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The Supreme Court declined Tuesday to hear three appeals seeking to reinstate federal rules forcing local phone carriers to lease their networks to rivals at discount rates set by the government — ensuring no last-minute reprieve for AT&T Corp. and MCI Corp. in their retreat from the consumer market. The Court, without comment, let stand a lower ruling that the Federal Communications Commission had failed to justify the need for the rules, which had enabled AT&T and others to lure millions of local phone subscribers away from the regional Bells with attractive offers. Few on either side of the dispute had expected the Supreme Court to take the case once the White House decided back in June that it wouldn’t challenge the ruling. But the added certainty brought by Tuesday’s decision returns the focus to the FCC, which was already working on new regulations to replace those thrown out in March by U.S. Court of Appeals for the District of Columbia. The Court, meanwhile, also upheld FCC rules requiring the four Bells — Verizon Communications Inc., BellSouth Corp., Qwest Communications International Inc. and SBC Communications Inc. — to allow providers of high-speed DSL Internet service to lease their copper wires, but not upgraded fiber optic or fiber-copper lines. The FCC says requiring access to fiber lines would deter the Bells from upgrading their networks. In trading Tuesday, AT&T shares closed up 35 cents at $15.59 on the New York Stock Exchange, toward the middle of its 52-week trading range of $13.59 to $22.10 per share. MCI shares finished down 15 cents at $16.83 on the Nasdaq Stock Market, the lower end of its 52-week range of $12.51 to $25.80. The local line-sharing rules were meant to force competition over Bell lines after nearly a century in which consumers had only one choice for local service. The Bells complained that they were willing to lease their lines, but that the states were forcing them to do so at a loss because their expenses exceeded the rates they were allowed to charge. The appeals court ruled that the FCC acted improperly by asking local regulators to oversee the process on a state-by-state basis. It is considered unlikely that the new line-sharing rules, which FCC Commissioner Michael Powell has said he’d like finalized before 2005, will impose the same stringent requirements on the Bells. To allow itself time to devise the new rules, the FCC froze the current line-sharing rates until mid-March. If the agency can’t meet that deadline, the Bells would be free to increase lease rates by as much as 15 percent for existing customers and even more for new subscribers. With so many uncertainties clouding the market, AT&T and MCI have said it no longer made sense to spend aggressively on marketing consumer services. AT&T announced in July it would no longer market traditional local or long-distance service to consumers. Not long after, MCI indicated that it too would scale back its efforts to sign up new residential customers. As a result of AT&T’s decision, the company announced last week that it was cutting at least 7,500 more jobs and slashing the book value of its assets by $11.4 billion. The sweeping writedown reflects the reduced value of AT&T’s national network now that it will be generating less revenue from consumer voice traffic. But despite the apparent surrender by AT&T and MCI, the companies and an association of state utility regulators still filed an appeal urging the Supreme Court to uphold the line-sharing rules. The long-distance companies argued that a failure to reinstate the rules — which expired in June — would eventually lead to higher local rates. “One consequence could well be the severe curtailment of competition in local telecommunications markets,” the National Association of Regulatory Utility Commissioners stated in its filing, citing the market retreat by AT&T and a smaller company named Z-Tel Communications Inc. The cases are National Association of Regulatory Utility Commissioners et al v. U.S. Telecom Association, AT&T Corp. et al v. U.S. Telecom Association, and the People of the state of California et al v. U.S. Telecom Association, 04-12, 04-15, 04-18. Copyright 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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