Judges Slam Rules on Phone Networks

Two appeals court judges Wednesday sharply criticized rules that force local telephone carriers to continue leasing their networks to rivals at government-mandated prices, signaling that the court could overturn the rules.

The two judges on a three-judge appeals panel said the Federal Communications Commission had erred by giving state regulators instructions to enforce the new network-sharing rules.

“I don’t know how you can do that,” Judge Harry Edwards told an attorney for the FCC during nearly two hours of oral arguments in the case. “There’s no doubt the states have no authority to do this.”

At issue are FCC regulations adopted in February that require state regulators to determine whether new carriers still face unfair burdens when competing for local telephone customers and therefore should have cheap access to the networks.

After listening to the arguments, Legg Mason analyst Blair Levin said the judges might order the FCC to come back soon with a revised plan to determine where local carriers should be required to share their lines.

A group of dominant local carriers sued to overturn the rules, arguing that they contradicted an earlier ruling by the same court, the U.S. Court of Appeals for the District of Columbia.

In 2002, the appeals court ordered the FCC to overhaul its network-sharing rules, saying the agency had failed to recognize local market conditions and related costs.

The Bells -- BellSouth Corp. Qwest Communications International Inc., SBC Communications Inc. and Verizon Communications -- have been particularly unhappy at having to lease a bundle of network parts to rivals at rates they say are below cost.

AT&T; Corp., WorldCom Inc. and other new entrants in the local telephone market have argued that they need access to the networks to compete against the dominant carriers.

Two of the appeals judges told FCC attorney John Ingle that federal law did not allow the agency to punt the issue to state public utility regulators.