White House Urges FCC to Keep Rein on Wholesale Phone Rates

The Bush administration urged the nation’s top phone regulator Wednesday to keep a lid on wholesale price increases for network lines and gear for at least a year and then gradually phase in any rate hikes.

The White House called on Federal Communications Commission Chairman Michael K. Powell to use “all methods at your disposal to protect consumers and ensure appropriate competitive access to local networks,” according to a letter from Michael D. Gallagher, an acting assistant secretary of the Commerce Department.

The FCC should rapidly adopt interim rules that would last for 12 months and any permanent rules adopted before then should hold rates at the same level for the full year, wrote Gallagher, head of the department’s National Telecommunications and Information Administration.

He said any rules also should include the “maximum legally sustainable transition period without wholesale rate increases” for network parts involved in the U.S. Circuit Court of Appeals decision March 2 to throw out the FCC’s local phone competition rules.

Baby Bells such as SBC Communications Inc. have said they wouldn’t raise wholesale rates they charged rivals like AT&T; Corp. for up to six months while both sides continued to negotiate contracts for leasing Bell equipment.

“Any suggestion that the status quo should be maintained beyond the end of the year will only provide a disincentive for some to conduct serious negotiations,” said Dave Pacholczyk, a spokesman for SBC, California’s dominant local phone company.

Powell has said he hoped the commission could adopt permanent rules by the end of this year.

The Bells’ two main rivals, AT&T; and MCI Inc., said rate hikes would lead them to raise consumer rates, drop some calling plans or exit some markets.

The administration and the FCC had pushed negotiations as a way of ending eight years of legal challenges to FCC rules implementing the Telecommunications Act of 1996, which was aimed at breaking up the Bell monopoly in local phone service.