FCC Plans Rewrite of Phone Rules

WASHINGTON — The head of the Federal Communications Commission said Thursday that the agency would write new regulations on the leasing of local telephone networks, now that the Bush administration has decided not to appeal a ruling overturning competition rules.

FCC Chairman Michael K. Powell said that revising the rules was at the top of his agenda. The rules, thrown out by an appeals court in March, have saved customers $16 billion a year by forcing SBC Communications Inc. and other Baby Bells to lease parts of their networks to rivals like AT&T Corp. at regulated wholesale rates.

Powell said the rewriting process would cause "as minimal consumer disruption as possible" and that any increase in price would be "phased in, if necessary." He didn't outline how he would recommend that the rules -- crafted by a divided FCC last year -- be refashioned.

His comments came a day after the FCC and the solicitor general said they wouldn't ask the Supreme Court to reverse the U.S. Court of Appeals ruling.

The government's decision put in doubt the ability of AT&T, MCI Inc. and other Bell rivals to offer the sort of competitive local phone service envisioned by the Telecommunications Act of 1996.

Chief Justice William H. Rehnquist must decide whether to stay the appellate court ruling until the Supreme Court considers whether to hear the case. Without a stay, the rules will expire Tuesday.

A full Supreme Court hearing couldn't take place until November at the earliest.

"The solicitor general represents the United States of America, and the Supreme Court is much more likely to hear a case if it has the backing of the government

Other backers of an appeal are the state of California, Michigan utility regulators and the National Assn. of Regulatory Utility Commissioners. In court papers, they told the high court that the appeals court ruling "jeopardizes the local telecommunications competition that has developed over the last decade."

In moving to rewrite the FCC phone rules, Powell didn't indicate how he and his four fellow commissioners would mend their bitter disagreement. The rules were approved last year with Republican Commissioner Kevin J. Martin siding with the agency's two Democratic commissioners.

Phone industry and FCC sources said the regulatory landscape was unlikely to dramatically change, at least in the short term.