Phone Firm Makes Bid to End Lease Dispute

Two days after federal regulators called on the telephone industry to work out wholesale lease rates, a small rival to the Baby Bell companies offered Friday to pay a flat $20 a month per line for all the Bell equipment needed to provide dial tone to customers.

But late in the day, some Bell representatives quietly asked lawyers at the Federal Communications Commission to change the terms of the letter that commissioners sent Wednesday to all the companies, according to sources in Washington.

The Bells want the FCC, among other things, to drop its request for a 45-day extension of the stay that a federal appeals court had granted March 2 in a ruling that tossed out key phone competition rules -- including the requirement that local phone companies lease networks to rivals at regulated rates.

The District of Columbia’s Court of Appeals originally stayed the order for 60 days, but the FCC and the Bush administration asked for more time so that the phone companies could negotiate a solution outside of court.

“That strikes me as not being in the spirit of what the administration and the FCC asked us to do,” said Thomas M. Koutsky, vice president at Z-Tel Communications Inc., the Tampa, Fla., firm that made the $20 offer. “I’m a little surprised they spent today talking to regulators and not looking at our proposal.”

Executives at SBC Communications Inc, California’s dominant local phone company, and Verizon Communications Inc., the state’s second-largest, could not be reached late in the day to comment on the meeting with the FCC.

Earlier, Z-Tel offered its “Twenty Dollar Solution” to resolve bitter fights over how much the Bells could charge competitors for equipment. The offer marked the first attempt by a rival to follow through on the FCC’s rare unanimous call for the nation’s four Bells and competitors to negotiate agreements for wholesale prices.

The Bells have long argued that the rates set by state regulators are below their costs.

Z-Tel said its offer would give the Bells $5 more than they were getting under regulated rates in some states, including California, yet leave room for the firm to make a profit.

The Z-Tel proposal will get “careful consideration,” SBC spokesman Dave Pacholczyk said Friday. “Here is indication that at least Z-Tel is recognizing the need to reach commercially reasonable rates.”

Other rivals welcomed Z-Tel’s offer as “generous” but raised questions on details that Z-Tel doesn’t address in its public statement.

Moreover, one competitor noted, the public is not sitting at the table during any negotiations. Although customers in some states with high wholesale prices could benefit, those in California and some Midwest states could see their phone bills increase.

But a hike in wholesale rates shouldn’t cause consumer prices to rise, said Steve Davis, a senior vice president at Qwest Communications International Inc, which is offering to freeze wholesale prices for the year, then increase rates by $3, $2 and $3, respectively, at six-month intervals.