Court Hangs Up On Baby Bells

The Supreme Court on Tuesday refused to make it easier for the nation's biggest local phone companies to break into the $90 billion long-distance market.

The court, without comment, rejected appeals in which three of the five regional Bell telephone companies challenged the special hurdles Congress placed in the way of their offering long-distance service.

SBC Communications, US West, and Bell Atlantic said the special requirements they must meet, spelled out in the Telecommunications Act of 1996, are discriminatory and single them out for punishment.

The Constitution bars laws that apply to an individual or a specific group and is punitive, and the phone companies' appeals said Congress subjected them to such a "bill of attainder."

The appeal filed jointly on behalf of SBC and US West contended that Congress never before has "singled out named companies to forbid them, and them alone, from engaging in otherwise lawful lines of business."

Federal appeals courts in New Orleans and the District of Columbia rejected that argument and upheld the disputed restrictions.

Justice Department lawyers urged the highest court to leave those rulings intact, arguing that "nothing in the challenged provisions can plausibly be characterized as punishment."

The 1996 law requires Baby Bells to open their local phone markets to long-distance companies and other potential rivals before the Federal Communications Commission will let them sell their own long-distance service to local customers.

No Bell company has yet won such FCC approval because, the commission says, none has sufficiently opened its market.

Together, the five Baby Bells provide more than 80 percent of the local phone service in the United States. The other two regional companies are BellSouth and Ameritech.

The Supreme Court currently has under study, and is expected to decide by July, the validity of federal rules aimed at quickly opening the $110 billion local telephone market to competition. At issue in that separate dispute is whether the FCC or the states have the authority to set pricing rules for the new competition.

Lawyers for SBC and US West urged the justices "to provide the lower courts and Congress with needed guidance as to the rules governing the legislature's ability to impose burdens on a targeted few."

They said the challenged provisions are depriving consumers of as much as $300 billion in savings that would flow from a more competitive long-distance market.

Government lawyers disagreed, telling the court that the Baby Bells' challenge threatens "to unravel much of the 1996 act, to the great detriment of American consumers."

The Supreme Court five times has struck down acts of Congress as unconstitutional bills of attainder, most notably laws that exposed members or adherents of the Confederacy and Communist Party to punitive treatment.

Unlke sanctions based on someone's political affiliation, "business regulations based on corporate economic power and incentives ... rest not on a desire to 'punish' the regulated corporations but on a recognition of the objective dangers posed by monopoly power," government lawyers said.

But the phone companies' appeals were supported in friend-of-the-court briefs submitted by 12 states: Arizona, Arkansas, Idaho, Indiana, Michigan, Mississippi, New Mexico, Oklahoma, Rhode Island, South Carolina, South Dakota, and Texas.

The cases are SBC Communications vs. FCC, 98-652, and Bell Atlantic vs. FCC, 98-653.

Written By Richard Careli, Associated Press Writer