A federal appeals court on Friday crippled a landmark FCC order directing local phone companies to open their networks to competition from long-distance companies.
The 8th US Circuit Court of Appeals in St. Louis, Missouri, said the commission overstepped powers granted in the 1996 Telecommunications Act by setting the prices local telcos would be allowed to charge for network access. The court said that Congress intended states, not the FCC, to set the rate structures.
Reaction split along predictable lines: The former Bell operating companies and other local operators generally welcomed the ruling, long-distance companies expressed disappointment, and FCC chairman Reed Hundt warned of the threat to achieving real telephone industry competition.
Last August, in one of a series of major orders to implement the law, the FCC told local carriers to offer discounts by leasing lines in bulk to competitors at rates up to 25 percent below retail prices. The agency also ordered local telcos to break up network services into segments that rivals could lease to create their own local networks.
The court's opinion said the Telecommunications Act "directly and straightforwardly assigns to the states" the authority to set rules governing the pricing of local service. The judges said the FCC's interpretation ran counter to the law's "plain meaning."
The ruling was handed down amid more and more ambitious legal challenges not only to the FCC implementation of the law but to the constitutionality of the act itself.
SBC Communications has asked the St. Louis tribunal to throw out a portion of the FCC's universal service order that requires telecommunications companies to pay into a fund to provide new services to schools and libraries. In a second action, the company has filed suit against the law, saying that special provisions imposed on the Bell companies are unconstitutionally discriminatory.
