_____Technology Headlines_____ • Updated Technology Headlines E-Mail This Article Printer-Friendly Version

By Ryan Keith
Associated Press Writer
Monday, November 10, 2003; 8:26 PM

SPRINGFIELD, Ill. –– A federal appeals court agreed Tuesday that a hotly debated state law allowing telephone giant SBC Illinois to charge its competitors higher rates is invalid.

But in upholding a circuit court ruling that blocked the law's implementation, the 7th Circuit Court of Appeals in Chicago also sent the case to the Illinois Commerce Commission and ordered new rates to be set "speedily."

The law — passed by the Legislature and signed into law by Gov. Rod Blagojevich after a whirlwind five-day lobbying spree in May — increases the rates San Antonio-based SBC can charge competitors who want to use its vast network of phone lines to offer service.

It doesn't comply with federal standards that instruct states how to set local phone wholesale rates, Judge Frank Easterbrook wrote in the appeals court's opinion. The ICC should move quickly to set new rates, the court decided.

"A rate that is long out of date, as this 1997 rate is, frustrates the goals of (the federal law) every bit as much as does a rate generated under the flawed state legislation," Easterbrook wrote.

The telephone rivals each claimed victory.

SBC said the ruling is encouraging because it agrees that the rates must be updated quickly and it allows the ICC to use the factors established in the law to set the rates.

"The only disappointment we have is that the court didn't allow the new law to go into effect," SBC Illinois President Carrie Hightman said. "We hope the Commission will act as quickly as possible for the benefit of consumers."

A lobbying group representing SBC competitors AT&T and MCI, who filed the lawsuit, said the ruling is a "great victory for consumers."

"It validates my group's belief that any legislator who voted against this law when it passed is indeed a friend of the consumer," said Gary Mack, executive director of the Illinois Coalition for Competitive Telecommunications. "It also underscores in a variety of ways, I think, that SBC's anticompetitive behavior should not be rewarded."

SBC successfully pushed the significant rate increase through the Legislature by arguing it needed to charge competitors more money to shore up financial losses and protect jobs.

But its competitors fought the law vigorously, contending the ICC should set rates, not the Legislature. U.S. District Judge Charles Kocoras in June agreed, saying the state law and the method used to approve it violated federal law.

The appeals court disagreed with Kocoras' conclusion that the Legislature had no authority to offer the ICC direction in setting rates. But the law was invalid anyway because it focused too narrowly on the components needed to set valid, updated rates under federal law, Easterbrook wrote.

SBC sought an even higher rate increase through the ICC in December, but that process was derailed when the bill was passed in May. Regulators could pick up where they left off in that review, but there's no timetable for when that could be completed.

"The attorneys are reviewing it to see what our next step will be," ICC spokeswoman Beth Bosch said.