Gov't Decision on Local Phone Service Called 'Retreat From Free-Market Principles'

By Melanie Arter | July 7, 2008 | 8:21 PM EDT

( - The Bush administration's decision not to appeal to the Supreme Court a federal appeals court ruling that prevents increased competition for local telephone service is "a retreat from free-market principles," a policy group said Wednesday.

The Federal Communications Commission issued rules in August allowing states to require that the four major regional phone companies - Verizon, BellSouth, Qwest and SBC - lease parts of their networks at low prices to competitors like AT&T and MCI. But the regional phone companies protested, saying the rules left them at a disadvantage.

In March, the D.C. Circuit Court of Appeals threw out the rules despite warnings from consumer groups that doing so may lead to higher phone bills for customers.

The Frontier of Freedom expressed disappointment with U.S. Solicitor General Theodore Olson's decision not to appeal the ruling, saying the administration "has turned its back on rural America and consumers in general."

"Without the spur of competition, the big Bell companies have shown zero interest in providing rural areas with broadband service that is so crucial to the economic development of rural America," said the group's president George Landrith.

"If the appeals court decision is allowed to stand, the Bells won't even feel the need to continue their empty promises about deploying broadband in rural America. And they will proceed full-speed ahead with their plans to snuff out the competition that has managed to develop in other parts of the country," said Landrith.

"A failure by the Supreme Court to overturn the DC Circuit Court's ruling could completely remonopolize the telecommunications market," said Greg Blankenship, president of the Illinois Policy Institute.

"If the DC Court's decision stands, Illinois consumers will lose the benefits of market based competition and immediately experience a hike in their phone bill," he said.

"SBC is currently petitioning the Illinois Commerce Commission to hike wholesale rates it can charge competitors for leasing the local network. If SBC starts jacking up rates, Illinois consumers will feel the pain," Blankenship said.

The Supreme Court would have been more likely to consider the Federal Communications Commission's appeal if the Justice Department had decided to join the challenge.

Karen Kerrigan, founder and chairman of the Small Business Survival Committee said small business owners need the advantages that local phone competition brings.

But, she said, "with or without the support of the Solicitor General, we believe the Supreme Court should lose no time in accepting this case to settle the long running dispute over access to the local telephone network."

Kerrigan pointed to recent studies that show small businesses saved more than $4 billion last year alone from competition, and they can save an estimated $6 billion this year if the rules protecting competition are left in place.

"This critical case comes just as competition is starting to yield real quantifiable results in many states across the country," she said.

"While we regret that further litigation is the path that must be taken to end this dispute, the Bells have demonstrated through their persistent anticompetitive behavior that the finality of a Supreme Court ruling is the only way to bring this saga to an end," Kerrigan added.

"Unfortunately, as a result of today's decision, more than 20 million consumers who are currently benefiting from the fruits of local telephone competition can expect less competition, higher prices and fewer services," said Charlie Jarvis, chairman and chief executive of the United Seniors Association.

"In fact, due to the lack of local telephone competition, all consumers can expect to pay an average of $400 annually per household in additional costs for local telephone services," he said.

"Sadly, seniors, particularly seniors living on fixed incomes, cannot afford to go back to the monopoly days of the past when the lack of local telephone competition meant consumers paid higher prices for poorer service," said Jarvis.