Baby Bells Pushing to Keep Lid on Lease Deals

As regional Bell phone companies negotiate contracts to lease their lines and equipment to rivals, the federal regulators encouraging the talks are likely to face a dilemma: whether to make the agreements public.

The 1996 federal law promoting local phone competition requires that so-called interconnection agreements be approved by state regulators. But some of the companies striking the deals want to keep details under wraps.

If the states force the issue, the Bells probably would ask the Federal Communications Commission to step in as they try to meet a deadline for inking the leases competitors need to offer phone service. And that would put the FCC in a bind.

The five commissioners urged the Bells and their competitors to strike privately negotiated deals in the wake of a federal appeals court order that threw out FCC phone competition rules, giving the agency and Bell rivals until June 15 to seek Supreme Court review.

In the past, the FCC has levied fines when agreements weren’t made public. Just last month, for instance, the agency proposed fining Qwest Communications International Inc. $9 million for failing to file agreements dating to 1999.

FCC Commissioner Michael J. Copps said the disclosure requirements of the Telecommunications Act of 1996 were clear.

“Consumers have a right to know what deals carriers reach behind closed doors,” Copps said. “They’re the ones who will foot the bill if these negotiations produce only higher rates.”

But officially, the question isn’t before the agency, FCC spokesman Michael Balmoris said, so the FCC doesn’t have to address it yet.

The issue arose this month when SBC Communications Inc., California’s dominant local phone company, and rival Sage Telecom Inc. struck a deal for Sage to lease SBC’s lines. The two Texas-based firms said disclosing the contract’s terms would reveal Sage’s business plans and hurt SBC’s effort to reach agreements with other carriers.

The rationale for making the contracts public is to ensure they are not discriminatory or anti-competitive.

It prevents network owners, for instance, from pricing deals in a way that would attract mainly small carriers, not the larger ones that would have a bigger effect on the Bells’ market share, said Robert Quinn, an AT&T; Corp. vice president for regulatory affairs.

James Smith, SBC’s senior vice president for FCC matters, said parts of the company’s deal with Sage would be filed with state regulators, but not the entire document.

SBC, Smith said, views the March 2 decision by the U.S. Circuit Court of Appeals for the District of Columbia as eliminating a number of key network elements, like switching gear that connects calls, from the telecom act’s provisions. So terms covering those issues won’t be filed with the states.

“I’m very mystified by that position,” said former FCC Commissioner Harold Furchtgott-Roth. “It seems the commission has been fairly consistent with requiring the filing of all terms and conditions, not just part of them.”

He said he also was surprised that Verizon Communications Inc., California’s second-largest local phone company, and BellSouth Corp. had taken similar positions.

Separately, SBC said Tuesday that it would freeze wholesale lease rates through the end of the year if rivals agreed to pay $22 a month for the lines and the gear needed to deliver service to their customers, and to negotiate for longer-term deals. That would be about $8 a month more than the regulated lease rates SBC is required to offer in California.

Smith said the offer wouldn’t require competitors to give up any legal rights, including the appeal of the circuit court’s decision.

Quinn and Furchtgott-Roth questioned SBC’s motives, saying a deal that lasts until only the end of the year doesn’t provide much time for rivals to recoup expenses of attracting new customers.

“A lot of people are trying to get this issue postponed beyond the [presidential] election,” Furchtgott-Roth said. “It’s imprudent to interpret these things as substitutes for serious negotiations that the FCC and the administration have called for. You can’t do that with press releases.”