Regulators put hold on wholesale phone rates, but hikes could follow

Friday, August 20th 2004, 8:33 pm

By: News On 6

WASHINGTON (AP) _ Federal regulators on Friday imposed a six-month freeze on the rates regional phone companies may charge their competitors to use networks to provide local service.

The Federal Communications Commission's temporary rules place on hold the rates the major regional companies _ Verizon, SBC, Qwest and BellSouth _ charge MCI, AT&T and other carriers.

The FCC needs time to come up with final rules on local competition. If the agency can't meet the six-month deadline, the regionals would be free to increase lease rates by as much as 15 percent for existing customers and even more for new subscribers.

That cost, or at least some of it, would likely be passed along to consumers, the regionals' competitors say.

Some industry officials have expressed doubts about whether the FCC can craft such complex rules in just six months.

About 19 million people _ roughly 15 percent of those with home phones _ buy local service from a company other than the regional providers. Those companies also serve about 30 percent of small businesses in metropolitan areas.

FCC Chairman Michael Powell said the interim rules will ensure that ``consumers and competitors are protected while we complete our work.'' He also disputed claims that there would be automatic price increases if the agency doesn't come up with final rules in six months.

Commissioner Michael Copps, one of two Democrats who voted against the rules, disagreed.

``The current Commission is on track to butcher the pro-competitive vision of the 1996 (Telecommunications) Act,'' said Copps. ``It is sticking consumers with higher telephone rates and fewer choices. The people who pay America's phone bills deserve better.''

The six-month period begins once the rules are published in the Federal Register.

The FCC was forced to begin writing new phone regulations after a decision in March by the U.S. Court of Appeals for the District of Columbia. It threw out FCC rules issued last year that allowed states to require the Bells to lease parts of their networks at deep discounts to the long-distance companies.

Long-distance carriers said they needed the discounts to compete. But the regionals said the prices were set too low, and essentially forced them to subsidize the business of their competitors.

BellSouth said it was pleased the agency would begin writing new rules. ``BellSouth believes the quick adoption and implementation of permanent rules is essential to economic recovery and job creation in Americas technology sector,'' said a company statement.

AT&T said consumers would come out on the losing end of the interim rules. ``The order approved by the majority of the Commission does little to protect and preserve consumer benefits and the existing competition in today's consumer markets,'' said company spokeswoman Teri Rucker.

Last month, AT&T cited the March court decision when the company announced it would no longer market its long-distance service to residential customers. While it will continue to provide service to current residential customers, the company instead is shifting its focus to business customers, which account for most of its revenue.