Washington-A federal court last week dealt a blow to AT & T Corp.'s attempt to block the Baby Bells from entering the long-distance telephone business based on concerns over their power to discriminate against competitors.
In ruling on an appeal filed by AT & T, a panel from the U.S. Court of Appeals for the District of Columbia held that the Federal Communications Commission acted properly last December in allowing Bell Atlantic Corp. (now Verizon Communications) to carry long-distance calls in New York state.
AT & T cited four instances in which the FCC failed to follow the law in reviewing Bell Atlantic's long-distance application. But the court sided with the FCC each time.
"This decision is a great victory," FCC chairman William Kennard said in a statement. "The court clearly affirmed the FCC's framework for deciding long distance applications from the Bell companies-the heart and soul of the Telecommunications Act of 1996."
An AT & T spokeswoman said the company was evaluating the decision and did not know if it would appeal. AT & T can seek a rehearing before the full circuit court or file an appeal with the Supreme Court.
"Our case raised valid concerns of substantial importance to consumers and local competition," the AT & T spokeswoman said. "We are hopeful that in future proceedings, the FCC will be vigilant to protect the interests of consumers and competition."
Bell Atlantic became the first Baby Bell allowed into the long-distance market since the AT & T monopoly was broken up in 1984 and since the passage of the 1996 telecommunications law. The latter measure voided the AT & T consent decree and gave the FCC, working with states and the Justice Department, the authority to let local telcos offer long distance.
SBC Communications Inc. became the second Bell to win FCC approval.
SBC is now allowed to provide long-distance service to customers in Texas. AT & T has appealed that decision at the same court that decided the Bell Atlantic case last week.
Under the 1996 law, the Bells must comply with a 14-point competitive checklist designed to ensure their local facilities are truly open to competitors. Where the Bells are allowed to enter the competitive long-distance market prematurely, providers like AT & T fear they will use their local monopoly power to subsidize charges and undermine competition for that service and others, including high-speed data.
For that reason alone, AT & T and digital-subscriber-line service providers like Covad Communications Group Inc. have aggressively monitored FCC reviews of Baby Bell long-distance applications.
Although the FCC has allowed two Bells to proceed, it has rejected petitions from five others.
AT & T contended that Bell Atlantic failed to meet four tests in the checklist. For example, AT & T said the FCC allowed Bell Atlantic to overcharge wholesale customers for unbundled elements and permitted Bell Atlantic to market long-distance service in ways that were unfair to competitors.
In a 28-page opinion, the court said the FCC had to make many tough policy calls, and said it must defer to the agency's expert analysis.
"We believe that the [FCC] set the bar at a reasonable height," the court said. "It demanded real evidence that Bell Atlantic had complied with all checklist requirements, but at the same time, it did not allow 'the infeasible perfect to oust the feasible good.'"
It's "a given" that the court would back the FCC over AT & T, said George Reed-Dellinger, a telecom analyst with Washington Analysis.
He said the four Baby Bells, which serve almost all of the lower 48 states, might react to the decision by flooding the FCC with long-distance applications in the months ahead.
Because the FCC has just 90 days to act on a long-distance application, the Bells might decide they have a better chance gaining of access after the November election. That's when, as Reed-Dellinger said, the agency's leadership is "in limbo."
But the FCC could respond to that tactic by summarily denying the applications, he acknowledged.