FCC under fire Industry claims Fifth Amendment, states' rights violations in interconnection order >BY Shira McCarthy, Associate Editor-News

A challenge to the Federal Communications Commission's interconnection order by Southern New England Telecommunications and GTE last week opened a floodgate of protests expected to continue for at least another week.

SNET and GTE's request that the FCC suspend implementation of its ruling on Wednesday afternoon was followed by an appeal from the National Association of Regulatory Utility Commissioners and the New York Public Service Commission.

The U.S. Telephone Association is also likely to take legal action, a spokeswoman said. Several of the Bell regional holding companies are expected to appeal the ruling as well. Last week's legal frenzy isn't surprising, said Nick Allard, a communications attorney with Latham & Watkins, Washington, D.C.

"This is one of the biggest and most important issues that the FCC has taken on, so I think it was inevitable. The only surprise was that NARUC and the New York commission filed complaints because they worked with the FCC in drafting the rules, he noted. NARUC believes the FCC has overstepped its bounds, said Brad Ramsey, the association's deputy assistant general counsel.

"We believe they've incorrectly characterized the scope of their authority in the interconnection order, particularly with regard to pricing," he said.

Pricing is also at the heart of GTE and SNET's case. The order's detailed pricing standards force incumbent local exchange carriers to provide elements and services below cost, meaning that the LECs are not adequately compensated for their property, said Madelyn DeMatto, vice president and general counsel at SNET.

"We believe that we have a constitutional claim based on the Fifth Amendment," DeMatto said. "There can be no taking of property without just compensation, but that's what the FCC is doing to us."

SNET and GTE are also unhappy with the "cookie cutter" approach they believe the FCC is taking, said Fred Page, president of network services at SNET.

"The Telecommunications Reform Act of 1996 called for states to have certain responsibilities, and it looks to us like the FCC is ignoring the authority granted to the states," Page said. "This [ruling] sets on its ear everything we've been doing in Connecticut to move ahead on local competition. It basically forces us to redo everything-all of our cost studies, all of our unbundling concepts."

The FCC ruling "effectively demotes state commissioners to the role of clerks," said a GTE spokesman.

At press time, none of the RHCs were able to divulge definite plans to file against the FCC, but many, including U S West, said they supported GTE's and SNET's actions. Bell Atlantic definitely will not file against the FCC order, however, a company spokesman said.

Pacific Telesis, however, will try to modify some provisions of the order, possibly by filing a petition for changes with the FCC or in court, said Lee Bauman, vice president of local competition.

Unlike the RHCs, GTE and SNET were not constrained by the Modified Final Judgment, so they are not required to comply with FCC regulations to enter the long-distance market.