NEW YORK-SBC Communications Inc. and U S West Inc. won their legal challenge to the constitutionality of part of the Telecommunications Act of 1996.
The carriers had asked Judge Joe Kendall of the U.S. District Court for the Northern District of Texas in Wichita Falls to overturn a portion of the law that identifies by name and prohibits a small number of regional Bell operating companies and their affiliates from providing long-distance, manufacturing, electronic publishing and other services to their customers.
The Federal Communications Commission, AT&T Corp., MCI Communications Corp. and Sprint Corp. all have promised to appeal the decision.
In his ruling, Kendall said part of the 1996 telecommunications law discriminates against the Baby Bells because it does not apply to other local phone companies, like GTE Corp., Southern New England Telephone Co. and Frontier Corp. The provision he overturned required the RBOCs to open their local phone markets to competitors as a condition of winning federal approval to provide long-distance service to local customers.
“On New Year’s Eve, SBC pulled off another coup that could ultimately increase revenues [to] more than counterbalance [its] $4.4 billion expenditure for (acquiring) SNET. Offering in-region long distance is [local exchange carrier] nirvana-more money from existing customers without heavy lifting,” said Pat Martin and Simon Reeves, telecommunications analysts for Decision Resources, Waltham, Mass., in a report released last week.
“The RBOCs are quietly going mad with joy, even knowing that the appeals will drag on (because) RBOC long-distance services are guaranteed to cut deeply into the [inter-exchange carriers’] residential long-distance revenues. Meanwhile, the IXCs have hardly begun to implement a strategy to compete with the RBOCs for local phone service revenues.”
Although Judge Kendall’s ruling applies only to the companies that were party to the lawsuit, Bell Atlantic Corp., the largest regional Bell carrier, tried to piggyback onto the case the day before his decision. Bell Atlantic said it expects to learn later this month if it will be given so-called intervener status.
Ameritech Corp. and BellSouth Corp. said they are reviewing their options, including whether to file similar lawsuits.
Jim Ellis, SBC’s general counsel, said the carrier filed its lawsuit July 2, within a week of the FCC’s June 26 decision to reject SBC’s entry into long-distance service in Oklahoma. In doing so, the FCC set aside the recommendation of the Oklahoma Corporation Commission, Ellis said. The Oklahoma commission determined SBC had opened its local telephone markets to competition in compliance with the federal Telecommunications Act, and that SBC’s entry into long distance would be in the public interest for consumers, he said.
