APPEALS COURT REJECTS SBC ADVANCED SERVICES SUBSIDIARY
U.S. Appeals Court, D.C., handed important victory to Assn. of Communications Enterprises (ASCENT) late Tues., vacating FCC order on one of conditions imposed on SBC-Ameritech merger in 1999. Court vacated order that covered tradeoff FCC made with SBC in which company was permitted to provide advanced services free of interconnection requirements if it created separate affiliate to provide those services. Decision focused on arguments by challenger ASCENT that FCC essentially was forbearing from regulating when it decided to bypass interconnection requirements of Telecom Act’s Sec. 251 because SBC would be providing advanced, not basic, service through separate subsidiary.
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Court ruling said: “To allow an ILEC to sideslip 251(c)’s requirements by simply offering telecommunications services through a wholly owned affiliate seems to us a circumvention of the statutory scheme.” Senior Judge Laurence Silberman wrote opinion, in which he was joined by Chief Judge Harry Edwards and Judge Judith Rogers. Court said Commission had reasoned that affiliate structure would be illegal only if it were obligated to treat affiliate as “successor and assign” of ILEC. Only under such scenario, court said, would Sec. 251 requirements apply to affiliate. “Paradoxically, the Commission is using language designed by Congress as an added limitation on an ILEC’s ability to offer telecommunications services as a statutory device to ameliorate 251(c)’s restriction,” decision said. Ruling said it was “implausible” to interpret Telecom Act as allowing that “a wholly owned affiliate providing telecommunications services with equipment originally owned by its ILEC parent, to customers previously served by its ILEC parent, marketed under the name of the ILEC parent, should be presumed to be exempted from the duties of that ILEC parent.”
Ruling also pointed out broader implications of decision, although immediate case in point concerned SBC-Ameritech condition. Under order, “any ILEC would be entitled, according to the Commission’s logic, to set up a similar affiliate and thereby avoid 251(c)’s resale obligations,” ruling said.
SBC Senior Exec. Vp-Gen. Counsel James Ellis said in statement that original merger conditions accounted for possibility such as court ruling on whether affiliate was subject to Telecom Act’s unbundling and resale obligations. Conditions provide that if court concluded that affiliate was subject to these obligations, that it could be reabsorbed back into phone company, subject to certain conditions. “We will be looking at the option of bringing the separate subsidiary back into the telephone company,” Ellis said in statement.
ASCENT Pres. Ernie Kelly praised court decision. “It will spur competition in the advanced services arena and deliver lower prices and more choices to consumers. It also will benefit competitive carriers, who need greater access to advanced services to survive and prosper in the new economy."