High Court Keeps Phone Lines Open

A divided Supreme Court cleared the way Monday for competitors to fight for the $110 billion local telephone business against companies that emerged from the Bell System breakup — a ruling that probably will give consumers more choice.

The issue for the justices was the 1996 Telecommunications Act, which requires local phone markets to be opened.

Most Americans who were promised competition have seen neither options nor lower phone bills. But the Supreme Court said the government's plan to open the market is reasonable and should be given a chance.

The ruling would keep costs low for companies such as WorldCom and AT&T Corp., which pay fees to piggyback on a local telephone companies' calling networks.

A conglomeration of former Bells, including Verizon Communications, wanted the ability to charge other telephone companies higher fees for using their lines. The court said no.

"Competitors and consumers dodged a bullet," said Mark Cooper, with the Consumer Federation of America.

He said residential customers could save $10 a month when competition becomes nationwide. It is available now mostly in larger markets like New York.

Time will tell if competition hopes were an illusion, the court said.

In theory, Monday's decision maintains healthy competition and lower prices for customers. But in reality, CBS News Correspondent Sharyl Attkisson reports, the Telecommunications Act never produced either. Six years later, millions of Americans are still waiting for prices to fall.

"We were promised more choices and lower prices," said Gene Kimmelman, of the Consumers Union. "Instead all the big telephone companies merged together and really tried to block competition."

In fact, the eight super regional giant phone companies in 1996 have since merged into four even bigger companies. Local phone charges aren't down -- they're up 17percent, according to the latest information from the Bureau of Labor Statistics. Any long distance savings per-minute have been erased by increases in monthly fees. And cable rates? They've shot up 43 percent.

The defeat at the Supreme Court for the former baby Bells sends the fight back to the Federal Communications Commission, which has struggled for a way to satisfy all sides while giving choices to users. So far, less than 10 percent of the old Bell system is being leased by rival companies for residential service, consumer advocates have said.

The court ruled 5-3 in 1999 that the FCC could set pricing rules. Justice Stephen Breyer, joined by Justice Antonin Scalia, said Monday the court was giving the FCC too much authority with the latest ruling. Justice Clarence Thomas endorsed only part of the decision.

Justice David Souter wrote for the majority: "We cannot say whether the passage of time will show competition prompted by TELRIC to be an illusion, but TELRIC appears to be a reasonable policy for now, and that is all that counts."

In addition to the fees issue, justices ruled that regulators could require the Bell spinoffs to make more network connections available to competitors.

The decisions on the two issues mean that FCC rules, "which were designed to break open the Bells' lock on local customers, are now the law of the land," said Michael Salsbury, WorldCom general counsel.

In another decision handed down Monday, the court, in the latest case dealing with a federal attempt to ban Internet porn, ruled jurors can apply contemporary standards in their communities to determine whether something in the Internet is harmful to minors, but it wasn't a complete endorsement of a new law.

Critics of the Internet porn law say it will force everyone online to follow the standards in the most conservative communities in the country. The American Civil Liberties Union had challenged the law as unconstitutional, claiming that in protecting children the Child Online Protection Act also violates the rights of adults to see or buy what they want on the Internet.

However, it wasn't a complete victory for the anti-smut forces: The High Court said the Child Online Protection Act cannot take effect until a lower court reviews it to see if the overall law violates the Constitution.

A divided Supreme Court said that the law's use of what it calls "community standards" to define what is harmful to children does not by itself make the law unconstitutional, as a lower federal appeals court ruled.

But the court went on to say that there are other potential constitutional problems with the law that were not addressed by the lower court.

Without taking a position on those other potential problems, the high court threw out the lower court's ruling and sent the case back for further review.

The high court action means the 1998 law is still on hold, and the government is barred from enforcing it.

The ruling is a partial victory for the Bush administration, but neither side got what it really wanted.

The law, known as COPA, makes it a crime to knowingly place material deemed harmful to children within their easy reach on the Internet. Violators may be fined up to $50,000, and sentenced to six months in jail.

The law also requires adults to use access codes and or other ways of registering before they could see objectionable material online.

The ACLU challenged the law on behalf of artists, sex therapists and others who post legitimate, if risque, material on the World Wide Web.

Eight justices agreed that the case should be sent back to the 3rd U.S. Circuit Court of Appeals for a closer look, although they differed in their reasons. Only Justice John Paul Stevens dissented.

In other rulings: