The Bush administration and federal regulators sided with the Baby Bell companies Wednesday and refused to seek Supreme Court review of telephone competition rules.
AT&T Corp. and MCI Inc. said they still planned to appeal the court decision that threw out rules requiring the Bells to lease their local phone lines and gear to competitors at regulated wholesale rates.
The legal and political muscle of the White House and the Federal Communications Commission could have bolstered the two companies' effort -- and critics accused the Bush administration of favoring giant Bell companies like SBC Communications Inc. over relative newcomers to the local phone business.
"This decision is the final nail in the coffin for local telephone competition," said Gene Kimmelman, public policy director for Consumers Union, publisher of Consumer Reports magazine. "It signifies that the Bush administration is willing to let nascent local phone competition wither or disappear, enabling the Bell telephone companies to become dominant local phone monopolies again."
There were predictions that the administration's refusal to join the appeal could turn into a political liability during an election year in which voters are already stewing over high gasoline and milk prices.
The chairman and the ranking Democrat on the House Judiciary Committee, Rep. F. James Sensenbrenner Jr. (R-Wis.) and John Conyers Jr. (D-Mich.), called the decision "unwise."
They said in a statement that the administration's stance "undermines the clear intent of Congress" when it passed the Telecommunications Act of 1996 and "threatens to undermine consumer choice and local telephone competition for millions of Americans."
White House spokeswoman Claire Buchan said the decision was "consistent with the administration's policy of ending the cycle of litigation and moving to regulatory stability" after eight years of court challenges to rules implementing the act, aimed at opening the phone business to competition.
SBC, California's dominant local phone service provider, called the White House and FCC staying out of the fight "a major victory for consumers and the nation's economy."
The federal rules are set to be taken off the books Tuesday. The Bells are, in the meantime, in talks with companies that have been leasing lines and equipment at the wholesale rates. The Bells have long argued that rates should be set in the marketplace, not by regulators.
