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Tech Almanac

Local Phone Service Rules Left to Expire

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_____Online Reaction_____
United States Telecom Assn.
Verizon Communications
SBC Communications Inc.
CompTel/Ascent
Association of Local Telecommunications Services (pdf)
MCI
_____FCC In The News_____
High Court Allows FCC To Throw Out Phone Rules (The Washington Post, Jun 15, 2004)
Phone Firms Appeal Over Local Access (The Washington Post, Jun 11, 2004)
FCC Won't Let Schools Sell Airwaves (The Washington Post, Jun 11, 2004)
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Written by washingtonpost.com's tech policy team, the e-mail version of this weekly feature includes an original news article and links to policy and cyber-security stories from the previous week.
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By Christopher Stern
Washington Post Staff Writer
Thursday, June 10, 2004; Page A01

Rules that govern how telephone companies compete for local customers will expire next week under a decision announced yesterday by the Bush administration, throwing into question how much residential customers and small businesses will pay for service and what choices they will have.

The Justice Department said it would not appeal a federal court's rejection of government rules requiring regional phone companies to lease their networks to rivals at a discount. The rules now are set to expire on Tuesday.

The Justice Department's decision is a huge blow to struggling long-distance companies such as AT&T Corp. and MCI Inc., which used the regulations to launch their own brands of local service. It also adds confusion to an industry already roiled by technological changes, as wireless phones proliferate and Internet phone service becomes a reality.

About 19 million telephone lines -- about 14 percent of the local phone market -- are served by companies that relied on the government regulations. AT&T said yesterday that the decision could lead it to raise rates and possibly abandon local service in some markets.

"Failure to appeal this case could do lasting damage to the entire competitive telecom industry -- and will lead inevitably to higher prices and fewer choices for Americans," James W. Cicconi, AT&T's general counsel, said in a prepared statement yesterday.

The Justice Department declined to comment on its decision, which followed months of intense lobbying by the nation's largest telecommunications companies. Sources on both sides of the issue said the senior White House staff was divided.

The political staff, led by senior adviser Karl Rove, raised concerns that rising telephone rates could hurt President Bush in the upcoming election. The policy staff opposed an appeal, saying the rules run counter to Bush's efforts to reduce business regulation.

The White House had hoped to avoid a decision by calling on the companies to reach voluntary agreements with one another. But negotiations, including a recent round hosted by Federal Communications Commission Chairman Michael K. Powell, failed.

The rules at the center of yesterday's decision are a byproduct of the Telecommunications Act of 1996, an effort by Congress to introduce competition into the telephone market. At the time, the industry was largely shaped by a court decision that spun off several regional companies from AT&T. The regional companies were given the local phone business, and AT&T was handed the long-distance market. The act allowed the regional giants into the long-distance market if they would open their local markets to competition. AT&T and other long-distance carriers were allowed into local markets.

The regional companies have outperformed their rivals in the past eight years.

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