one talks. But SBC this week agreed to waive its nondisclosure agreement with Talk America Holdings Inc., essentially opening up those talks to some public scrutiny.
