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Competition on the Line

June 09, 2004

Given that cellphones and Internet telephone service are changing the way Americans communicate, the long-running court battle over local telephone competition seems almost quaint. But for all the changes, the majority of consumers still connect to the outside world using old-fashioned copper wires. And they stand to pay higher bills unless action is taken in the next week.

The Telecommunications Act of 1996 requires regional phone companies, which long ago installed the copper lines that reach into consumers' homes, to allow competitors to lease these systems. As a result, consumers have saved $16 billion a year, according to studies. Yet executives with the Baby Bells argue with a straight face that local phone competition is bad for their customers.

Without the 1996 rules, competitors would have to either build their own phone-line networks or pay sky-high prices to the Baby Bells to use the existing infrastructure. Either way, competitors say, the costs would freeze out most competition.

The future of the competition rules was thrown into question Friday when the U.S. Circuit Court of Appeals in Washington, D.C., refused to stay a lower court ruling that ordered the FCC to drop those regulations next Tuesday. The lower court had ruled that the FCC rules failed to accurately reflect the 1996 telecom act's intent.

The Bush administration had hoped that the appeals court would issue a stay so the rules would remain in effect. That arguably would have given the would-be competition time to negotiate pacts with Verizon Communications, SBC Communications and the other Baby Bells.

It also would have freed the administration from having to take sides. The administration has been slow to say whether it would join an appeal to the U.S. Supreme Court on the side of consumers and competition. Legal experts say the high court would be more likely to take the case if the U.S. solicitor general, who traditionally represents the Federal Communications Commission, were on board.

Cellphones and the Internet will continue to reshape traditional phone service, but competition is working for about 20 million households that are bypassing local phone companies to get service from AT&T and other providers. By making it harder to raise rates, competition also benefits customers who stick with the local phone company. The White House should stop dragging its feet and rejoin the battle with the Bells.

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