Appeals Court Overrules FCC in SBC Merger

A subsidiary created by SBC Communications Inc. to offer high-speed Internet service is not sheltered from a law aimed at opening up telecommunications monopolies to competition, a federal appeals court ruled Tuesday.

The court ruling threw out conclusions reached by the Federal Communications Commission last year when it gave approval for two Bell companies--SBC and Ameritech Corp.--to merge.

The two phone companies agreed to establish a separate subsidiary to provide advanced services such as high-speed Internet access. The subsidiary, like other SBC competitors, buys lines wholesale from the parent phone company and then sells retail Internet service.

The FCC, in its decision, determined the SBC subsidiary was not subject to the 1996 Telecommunications Act that required Bell monopolies to lease portions of their network wholesale to companies that want to offer competing services.

But the U.S. Circuit Court of Appeal for the District of Columbia disagreed. It noted that the subsidiary provides services using equipment originally owned by its parent company and serves customers under the same name and in the same market as its parent.

The FCC said it is reviewing the court’s decision.

SBC closed up $1.81 at $51.94 on the New York Stock Exchange.