High Court Takes Up Telecom Act Appeal

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The Supreme Court will begin hearing a case this week that
will determine whether federal regulators can set interconnection-pricing guidelines for
new entrants into local-exchange markets.

Specifically, it will review a lower court ruling that
found that the Federal Communications Commission cannot set the price that a regional Bell
operating company charges competitors for interconnecting with its telephone network.

It will also review the portion of that decision that
allows the RBOCs to unbundle parts of their networks before selling them to competitive
LECs.

In a July 1997 ruling, the Eighth Circuit Court of Appeals
threw out the FCC's price guidelines on the grounds that the Telecommunications Act
of 1996 granted that authority "directly and straightforwardly" to the states.

The court will begin its review with two hours of oral
arguments Tuesday (Oct. 13). A final decision is not expected until next year.

Those with the most at stake are the long-distance
carriers, which want to buy elements of the local telephone networks from the telcos at
discounts steep enough to justify getting into the local exchange.

But despite cable's recent move back toward the
telephony business, some observers believe that the court's decision remains a
nonstarter for the industry.

Chris Savage, an attorney with Cole, Raywid &
Braverman, a Washington, D.C.-based law firm specializing in cable issues, said a
facilities-based cable operator doesn't require as many elements of the local network
to offer phone service as a CLEC does.

"If you have your own complete network, you just need
a pipe that connects customers. The only hard item left is what to charge so that traffic
flows back and forth," Savage said. "So, if an operator wants to initiate
telephone service, he doesn't have to go on bended knee to the [incumbent LEC]. But
if you're a CLEC, with no facilities, then you need things like the unbundled
loop."

Gary Farber, a cable analyst with S.G. Cowan Securities,
said that with the FCC pushing for the local competition sought by the 1996 act, it's
hard to imagine that the RBOCs will win it all at the Supreme Court.

"This is what the whole Telecom Act was about,"
Farber said. "At the end of the day, it's hard to believe that the RBOCs will
get everything, and cable and the CLECs nothing."

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