US telcos divided over network-sharing decision

A decision not to appeal a court ruling overturning many US rules on network-sharing among telecommunications companies could...

A decision not to appeal a court ruling overturning many US rules on network-sharing among telecommunications companies could result in higher telephone service prices for customers, some telcos have warned.

The decision, which overturned an earlier decision on sharing switching facilities and some high-capacity DS-1 and DS-3 network loops, has forced competitive local exchange carriers (CLECs) to enter into private negotiations with the incumbent carriers for those pieces of their networks, but few agreements have been signed since the ruling.

"If the [Federal Communication Commission] rules are allowed to lapse and wholesale rates rise, MCI may be forced to raise prices in some markets and pull out of others," said Stasia Kelly, executive vice president and general counsel of MCI.

"The [Bush] administration's decision will clearly disrupt the marketplace.  Without competition, consumers will soon find themselves with higher rates, lower quality of service and less innovation."

The incumbent owners of much of the nation's telephone networks, often called the regional Bells, were the winners in the appeals court case, and they applauded the decision.

"[It] is a major victory for consumers and the nation's economy," said SBC Communications general counsel James Ellis. "Allowing these unlawful rules to lapse will ensure a bright new era of stability in the highly competitive telecommunications industry that will benefit American consumers."

SBC has committed to not unilaterally raising the cost for its network elements. Ellis praised the decision to not move forward in what has been a series of court cases on the network element rules since the Telecommunications Act of 1996 was passed.

The regional Bells, which inherited much of their networks after the breakup of the old AT&T monopoly in the early 1980s, argue that they have little incentive to invest in new equipment when they have to share parts of their networks with competitors.

"When this eight-year legal odyssey is finally ended, it will help foster sustainable competition and economically rational competition that will drive job growth and investment in this vital sector, and extend telecommunications innovations farther and faster into the marketplace," Ellis said.

Russell Frisby, chief executive officer of telecom trade group CompTel/Ascent, called the solicitor general's decision "contrary to the law and the public interest", although he predicted that the Supreme Court would still take the case based on its merits.

Two powerful US representatives, however, said they were "delighted" by the decision not to appeal the case. Representatives Joe Barton, chairman of the House Energy and Commerce Committee, and Fred Upton,  chairman of the Telecommunications and the Internet Subcommittee, said in a joint statement they hoped private negotiations between the Bells and their competitors will continue.

They also encouraged the FCC to create new access rules to use if private negotiations fail.

"This is the right decision to facilitate new investment in the telecommunications sector that can help continue the economic growth that we have witnessed so far this year," the men said in their statement.

Grant Gross writes for IDG News Service

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