SBC-Ameritech condition nixed

(Telephony) A condition of the two-year-old SBC Communications-Ameritech merger that was designed to promote competition in DSL services actually does the opposite, according to a ruling yesterday by the U.S. Court of Appeals for the District of Columbia.

The court struck down a condition imposed by the Federal Communications Commission (FCC) that called for SBC to set up a separate high-speed data services subsidiary to ensure SBC would not discriminate against competitors. But in doing so the FCC shielded the affiliate from rules that call for incumbents to sell unbundled network elements at wholesale cost to competitive carriers, the court said.

According to the U.S. Court of Appeal opinion filed by Senior Circuit Judge Laurence Silberman, the affiliate units of incumbent carriers should be subject to the same laws as their parent companies.

While incumbents such as SBC have argued that advanced services such as DSL shouldn’t be subject to Section 251 requirements, the court disagreed. “[In the Telecommunications Act of 1996,] Congress did not treat advanced services differently from other telecommunications services,” Silberman wrote. “It did not limit the regulation of telecommunications services to those services that rely on the local loop. For that reason the Commission may not permit an ILEC to avoid [section 251] obligations as applied to advanced services by setting up a wholly owned affiliate to offer those services.”

The outfit that brought the suit against the FCC, the Association of Communications Enterprises (ASCENT), formerly the Telecommunications Reseller Association, applauded the decision, saying it would spur competition in advanced services and deliver lower prices to consumers.

According to SBC, the FCC merger conditions already provided for the possibility that the data affiliate condition could be overturned in court. “The merger conditions provide that, if a court ruled that the affiliate were subject to the Act’s resale and unbundling obligations, then the separate affiliate could be reabsorbed back into the telephone company, subject to certain conditions,” said a statement from Jim Ellis, SBC’s general counsel. “We will be looking at the option of bringing the separate subsidiary back into the telephone company.” If SBC does so, however, the affiliate, Advanced Solution of San Antonio, Texas, would have to provide competitors with access to its network at a discount.

Verizon Communications, which was required to set up a data affiliate as part of the regulatory approval of its merger with GTE, could also be affected by the ruling.

The FCC said it was reviewing the court’s decision. It could challenge the ruling in the U.S. Supreme Court. Commission Harold Furchtgott-Roth, who dissented from the SBC-Ameritech order in 1999 on the grounds that the conditions were invalid, released a statement supporting the decision and lamenting the slow progress of recent rulings issued by the FCC.

“In important case after important case, the FCC has been reversed on appeal,” Furchtgott-Roth said. “The result has been that the agency finds itself grappling with precisely the same issues for months, if not years, after it has released an initial order.”