By Jeffrey H. Birnbaum and Christopher Stern Washington Post Staff Writers
Friday, June 4, 2004; Page E01
The Bush administration is being forced to take sides in one of the longest-running and most consumer-sensitive feuds in corporate America, between long-distance telephone companies such as AT&T and MCI and regional phone giants, including Verizon, BellSouth and SBC Communications.
At stake is whether local phone rates will go up for 19 million people -- which in turn could have consequences in the presidential campaign -- and what companies will dominate the highly volatile telecommunications industry.
Solicitor General Theodore B. Olson has a June 15 deadline to decide whether to appeal a federal court ruling that would void regulations that govern the commercial interaction between phone companies. The U.S. Court of Appeals for the D.C. Circuit ruled in March that the regional firms can no longer be forced by the federal government to allow long-distance and other telephone firms to lease their lines at discounted rates.
If Olson appeals -- siding in effect with the long-distance carriers -- phone rates will probably remain unchanged for many months, certainly through the November elections. But if Olson doesn't appeal, AT&T and other long-distance carriers have threatened to raise their rates to pass along any higher charges they incur or to abandon the local phone business altogether.
The trade group CompTel/Ascent, which represents competitors to local phone companies, has prepared political commercials against President Bush for allowing that to happen and has threatened to run those ads in states that are pivotal to his reelection campaign.
"It would be painful [to Bush] because people view telephone service as a basic right. It could potentially cause a problem [for Bush] because at the same time you see rate increases in gas and other commodities," said H. Russell Frisby Jr. chief executive of CompTel/Ascent.
No one knows what Olson will do. Traditionally the administration defends federal policies all the way to the Supreme Court, which is the next stop for this litigation. On the other hand, the regulations at issue, which were first produced during the presidency of Bill Clinton, have already been struck down twice in federal courts and are opposed by the Republican chairman of the Federal Communications Commission, Michael K. Powell. However, three of the FCC's five members favor keeping the rules in place.
Senior executives of both the long-distance and regional phone companies have been lobbying high-ranking officials in the White House and the Commerce Department, hoping to influence Olson's decision. The pressure has been so intense that the Bush administration has decided that it would rather not decide.
In an attempt to avoid having to choose, Powell called the chief executives of the warring companies together over Memorial Day weekend and pressed them to negotiate a payment schedule to replace the federal mandates. One deal was cut earlier -- between MCI and Qwest Communications International, a regional phone company based in Denver. But the biggest players, notably Verizon and AT&T, haven't agreed despite extraordinary private meetings held at a Washington hotel this week.
So Olson must make a move. His first decision will be whether to ask Chief Justice William H. Rehnquist to stay the lower-court ruling and allow the federally imposed discounting to continue. Olson would be unlikely to make that request if he didn't intend to appeal the case. A spokesman for Olson at the Justice Department declined to comment. White House spokeswoman Claire Buchan said: "Our view continues to be that commercial agreements are preferable to litigation and we continue to urge the parties to resolve their differences."